As filed with the Securities and Exchange Commission on April 25, 2002
1933 Act File No. 333-83402
1940 Act File No. 811-21043
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
(Check appropriate box or boxes)
_X_ REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
_X_ Pre-Effective Amendment No. 2
___ Post-Effective Amendment No. __
and/or
_X_ REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
_X_ Amendment No. 2
PIONEER HIGH INCOME TRUST
Exact Name of Registrant as Specified in Charter
60 State Street, Boston, Massachusetts 02109
Address of Principal Executive Offices (Number, Street, City, State, ZIP Code)
(617) 742-7825
Registrant's Telephone Number, including Area Code
Joseph P. Barri, Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109 Name and Address (Number, Street, City, State, ZIP Code) of Agent for Service
Copies to: Leonard B. Mackey, Jr., Esq.
Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 10166-0153
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Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
If any securities being registered on this form are to be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), other than securities offered in connection with dividend or interest reinvestment plans, check the following box. ___
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT
----------------------- --------------------- -------------------- --------------------- --------------------
Title of Securities Amount Being Proposed Maximum Proposed Maximum Amount of
Being Registered Registered Offering Price Per Aggregate Offering Registration Fee(1)
Unit Price
----------------------- --------------------- -------------------- --------------------- --------------------
----------------------- --------------------- -------------------- --------------------- --------------------
Common Shares (no par
value)
34,500,000 shares $15.00 $517,500,000 $47,610.00(1)
----------------------- --------------------- -------------------- --------------------- --------------------
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(1) Transmitted prior to the filing date to the designated lockbox of the Securities and Exchange Commission at Mellon Bank in Pittsburgh, Pennsylvania.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment, which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
PIONEER HIGH INCOME TRUST
CROSS-REFERENCE SHEET
PART A--PROSPECTUS
ITEMS IN PART A OF FORM N-2 LOCATION IN PROSPECTUS
Item 1. Outside Front Cover Cover page
Item 2. Cover Pages; Other Offering
Information Cover pages
Item 3. Fee Table and Synopsis Summary of Trust Expenses
Item 4. Financial Highlights Not applicable
Item 5. Plan of Distribution Cover page; Prospectus Summary;
Underwriting
Item 6. Selling Shareholders Not applicable
Item 7. Use of Proceeds Use of Proceeds
Item 8. General Description of the
Registrant Cover page; Prospectus Summary;
The Trust; Investment Objective
and Principal Investment
Strategies; Leverage; Risk
Factors; Closed-End Fund
Structure; Net Asset Value
Item 9. Management Prospectus Summary; Management
of the Trust; Description of
Shares; Custodian, Transfer
Agent, Dividend Disbursing Agent
and Registrar
Item 10. Capital Stock, Long-Term Debt,
and Other Securities Description of Shares; Dividends
and Distributions; Automatic
Dividend Reinvestment Plan; U.S.
Federal Income Tax Matters
Item 11. Defaults and Arrears on Senior
Securities Not applicable
Item 12. Legal Proceedings Not applicable
Item 13. Table of Contents of the Statement
of Additional Information Table of Contents for Statement
of Additional Information
PART B--STATEMENT OF ADDITIONAL INFORMATION
ITEMS IN PART B OF FORN N-2 LOCATION IN THE STATEMENT OF
ADDITIONAL INFORMATION
Item 14. Cover Page Cover page
Item 15. Table of Contents Cover page
Item 16. General Information and History Not applicable
Item 17. Investment Objective and Policies Use of Proceeds; Investment
Objective and Policies;
Investment Restrictions;
Appendix A--Description of
Ratings
Item 18. Management Management of the Trust
Item 19. Control Persons and Principal
Holders of Securities Not applicable
Item 20. Investment Advisory and Other
Services Management of the Trust
Item 21. Brokerage Allocation and Other
Practices Portfolio Transactions
Item 22. Tax Status U.S. Federal Tax Matters
Item 23. Financial Statements Experts; Financial Statements
and Independent Auditors' Report
PART C--OTHER INFORMATION
Items 24-33 have been answered in Part C of this Registration Statement.
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PROSPECTUS
[PIONEER LOGO]
Shares
Pioneer High Income Trust
Common Shares
$15.00 per share
----------------------
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Investment Objective. Pioneer High Income Trust (the trust) is a newly organized, diversified, closed-end management investment company. The trust's investment objective is a high level of current income. The trust may, as a secondary objective, also seek capital appreciation to the extent consistent with its investment objective.
Portfolio Contents. Under normal market conditions, the trust invests at
least 80% of its assets (net assets plus borrowing for investment purposes) in
below investment grade (high yield) debt securities, loans and preferred stocks.
These securities are rated Ba or lower by Moody's Investors Service, Inc.
(Moody's) or BB or lower by Standard & Poor's Ratings Group (Standard & Poor's)
or are unrated securities of comparable quality as determined by the trust's
investment adviser. Because the trust's investments will be concentrated in high
yield securities, it will be subject to risks of such securities. Below
investment grade securities are commonly referred to as "junk bonds" and are
considered speculative with respect to the issuer's capacity to pay interest and
repay principal. They involve greater risk of loss, are subject to greater price
volatility and are less liquid, especially during periods of economic
uncertainty or change, than higher rated debt securities. There can be no
assurance that the trust will achieve its investment objective.
Investment Adviser. Pioneer Investment Management, Inc. (Pioneer) is the trust's investment adviser. See "Management of the Trust."
No Prior History. Because the trust is newly organized, its shares have no history of public trading. Shares of closed-end funds frequently trade at prices lower than their net asset value. The risk of loss due to this discount may be greater for initial investors expecting to sell their shares in a relatively short period after completion of the public offering. The trust has applied to list its common shares on the New York Stock Exchange under the symbol "PHH," subject to official notice of issuance.
Leverage. The trust may, but is not required to, issue preferred shares or borrow to the maximum extent permitted by the Investment Company Act of 1940, as amended. This practice is known as leverage. The trust may issue preferred stock or borrow from banks or other financial institutions. The trust may also borrow through reverse repurchase agreements and mortgage dollar rolls. The use of preferred shares or borrowing to leverage the common shares creates risks.
PER SHARE TOTAL
--------- -----
Public offering price....................................... $15.00 $
Sales load.................................................. $.675 $
Estimated offering expenses................................. $ $
Net proceeds, after expenses, to the trust.................. $14.295 $
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The aggregate expenses of the offering are estimated to be $689,493. Pioneer has agreed to pay organizational expenses and offering costs (other than sales load) that exceed $0.03 per share. The underwriters may also purchase up to an additional common shares at the public offering price, less the sales load, within 45 days from the date of this prospectus to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The common shares will be ready for delivery on or about April , 2002.
----------------------
MERRILL LYNCH & CO. UBS WARBURG
RBC CAPITAL MARKETS
ADVEST, INC.
JANNEY MONTGOMERY SCOTT LLC
MCDONALD INVESTMENTS INC.
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You should read the prospectus, which contains important information about the trust, before deciding whether to invest in the trust's common shares and retain it for future reference. A statement of additional information, dated April , containing additional information about the trust, has been filed with the Securities and Exchange Commission and is incorporated by reference in its entirety into this prospectus. You may request a free copy of the statement of additional information, the table of contents of which is on page 48 of this prospectus, by calling 1-800-225-6292 or by writing to the trust. You can review and copy documents the trust has filed at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Call 1-202-942-8090 for information. The Commission charges a fee for copies. You can get the same information free from the Commission's EDGAR database on the Internet (http://www.sec.gov). You may also e-mail requests for these documents to publicinfo@sec.gov or make a request in writing to the Commission's Public Reference Section, Washington, D.C. 20549-0102.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary.......................................... 4
Summary of Trust Expenses................................... 15
The Trust................................................... 16
Use of Proceeds............................................. 16
Investment Objective and Principal Investment Strategies.... 16
Leverage.................................................... 24
Risk Factors................................................ 27
Management of the Trust..................................... 33
Dividends and Distributions; Automatic Dividend Reinvestment
Plan...................................................... 35
Closed-End Fund Structure................................... 38
U.S. Federal Income Tax Matters............................. 39
Net Asset Value............................................. 41
Description of Shares....................................... 41
Underwriting................................................ 46
Custodian, Transfer Agent, Dividend Disbursing Agent and
Registrar................................................. 47
Validity of Common Shares................................... 48
Table of Contents for Statement of Additional Information... 49
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The trust's common shares do not represent a deposit or obligation of, and are not guaranteed or endorsed by, any bank or other insured depository institution and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT, AND THE UNDERWRITERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE UNDERWRITERS ARE NOT, MAKING AN OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION APPEARING IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
Through and including , 2002 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade the common shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.
PRIVACY PRINCIPLES OF THE TRUST
The trust is committed to maintaining the privacy of its shareholders and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information the trust collects, how the trust protects that information and why, in certain cases, the trust may share information with select other parties.
Generally, the trust does not receive any non-public personal information relating to its shareholders, although certain non-public personal information of its shareholders may become available
to the trust. The trust does not disclose any non-public personal information about its shareholders or former shareholders to anyone, except as permitted by law or as is necessary in order to service shareholder accounts (for example, to a transfer agent or third-party administrator).
The trust restricts access to non-public personal information about its shareholders to employees of the trust's investment adviser and its affiliates with a legitimate business need for the information. The trust maintains physical, electronic and procedural safeguards designed to protect the non-public personal information of its shareholders.
PROSPECTUS SUMMARY
This is only a summary. This summary may not contain all of the information that you should consider before investing in the trust's common shares. You should review the more detailed information contained in this prospectus and in the statement of additional information, especially the information set forth under the heading "Risk Factors."
THE TRUST................... Pioneer High Income Trust (the trust) is a newly
organized, diversified, closed-end management
investment company.
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THE OFFERING................ The trust is offering common shares at an initial offering price of $15.00 per share. The common shares are being offered by a group of underwriters led by Merrill Lynch, Pierce, Fenner & Smith Incorporated, UBS Warburg LLC and RBC Dain Rauscher Inc. You must purchase at least 100 common shares ($1,500) in order to participate in the offering. The trust has granted the underwriters the right to purchase up to an additional common shares at the public offering price, less the sales load, within 45 days from the date of this prospectus to cover over-allotments. Pioneer Investment Management, Inc., the trust's investment adviser (Pioneer), has agreed to pay organizational expenses and offering costs (other than sales load) that exceed $0.03 per share. See "Underwriting."
INVESTMENT OBJECTIVE........ The trust's investment objective is a high level
of current income. The trust may, as a secondary
objective, also seek capital appreciation to the
extent consistent with its investment objective.
There can be no assurance that the trust will
achieve its investment objective.
INVESTMENT POLICIES......... The trust invests at least 80% of its assets (net
assets plus borrowing for investment purposes) in
below investment grade (high yield) debt
securities, loans and preferred stocks. These
securities are rated Ba or lower by Moody's or BB
or lower by Standard & Poor's or are unrated
securities of comparable quality as determined by
Pioneer, the trust's investment adviser. The trust
may invest in high yield securities of any rating,
including securities that are in default at the
time of purchase. Debt securities rated below
investment grade are commonly referred to as "junk
bonds" and are considered speculative with respect
to the issuer's capacity to pay interest and repay
principal. They involve greater risk of loss, are
subject to greater price volatility and are less
liquid, especially during periods of economic
uncertainty or change, than higher rated debt
securities. The trust's investments in high yield
securities may have fixed or variable principal
payments and all types of interest rate and
dividend payment and reset terms, including fixed
rate, adjustable rate, zero coupon, contingent,
deferred, payment in kind and auction rate
features. The trust invests in securities with a
broad range of maturities.
Convertible Securities. The trust's investments
in fixed income securities may include bonds and
preferred stocks that are convertible into the
equity securities of the issuer. The trust will
not
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invest more than 50% of its total assets in
convertible instruments. Depending upon the
relationship of the conversion price to the market
value of the underlying securities, convertible
securities may trade more like equity securities
than debt instruments.
Loans. The trust may invest a portion of its
assets in loan participations and other direct
claims against a borrower. The corporate loans in
which the trust invests primarily consist of
direct obligations of a borrower and may include
debtor in possession financings pursuant to
Chapter 11 of the U.S. Bankruptcy Code,
obligations of a borrower issued in connection
with a restructuring pursuant to Chapter 11 of the
U.S. Bankruptcy Code, leveraged buy-out loans,
leveraged recapitalization loans, receivables
purchase facilities, and privately placed notes.
The trust may invest in a corporate loan at
origination as a co-lender or by acquiring in the
secondary market participations in, assignments of
or novations of a corporate loan. By purchasing a
participation, the trust acquires some or all of
the interest of a bank or other lending
institution in a loan to a corporate or government
borrower.
Distressed Securities. The trust may invest up to
10% of its total assets in distressed securities,
including corporate loans, which are the subject
of bankruptcy proceedings or otherwise in default
as to the repayment of principal and/or payment of
interest at the time of acquisition by the trust
or are rated in the lower rating categories (Ca or
lower by Moody's or CC or lower by Standard &
Poor's) or which are unrated investments
considered by Pioneer to be of comparable quality.
An investment in distressed securities is
speculative and involves significant risk.
Distressed securities frequently do not produce
income while they are outstanding and may require
the trust to bear certain extraordinary expenses
in order to protect and recover its investment.
Therefore, to the extent the trust seeks capital
appreciation through investment in distressed
securities, the trust's ability to achieve current
income for its shareholders may be diminished. The
trust also will be subject to significant
uncertainty as to when, in what manner and for
what value the obligations evidenced by the
distressed securities will eventually be satisfied
(e.g., through a liquidation of the obligor's
assets, an exchange offer or plan of
reorganization involving the distressed securities
or a payment of some amount in satisfaction of the
obligation).
Foreign Issuers. While the trust primarily
invests in securities of U.S. issuers, the trust
may invest up to 25% of its total assets in
securities of corporate and governmental issuers
located outside the United States and denominated
in foreign currencies, including debt and equity
securities of corporate issuers and debt
securities of government issuers in developed and
emerging markets.
Illiquid Securities. The trust may invest up to
50% of its total assets in illiquid securities,
which are securities that can not be disposed of
by the trust within seven days in the ordinary
course of business at approximately the amount at
which the trust values the
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securities. Pioneer anticipates that its research
efforts and investment approach will result in a
significant portion of the trust's assets being
invested in thinly traded securities. The trust
may invest in securities that are sold in direct
private placement transactions and are neither
listed on an exchange nor traded in the
over-the-counter market.
Mortgage- and Asset-Backed Securities and Real
Estate Investment Trusts (REITs). The trust may
invest in mortgage- and asset-backed securities.
Mortgage-backed securities may be issued by
private companies or agencies of the U.S.
government and represent direct or indirect
participation in, or are collateralized by and
payable from, mortgage loans secured by real
property. Asset-backed securities represent
participations in and are secured by and payable
from assets such as installment sales or loan
contracts, leases, credit card receivables and
other categories of receivables. REITs are
companies that invest primarily in real estate or
real estate related loans. Interests in REITs are
significantly affected by the market for real
estate and are dependent upon management's skills
and cash flows.
Mortgage Dollar Rolls. The trust may enter into
mortgage dollar roll transactions to earn
additional income. In these transactions, the
trust sells a U.S. agency mortgage-backed security
and simultaneously agrees to repurchase at a
future date another U.S. agency mortgage-backed
security with the same interest rate and maturity
date, but generally backed by a different pool of
mortgages. The trust loses the right to receive
interest and principal payments on the security it
sold. However, the trust benefits from the
interest earned on investing the proceeds of the
sale and may receive a fee or a lower repurchase
price. The benefits from these transactions depend
upon Pioneer's ability to forecast mortgage
prepayment patterns on different mortgage pools.
The trust may lose money if, during the period
between the time it agrees to the forward purchase
of the mortgage securities and the settlement
date, these securities decline in value due to
market conditions or prepayments on the underlying
mortgages.
Strategic Transactions. The trust may use futures
and options on securities, indices and currencies,
forward foreign currency exchange contracts, swap
contracts 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, currencies, indices or
other financial instruments. The trust does not
use derivatives as a primary investment technique
and generally limits their use to hedging.
However, the trust may use derivatives for a
variety of non-principal purposes, including:
- As a hedge against adverse changes in
securities market prices, interest rates or
currency exchange rates;
- As a substitute for purchasing or selling
securities; and
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- To increase the trust's return as a non-hedging strategy that may be considered speculative.
Other Securities. Normally, the trust invests substantially all of its assets to meet its investment objective. The trust may invest the remainder of its assets in securities with remaining maturities of less than one year, equity securities, cash equivalents or may hold cash. For temporary defensive purposes, the trust 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 trust may not be able to achieve its investment objective.
USE OF LEVERAGE BY THE
TRUST....................... The trust may, but is not required to, issue
preferred shares, borrow money or issue debt
securities to the maximum extent permitted by the
Investment Company Act of 1940, as amended (1940
Act). This practice is known as leverage. The
trust currently anticipates that it will issue
preferred shares, as soon as practicable after the
closing of this offering, with an aggregate
liquidation preference of up to 25% of the trust's
total assets, but will be permitted to incur
leverage in an amount up to 33 1/3% of the trust's
total assets. The trust may not be leveraged at
all times and the amount of borrowing or leverage,
if any, may vary depending upon a variety of
factors, including Pioneer's outlook for the high
yield market and the costs that the trust would
incur as a result of such leverage. The trust may
issue preferred shares in the public or private
markets or may borrow from banks and other
financial institutions. The trust may also borrow
through reverse repurchase agreements and mortgage
dollar rolls. Leverage involves greater risks. The
trust's leveraging strategy may not be successful.
By leveraging its investment portfolio, the trust
creates an opportunity for increased net income or
capital appreciation. However, the use of leverage
also involves risks, which can be significant.
These risks include the possibility that the value
of the assets acquired with such borrowing
decreases although the trust's liability is fixed,
greater volatility in the trust's net asset value
and the market price of the trust's common shares
and higher expenses. Since Pioneer's fee is based
upon a percentage of the trust's total assets, the
investment adviser's fee will be higher if the
trust is leveraged and Pioneer will have an
incentive to be more aggressive and leverage the
trust. Pioneer intends only to leverage the trust
when it believes that the potential return on such
additional investments is likely to exceed the
costs incurred in connection with the borrowing.
INVESTMENT ADVISER.......... Pioneer is the trust's investment adviser. Pioneer
is responsible on a day-to-day basis for
investment of the trust's portfolio in accordance
with its investment objective and policies.
Pioneer makes all investment decisions for the
trust and places purchase and sale orders for the
trust's portfolio securities.
Pioneer or its predecessors have been managing
investment companies since 1928. Pioneer is an
indirect, majority owned subsidiary of UniCredito
Italiano S.p.A. (UniCredito), one of the
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leading banking groups in Italy. As of December
31, 2001, Pioneer and its affiliates had
approximately $99 billion in assets under
management worldwide, including over $19 billion
in U.S. open-end and closed-end investment
companies.
The trust pays Pioneer a fee for its investment
advisory services equal to 0.60% of the trust's
average weekly managed assets. This fee is payable
monthly. "Managed assets" means the total assets
of the trust (including any assets attributable to
any leverage that may be outstanding) minus the
sum of accrued liabilities (other than debt
representing financial leverage).
Day-to-day management of the trust's portfolio is
the responsibility of a team of fixed income
portfolio managers led by Kenneth J. Taubes. The
team manages other Pioneer mutual funds investing
primarily in fixed income securities. Mr. Taubes
is responsible for overseeing the U.S. and global
fixed income team. He joined Pioneer as a senior
vice president in September 1998 and has been an
investment professional since 1982. Prior to
joining Pioneer, Mr. Taubes had served since 1991
as a senior vice president and senior portfolio
manager for several institutional accounts and
mutual funds at another investment adviser.
LISTING..................... Currently, there is no public market for the
trust's common shares. However, the trust has
applied to list its common shares on the New York
Stock Exchange under the trader or "ticker" symbol
"PHH," subject to official notice of issuance.
CUSTODIAN AND TRANSFER
AGENT....................... Brown Brothers Harriman & Co. will serve as the
trust's custodian, and Pioneer Investment
Management Shareholder Services, Inc. will serve
as the trust's transfer agent. The transfer agent
has engaged Mellon Investor Services LLC as
sub-transfer agent, registrar, shareholder
servicing agent and dividend dispersing agent.
ADMINISTRATOR............... Pioneer has engaged Princeton Administrators L.P.,
an affiliate of Merrill Lynch, Pierce, Fenner and
Smith Incorporated, to provide certain
administrative services for the trust. Pioneer
(and not the trust) will pay the administrator a
monthly fee computed at an annual rate of 0.10% of
the trust's total managed assets, subject to a
minimum monthly fee of $10,000.
MARKET PRICE OF COMMON
SHARES...................... Common shares of closed-end investment companies
frequently trade at prices lower than their net
asset value. Common shares of closed-end
investment companies like the trust that invest
predominately in high yield securities have during
some periods traded at prices higher than their
net asset value and during other periods traded at
prices lower then their net asset value. The trust
cannot assure you that its common shares will
trade at a price higher than or equal to net asset
value. The trust's net asset value will be reduced
immediately following this offering by the sales
load and the amount of the organization and
offering expenses paid by the trust. See "Use of
Proceeds." In addition to net asset value, the
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market price of the trust's common shares may be
affected by such factors as the trust's use of
leverage, dividend stability, portfolio credit
quality, liquidity, market supply and demand, the
trust's dividends paid (which are in turn affected
by expenses), call protection for portfolio
securities and interest rate movements. See
"Leverage," "Risk Factors" and "Description of
Shares." The trust's common shares are designed
primarily for long-term investors, and you should
not purchase common shares if you intend to sell
them shortly after purchase.
DISTRIBUTIONS............... The trust intends to distribute to common
shareholders all or a portion of its net
investment income monthly and net realized capital
gains, if any, at least annually. The trust
expects that it will commence paying dividends
within 90 days of the date of this prospectus. At
times, in order to maintain a stable level of
distributions, the trust may pay out less than all
of its net investment income or pay out
accumulated undistributed income in addition to
current net investment income.
Dividend and capital gains distributions generally
are used to purchase additional common shares of
the trust. However, an investor can choose to
receive distributions in cash. Since not all
investors can participate in the automatic
dividend reinvestment plan, you should contact
your broker or nominee to confirm that you are
eligible to participate in the plan.
RISKS....................... No Operating History. The trust is a newly
organized closed-end management investment company
and has no operating history or history of public
trading.
Market Discount Risk. Shares of closed-end funds
frequently trade at prices lower than their net
asset value. This is commonly referred to as
"trading at a discount." This characteristic of
shares of closed-end funds is a risk separate and
distinct from the risk that the trust's net asset
value may decrease. Investors who sell their
shares within a relatively short period after
completion of the public offering are likely to be
exposed to this risk. Accordingly, the trust is
designed primarily for long-term investors and
should not be considered a vehicle for trading
purposes. Net asset value will be reduced
following the offering by the underwriting
discount and the amount of offering expenses paid
by the trust.
High Yield Debt Securities. Investment in high
yield securities involves substantial risk of
loss. Below investment grade debt securities or
comparable unrated securities are commonly
referred to as "junk bonds" and are considered
predominantly speculative with respect to the
issuer's ability to pay interest and principal and
are susceptible to default or decline in market
value due to adverse economic and business
developments. The market values for high yield
securities tend to be very volatile, and these
securities are less
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liquid than investment grade debt securities. For
these reasons, your investment in the trust is
subject to the following specific risks:
- Increased price sensitivity to changing
interest rates and to a deteriorating economic
environment;
- Greater risk of loss due to default or
declining credit quality;
- Adverse company specific events are more
likely to render the issuer unable to make
interest and/or principal payments; and
- If a negative perception of the high yield
market develops, the price and liquidity of
high yield securities may be depressed. This
negative perception could last for a
significant period of time.
Adverse changes in economic conditions are more
likely to lead to a weakened capacity of a high
yield issuer to make principal payments and
interest payments than an investment grade issuer.
The principal amount of high yield securities
outstanding has proliferated in the past decade as
an increasing number of issuers have used high
yield securities for corporate financing. An
economic downturn could severely affect the
ability of highly leveraged issuers to service
their debt obligations or to repay their
obligations upon maturity.
The secondary market for high yield securities may
not be as liquid as the secondary market for more
highly rated securities, a factor which may have
an adverse effect on the trust's ability to
dispose of a particular security. There are fewer
dealers in the market for high yield securities
than investment grade obligations. The prices
quoted by different dealers may vary significantly
and the spread between the bid and asked price is
generally much larger than for higher quality
instruments. Under adverse market or economic
conditions, the secondary market for high yield
securities could contract further, independent of
any specific adverse changes in the condition of a
particular issuer, and these instruments may
become illiquid. As a result, the trust could find
it more difficult to sell these securities or may
be able to sell the securities only at prices
lower than if such securities were widely traded.
Prices realized upon the sale of such lower rated
or unrated securities, under these circumstances,
may be less than the prices used in calculating
the trust's net asset value.
Interest Rate Risk. In addition to the risks
discussed above, high yield securities are subject
to certain risks, including:
- If interest rates go up, the value of debt
securities in the trust's portfolio generally
will decline;
- During periods of declining interest rates,
the issuer of a security may exercise its
option to prepay principal earlier than
scheduled, forcing the trust to reinvest in
lower yielding securities. This is known as
call or prepayment risk. High yield securities
frequently have call features that allow the
issuer to
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repurchase the security prior to its stated
maturity. An issuer may redeem a high yield
obligation if the issuer can refinance the
debt at a lower cost due to declining interest
rates or an improvement in the credit standing
of the issuer;
- During periods of rising interest rates, the
average life of certain types of securities
may be extended because of slower than
expected principal payments. This may lock in
a below market interest rate, increase the
security's duration (the estimated period
until the security is paid in full) and reduce
the value of the security. This is known as
extension risk; and
- Pioneer's judgment about the attractiveness,
relative value or potential appreciation of a
particular sector, security or investment
strategy may prove to be incorrect.
Convertible Securities. The trust may invest up
to 50% of its total assets in convertible
securities. Convertible securities generally offer
lower interest or dividend yields than
non-convertible securities of similar quality. As
with all fixed income securities, the market
values of convertible securities tend to decline
as interest rates increase and, conversely, to
increase as interest rates decline. However, when
the market price of the common stock underlying a
convertible security exceeds the conversion price,
the convertible security tends to reflect the
market price of the underlying common stock. As
the market price of the underlying common stock
declines, the convertible security tends to trade
increasingly on a yield basis and thus may not
decline in price to the same extent as the
underlying common stock. Convertible securities
rank senior to common stocks in an issuer's
capital structure and consequently entail less
risk than the issuer's common stock.
Corporate Loans. The trust may acquire interests
in loans made by banks or other financial
institutions to corporate issuers or participation
interests in such loans. By purchasing a
participation interest in a loan, the trust
acquires some or all of the interest of a bank or
other lending institution in a loan to a corporate
or government borrower. The participations
typically will result in the trust having a
contractual relationship only with the lender, not
the borrower. The trust will have the right to
receive payments of principal, interest and any
fees to which it is entitled only from the lender
selling the participation and only upon receipt by
the lender of the payments from the borrower. If
the trust only acquires a participation in the
loan made by a third party, the trust may not be
able to control the exercise of any remedies that
the lender would have under the corporate loan.
These arrangements are designed to give corporate
loan investors preferential treatment over high
yield investors in the event of a deterioration in
the credit quality of the issuer. Even when these
arrangements exist, however, there can be no
assurance that the principal and interest owed on
the corporate loan will be repaid in full.
Corporate loans generally bear interest at rates
set at a margin above a generally recognized
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base lending rate that may fluctuate on a
day-to-day basis, in the case of the prime rate of
a U.S. bank, or which may be adjusted on set
dates, typically 30 days but generally not more
than one year, in the case of the London Interbank
Offered Rate. Consequently, the value of corporate
loans held by the trust may be expected to
fluctuate significantly less than the value of
other fixed rate high yield instruments as a
result of changes in the interest rate
environment. On the other hand, the secondary
dealer market for certain corporate loans may not
be as well developed as the secondary dealer
market for high yield bonds and, therefore,
presents increased market risk relating to
liquidity and pricing concerns.
Illiquid Investments. The trust may invest up to
50% of its total assets in illiquid securities.
Illiquid securities may be difficult to dispose of
at a fair price at the times when the trust
believes it is desirable to do so. The market
price of illiquid securities generally is more
volatile than that of more liquid securities,
which may adversely affect the price that the
trust pays for or recovers upon the sale of
illiquid securities. Illiquid securities are also
more difficult to value and Pioneer's judgement
may play a greater role in the valuation process.
Investment of the trust's assets in illiquid
securities may restrict the trust's ability to
take advantage of market opportunities. The risks
associated with illiquid securities may be
particularly acute in situations in which the
trust's operations require cash and could result
in the trust borrowing to meet its short-term
needs or incurring losses on the sale of illiquid
securities.
Foreign Securities. Investments in non-U.S.
issuers may involve unique risks compared to
investing in securities of U.S. issuers. These
risks are more pronounced to the extent that the
trust invests a significant portion of its
non-U.S. investments in one region or in the
securities of emerging market issuers. These risks
may include:
- Less information about non-U.S. issuers or
markets may be available due to less rigorous
disclosure or accounting standards or
regulatory practices;
- Many non-U.S. markets are smaller, less liquid
and more volatile. In a changing market,
Pioneer may not be able to sell the trust's
portfolio securities at times, in amounts and
at prices it considers reasonable;
- Adverse effect of currency exchange rates or
controls on the value of the trust's
investments;
- The economies of non-U.S. countries may grow
at slower rates than expected or may
experience a downturn or recession;
- Economic, political and social developments
may adversely affect the securities markets;
and
- Withholding and other non-U.S. taxes may
decrease the trust's return.
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Sovereign Debt. An investment in debt obligations
of non-U.S. governments and their political
subdivisions (sovereign debt), whether denominated
in U.S. dollars or a foreign currency, involves
special risks that are not present in corporate
debt obligations. The non-U.S. issuer of the
sovereign debt or the non-U.S. governmental
authorities that control the repayment of the debt
may be unable or unwilling to repay principal or
interest when due, and the trust may have limited
recourse in the event of a default. During periods
of economic uncertainty, the market prices of
sovereign debt may be more volatile than prices of
debt obligations of U.S. issuers. In the past,
certain non-U.S. countries have encountered
difficulties in servicing their debt obligations,
withheld payments of principal and interest and
declared moratoria on the payment of principal and
interest on their sovereign debt.
Derivatives. Even a small investment in
derivatives can have a significant impact on the
trust's exposure to interest rates or currency
exchange rates. If changes in a derivative's value
do not correspond to changes in the value of the
trust's other investments, the trust may not fully
benefit from or could lose money on the derivative
position. In addition, some derivatives involve
risk of loss if the person who issued the
derivative defaults on its obligation. Certain
derivatives may be less liquid and more difficult
to value.
Leverage. The trust may issue preferred shares,
borrow money or issue debt securities to the
maximum extent permitted by the 1940 Act. Leverage
creates risks which may adversely affect the
return for the holders of common shares,
including:
- the likelihood of greater volatility of net
asset value and market price of the trust's
common shares;
- fluctuations in the dividend rates on any
preferred shares or in interest rates on
borrowings and short-term debt;
- increased operating costs, which may reduce
the trust's total return; and
- the potential for a decline in the value of an
investment acquired with borrowed funds, while
the trust's obligations under such borrowing
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 trust'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 trust incurs
capital losses, the return of the trust 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.
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Certain types of borrowings may result in the
trust being subject to covenants in credit
agreements, including those relating to asset
coverage, borrowing base and portfolio composition
requirements and additional covenants that may
affect the trust's ability to pay dividends and
distributions on common shares in certain
instances. The trust may also be required to
pledge its assets to the lenders in connection
with certain types of borrowing. The trust may be
subject to certain restrictions on investments
imposed by guidelines of one or more nationally
recognized rating organizations which may issue
ratings for the preferred shares or short-term
debt instruments issued by the trust. These
guidelines may impose asset coverage or portfolio
composition requirements that are more stringent
than those imposed by the 1940 Act.
Recent Events. The terrorist attacks in the
United States on September 11, 2001 had a
disruptive effect on the securities markets. The
trust does not know how long the securities
markets will continue to be affected by these
events and cannot predict the effects of similar
events in the future on the U.S. economy. High
yield securities tend to be more volatile than
higher rated fixed income securities so that these
events and any actions resulting from them may
have a greater impact on the prices and volatility
of high yield debt instruments than on higher
rated fixed income securities.
Anti-takeover Provisions. The trust's Declaration
of Trust and by-laws include provisions that could
limit the ability of other entities or persons to
acquire control of the trust or to change the
composition of its Board of Trustees. Such
provisions could limit the ability of shareholders
to sell their shares at a premium over prevailing
market prices by discouraging a third party from
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seeking to obtain control of the trust. These provisions include staggered terms of office for the Trustees, advance notice requirements for shareholder proposals, and super-majority voting requirements for open-ending the trust or a merger, liquidation, asset sales and similar transactions.
SUMMARY OF TRUST EXPENSES
The following table shows the trust's expenses as a percentage of net assets attributable to common shares assuming the use of leverage through the issuance of preferred shares in an amount equal to 25% of the trust's total managed assets. "Managed assets" means the total assets of the trust (including any assets attributable to any leverage that may be outstanding) minus the sum of accrued liabilities (other than debt representing financial leverage). The liquidation preference of the preferred shares is not a liability.
SHAREHOLDER TRANSACTION EXPENSES(1): Sales Load (as a percentage of offering price)........... 4.50% Dividend Reinvestment Plan Fees(2)....................... None |
PERCENTAGE OF NET ASSETS
ATTRIBUTABLE TO
COMMON SHARES(3)
------------------------
ANNUAL EXPENSES:
Management Fee........................................... 0.80%
Other Expenses........................................... 0.16%
----
Total Annual Expenses.................................... 0.96%
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(1) The trust will bear expenses in connection with the offering in an amount up to $0.03 per share. Pioneer has agreed to pay organizational expenses and offering costs (other than sales load) that exceed $0.03 per share. If the trust completes an offering of preferred shares, the trust will also pay expenses in connection with such offering.
(2) A shareholder that directs the plan agent to sell shares held in a dividend reinvestment account will pay brokerage charges.
(3) The table above shows the estimated expenses that you will bear as a holder of common shares, assuming the trust issues preferred shares in an amount equal to 25% of the trust's total managed assets, stated as percentage of the trust's net assets attributable to common shares. The table below shows the estimated expenses of the trust assuming the trust does not issue preferred shares or otherwise utilize leverage.
PERCENTAGE OF NET ASSETS
ATTRIBUTABLE TO
COMMON SHARES
------------------------
ANNUAL EXPENSES:
Management Fee........................................... 0.60%
Other Expenses........................................... 0.07%
----
Total Annual Expenses.................................... 0.67%
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The purpose of the tables in this section is to assist you in understanding the various costs and expenses that a shareholder will bear directly or indirectly by investing in the trust's common shares. As of the date of this prospectus, the trust has not commenced investment operations. The amount set forth under other expenses is based upon estimates for the current year, assuming no exercise of the over-allotment option granted to the underwriters. The table assumes that the trust issues 30,000,000 common shares and issues preferred shares as a means of leverage. If the trust issues fewer common shares, all other things being equal, these expenses would increase. If the trust leverages through borrowing, the trust would incur interest expense. For additional information with respect to the trust's expenses, see "Management of the Trust." Other expenses include custodial and transfer agency fees,
reimbursement of Pioneer for certain administrative expenses, legal and accounting expenses, and listing fees.
EXAMPLE:
The following example illustrates the expenses (including the sales load
of $45.00) that you would pay on a $1,000 investment in common shares, assuming
(1) total net annual expenses of 0.96% of net assets attributable to common
shares and (2) a 5% annual return:*
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Total Expenses Incurred............................... $54 $74 $ 96 $158
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THE TRUST
Pioneer High Income Trust is a newly organized, diversified, closed-end management investment company. The trust was organized under the laws of the state of Delaware on January 30, 2002, and has registered under the 1940 Act. As a recently organized entity, the trust has no operating history. The trust's principal office is located at 60 State Street, Boston, Massachusetts 02109, and its telephone number is (617) 742-7825.
USE OF PROCEEDS
The net proceeds of this offering will be approximately $ (or approximately $ assuming the underwriters exercise the over-allotment option in full) after payment of offering costs estimated to be approximately $ and the deduction of the sales load.
The trust will invest the net proceeds of the offering in accordance with its investment objective and policies as stated below. However, due to current illiquidity in the high yield debt markets, investments that, in the judgment of Pioneer, are appropriate investments for the trust may not be immediately available. Therefore, the trust expects that there will be an initial investment period of up to three months following the completion of its common shares offering before it is invested in accordance with its investment objective and policies. Pending such investment, the trust anticipates that all or a portion of the proceeds will be invested in U.S. government securities or high grade, short-term money market instruments. See "Investment Objective and Principal Investment Strategies."
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The trust's investment objective is a high level of current income. The trust may, as a secondary objective, also seek capital appreciation to the extent consistent with its investment objective. The trust's investment objective is a fundamental policy and may not be changed without the approval of a majority of the outstanding voting securities (as defined in the 1940 Act) of the trust. The trust makes no assurance that it will realize its objective.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the trust invests at least 80% of its assets (net assets plus borrowing for investment purposes) in below investment grade debt securities, loans and preferred stocks. This is a non-fundamental policy and may be changed by the Board of Trustees of the trust provided that shareholders are provided with at least 60 days prior written notice of any change as required by the rules under the 1940 Act.
High Yield Securities. The high yield securities in which the trust invests are rated Ba or lower by Moody's or BB or lower by Standard & Poor's or are unrated but determined by Pioneer to be of comparable quality. Debt securities rated below investment grade are commonly referred to as "junk bonds" and are considered speculative with respect to the issuer's capacity to pay interest and repay principal. Below investment grade debt securities involve greater risk of loss, are subject to greater price volatility and are less liquid, especially during periods of economic uncertainty or change, than higher rated debt securities. An investment in the trust may be speculative in that it involves a high degree of risk and should not constitute a complete investment program. See "Risk Factors." For purposes of the trust's credit quality policies, if a security receives different ratings from nationally recognized securities rating organizations, the trust will use the rating chosen by the portfolio manager as most representative of the security's credit quality. The trust's high yield securities may have fixed or variable principal payments and all types of interest rate and dividend payment and reset terms, including fixed rate, adjustable rate, zero coupon, contingent, deferred, payment in kind and auction rate features. The trust invests in high yield securities with a broad range of maturities.
Convertible Securities. The trust's investment in fixed income securities may include bonds and preferred stocks that are convertible into the equity securities of the issuer or a related company. The trust will not invest more that 50% of its total in convertible securities. Depending upon the relationship of the conversion price to the market value of the underlying securities, convertible securities may trade more like equity securities than debt instruments. Consistent with its objective and other investment policies, the trust may also invest a portion of its assets in equity securities, including common stocks, depositary receipts, warrants, rights and other equity interests.
Loans. The trust may invest a portion of its assets in loan participations and other direct claims against a borrower. The trust considers corporate loans to be high yield debt instruments if the issuer has outstanding debt securities rated below investment grade or has no rated securities, and includes corporate loans in determining whether at least 80% of its assets are invested in high yield debt instruments. The corporate loans in which the trust invests primarily consist of direct obligations of a borrower and may include debtor in possession financings pursuant to Chapter 11 of the U.S. Bankruptcy Code, obligations of a borrower issued in connection with a restructuring pursuant to Chapter 11 of the U.S. Bankruptcy Code, leveraged buy-out loans, leveraged recapitalization loans, receivables purchase facilities, and privately placed notes. The trust may invest in a corporate loan at origination as a co-lender or by acquiring in the secondary market participations in, assignments of or novations of a corporate loan. By purchasing a participation, the trust acquires some or all of the interest of a bank or other lending institution in a loan to a corporate or government borrower. The participations typically will result in the trust having a contractual relationship only with the lender, not the borrower. The trust will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the participation and only upon receipt by the lender of the payments from the borrower. Many such loans are secured, although some may be unsecured. Such loans may be in default at the time of purchase. Loans that are fully secured offer the trust more protection than an unsecured loan in the event of non-payment of scheduled interest or principal. However, there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower's obligation, or that the collateral can be liquidated. Direct debt instruments may involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection
to the trust in the event of fraud or misrepresentation. In addition, loan participations involve a risk of insolvency of the lending bank or other financial intermediary. The markets in loans are not regulated by federal securities laws or the Securities and Exchange Commission (SEC).
As in the case of other high yield investments, such corporate loans may be rated in the lower rating categories of the established rating services (Ba or lower by Moody's or BB or lower by Standard & Poor's), or may be unrated investments considered by Pioneer to be of comparable quality. As in the case of other high yield investments, such corporate loans can be expected to provide higher yields than lower yielding, higher rated fixed income securities, but may be subject to greater risk of loss of principal and income. There are, however, some significant differences between corporate loans and high yield bonds. Corporate loan obligations are frequently secured by pledges of liens and security interests in the assets of the borrower, and the holders of corporate loans are frequently the beneficiaries of debt service subordination provisions imposed on the borrower's bondholders. These arrangements are designed to give corporate loan investors preferential treatment over high yield investors in the event of a deterioration in the credit quality of the issuer. Even when these arrangements exist, however, there can be no assurance that the borrowers of the corporate loans will repay principal and/or pay interest in full. Corporate loans generally bear interest at rates set at a margin above a generally recognized base lending rate that may fluctuate on a day-to-day basis, in the case of the prime rate of a U.S. bank, or which may be adjusted on set dates, typically 30 days but generally not more than one year, in the case of the London Interbank Offered Rate. Consequently, the value of corporate loans held by the trust may be expected to fluctuate significantly less than the value of other fixed rate high yield instruments as a result of changes in the interest rate environment. On the other hand, the secondary dealer market for certain corporate loans may not be as well developed as the secondary dealer market for high yield bonds and, therefore, presents increased market risk relating to liquidity and pricing concerns.
Distressed Securities. The trust may invest up to 10% of its total assets in distressed securities, including corporate loans, which are the subject of bankruptcy proceedings or otherwise in default as to the repayment of principal and/or payment of interest at the time of acquisition by the trust or are rated in the lower rating categories (Ca or lower by Moody's or CC or lower by Standard & Poor's) or which are unrated investments considered by Pioneer to be of comparable quality. Investment in distressed securities is speculative and involves significant risk. Distressed securities frequently do not produce income while they are outstanding and may require the trust to bear certain extraordinary expenses in order to protect and recover its investment. Therefore, to the extent the trust seeks capital appreciation through investment in distressed securities, the trust's ability to achieve current income for its shareholders may be diminished. The trust also will be subject to significant uncertainty as to when and in what manner and for what value the obligations evidenced by the distressed securities will eventually be satisfied (e.g., through a liquidation of the obligor's assets, an exchange offer or plan of reorganization involving the distressed securities or a payment of some amount in satisfaction of the obligation). In addition, even if an exchange offer is made or a plan of reorganization is adopted with respect to distressed securities held by the trust, there can be no assurance that the securities or other assets received by the trust in connection with such exchange offer or plan of reorganization will not have a lower value or income potential than may have been anticipated when the investment was made. Moreover, any securities received by the trust upon completion of an exchange offer or plan of reorganization may be restricted as to resale. As a result of the trust's participation in negotiations with respect to any exchange offer or plan of reorganization with respect to an issuer of distressed securities, the trust may be restricted from disposing of such securities.
Preferred Shares. The trust may invest in preferred shares. Preferred shares are equity securities, but they have many characteristics of fixed income securities, such as a fixed dividend payment rate and/or a liquidity preference over the issuer's common shares. However, because preferred
shares are equity securities, they may be more susceptible to risks traditionally associated with equity investments than the trust's fixed income securities.
Foreign Securities. While the trust primarily invests in securities of U.S. issuers, the trust may invest up to 25% of its total assets in securities of corporate and governmental issuers located outside the United States, including debt and equity securities of corporate issuers and debt securities of government issuers in developed and emerging markets.
Illiquid Securities. The trust may invest in bonds, corporate loans, convertible securities, preferred stocks and other securities that lack a secondary trading market or are otherwise considered illiquid. Liquidity of a security relates to the ability to easily dispose of the security and the price to be obtained upon disposition of the security, which may be less than would be obtained for a comparable more liquid security. The trust may invest up to 50% of its total assets in investments that are not readily marketable, and it may also invest in securities that are subject to contractual restrictions on resale. Such investments may affect the trust's ability to realize the net asset value in the event of a voluntary or involuntary liquidation of its assets. See "Net Asset Value" for information with respect to the valuation of illiquid securities.
Structured Securities. The trust may invest in structured securities. The value of the principal and/or interest on such securities is determined by reference to changes in the value of specific currencies, interest rates, commodities, indices or other financial indicators (Reference) or the relative change in two or more References. The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased depending upon changes in the Reference. The terms of the structured securities may provide in certain circumstances that no principal is due at maturity and, therefore, may result in a loss of the trust's investment. Changes in the interest rate or principal payable at maturity may be a multiple of the changes in the value of the Reference. Consequently, structured securities may entail a greater degree of market risk than other types of fixed income securities.
Mortgage-Backed Securities. The trust may invest in mortgage pass-through certificates and multiple-class pass-through securities, and mortgage derivative securities such as real estate mortgage investment conduits (REMIC) pass-through certificates, collateralized mortgage obligations (CMOs) and stripped mortgage-backed securities (SMBS), interest only mortgage-backed securities and principal only mortgage-backed securities and other types of mortgage-backed securities that may be available in the future. A mortgage-backed security is an obligation of the issuer backed by a mortgage or pool of mortgages or a direct interest in an underlying pool of mortgages. Some mortgage-backed securities, such as CMOs, make payments of both principal and interest at a variety of intervals; others make semiannual interest payments at a predetermined rate and repay principal at maturity (like a typical bond). Mortgage-backed securities are based on different types of mortgages including those on commercial real estate or residential properties. Mortgage-backed securities often have stated maturities of up to thirty years when they are issued, depending upon the length of the mortgages underlying the securities. In practice, however, unscheduled or early payments of principal and interest on the underlying mortgages may make the securities' effective maturity shorter than this, and the prevailing interest rates may be higher or lower than the current yield of the trust's portfolio at the time the trust receives the payments for reinvestment. Mortgage-backed securities may have less potential for capital appreciation than comparable fixed income securities, due to the likelihood of increased prepayments of mortgages as interest rates decline. If the trust buys mortgage-backed securities at a premium, mortgage foreclosures and prepayments of principal by mortgagors (which may be made at any time without penalty) may result in some loss of the trust's principal investment to the extent of the premium paid. The value of mortgage-backed securities may also change due to shifts in the market's perception of issuers. In addition, regulatory or tax changes may adversely affect the mortgage securities markets as a
whole. Non-governmental mortgage-backed securities may offer higher yields than those issued by government entities but also may be subject to greater price changes than governmental issues.
Asset-Backed Securities. The trust may invest in asset-backed securities, which are securities that represent a participation in, or are secured by and payable from, a stream of payments generated by particular assets, most often a pool or pools of similar assets (e.g., trade receivables). The credit quality of these securities depends primarily upon the quality of the underlying assets and the level of credit support and/or enhancement provided.
The underlying assets (e.g., loans) are subject to prepayments which shorten the securities' weighted average maturity and may lower their return. If the credit support or enhancement is exhausted, losses or delays in payment may result if the required payments of principal and interest are not made. The value of these securities also may change because of changes in the market's perception of the creditworthiness of the servicing agent for the pool, the originator of the pool, or the financial institution or trust providing the credit support or enhancement.
REITs. REITs primarily invest in income producing real estate or real estate related loans or interests. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. REITs are not taxed on income distributed to shareholders provided they comply with the applicable requirements of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code). The trust will in some cases indirectly bear its proportionate share of any management and other expenses paid by REITs in which it invests in addition to the expenses paid by the trust. Debt securities issued by REITs are, for the most part, general and unsecured obligations and are subject to risks associated with REITs.
U.S. Government Securities. U.S. government securities in which the trust invests include debt obligations of varying maturities issued by the U.S. Treasury or issued or guaranteed by an agency or instrumentality of the U.S. government, including the Federal Housing Administration, Federal Financing Bank, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Government National Mortgage Association (GNMA), General Services Administration, Central Bank for Cooperatives, Federal Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), Maritime Administration, Tennessee Valley Authority, District of Columbia Armory Board, Student Loan Marketing Association, Resolution Trust Corporation and various institutions that previously were or currently are part of the Farm Credit System (which has been undergoing reorganization since 1987). Some U.S. government securities, such as U.S. Treasury bills, Treasury notes and Treasury bonds, which differ only in their interest rates, maturities and times of issuance, are supported by the full faith and credit of the United States. Others are supported by: (i) the right of the issuer to borrow from the U.S. Treasury, such as securities of the Federal Home Loan Banks; (ii) the discretionary authority of the U.S. government to purchase the agency's obligations, such as securities of the FNMA; or (iii) only the credit of the issuer. No assurance can be given that the U.S. government will provide financial support in the future to U.S. government agencies, authorities or instrumentalities that are not supported by the full faith and credit of the United States. Securities guaranteed as to principal and interest by the U.S. government, its agencies, authorities or instrumentalities include: (i) securities for which the payment of principal and interest is backed by an irrevocable letter of credit issued by the U.S. government or any of its agencies, authorities or instrumentalities; and (ii) participations in loans made to non-U.S. governments or other entities that
are so guaranteed. The secondary market for certain of these participations is limited and, therefore, may be regarded as illiquid.
Zero Coupon Securities. The securities in which the trust invests may include zero coupon securities, which are debt obligations that are issued or purchased at a significant discount from face value. The discount approximates the total amount of interest the security will accrue and compound over the period until maturity or the particular interest payment date at a rate of interest reflecting the market rate of the security at the time of issuance. Zero coupon securities do not require the periodic payment of interest. These investments benefit the issuer by mitigating its need for cash to meet debt service, but generally require a higher rate of return to attract investors who are willing to defer receipt of cash. These investments may experience greater volatility in market value than securities that make regular payments of interest. The trust accrues income on these investments for tax and accounting purposes, which is distributable to shareholders and which, because no cash is received at the time of accrual, may require the liquidation of other portfolio securities to satisfy the trust's distribution obligations, in which case the trust will forgo the purchase of additional income producing assets with these funds. Zero coupon U.S. government securities include STRIPS and CUBES, which are issued by the U.S. Treasury as component parts of U.S. Treasury bonds and represent scheduled interest and principal payments on the bonds.
Investments in Equity Securities. Consistent with its objective, the trust may invest in equity securities. Equity securities, such as common stock, generally represent an ownership interest in a company. While equity securities have historically generated higher average returns than fixed income securities, equity securities have also experienced significantly more volatility in those returns. An adverse event, such as an unfavorable earnings report, may depress the value of a particular equity security held by the trust. Also, the price of equity securities, particularly common stocks, are sensitive to general movements in the stock market. A drop in the stock market may depress the price of equity securities held by the trust.
Other Investment Companies. The trust may invest in the securities of other investment companies to the extent that such investments are consistent with the trust's investment objective and policies and permissible under the 1940 Act. Under the 1940 Act, the trust may not acquire the securities of other domestic or non-U.S. investment companies if, as a result, (i) more than 10% of the trust's total assets would be invested in securities of other investment companies, (ii) such purchase would result in more than 3% of the total outstanding voting securities of any one investment company being held by the trust, or (iii) more than 5% of the trust's total assets would be invested in any one investment company. These limitations do not apply to the purchase of shares of any investment company in connection with a merger, consolidation, reorganization or acquisition of substantially all the assets of another investment company. The trust does not currently intend to invest in other investment companies for which Pioneer or any of its affiliates act as an investment adviser or distributor. However, Pioneer has applied for, and if granted would rely upon, an exemptive order from the SEC that would permit the trust to invest cash balances in money market funds managed by Pioneer.
The trust, as a holder of the securities of other investment companies, will bear its pro rata portion of the other investment companies' expenses, including advisory fees. These expenses are in addition to the direct expenses of the trust's own operations.
Defensive and Temporary Investments. When changing economic conditions and other factors cause the yield difference between lower rated and higher rated securities to narrow, the trust may purchase higher rated debt instruments if Pioneer believes that the risk of loss of income and principal may be reduced substantially with only a relatively small reduction in yield. In addition, under unusual
market or economic conditions or for temporary defensive purposes, the trust may invest up to 100% of its total assets in securities issued or guaranteed by the U.S. government or its instrumentalities or agencies, certificates of deposit, bankers' acceptances and other bank obligations, commercial paper rated in the highest category by a nationally recognized statistical rating organization or other fixed income securities deemed by Pioneer to be consistent with a defensive posture, or may hold cash. The yield on such securities may be lower than the yield on lower rated fixed income securities.
Strategic Transactions. The trust may, but is not required to, use various strategic transactions described below to earn income, facilitate portfolio management and mitigate risks. Such strategic transactions are generally accepted under modern portfolio management and are regularly used by many mutual funds and other institutional investors. Although Pioneer seeks to use the practices to further the trust's investment objective, no assurance can be given that these practices will achieve this result.
The trust may purchase and sell derivative instruments such as exchange-listed and over-the-counter put and call options on securities, financial futures, equity, fixed-income and interest rate indices, and other financial instruments, purchase and sell financial futures contracts and options thereon, enter into various interest rate transactions such as swaps, caps, floors or collars and enter into various currency transactions such as currency forward contracts, currency futures contracts, currency swaps or options on currency or currency futures or credit transactions and credit default swaps. The trust also may purchase derivative instruments that combine features of these instruments. Collectively, all of the above are referred to as "Strategic Transactions." The trust generally seeks to use Strategic Transactions as a portfolio management or hedging technique to seek to protect against possible adverse changes in the market value of securities held in or to be purchased for the trust's portfolio, protect the value of the trust's portfolio, facilitate the sale of certain securities for investment purposes, manage the effective interest rate exposure of the trust, protect against changes in currency exchange rates, manage the effective maturity or duration of the trust's portfolio, or establish positions in the derivatives markets as a temporary substitute for purchasing or selling particular securities. The trust may use Strategic Transactions to enhance potential gain, although no more than 5% of the trust's total assets will be committed to initial margin for Strategic Transactions for non-hedging purposes.
Strategic Transactions have risks, including the imperfect correlation between the value of such instruments and the underlying assets, the possible default of the other party to the transaction or illiquidity of the derivative instruments. Furthermore, the ability to successfully use Strategic Transactions depends on Pioneer's ability to predict pertinent market movements, which cannot be assured. Thus, the use of Strategic Transactions may result in losses greater than if they had not been used, may require the trust to sell or purchase portfolio securities at inopportune times or for prices other than current market values, may limit the amount of appreciation the trust can realize on an investment, or may cause the trust to hold a security that it might otherwise sell. The use of currency transactions can result in the trust incurring losses as a result of the imposition of exchange controls, suspension of settlements or the inability of the trust to deliver or receive a specified currency. Additionally, amounts paid by the trust as premiums and cash or other assets held in margin accounts with respect to Strategic Transactions are not otherwise available to the trust for investment purposes.
A more complete discussion of Strategic Transactions and their risks is contained in the statement of additional information.
Mortgage Dollar Rolls. The trust may enter into mortgage dollar roll transactions to earn additional income. In these transactions, the trust sells a U.S. agency mortgage-backed security and simultaneously agrees to repurchase at a future date another U.S. agency mortgage-backed security with the same interest rate and maturity date, but generally backed by a different pool of mortgages. The
trust loses the right to receive interest and principal payments on the security it sold. However, the trust benefits from the interest earned on investing the proceeds of the sale and may receive a fee or a lower repurchase price. The benefits from these transactions depend upon Pioneer's ability to forecast mortgage prepayment patterns on different mortgage pools. The trust may lose money if, during the period between the time it agrees to the forward purchase of the mortgage securities and the settlement date, these securities decline in value due to market conditions or prepayments on the underlying mortgages.
Repurchase Agreements. The trust may enter into repurchase agreements with broker-dealers, member banks of the Federal Reserve System and other financial institutions. Repurchase agreements are arrangements under which the trust purchases securities and the seller agrees to repurchase the securities within a specific time and at a specific price. The repurchase price is generally higher than the trust's purchase price, with the difference being income to the trust. Under the direction of the Board of Trustees, Pioneer reviews and monitors the creditworthiness of any institution which enters into a repurchase agreement with the trust. The counterparty's obligations under the repurchase agreement are collateralized with U.S. Treasury and/or agency obligations with a market value of not less than 100% of the obligations, valued daily. Collateral is held by the trust's custodian in a segregated, safekeeping account for the benefit of the trust. Repurchase agreements afford the trust an opportunity to earn income on temporarily available cash at low risk. In the event of commencement of bankruptcy or insolvency proceedings with respect to the seller of the security before repurchase of the security under a repurchase agreement, the trust may encounter delay and incur costs before being able to sell the security. Such a delay may involve loss of interest or a decline in price of the security. If the court characterizes the transaction as a loan and the trust has not perfected a security interest in the security, the trust may be required to return the security to the seller's estate and be treated as an unsecured creditor of the seller. As an unsecured creditor, the trust would be at risk of losing some or all of the principal and interest involved in the transaction.
Lending of Portfolio Securities. The trust may lend portfolio securities to registered broker-dealers or other institutional investors deemed by Pioneer to be of good standing under agreements which require that the loans be secured continuously by collateral in cash, cash equivalents or U.S. Treasury bills maintained on a current basis at an amount at least equal to the market value of the securities loaned. The trust continues to receive the equivalent of the interest or dividends paid by the issuer on the securities loaned as well as the benefit of an increase and the detriment of any decrease in the market value of the securities loaned and would also receive compensation based on investment of the collateral. The trust would not, however, have the right to vote any securities having voting rights during the existence of the loan, but would call the loan in anticipation of an important vote to be taken among holders of the securities or of the giving or withholding of consent on a material matter affecting the investment.
As with other extensions of credit, there are risks of delay in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. The trust will lend portfolio securities only to firms that have been approved in advance by the Board of Trustees, which will monitor the creditworthiness of any such firms. At no time would the value of the securities loaned exceed 33 1/3% of the value of the trust's total assets.
Portfolio Turnover. It is the policy of the trust not to engage in trading for short-term profits although portfolio turnover rate is not considered a limiting factor in the execution of investment decisions for the trust.
BENEFITS OF INVESTING IN THE TRUST
Investment in the trust offers the individual investor several potential benefits. In managing a portfolio of debt instruments, Pioneer provides professional management which includes the extensive credit analysis needed to invest in high yield bonds, corporate loans, distressed securities, foreign securities, convertible securities and preferred shares. The trust also relieves the investor of the burdensome administrative details involved in managing a portfolio of such investments. Additionally, Pioneer may seek to enhance the yield or capital appreciation of the trust's common shares by leveraging the trust's capital structure through the issuance of preferred shares or short-term debt securities or the borrowing of money. These benefits are at least partially offset by the expenses involved in running an investment company. Such expenses primarily consist of advisory fees and operational costs. The use of leverage also involves certain expenses and risk considerations. See "Risk Factors--Leverage" and "Leverage."
PIONEER'S INVESTMENT APPROACH
Pioneer considers both broad economic and issuer specific factors in selecting a portfolio designed to achieve the trust's investment objective. In assessing the appropriate maturity, rating, sector and country weightings of the trust'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, sector and issuer diversification. Pioneer also employs due diligence and fundamental research to assess an issuer's credit quality, taking into account financial condition and profitability, future capital needs, potential for change in rating, industry outlook, the competitive environment and management ability.
Pioneer's analysis of issuers may include, among other things, historic and current financial conditions, current and anticipated cash flow and borrowing requirements, value of assets in relation to historical costs, strength of management, responsiveness to business conditions, credit standing, and current and anticipated results of operations. While Pioneer considers as one factor in its credit analysis the ratings assigned by the rating services, Pioneer performs its own independent credit analysis of issuers and, consequently, the trust may invest, without limit, in unrated securities. As a result, the trust's ability to achieve its investment objective may depend to a greater extent on Pioneer's own credit analysis than investment companies which invest in higher rated securities.
In making these portfolio decisions, Pioneer relies on the knowledge, experience and judgment of its staff who have access to a wide variety of research. The trust may continue to hold securities that are downgraded after the trust purchases them and will sell such securities only if, in Pioneer's judgment, it is advantageous to sell such securities.
LEVERAGE
The trust may issue preferred shares or borrow or issue short-term debt
securities to increase its assets available for investment. The trust is
authorized to issue preferred shares or issue debt obligations to the maximum
extent permitted by the 1940 Act. The trust currently anticipates that it will
issue, as soon as practicable after the closing of this offering, preferred
shares with an aggregate liquidation preference of up to 25% of the trust's
total assets, but will be permitted to incur leverage in an amount up to 33 1/3%
of the trust's total assets. The trust generally will not issue preferred shares
or borrow
unless Pioneer expects that the trust will achieve a greater return on such borrowed funds than the additional costs the trust incurs as a result of such borrowing. The trust also may borrow money as a temporary measure for extraordinary or emergency purposes, including the payment of dividends and the settlement of securities transactions which otherwise might require untimely dispositions of the trust's holdings. When the trust leverages its assets, the fees paid to Pioneer for investment advisory and management services will be higher than if the trust did not borrow because Pioneer's fees are calculated based on the trust's total assets including the proceeds of the issuance of preferred shares or any outstanding borrowings. Consequently, the trust and Pioneer may have differing interests in determining whether to leverage the trust's assets. The Board of Trustees will monitor this potential conflict.
The trust's use of leverage is premised upon the expectation that the trust's preferred share dividends or borrowing cost will be lower than the return the trust achieves on its investments with the proceeds of the issuance of preferred shares or borrowing. Such difference in return may result from the trust's higher credit rating or the short-term nature of its borrowing compared to the long-term nature of its investments. Since the total assets of the trust (including the assets obtained from leverage) will be invested in the higher yielding portfolio investments or portfolio investments with the potential for capital appreciation, the holders of common shares will be the beneficiaries of the incremental return. Should the differential between the underlying assets and cost of leverage narrow, the incremental return "pick up" will be reduced. Furthermore, if long-term rates rise or the trust otherwise incurs losses on its investments, the trust's net asset value attributable to its common shares will reflect the decline in the value of portfolio holdings resulting therefrom.
Leverage creates risks which may adversely affect the return for the holders of common shares, including:
- the likelihood of greater volatility of net asset value and market price of common shares;
- fluctuations in the dividend rates on any preferred shares or in interest rates on borrowings and short-term debt;
- increased operating costs, which may reduce the trust's total return; and
- the potential for a decline in the value of an investment acquired with borrowed funds, while the trust's obligations under such borrowing remains fixed.
To the extent the income or capital appreciation derived from securities purchased with funds received from leverage exceeds the cost of leverage, the trust'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 trust incurs capital losses, the return of the trust 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. Pioneer may determine to maintain the trust's leveraged position if it expects that the long-term benefits to the trust's shareholders of maintaining the leveraged position will outweigh the current reduced return. Capital raised through the issuance of preferred shares or borrowing will be subject to dividend payments or interest costs that may or may not exceed the income and appreciation on the assets purchased. The issuance of additional classes of preferred shares involves offering expenses and other costs and may limit the trust's freedom to pay dividends on common shares or to engage in other activities. The trust also may be required to maintain minimum average balances in connection with borrowings or to pay a commitment or other fee to maintain a line of credit; either of these requirements will increase the cost of borrowing over the stated interest rate.
The trust may be subject to certain restrictions on investments imposed by guidelines of one or more nationally recognized rating organizations which may issue ratings for the preferred shares or short-term debt instruments issued by the trust. These guidelines may impose asset coverage or portfolio composition requirements that are more stringent than those imposed by the 1940 Act. Certain types of borrowings may result in the trust being subject to covenants in credit agreements, including those relating to asset coverage, borrowing base and portfolio composition requirements and additional covenants that may affect the trust's ability to pay dividends and distributions on common shares in certain instances. The trust may also be required to pledge its assets to the lenders in connection with certain types of borrowing. Pioneer does not anticipate that these covenants or restrictions will adversely affect its ability to manage the trust's portfolio in accordance with the trust's investment objective and policies. Due to these covenants or restrictions, the trust may be forced to liquidate investments at times and at prices that are not favorable to the trust, or the trust may be forced to forgo investments that Pioneer otherwise views as favorable.
Under the 1940 Act, the trust is not permitted to issue preferred shares unless immediately after such issuance the net asset value of the trust's portfolio is at least 200% of the liquidation value of the outstanding preferred shares (i.e., such liquidation value may not exceed 50% of the value of the trust's total assets). In addition, the trust is not permitted to declare any cash dividend or other distribution on its common shares unless, at the time of such declaration, the net asset value of the trust's portfolio (determined after deducting the amount of such dividend or distribution) is at least 200% of such liquidation value. In the event preferred shares are issued, the trust intends, to the extent possible, to purchase or redeem preferred shares from time to time to maintain coverage of any preferred shares of at least 200%. Under the 1940 Act, the trust is not permitted to incur indebtedness unless immediately after such borrowing the trust has an asset coverage of at least 300% of the aggregate outstanding principal balance of indebtedness (i.e., such indebtedness may not exceed 33 1/3% of the value of the trust's total assets). Additionally, under the 1940 Act, the trust may not declare any dividend or other distribution upon any class of its shares, or purchase any such shares, unless the aggregate indebtedness of the trust has, at the time of the declaration of any such dividend or distribution or at the time of any such purchase, an asset coverage of at least 300% after deducting the amount of such dividend, distribution, or purchase price, as the case may be.
If and to the extent that the trust employs leverage will depend on many factors, the most important of which are investment outlook, market conditions and interest rates. Successful use of a leveraging strategy depends on Pioneer's ability to predict correctly interest rates and market movements. There is no assurance that a leveraging strategy will be successful during any period in which it is employed. None of the other investment companies managed by Pioneer use leverage to a material extent or as part of a systematic investment program.
Assuming the trust issues preferred shares with a liquidation preference equal to approximately 25% of the trust's total assets and an annual dividend rate of 2.30% of such liquidation preference (which rate is approximately the rate which Pioneer expects the trust to pay), based on market rates as of the date of this prospectus, the trust would need to achieve an annual return on its total assets of 1.295% in order to cover such dividend payments on the preferred shares.
The following table illustrates the hypothetical effect on the return to a holder of the trust's common shares of the leverage obtained by issuing preferred shares with a liquidation value equal to 25% of the trust's total assets, assuming hypothetical annual returns of the trust's portfolio of minus 10% to plus 10%. As the table shows, leverage generally increases the return to shareholders when portfolio return is positive and greater than the cost of leverage and decreases the return when the
portfolio return is negative or less than the cost of leverage. The figures appearing in the table are hypothetical and actual returns may be greater or less than those appearing in the table.
Assumed portfolio return (net of expenses)..... (10.00)% (5.00)% 0.00% 5.00% 10.00% Corresponding common share return.............. (14.10)% (7.43)% (0.76)% 5.90% 12.56% |
Until the trust issues preferred shares or borrows, the trust's common shares will not be leveraged, and the risks and special considerations related to leverage described in this prospectus will not apply. Such leveraging of the common shares cannot be fully achieved until the proceeds resulting from the use of leverage have been invested in longer term debt instruments in accordance with the trust's investment objective and policies.
RISK FACTORS
General. The trust is a diversified, closed-end management investment company designed primarily as a long-term investment and not as a trading tool. Because the trust invests in high yield securities, an investment in the trust's common shares may be speculative in that it involves a high degree of risk. The trust should not constitute a complete investment program. Due to the uncertainty in all investments, there can be no assurance that the trust will achieve its investment objective.
No Operating History. The trust is a newly organized closed-end management investment company and has no operating history or history of public trading.
High Yield Debt Securities. Investment in high yield securities involves substantial risk of loss. Below investment grade debt securities or comparable unrated securities are commonly referred to as "junk bonds" and are considered predominantly speculative with respect to the issuer's ability to pay interest and principal and are susceptible to default or decline in market value due to adverse economic and business developments. The market values for high yield securities tend to be very volatile, and these securities are less liquid than investment grade debt securities. For these reasons, your investment in the trust is subject to the following specific risks:
- Increased price sensitivity to changing interest rates and to a deteriorating economic environment;
- Greater risk of loss due to default or declining credit quality;
- Adverse company specific events are more likely to render the issuer unable to make interest and/or principal payments; and
- If a negative perception of the high yield market develops, the price and liquidity of high yield securities may be depressed. This negative perception could last for a significant period of time.
Debt securities rated below investment grade are speculative with respect to the capacity to pay interest and repay principal in accordance with the terms of such securities. A rating of C from Moody's means that the issue so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Standard & Poor's assigns a rating of C to issues that are currently highly vulnerable to nonpayment, and the C rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on the obligation are being continued (a C rating is also assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying). See the statement of additional information for a description of Moody's and Standard & Poor's ratings.
Adverse changes in economic conditions are more likely to lead to a weakened capacity of a high yield issuer to make principal payments and interest payments than an investment grade issuer. The principal amount of high yield securities outstanding has proliferated in the past decade as an increasing number of issuers have used high yield securities for corporate financing. An economic downturn could severely affect the ability of highly leveraged issuers to service their debt obligations or to repay their obligations upon maturity. The percentage of defaults on high yield debt securities as reported by Moody's were 5.5% and 5.7% in 1999 and 2000, and increased to 10.2% in 2001. If the national economy enters into a deeper recessionary phase during 2002 or interest rates rise sharply, the number of defaults by high yield issuers is likely to increase. Similarly, down-turns in profitability in specific industries could adversely affect the ability of high yield issuers in those industries to meet their obligations. The market values of lower quality debt securities tend to reflect individual developments of the issuer to a greater extent than do higher quality securities, which react primarily to fluctuations in the general level of interest rates. Factors having an adverse impact on the market value of lower quality securities may have an adverse effect on the trust's net asset value and the market value of its common shares. In addition, the trust may incur additional expenses to the extent it is required to seek recovery upon a default in payment of principal or interest on its portfolio holdings. In certain circumstances, the trust may be required to foreclose on an issuer's assets and take possession of its property or operations. In such circumstances, the trust would incur additional costs in disposing of such assets and potential liabilities from operating any business acquired.
The secondary market for high yield securities may not be as liquid as the secondary market for more highly rated securities, a factor which may have an adverse effect on the trust's ability to dispose of a particular security when necessary to meet its liquidity needs. There are fewer dealers in the market for high yield securities than investment grade obligations. The prices quoted by different dealers may vary significantly and the spread between the bid and asked price is generally much larger than for higher quality instruments. Under adverse market or economic conditions, the secondary market for high yield securities could contract further, independent of any specific adverse changes in the condition of a particular issuer, and these instruments may become illiquid. As a result, the trust could find it more difficult to sell these securities or may be able to sell the securities only at prices lower than if such securities were widely traded. Prices realized upon the sale of such lower rated or unrated securities, under these circumstances, may be less than the prices used in calculating the trust's net asset value.
Since investors generally perceive that there are greater risks associated with lower quality debt securities of the type in which the trust may invest a portion of its assets, the yields and prices of such securities may tend to fluctuate more than those for higher rated securities. In the lower quality segments of the debt securities market, changes in perceptions of issuers' creditworthiness tend to occur more frequently and in a more pronounced manner than do changes in higher quality segments of the debt securities market, resulting in greater yield and price volatility.
If the trust invests in high yield securities that are rated C or below, the trust will incur significant risk in addition to the risks associated with investments in high yield securities and corporate loans. Distressed securities frequently do not produce income while they are outstanding. The trust may purchase distressed securities that are in default or the issuers of which are in bankruptcy. The trust may be required to bear certain extraordinary expenses in order to protect and recover its investment.
Leverage. The trust may issue preferred shares, borrow money or issue debt securities with a liquidation preference or principal amount up to the maximum extent permitted by the 1940 Act.
Leverage creates risks which may adversely affect the return for the holders of common shares, including:
- the likelihood of greater volatility of net asset value and market price of common shares;
- fluctuations in the dividend rates on any preferred shares or in interest rates on borrowings and short-term debt;
- increased operating costs, which may reduce the trust's total return; and
- the potential for a decline in the value of an investment acquired with borrowed funds, while the trust's obligations under such borrowing 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 trust'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 trust incurs capital losses, the return of the trust 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.
Certain types of borrowings may result in the trust being subject to covenants in credit agreements, including those relating to asset coverage, borrowing base and portfolio composition requirements and additional covenants that may affect the trust's ability to pay dividends and distributions on common shares in certain instances. The trust may also be required to pledge its assets to the lenders in connection with certain types of borrowing. The trust may be subject to certain restrictions on investments imposed by guidelines of one or more nationally recognized rating organizations which may issue ratings for the preferred shares or short-term debt instruments issued by the trust. These guidelines may impose asset coverage or portfolio composition requirements that are more stringent than those imposed by the 1940 Act.
Since Pioneer's fee is a percentage of the trust's total assets, Pioneer's fee will be higher if the trust is leveraged and Pioneer will have an incentive to be more aggressive and leverage the trust.
Interest Rate Risk. Fixed income securities, including high yield securities, are subject to certain common risks, including:
- If interest rates go up, the value of debt securities in the trust's portfolio generally will decline;
- During periods of declining interest rates, the issuer of a security may exercise its option to prepay principal earlier than scheduled, forcing the trust to reinvest in lower yielding securities. This is known as call or prepayment risk. Debt securities frequently have call features that allow the issuer to repurchase the security prior to its stated maturity. An issuer may redeem an obligation if the issuer can refinance the debt at a lower cost due to declining interest rates or an improvement in the credit standing of the issuer;
- During periods of rising interest rates, the average life of certain types of securities may be extended because of slower than expected principal payments. This may lock in a below market interest rate, increase the security's duration (the estimated period until the security is paid in full) and reduce the value of the security. This is known as extension risk; and
- Pioneer's judgment about the attractiveness, relative value or potential appreciation of a particular sector, security or investment strategy may prove to be incorrect.
Convertible Securities. The trust may invest up to 50% of its total assets in convertible securities. Convertible fixed income securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. As with all fixed income securities, the market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. However, when the market price of the common stock underlying a convertible security exceeds the conversion price, the convertible security tends to reflect the market price of the underlying common stock. As the market price of the underlying common stock declines, the convertible security tends to trade increasingly on a yield basis and thus may not decline in price to the same extent as the underlying common stock. Convertible securities rank senior to common stocks in an issuer's capital structure and consequently entail less risk than the issuer's common stock.
Corporate Loans. The trust may acquire interests in loans made by banks or other financial institutions to corporate issuers or participation interests in such loans. By purchasing a participation interest in a loan, the trust acquires some or all of the interest of a bank or other lending institution in a loan to a corporate or government borrower. The participations typically will result in the trust having a contractual relationship only with the lender, not the borrower. The trust will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the participation and only upon receipt by the lender of the payments from the borrower.
Unlike most other high yield securities, corporate loan obligations are frequently secured by security interests in the assets of the borrower and the holders of corporate loans are frequently the beneficiaries of debt service subordination provisions imposed on the borrower's bondholders. If the trust only acquires a participation in the loan made by a third party, the trust may not be able to control the exercise of any remedies that the lender would have under the corporate loan. These arrangements are designed to give corporate loan investors preferential treatment over high yield investors in the event of a deterioration in the credit quality of the issuer. Even when these arrangements exist, however, there can be no assurance that the principal and interest owed on the corporate loan will be repaid in full. Corporate loans generally bear interest at rates set at a margin above a generally recognized base lending rate that may fluctuate on a day-to-day basis, in the case of the prime rate of a U.S. bank, or which may be adjusted on set dates, typically 30 days but generally not more than one year, in the case of the London Interbank Offered Rate. Consequently, the value of corporate loans held by the trust may be expected to fluctuate significantly less than the value of other fixed rate high yield instruments as a result of changes in the interest rate environment. On the other hand, the secondary dealer market for certain corporate loans may not be as well developed as the secondary dealer market for high yield bonds and, therefore, presents increased market risk relating to liquidity and pricing concerns.
Mortgage- and Asset-Backed Securities and Structured Securities. To the extent the trust invests significantly in asset-backed and mortgage-related securities, its exposure to prepayment and extension risks may be greater than if it invested in other fixed income securities. Certain debt instruments may only pay principal at maturity or may only represent the right to receive payments of principal or payments of interest on underlying pools of mortgage or government securities, but not both. The value of these types of instruments may change more drastically than debt securities that pay both principal and interest during periods of changing interest rates. Principal only mortgage-backed securities generally increase in value if interest rates decline, but are also subject to the risk of prepayment. Interest only instruments generally increase in value in a rising interest rate environment when fewer of the underlying mortgages are prepaid. The value of interest only instruments may decline significantly or these instruments may become worthless in the event that the underlying mortgage pool experiences substantial and unanticipated prepayments.
The trust may invest in mortgage derivatives and structured securities. Because these securities have imbedded leverage features, small changes in interest or prepayment rates may cause large and sudden price movements. Mortgage derivatives can also become illiquid and hard to value in declining markets.
REITs. Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. An equity REIT may be affected by changes in the value of the underlying properties owned by the REIT. A mortgage REIT may be affected by changes in interest rates and the ability of the issuers of its portfolio mortgages to repay their obligations. REITs are dependent upon the skills of their managers and are not diversified. REITs are generally dependent upon maintaining cash flows to repay borrowings and to make distributions to shareholders and are subject to the risk of default by lessees or borrowers. REITs whose underlying assets are concentrated in properties used by a particular industry, such as health care, are also subject to risks associated with such industry.
REITs (especially mortgage REITs) are also subject to interest rate risks. When interest rates decline, the value of a REIT's investment in fixed rate obligations can be expected to rise. Conversely, when interest rates rise, the value of a REIT's investment in fixed rate obligations can be expected to decline. If the REIT invests in adjustable rate mortgage loans the interest rates on which are reset periodically, yields on a REIT's investments in such loans will gradually align themselves to reflect changes in market interest rates. This causes the value of such investments to fluctuate less dramatically in response to interest rate fluctuations than would investments in fixed rate obligations.
REITs may have limited financial resources and may trade less frequently and in a more limited volume than larger company securities.
Illiquid Investments. The trust may invest up to 50% of its total assets in illiquid securities. Illiquid securities may be difficult to dispose of at a fair price at the times when the trust believes it is desirable to do so. The market price of illiquid securities generally is more volatile than that of more liquid securities, which may adversely affect the price that the trust pays for or recovers upon the sale of illiquid securities. Illiquid securities are also more difficult to value and Pioneer's judgement may play a greater role in the valuation process. Investment of the trust's assets in illiquid securities may restrict the trust's ability to take advantage of market opportunities. The risks associated with illiquid securities may be particularly acute in situations in which the trust's operations require cash and could result in the trust borrowing to meet its short-term needs or incurring losses on the sale of illiquid securities.
Foreign Securities. Investments in non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers. These risks are more pronounced to the extent that the trust invests a significant portion of its non-U.S. investments in one region or in the securities of emerging market issuers. These risks may include:
- Less information about non-U.S. issuers or markets may be available due to less rigorous disclosure or accounting standards or regulatory practices;
- Many non-U.S. markets are smaller, less liquid and more volatile. In a changing market, Pioneer may not be able to sell the trust's portfolio securities at times, in amounts and at prices it considers reasonable;
- Adverse effect of currency exchange rates or controls on the value of the trust's investments
- The economies of non-U.S. countries may grow at slower rates than expected or may experience a downturn or recession;
- Economic, political and social developments may adversely affect the securities markets; and
- Withholding and other non-U.S. taxes may decrease the trust's return.
There may be less publicly available information about non-U.S. markets and issuers than is available with respect to U.S. securities and issuers. Non-U.S. companies generally are not subject to accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. companies. The trading markets for most non-U.S. securities are generally less liquid and subject to greater price volatility than the markets for comparable securities in the U.S. The markets for securities in certain emerging markets are in the earliest stages of their development. Even the markets for relatively widely traded securities in certain non-U.S. markets, including emerging market countries, may not be able to absorb, without price disruptions, a significant increase in trading volume or trades of a size customarily undertaken by institutional investors in the U.S. Additionally, market making and arbitrage activities are generally less extensive in such markets, which may contribute to increased volatility and reduced liquidity.
Economies and social and political climate in individual countries may differ unfavorably from the U.S. Non-U.S. economies may have less favorable rates of growth of gross domestic product, rates of inflation, currency valuation, capital reinvestment, resource self-sufficiency and balance of payments positions. Many countries have experienced substantial, and in some cases extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, very negative effects on the economies and securities markets of certain emerging countries. Unanticipated political or social developments may also affect the values of the trust's investments and the availability to the trust of additional investments in such countries.
Currency Risks. The value of the securities denominated or quoted in foreign currencies may be adversely affected by fluctuations in the relative currency exchange rates and by exchange control regulations. The trust's investment performance may be negatively affected by a devaluation of a currency in which the trust's investments are denominated or quoted. Further, the trust's investment performance may be significantly affected, either positively or negatively, by currency exchange rates because the U.S. dollar value of securities denominated or quoted in another currency will increase or decrease in response to changes in the value of such currency in relation to the U.S. dollar.
Sovereign Debt. An investment in debt obligations of non-U.S. governments and their political subdivisions (sovereign debt), whether denominated in U.S. dollars for a foreign currency, involves special risks that are not present in corporate debt obligations. The non-U.S. issuer of the sovereign debt or the non-U.S. governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due, and the trust may have limited recourse in the event of a default. During periods of economic uncertainty, the market prices of sovereign debt may be more volatile than prices of debt obligations of U.S. issuers. In the past, certain non-U.S. countries have encountered difficulties in servicing their debt obligations, withheld payments of principal and interest and declared moratoria on the payment of principal and interest on their sovereign debt.
A sovereign debtor's willingness or ability to repay principal and pay
interest in a timely manner may be affected by, among other factors, its cash
flow situation, the extent of its foreign currency reserves, the availability of
sufficient foreign exchange, the relative size of the debt service burden, the
sovereign debtor's policy toward its principal international lenders and local
political constraints. Sovereign debtors may also be dependent on expected
disbursements from non-U.S. governments, multilateral agencies and other
entities to reduce principal and interest arrearages on their debt. The failure
of a sovereign debtor to implement economic reforms, achieve specified levels of
economic performance or repay principal or interest when due may result in the
cancellation of third-party
commitments to lend funds to the sovereign debtor, which may further impair such debtor's ability or willingness to service its debts.
Market Price of Shares. Shares of closed-end funds frequently trade at a prices lower than their net asset value. This is commonly referred to as "trading at a discount." This characteristic of shares of closed-end funds is a risk separate and distinct from the risk that the trust's net asset value may decrease. Investors who sell their shares within a relatively short period after completion of the public offering are likely to be exposed to this risk. Accordingly, the trust is designed primarily for long-term investors and should not be considered a vehicle for trading purposes. Net asset value will be reduced following the offering by the underwriting discount and the amount of offering expenses paid by the trust.
Whether investors will realize a gain or loss upon the sale of the trust's common shares will depend upon whether the market value of the shares at the time of sale is above or below the price the investor paid, taking into account transaction costs, for the shares and is not directly dependent upon the trust's net asset value. Because the market value of the trust's shares will be determined by factors such as the relative demand for and supply of the shares in the market, general market conditions and other factors beyond the control of the trust, the trust cannot predict whether its common shares will trade at, below or above net asset value, or below or above the initial offering price for the shares.
Strategic Transactions. Even a small investment in derivatives can have a significant impact on the trust's exposure to interest rates or currency exchange rates. If changes in a derivative's value do not correspond to changes in the value of the trust's other investments, the trust may not fully benefit from or could lose money on the derivative position. In addition, some derivatives involve risk of loss if the person who issued the derivative defaults on its obligation. Certain derivatives may be less liquid and more difficult to value.
Anti-takeover Provisions. The trust's Agreement and Declaration of Trust and by-laws include provisions that could limit the ability of other entities or persons to acquire control of the trust or to change the composition of its Board of Trustees. Such provisions could limit the ability of shareholders to sell their shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the trust. These provisions include staggered terms of office for the Trustees, advance notice requirements for shareholder proposals, and super-majority voting requirements for certain transactions with affiliates, open-ending the trust or a merger, liquidation, asset sales and similar transactions.
Recent Events. The terrorist attacks in the United States on September 11, 2001 had a disruptive effect on the securities markets. The trust does not know how long the securities markets will continue to be affected by these events and cannot predict the effects of similar events in the future on the U.S. economy. High yield debt instruments tend to be more volatile than higher rated fixed income securities so that these events and any actions resulting from them may have a greater impact on the prices and volatility of high yield debt instruments than on higher rated fixed income securities.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The trust's Board of Trustees provides broad supervision over the affairs
of the trust. The officers of the trust are responsible for the trust's
operations. The Trustees and officers of the trust, together with their
principal occupations during the past five years, are listed in the statement of
additional
information. Each of the Trustees serves as a Trustee of each of the 60 U.S. registered investment portfolios for which Pioneer serves as investment adviser.
INVESTMENT ADVISER
The trust has contracted with Pioneer to act as its investment adviser. Pioneer is an indirect, majority owned subsidiary of UniCredito. Pioneer is part of the global asset management group providing investment management and financial services to mutual funds, institutional and other clients. As of December 31, 2001, assets under management were approximately $99 billion worldwide, including over $19 billion in assets under management by Pioneer. Certain Trustees or officers of the trust are also directors and/or officers of certain of UniCredito's subsidiaries.
As the trust's investment adviser, Pioneer provides the trust with investment research, advice and supervision and furnishes the trust with an investment program consistent with the trust's investment objective and policies, subject to the supervision of the trust'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 trust's securities transactions, and reports to the Trustees on the trust's investments and performance.
COMPENSATION AND EXPENSES
Under the management contract, the trust will pay to Pioneer monthly, as compensation for the services rendered and expenses paid by it, a fee equal on an annual basis to 0.60% of the trust's average weekly managed assets. Because the fee paid to Pioneer is determined on the basis of the trust's managed assets, Pioneer's interest in determining whether to leverage the trust may differ from the interests of the trust.
The trust's average weekly managed assets are determined for the purpose of calculating the management fee by taking the average of all the weekly determinations of total assets during a given calendar month. The fees are payable for each calendar month as soon as practicable after the end of that month.
Under the terms of its management contract with the trust, Pioneer pays all the operating expenses, including executive salaries and the rental of office space, relating to its services for the trust, with the exception of the following, which are to be paid by the trust: (a) charges and expenses 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 administrator, custodian, transfer agent, plan agent, dividend disbursing agent and registrar appointed by the trust; (d) issue and transfer taxes chargeable to the trust in connection with securities transactions to which the trust 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 trust to federal, state or other governmental agencies; (f) fees and expenses involved in registering and maintaining registrations of the trust 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 trust and the Trustees; (i) compensation of those Trustees of the trust who are not affiliated with
or interested persons of Pioneer or the trust (other than as Trustees); (j) the cost of preparing and printing share certificates; (k) interest on borrowed money, if any; and (l) the fees and other expenses of listing the trust's shares on the New York Stock Exchange or any other national stock exchange. In addition, the trust will pay all brokers' and underwriting commissions chargeable to the trust in connection with securities transactions to which the trust is a party.
The trust has also entered into an administration agreement with Pioneer, pursuant to which Pioneer provides certain administrative and accounting services. Pioneer is reimbursed by the trust for Pioneer's costs in providing such services, except for the fees of any sub-administrators retained by Pioneer, which fees are paid by Pioneer. Pioneer has retained Princeton Administrators L.P., an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, to provide certain administrative services to the trust on its behalf. Pioneer will pay Princeton Administrators L.P. a monthly fee equal at an annual rate to 0.10% of the average weekly value of the trust's managed assets, subject to a minimum monthly fee of $10,000.
PORTFOLIO MANAGER
Day-to-day management of the trust's portfolio is the responsibility of a team of fixed income portfolio managers led by Kenneth J. Taubes. The team manages other Pioneer mutual funds investing primarily in fixed income securities. Mr. Taubes is responsible for overseeing the U.S. and global fixed income team. He joined Pioneer as a senior vice president in September 1998 and has been an investment professional since 1982. Prior to joining Pioneer, Mr. Taubes had served since 1991 as a senior vice president and senior portfolio manager for several Putnam Investments institutional accounts and mutual funds. The team may draw upon the research and investment management expertise of Pioneer's affiliate, Pioneer Investment Management Limited.
John A. Carey, the head of portfolio management and an executive vice president of Pioneer, supervises Mr. Taubes and his team. Mr. Carey joined Pioneer as an analyst and has been an investment professional since 1979.
DIVIDENDS AND DISTRIBUTIONS; AUTOMATIC DIVIDEND REINVESTMENT PLAN
DIVIDENDS AND DISTRIBUTIONS
The trust intends to distribute dividends of all or a portion of its net investment income monthly to holders of common shares. It is expected that the trust will commence paying dividends to holders of common shares within approximately 90 days of the date of this prospectus. Dividends and distributions may be payable in cash or common shares, with the option to receive cash in lieu of the shares. The trust may at times in its discretion pay out less than the entire amount of net investment income earned in any particular period and may at times pay out such accumulated undistributed income in addition to net investment income earned in other periods in order to permit the trust to maintain a more stable level of distributions. As a result, the dividend paid by the trust to holders of common shares for any particular period may be more or less than the amount of net investment income earned by the trust during such period. The trust is not required to maintain a stable level of distributions to shareholders. For federal tax purposes, the trust is required to distribute substantially all of its net investment income for each year. All net realized capital gains, if any, will be distributed to the trust's shareholders at least annually.
Under the 1940 Act, the trust is not permitted to incur indebtedness unless immediately after such incurrence the trust has an asset coverage of at least 300% of the aggregate outstanding principal
balance of indebtedness. Additionally, under the 1940 Act, the trust may not declare any dividend or other distribution upon any class of its capital shares, or purchase any such capital shares, unless the aggregate indebtedness of the trust has, at the time of the declaration of any such dividend or distribution or at the time of any such purchase, an asset coverage of at least 300% after deducting the amount of such dividend, distribution, or purchase price, as the case may be.
While any preferred shares are outstanding, the trust may not declare any cash dividend or other distribution on its common shares, unless at the time of such declaration, (1) all accumulated preferred dividends have been paid and (2) the net asset value of the trust's portfolio (determined after deducting the amount of such dividend or other distribution) is at least 200% of the liquidation value of the outstanding preferred shares (expected to be equal to the original purchase price per share plus any accumulated and unpaid dividends thereon).
In addition to the limitations imposed by the 1940 Act described above, certain lenders may impose additional restrictions on the payment of dividends or distributions on the common shares in the event of a default on the trust's borrowings. If the trust's ability to make distributions on its common shares is limited, such limitation could under certain circumstances impair the ability of the trust to maintain its qualification for taxation as a regulated investment company, which would have adverse tax consequences for shareholders. See "Leverage" and "U.S. Federal Income Tax Matters."
See "Automatic Dividend Reinvestment Plan" for information concerning the manner in which dividends and distributions to common shareholders may be automatically reinvested in common shares. Dividends and distributions may be taxable to shareholders whether they are reinvested in shares of the trust or received in cash.
The yield on the trust's common shares will vary from period to period depending on factors including, but not limited to, market conditions, the timing of the trust's investment in portfolio securities, the securities comprising the trust's portfolio, changes in interest rates including changes in the relationship between short-term rates and long-term rates, the amount and timing of the use of borrowings and other leverage by the trust, the effects of leverage on the common shares discussed above under "Leverage," the timing of the investment of leverage proceeds in portfolio securities, the trust's net assets and its operating expenses. Consequently, the trust cannot guarantee any particular yield on its shares and the yield for any given period is not an indication or representation of future yields on the trust's shares.
AUTOMATIC DIVIDEND REINVESTMENT PLAN
Pursuant to the trust's Automatic Dividend Reinvestment Plan (Plan), unless a shareholder is ineligible or elects otherwise, all dividend and capital gains distributions are automatically reinvested by Mellon Bank, N.A. (Mellon), as agent for shareholders in administering the Plan (Plan Agent), in additional common shares of the trust. In the event a dividend or capital gains distribution is declared in shares with the option to take cash and the shares are trading at a "market discount," as described below, the Plan provides that its distribution will be taken in cash and reinvested in accordance with the Plan. Shareholders who are ineligible or who elect not to participate in the Plan will receive all dividends and distributions payable in cash paid by check mailed directly to the shareholder of record (or, if the shares are held in street or other nominee name, then to such nominee) by Mellon, as dividend paying agent. Such shareholders may elect not to participate in the Plan and to receive all distributions of dividends and capital gains in cash by sending written instructions to Mellon, as dividend paying agent, at the address set forth below. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by written notice if received by the Plan
Agent not less than ten days prior to any dividend record date; otherwise, such termination will be effective with respect to any subsequently declared dividend or capital gains distribution.
Whenever the trust declares an ordinary income dividend or a capital gain dividend (collectively referred to as "dividends") payable either in shares or in cash, non-participants in the Plan will receive cash, and participants in the Plan will receive the equivalent in shares of common shares. The shares are acquired by the Plan Agent for the participant's account, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized common shares from the trust ("newly issued shares") or (ii) by purchase of outstanding common shares on the open market (open-market purchases) on the New York Stock Exchange or elsewhere. If, on the payment date for any dividend or distribution, the net asset value per share of the common shares is equal to or less than the market price per common share plus estimated brokerage commissions (such condition being referred to herein as "market premium"), the Plan Agent will invest the amount of such dividend or distribution in newly issued shares on behalf of the participant. The number of newly issued common shares to be credited to the participant's account will be determined by dividing the dollar amount of the dividend by the net asset value per 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 may not exceed 5%. If on the dividend payment date the net asset value per share is greater than the market value or premium (such condition being referred to herein as "market discount"), the Plan Agent will invest the dividend amount in shares acquired on behalf of the participant in open-market purchases. Prior to the time common shares commence trading on the New York Stock Exchange, participants in the Plan will receive any dividends in newly issued shares.
In the event of a market discount on the payment date for any dividend or distribution, the Plan Agent has until the last business day before the next date on which the shares trade on an "ex-dividend" basis or in no event more than 30 days after the dividend payment date (last purchase date) to invest the dividend amount in shares acquired in open-market purchases. It is contemplated that the trust will pay monthly income dividends. Therefore, the period during which open-market purchases can be made will exist only from the payment date on the dividend through the date before the next ex-dividend date, which typically will be approximately ten days. If, before the Plan Agent has completed its open-market purchases, the market price of a common share exceeds the net asset value per share, the average per share purchase price paid by the Plan Agent may exceed the net asset value of the trust's shares, resulting in the acquisition of fewer shares than if the dividend had been paid in newly issued shares on the dividend payment date. Because of the foregoing difficulty with respect to open- market purchases, the Plan provides that if the Plan Agent is unable to invest the full dividend amount in open-market purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Agent will cease making open-market purchases and will invest the uninvested portion of the dividend amount in newly issued shares at the close of business on the last purchase date.
The Plan Agent maintains all shareholders' accounts in the Plan and furnishes written confirmation of all transactions in the account, including information needed by shareholders for tax records. Dividend reinvestment is confirmed quarterly. Shares in the account of each Plan participant will be held by the Plan Agent in non-certificated form in the name of the participant, and each shareholder's proxy will include those shares purchased or received pursuant to the Plan. The Plan Agent will forward all proxy solicitation materials to participants and vote proxies for shares held pursuant to the Plan in accordance with the instructions of the participants.
In the case of shareholders such as banks, brokers or nominees which hold shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of shares
certified from time to time by the record shareholders as representing the total amount registered in the record shareholder's name and held for the account of beneficial owners who are to participate in the Plan.
There will be no brokerage charges with respect to shares issued directly by the trust as a result of dividends or capital gains distributions payable either in shares or in cash. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open-market purchases in connection with the reinvestment of dividends.
The automatic reinvestment of dividends and distributions will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such dividends. See "U.S. Federal Income Tax Matters."
Shareholders participating in the Plan may receive benefits not available to shareholders not participating in the Plan. If the market price plus commissions of the trust's shares is higher than the net asset value, participants in the Plan will receive shares of the trust at less than they could otherwise purchase them and will have shares with a cash value greater than the value of any cash distribution they would have received on their shares. If the market price plus commissions is below the net asset value, participants receive distributions of shares with a net asset value greater than the value of any cash distribution they would have received on their shares. However, there may be insufficient shares available in the market to make distributions in shares at prices below the net asset value. Also, since the trust does not redeem its shares, the price on resale may be more or less than the net asset value.
Experience under the Plan may indicate that changes are desirable. Accordingly, the trust reserves the right to amend or terminate the Plan. There is no direct service charge to participants in the Plan; however, the trust reserves the right to amend the Plan to include a service charge payable by the participants.
All correspondence concerning the Plan should be directed to the Plan Agent at Mellon Investor Services, P.O. Box 3338, South Hackensack, New Jersey 07606-1938.
CLOSED-END FUND STRUCTURE
The trust is a newly organized, diversified, closed-end management investment company (commonly referred to as a closed-end fund). Closed-end funds differ from open-end funds (which are generally referred to as mutual funds) in that closed-end funds generally list their shares for trading on a stock exchange and do not redeem their shares at the request of the shareholder. This means that if you wish to sell your shares of a closed-end fund you must trade them on the market like any other stock at the prevailing market price at that time. In a mutual fund, if the shareholder wishes to sell shares of the fund, the mutual fund will redeem or buy back the shares at "net asset value." Also, mutual funds generally offer new shares on a continuous basis to new investors, and closed-end funds generally do not. The continuous inflows and outflows of assets in a mutual fund can make it difficult to manage the fund's investments. By comparison, closed-end funds are generally able to stay more fully invested in securities that are consistent with their investment objectives and also have greater flexibility to make certain types of investments and to use certain investment strategies, such as financial leverage and investments in illiquid securities.
Shares of closed-end funds frequently trade at a discount to their net asset value. Common shares of closed-end investment companies like the trust that invest predominantly in high yield securities have during some periods traded at prices higher than their net asset value (at a "premium")
and during other periods traded at prices lower than their net asset value (at a "discount"). This is in part because the market price reflects the dividend yield on the common shares. When the yield on the net asset value per share is higher than yields generally available in the market for comparable securities, the market price will tend to reflect this by trading higher than the net asset value per share to adjust the yield to a comparable market rate. To the extent the common shares do trade at a discount, the trust's Board of Trustees may from time to time engage in open market repurchases or tender offers for shares after balancing the benefit to shareholders of the increase in the net asset value per share resulting from such purchases against the decrease in the assets of the trust and potential increase in the expense ratio of expenses to assets of the trust and consequent reduction in yield. The Board of Trustees believes that in addition to the beneficial effects described above, any such purchases or tender offers may result in the temporary narrowing of any discount but will not have any long-term effect on the level of any discount.
U.S. FEDERAL INCOME TAX MATTERS
The following is a summary discussion of certain U.S. federal income tax consequences that may be relevant to a shareholder of acquiring, holding and disposing of common shares of the trust. This discussion only addresses U.S. federal income tax consequences to U.S. shareholders who hold their shares as capital assets and does not address all of the U.S. federal income tax consequences that may be relevant to particular shareholders in light of their individual circumstances. This discussion also does not address the tax consequences to shareholders who are subject to special rules, including, without limitation, financial institutions, insurance companies, dealers in securities or foreign currencies, foreign holders, persons who hold their shares as or in a hedge against currency risk, a constructive sale, or conversion transaction, holders who are subject to the alternative minimum tax, or tax-exempt or tax-deferred plans, accounts, or entities. In addition, the discussion does not address any state, local, or foreign tax consequences, and it does not address any federal tax consequences other than U.S. federal income tax consequences. The discussion reflects applicable tax laws of the United States as of the date of this prospectus, which tax laws may be changed or subject to new interpretations by the courts or the Internal Revenue Service (IRS) retroactively or prospectively. No attempt is made to present a detailed explanation of all U.S. federal income tax concerns affecting the trust and its shareholders, and the discussion set forth herein does not constitute tax advice. Investors are urged to consult their own tax advisers to determine the specific tax consequences to them of investing in the trust, including the applicable federal, state, local and foreign tax consequences to them and the effect of possible changes in tax laws.
The trust intends to elect be treated and to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code and to comply with applicable distribution requirements so that it generally will not pay U.S. federal income tax on income and capital gains distributed to shareholders. In order to qualify as a regulated investment company, which the following discussion assumes, the trust must satisfy certain tests regarding the nature of its income and the diversification of its assets. If the trust qualifies as a regulated investment company and, for each taxable year, it distributes to its shareholders an amount equal to or exceeding the sum of (i) 90% of its "investment company taxable income" as that term is defined in the Internal Revenue Code (which includes, among other things, dividends, taxable interest, and the excess of any net short-term capital gains over net long-term capital losses, as reduced by certain deductible expenses) with regard to the deduction for dividends paid and (ii) 90% of the excess of its gross tax-exempt interest, if any, over certain disallowed deductions, the trust generally will be relieved of U.S. federal income tax on any income of the trust, including long-term capital gains, distributed to shareholders. However, if the trust retains any investment company taxable income or "net capital gain" (the excess of net long-term capital gain over net short-term capital loss), it generally will be subject to U.S. federal income tax at
regular corporate rates on the amount retained. The trust intends to distribute at least annually all or substantially all of its investment company taxable income, net tax-exempt interest, and net capital gain. If for any taxable year the trust did not qualify as a regulated investment company, it would be treated as a corporation subject to U.S. federal income tax.
Unless a shareholder is ineligible to participate or elects otherwise, distributions will be automatically reinvested in additional common shares of the trust pursuant to the Plan. For U.S. federal income tax purposes, assuming the trust has sufficient current or accumulated earnings and profits, such distributions generally are taxable whether a shareholder takes them in cash or shares or they are reinvested pursuant to the Plan in additional shares of the trust. In general, dividends from investment company taxable income are taxable as ordinary income, and designated dividends from net capital gain, if any, are taxable as long-term capital gains for U.S. federal income tax purposes without regard to the length of time the shareholder has held shares of the trust. The U.S. federal income tax status of all distributions will be reported to shareholders annually.
If the trust retains any net capital gain, the trust may designate the retained amount as undistributed capital gains in a notice to shareholders who, if subject to U.S. federal income tax on long-term capital gains, (i) will be required to include in income for U.S. federal income tax purposes, as long-term capital gain, their proportionate shares of such undistributed amount, and (ii) will be entitled to credit their proportionate shares of the tax paid by the trust on the undistributed amount against their U.S. federal income tax liabilities, if any, and to claim refunds to the extent the credit exceeds such liabilities.
Sales and other dispositions of the trust's shares generally are taxable events for shareholders that are subject to tax. Shareholders should consult their own tax advisers with reference to their individual circumstances to determine whether any particular transaction in the trust's shares is properly treated as a sale for tax purposes, as the following discussion assumes, and the tax treatment of any gains or losses recognized in such transactions. In general, if shares of the trust are sold, the shareholder will recognize gain or loss equal to the difference between the amount realized on the sale and the shareholder's adjusted basis in the shares. Such gain or loss generally will be treated as long-term gain or loss if the shares were held for more than one year and otherwise generally will be treated as short-term gain or loss. Any loss recognized by a shareholder upon the sale or other disposition of shares with a tax holding period of six months or less generally will be treated as a long-term capital loss to the extent of any amounts treated as distributions of long-term capital gain with respect to such shares. Losses on sales or other dispositions of shares may be disallowed under "wash sale" rules in the event of other investments in the trust (including those made pursuant to reinvestment of dividends and/or capital gains distributions) within a period of 61 days beginning 30 days before and ending 30 days after a sale or other disposition of shares.
The trust is required in certain circumstances to backup withhold on reportable payments, including dividends, capital gains distributions, and proceeds of sales or other dispositions of the trust's shares paid to certain holders of the trust's shares who do not furnish the trust with their correct social security number or other taxpayer identification number and certain other certifications, or who are otherwise subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld from payments made to a shareholder may be refunded or credited against such shareholder's U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS.
The foregoing is a general and abbreviated summary of the provisions of the Internal Revenue Code and the Treasury regulations in effect as they generally affect the taxation of the trust and its shareholders. As noted above, these provisions are subject to change by legislative, judicial or
administrative action, and any such change may be retroactive. A further discussion of the U.S. federal income tax rules applicable to the trust can be found in the statement of additional information which is incorporated by reference into this prospectus. Shareholders are urged to consult their tax advisers regarding specific questions as to U.S. federal, foreign, state, and local income or other taxes.
NET ASSET VALUE
The trust calculates a net asset value for its common shares every day the New York Stock Exchange is open when regular trading closes (normally 4:00 p.m. Eastern time). For purposes of determining the net asset value of a common share, the value of the securities held by the trust plus any cash or other assets (including interest accrued but not yet received) minus all liabilities (including accrued expenses and indebtedness) and the aggregate liquidation value of any outstanding preferred shares is divided by the total number of common shares outstanding at such time. Expenses, including the fees payable to Pioneer, are accrued daily. Currently, the net asset values of shares of publicly traded closed-end investment companies investing in debt securities are published in Barron's, the Monday edition of The Wall Street Journal and the Monday and Saturday editions of The New York Times.
The trust generally values its portfolio securities using closing market prices or readily available market quotations. The trust may use a pricing service or a pricing matrix to value some of its assets. When closing market prices or market quotations are not available or are considered by Pioneer to be unreliable, the trust may use a security's fair value. Fair value is the valuation of a security determined on the basis of factors other than market value in accordance with procedures approved by the trust's Trustees. The trust also may use the fair value of a security, including a non-U.S. security, when Pioneer determines that the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security due to factors affecting one or more relevant securities markets or the specific issuer. The use of fair value pricing by the trust may cause the net asset value of its shares to differ from the net asset value that would be calculated using closing market prices. International securities markets may be open on days when the U.S. markets are closed. For this reason, the value of any international securities owned by the trust could change on a day you cannot buy or sell shares of the trust. Debt securities with remaining maturities of 60 days or less are valued at amortized cost, which is a method of estimating market value. The value of interest rate swaps, caps and floors is determined in accordance with a formula and then confirmed periodically by obtaining a bank quotation. Positions in options are valued at the last sale price on the market where any such option is principally traded. Positions in futures contracts are valued at closing prices for such contracts established by the exchange on which they are traded. Repurchase agreements are valued at cost plus accrued interest.
DESCRIPTION OF SHARES
The trust is authorized to issue an unlimited number of common shares, without par value. The trust is also authorized to issue preferred shares. After the completion of this offering, the trust will only have common shares outstanding. The Board of Trustees is authorized to classify and reclassify any unissued shares into one or more additional classes or series of shares. The Board of Trustees may establish such series or class, including preferred shares, from time to time by setting or changing in any one or more respects the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares and pursuant to such classification or reclassification to increase or decrease the number of authorized shares of any existing class or series. The Board of Trustees, without shareholder approval, is
authorized to amend the Agreement of Declaration of Trust and by-laws to reflect the terms of any such class or series, including any class of preferred shares. The trust currently anticipates that it will issue preferred shares as soon as practicable after the closing of this offering. See "Leverage." The trust may issue preferred shares. The trust is also authorized to issue other securities, including debt securities.
COMMON SHARES
Common shares, when issued and outstanding, will be fully paid and non-assessable. Shareholders are entitled to share pro rata in the net assets of the trust available for distribution to common shareholders upon liquidation of the trust. Common shareholders are entitled to one vote for each share held.
In the event that the trust issues preferred shares and so long as any shares of the trust's preferred shares are outstanding, holders of common shares will not be entitled to receive any net income of or other distributions from the trust 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. See "Leverage."
The trust will send unaudited reports at least semiannually and audited annual financial statements to all of its shareholders.
Pioneer provided the initial capital for the trust by purchasing 6,981 shares of common shares of the trust for $100,003. As of the date of this prospectus, Pioneer owned 100% of the outstanding common shares. Pioneer may be deemed to control the trust until such time as it owns less than 25% of the outstanding shares of the trust.
PREFERRED SHARES
The trust in the future may elect to issue preferred shares as part of its leverage strategy. The trust currently anticipates issuing, as soon as practical after the closing of this offering, preferred shares with an aggregate liquidation preference of up to 25% of the trust's total assets, but will be permitted to incur leverage in an amount up to 33 1/3% of the trust's total assets. The Board of Trustees reserves the right to issue preferred shares to the extent permitted by the 1940 Act, which currently limits the aggregate liquidation preference of all outstanding preferred shares to 50% of the value of the trust's total assets less the trust's liabilities and indebtedness. Although the terms of any preferred shares, including dividend rate, liquidation preference and redemption provisions, will be determined by the Board of Trustees, subject to applicable law and the Agreement and Declaration of Trust, it is likely that the preferred shares will be structured to carry a relatively short-term dividend rate reflecting interest rates on short-term bonds by providing for the periodic redetermination of the dividend rate at relatively short intervals through an auction, remarketing or other procedure. The trust also believes that it is likely that the liquidation preference, voting rights and redemption provisions of the preferred shares will be similar to those stated below.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the trust, the holders of preferred shares will be entitled to receive a preferential liquidating distribution, which is expected to equal the original purchase price per preferred share plus accrued and unpaid dividends, whether or not declared, before any distribution of assets is made to holders of common shares. After payment of the full amount of the liquidating distribution to which they are entitled, the holders of preferred shares will not be entitled to any further participation in any distribution of assets by the trust.
The 1940 Act requires that the holders of any preferred shares, voting separately as a single class, have the right to elect at least two Trustees at all times. The remaining Trustees will be elected by holders of common shares and preferred shares, voting together as a single class. In addition, subject to the prior rights, if any, of the holders of any other class of senior securities outstanding, the holders of any preferred shares have the right to elect a majority of the Trustees at any time two years' dividends on any preferred shares are unpaid. The 1940 Act also requires that, in addition to any approval by shareholders that might otherwise be required, the approval of the holders of a majority of any outstanding preferred shares, voting separately as a class, would be required to (1) adopt any plan of reorganization that would adversely affect the preferred shares, and (2) take any action requiring a vote of security holders under Section 13(a) of the 1940 Act, including, among other things, changes in the trust's subclassification as a closed-end investment company or changes in its fundamental investment restrictions. See "Certain Provisions in the Agreement and Declaration of Trust and By-Laws." As a result of these voting rights, the trust's ability to take any such actions may be impeded to the extent that there are any preferred shares outstanding. The Board of Trustees presently intends that, except as otherwise indicated in this prospectus and except as otherwise required by applicable law, holders of preferred shares will have equal voting rights with holders of common shares (one vote per share, unless otherwise required by the 1940 Act) and will vote together with holders of common shares as a single class.
The affirmative vote of the holders of a majority of the outstanding preferred shares, voting as a separate class, will be required to amend, alter or repeal any of the preferences, rights or powers of holders of preferred shares so as to affect materially and adversely such preferences, rights or powers, or to increase or decrease the authorized number of preferred shares. The class vote of holders of preferred shares described above will in each case be in addition to any other vote required to authorize the action in question.
The terms of the preferred shares are expected to provide that (i) they are redeemable by the trust in whole or in part at the original purchase price per share plus accrued dividends per share, (ii) the trust may tender for or purchase preferred shares and (iii) the trust may subsequently resell any shares so tendered for or purchased. Any redemption or purchase of preferred shares by the trust will reduce the leverage applicable to the common shares, while any resale of shares by the trust will increase that leverage.
The discussion above describes the possible offering of preferred shares by the trust. If the Board of Trustees determines to proceed with such an offering, the terms of the preferred shares may be the same as, or different from, the terms described above, subject to applicable law and the Agreement and Declaration of Trust. The Board of Trustees, without the approval of the holders of common shares, may authorize an offering of preferred shares or may determine not to authorize such an offering, and may fix the terms of the preferred shares to be offered.
CERTAIN PROVISIONS OF THE AGREEMENT AND DECLARATION OF TRUST AND BY-LAWS
The trust's Agreement and Declaration of Trust includes provisions that could have the effect of limiting the ability of other entities or persons to acquire control of the trust 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 trust.
The Board of Trustees 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 but only by vote of the holders of at least 75% of the shares entitled to be voted on the matter.
In addition, the Agreement and Declaration of Trust requires the favorable vote of the holders of at least 75% of the trust's shares to approve, adopt or authorize the following:
- a merger or consolidation or statutory share exchange of the trust with any other corporations;
- a sale of all or substantially all of the trust's assets (other than in the regular course of the trust's investment activities); or
- a liquidation or dissolution of the trust;
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 the by-laws, in which case the affirmative vote of a majority of the trust's shares is required. Following any issuance of preferred shares by the trust, it is anticipated that the approval, adoption or authorization of the foregoing also would require the favorable vote of a majority of the trust's shares of preferred shares then entitled to be voted, voting as a separate class.
In addition, conversion of the trust to an open-end investment company would require an amendment to the trust's Agreement and Declaration of Trust. 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 trust's outstanding shares (including any preferred shares) entitled to be voted on the matter, voting as a single class (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, assuming preferred shares are issued, the affirmative vote of a majority of outstanding preferred shares, voting as a separate class. Such a vote also would satisfy a separate requirement in the 1940 Act that the change be approved by the shareholders. Shareholders of an open-end investment company may require the company to redeem their shares of common stock at any time (except in certain circumstances as authorized by or under the 1940 Act) at their net asset value, less such redemption charge, if any, as might be in effect at the time of a redemption. All redemptions will be made in cash. If the trust is converted to an open-end investment company, it could be required to liquidate portfolio securities to meet requests for redemption, and the common shares would no longer be listed on the New York Stock Exchange.
Conversion to an open-end investment company would also require changes in certain of the trust's investment policies and restrictions, such as those relating to the borrowing of money and the purchase of illiquid securities.
In addition, the Agreement and Declaration of Trust requires the favorable
vote of a majority of the Trustees followed by the favorable vote of the holders
of at least 75% of the outstanding shares of each affected class or series of
the trust, voting separately as a class or series, to approve, adopt or
authorize certain transactions with 5% or greater holders of a class or series
of shares and their associates, unless the transaction has been approved by at
least 75% of the Trustees, in which case "a majority of the outstanding voting
securities" (as defined in the 1940 Act) of the trust shall be required. For
purposes of these provisions, a 5% or greater holder of a class or series of
shares (a
"Principal Shareholder") refers to any person who, whether directly or indirectly and whether alone or together with its affiliates and associates, beneficially owns 5% or more of the outstanding shares of any class or series of shares of beneficial interest of the trust. The 5% holder transactions subject to these special approval requirements are:
- the merger or consolidation of the trust or any subsidiary of the trust with or into any Principal Shareholder;
- the issuance of any securities of the trust to any Principal Shareholder for cash;
- the sale, lease or exchange of all or any substantial part of the assets of the trust any Principal Shareholder, except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a 12-month period; or
- the sale, lease or exchange to the trust or any subsidiary of the trust, in exchange for securities of the trust, of any assets of any Principal Shareholder, except assets having an aggregate fair market value of less than $1,000,000, aggregating for purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within a 12-month period.
The Agreement and Declaration of Trust and by-laws provide that the Board of Trustees has the power, to the exclusion of shareholders, to make, alter or repeal any of the by-laws (except for any by-law specified not to be amended or repealed by the Board), subject to the requirements of the 1940 Act. Neither this provision of the Agreement and Declaration of Trust, nor any of the foregoing provisions thereof requiring the affirmative vote of 75% of outstanding shares of the trust, can be amended or repealed except by the vote of such required number of shares.
The trust's by-laws generally require that advance notice be given to the trust in the event a shareholder desires to nominate a person for election to the Board of Trustees or to transact any other business at an annual meeting of shareholders. With respect to an annual meeting following the first annual meeting of shareholders, notice of any such nomination or business must be delivered to or received at the principal executive offices of the trust not less than 90 calendar days nor more than 120 calendar days prior to the anniversary date of the prior year's annual meeting (subject to certain exceptions). In the case of the first annual meeting of shareholders, the notice must be given no later than the tenth calendar day following public disclosure as specified in the by-laws of the date of the meeting. Any notice by a shareholder must be accompanied by certain information as provided in the by-laws.
UNDERWRITING
Subject to the terms and conditions of a purchase agreement dated , 2002, each underwriter named below has severally agreed to purchase, and the trust has agreed to sell to such underwriter, the number of common shares set forth opposite the name of such underwriter.
NUMBER OF
COMMON SHARES
UNDERWRITER -------------
-----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
UBS Warburg LLC.............................................
RBC Dain Rauscher Inc.......................................
Advest, Inc.................................................
Janney Montgomery Scott LLC.................................
McDonald Investments Inc., a KeyCorp Company ...............
Stifel, Nicolaus & Company, Incorporated....................
Total..........................................
========
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The purchase agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to the approval of certain legal matters by counsel and to certain other conditions. The underwriters are obligated to purchase all the common shares sold under the purchase agreement if any of the common shares are purchased. In the purchase agreement, the trust and Pioneer have agreed to indemnify the underwriters against certain liabilities, including liabilities arising under the Securities Act of 1933, or to contribute payments the underwriters may be required to make for any of those liabilities.
The underwriters propose to initially offer some of the common shares directly to the public at the public offering price set forth on the cover page of this prospectus and some of the common shares to certain dealers at the public offering price less a concession not in excess of $ per share. The sales load the trust will pay of $.675 per share is equal to 4.5% of the initial offering price. The underwriters may allow, and the dealers may reallow, a discount not in excess of $ per share on sales to other dealers. After the initial public offering, the public offering price, concession and discount may be changed.
Pioneer has also agreed to pay from its own assets an additional commission to certain underwriters in connection with this offering. The co-lead managing underwriters will be entitled to an additional commission equal to 0.10% per year of the trust's average quarterly total managed assets multiplied by the percentage of the entire offering of the common shares such underwriter sells in this offering. Each other underwriter will also be entitled to this additional commission if such underwriter sells shares with an aggregate offering price of more than $50,000,000 in this offering. This additional commission will be payable quarterly during the continuance of the management contract or other advisory agreement between Pioneer and the trust.
The following table shows the public offering price, sales load and proceeds before expenses to the trust. The information assumes either no exercise or full exercise by the underwriters of their over-allotment option.
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------
Public offering price.................... $15.00 $ $
Sales load............................... $.675 $ $
Proceeds, before expenses, to the
trust.................................. $14.325 $ $
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The expenses of the offering are estimated at $689,493 and are payable by the trust. Pioneer has agreed to pay the trust's organizational and offering expenses (other than the sales load) that exceed $0.03 per share. The trust has agreed to pay the underwriters $0.005 per share as a partial reimbursement of expenses incurred in connection with the offering.
The trust has granted the underwriters an option to purchase up to additional common shares at the public offering price, less the sales load, within 45 days from the date of this prospectus solely to cover any over-allotments. If the underwriters exercise this option, each will be obligated, subject to conditions contained in the purchase agreement, to purchase a number of additional shares proportionate to that underwriter's initial amount reflected in the above table.
Until the distribution of the common shares is complete, SEC rules may limit underwriters and selling group members from bidding for and purchasing the trust's common shares. However, the representatives may engage in transactions that stabilize the price of common shares, such as bids or purchases to peg, fix or maintain that price.
If the underwriters create a short position in the trust's common shares in connection with the offering, i.e., if they sell more common shares than are listed on the cover of this prospectus, the representatives may reduce that short position by purchasing common shares in the open market. The representatives may also elect to reduce any short position by exercising all or part of the over-allotment option described above. Purchases of common shares to stabilize its price or to reduce a short position may cause the price of the trust's common shares to be higher than it might be in the absence of such purchases.
Neither the trust nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transaction described above may have on the price of common shares. In addition, neither the trust nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
The trust has agreed not to offer or sell any additional common shares for a period of 180 days after the date of the purchase agreement without the prior written consent of the underwriters, except for the sale of common shares to the underwriters pursuant to the purchase agreement.
The trust anticipates that the underwriters may from time to time act as brokers or dealers in executing the trust's portfolio transactions after they have ceased to be underwriters. The underwriters are active underwriters of, and dealers in, securities and act as market makers in a number of such securities and, therefore, can be expected to engage in portfolio transactions with the trust. Pioneer has retained an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated to provide certain administrative services to the trust on its behalf.
In order to meet the requirements for listing the common shares on the New York Stock Exchange, the underwriters have undertaken to sell (i) common shares to insure a minimum of 100 beneficial holders with a minimum of 100,000 common shares outstanding and (ii) sufficient shares of the common shares so that following this offering, the trust has a minimum aggregate market value of at least $2 million.
CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR
The trust's securities and cash are held under a custodian agreement with Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts 02109. Pioneer Investment Management Shareholder Services Inc. is the trust's transfer agent. The transfer agent has engaged Mellon Investor
Services LLC as registrar, shareholder servicing agent and dividend disbursing agent for the trust's shares. Mellon Investor Services LLC's address is 85 Challenger Road, Ridgefield Park, New Jersey 07660.
VALIDITY OF COMMON SHARES
Certain legal matters in connection with the shares offered hereby are passed on for the trust by Hale and Dorr LLP, Boston Massachusetts. Certain matters have been passed upon for the underwriters by Clifford Chance Rogers & Wells LLP, New York, New York.
TABLE OF CONTENTS FOR
STATEMENT OF ADDITIONAL INFORMATION
PAGE
----
Use of Proceeds............................................. 2
Investment Objective and Policies........................... 2
Investment Restrictions..................................... 15
Management of the Trust..................................... 17
Portfolio Transactions...................................... 27
Repurchase of Common Shares................................. 28
U.S. Federal Income Tax Matters............................. 29
Performance-Related, Comparative and Other Information...... 33
Experts..................................................... 35
Additional Information...................................... 35
Financial Statements and Independent Auditors' Report....... 36
Appendix A -- Description of Ratings........................ A-1
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SHARES
PIONEER HIGH INCOME TRUST
COMMON SHARES
MERRILL LYNCH & CO.
UBS WARBURG
RBC CAPITAL MARKETS
ADVEST, INC.
JANNEY MONTGOMERY SCOTT LLC
MCDONALD INVESTMENTS INC.
STIFEL, NICOLAUS & COMPANY
INCORPORATED
, 2002
11842-00-0402
PIONEER HIGH INCOME TRUST
STATEMENT OF ADDITIONAL INFORMATION
Pioneer High Income Trust (the "trust") is a newly organized, diversified, closed-end management investment company. This statement of additional information relating to common shares does not constitute a prospectus, but should be read in conjunction with the prospectus relating thereto dated April __, 2002. This statement of additional information does not include all information that a prospective investor should consider before purchasing common shares, and investors should obtain and read the prospectus prior to purchasing such shares. A copy of the prospectus may be obtained without charge by calling 1-800-225-6292. You may also obtain a copy of the prospectus on the Securities and Exchange Commission's web site (http://www.sec.gov).
TABLE OF CONTENTS
Use of Proceeds........................................................2 Investment Objective and Policies......................................2 Investment Restrictions................................................15 Management of the Trust................................................17 Portfolio Transactions.................................................27 Repurchase of Common Shares............................................28 U.S. Federal Income Tax Matters........................................29 Performance-Related, Comparative and Other Information.................33 Experts................................................................35 Additional Information.................................................35 Financial Statements and Independent Auditors' Report..................36 Appendix A--Description of Ratings.....................................A-1 |
This statement of additional information is dated April __, 2002.
USE OF PROCEEDS
Pending investment in securities that meet the trust's investment objective and policies, the net proceeds will be invested in accordance with the trust's investment objective and policies during a period not to exceed six months from the closing of this offering. Pending such investment, the net proceeds may be invested in high quality, short-term debt securities. If necessary, the trust may also purchase, as temporary investments, securities of other open- or closed-end investment companies that invest primarily in high yield securities.
INVESTMENT OBJECTIVE AND POLICIES
The prospectus presents the investment objective and the principal investment strategies and risks of the trust. This section supplements the disclosure in the trust's prospectus and provides additional information on the trust's investment policies or restrictions. Restrictions or policies stated as a maximum percentage of the trust's assets are only applied immediately after a portfolio investment to which the policy or restriction is applicable (other than the limitations on borrowing). Accordingly, any later increase or decrease resulting from a change in values, net assets or other circumstances will not be considered in determining whether the investment complies with the trust's restrictions and policies.
PRIMARY INVESTMENTS
Under normal circumstances, the trust invests at least 80% of its assets (net assets plus borrowing) in below investment grade (high yield) debt securities, loans and preferred stocks.
The trust will provide written notice to shareholders at least 60 days prior to any change to the requirement that it invest at least 80% of its assets (net assets plus borrowing) as described in this section.
DEBT OBLIGATIONS OF NON-U.S. GOVERNMENTS
An investment in debt obligations of non-U.S. governments and their political subdivisions (sovereign debt) involves special risks that are not present in corporate debt obligations. The non-U.S. issuer of the sovereign debt or the non-U.S. governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due, and the trust may have limited recourse in the event of a default. During periods of economic uncertainty, the market prices of sovereign debt may be more volatile than prices of debt obligations of U.S. issuers. In the past, certain non-U.S. countries have encountered difficulties in servicing their debt obligations, withheld payments of principal and interest and declared moratoria on the payment of principal and interest on their sovereign debt.
A sovereign debtor's willingness or ability to repay principal and pay interest in a timely manner may be affected by, among other factors, its cash flow situation, the extent of its foreign currency reserves, the availability of sufficient non-U.S. exchange, the relative size of the debt service burden, the sovereign debtor's policy toward its principal international lenders and local political constraints. Sovereign debtors may also be dependent on expected disbursements from non-U.S. governments, multilateral agencies and other entities to reduce principal and interest arrearages on their debt. The failure of a sovereign debtor to implement economic reforms, achieve specified levels of economic performance or repay principal or interest when due may result in the cancellation of third-party commitments to lend funds to the sovereign debtor, which may further impair such debtor's ability or willingness to service its debts.
EURODOLLAR INSTRUMENTS AND SAMURAI AND YANKEE BONDS. The trust may invest in Eurodollar instruments and Samurai and Yankee bonds. Eurodollar instruments are bonds of corporate and government issuers that pay interest and principal in U.S. dollars but are issued in markets outside the United States, primarily in Europe. Samurai bonds are yen-denominated bonds sold in Japan by non-Japanese issuers. Yankee bonds are U.S. dollar-denominated bonds typically issued in the U.S. by non-U.S. governments and their agencies and non-U.S. banks and corporations. The trust may also invest in Eurodollar Certificates of Deposit ("ECDs"), Eurodollar Time Deposits ("ETDs") and Yankee Certificates of Deposit ("Yankee CDs"). ECDs are U.S. dollar-denominated certificates of deposit issued by non-U.S. branches of domestic banks; ETDs are U.S. dollar-denominated deposits in a non-U.S. branch of a U.S. bank or in a non-U.S.
bank; and Yankee CDs are U.S. dollar-denominated certificates of deposit issued by a U.S. branch of a non-U.S. bank and held in the U.S. These investments involve risks that are different from investments in securities issued by U.S. issuers, including potential unfavorable political and economic developments, non-U.S. withholding or other taxes, seizure of non-U.S. deposits, currency controls, interest limitations or other governmental restrictions which might affect payment of principal or interest.
RISKS OF NON-U.S. INVESTMENTS
Investing in securities of non-U.S. issuers involves considerations and risks not typically associated with investing in the securities of issuers in the U.S. These risks are heightened with respect to investments in countries with emerging markets and economies. The risks of investing in securities of non-U.S. issuers generally, or in issuers with significant exposure to non-U.S. markets may be related, among other things, to (i) differences in size, liquidity and volatility of, and the degree and manner of regulation of, the securities markets of certain non-U.S. markets compared to the securities markets in the U.S.; (ii) economic, political and social factors; and (iii) foreign exchange matters, such as restrictions on the repatriation of capital, fluctuations in exchange rates between the U.S. dollar and the currencies in which the trust's portfolio securities are quoted or denominated, exchange control regulations and costs associated with currency exchange. The political and economic structures in certain countries, particularly emerging markets, are expected to undergo significant evolution and rapid development, and such countries may lack the social, political and economic stability characteristic of more developed countries. Unanticipated political or social developments may affect the values of the trust's investments in such countries. The economies and securities and currency markets of many emerging markets have experienced significant disruption and declines. There can be no assurances that these economic and market disruptions will not continue.
NON-U.S. SECURITIES MARKETS AND REGULATIONS. There may be less publicly available information about non-U.S. markets and issuers than is available with respect to U.S. securities and issuers. Non-U.S. companies generally are not subject to accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. companies. The trading markets for most non-U.S. securities are generally less liquid and subject to greater price volatility than the markets for comparable securities in the U.S. The markets for securities in certain emerging markets are in the earliest stages of their development. Even the markets for relatively widely traded securities in certain non-U.S. markets, including emerging market countries, may not be able to absorb, without price disruptions, a significant increase in trading volume or trades of a size customarily undertaken by institutional investors in the U.S. Additionally, market making and arbitrage activities are generally less extensive in such markets, which may contribute to increased volatility and reduced liquidity. The less liquid a market, the more difficult it may be for the trust to price its portfolio securities accurately or to dispose of such securities at the times determined by Pioneer Investment Management, Inc., the trust's investment adviser ("Pioneer"), to be appropriate. The risks associated with reduced liquidity may be particularly acute in situations in which the trust's operations require cash, such as in order to meet redemptions and to pay its expenses.
ECONOMIC, POLITICAL AND SOCIAL FACTORS. Certain countries, including emerging markets, may be subject to a greater degree of economic, political and social instability than is the case in the U.S. and Western European countries. Such instability may result from, among other things: (i) authoritarian governments or military involvement in political and economic decision making; (ii) popular unrest associated with demands for improved economic, political and social conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring countries; and (v) ethnic, religious and racial disaffection and conflict. Such economic, political and social instability could significantly disrupt the financial markets in such countries and the ability of the issuers in such countries to repay their obligations. Investing in emerging market countries also involves the risk of expropriation, nationalization, confiscation of assets and property or the imposition of restrictions on foreign investments and on repatriation of capital invested. In the event of such expropriation, nationalization or other confiscation in any emerging country, the trust could lose its entire investment in that country.
Certain emerging market countries restrict or control foreign investment in their securities markets to varying degrees. These restrictions may limit the trust's investment in those markets and may increase the expenses of the trust. In addition, the repatriation of both investment income and capital from certain markets in the region is subject to restrictions such as the need for certain governmental consents. Even where there is no outright restriction on repatriation of capital, the mechanics of repatriation may affect certain aspects of the trust's operation.
Economies in individual countries may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rates of inflation, currency valuation, capital reinvestment, resource self-sufficiency and balance of payments positions. Many countries have experienced substantial, and in some cases extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, very negative effects on the economies and securities markets of certain emerging countries.
Unanticipated political or social developments may also affect the values of the trust's investments and the availability to the trust of additional investments in such countries. During 1997 and 1998, the political stability, economies and securities and currency markets of many markets in India and the Asian subcontinent experienced significant disruption and declines. There can be no assurances that these economic and market disruptions will not continue or spread to other countries in the region.
Economies in emerging market countries generally are dependent heavily upon international trade and, accordingly, have been and may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been, and may continue to be, affected adversely by economic conditions in the countries with which they trade.
CURRENCY RISKS. The value of the securities quoted or denominated in foreign currencies may be adversely affected by fluctuations in the relative currency exchange rates and by exchange control regulations. The trust's investment performance may be negatively affected by a devaluation of a currency in which the trust's investments are quoted or denominated. Further, the trust's investment performance may be significantly affected, either positively or negatively, by currency exchange rates because the U.S. dollar value of securities quoted or denominated in another currency will increase or decrease in response to changes in the value of such currency in relation to the U.S. dollar.
CUSTODIAN SERVICES AND RELATED INVESTMENT COSTS. Custodial services and other costs relating to investment in international securities markets generally are more expensive than in the U.S. Such markets have settlement and clearance procedures that differ from those in the U.S. In certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. The inability of the trust to make intended securities purchases due to settlement problems could cause the trust to miss attractive investment opportunities. Inability to dispose of a portfolio security caused by settlement problems could result either in losses to the trust due to a subsequent decline in value of the portfolio security or could result in possible liability to the trust. In addition, security settlement and clearance procedures in some emerging countries may not fully protect the trust against loss or theft of its assets.
WITHHOLDING AND OTHER TAXES. The trust will be subject to taxes, including withholding taxes, on income (possibly including, in some cases, capital gains) that are or may be imposed by certain countries with respect to the trust's investments in such countries. These taxes will reduce the return achieved by the trust. Treaties between the U.S. and such countries may not be available to reduce the otherwise applicable tax rates.
ECONOMIC MONETARY UNION (EMU). On January 1, 1999, 11 European countries adopted a single currency - the euro. The conversion to the euro was phased in over a three-year period. As of January 1, 2002, there are 15 participating countries and 12 of these countries share the euro as a single currency and single official interest rate and are adhering to agreed upon limits on government borrowing. Budgetary decisions will remain in the hands of each participating country but will be subject to each country's commitment to avoid "excessive deficits" and other more specific budgetary criteria. A European Central Bank is responsible for setting the official interest rate to maintain price stability within the euro zone.
EMU is driven by the expectation of a number of economic benefits, including lower transaction costs, reduced exchange risk, greater competition, and a broadening and deepening of European financial markets. However, there are a number of significant risks associated with EMU. Monetary and economic union on this scale has never been attempted before. There is a significant degree of uncertainty as to whether participating countries will remain committed to EMU in the face of changing economic conditions. This uncertainty may increase the volatility of European markets. A participating country's withdrawal from the EMU could have a negative effect on the trust's non-U.S. investments.
INVESTMENTS IN DEPOSITARY RECEIPTS. The trust may hold securities of non-U.S. issuers in the form of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") and other similar instruments. Generally, ADRs in registered form are designed for use in U.S. securities markets, and EDRs and GDRs and other similar global instruments in bearer form are designed for use in non-U.S. securities markets.
ADRs are denominated in U.S. dollars and represent an interest in the right to receive securities of non-U.S. issuers deposited in a U.S. bank or correspondent bank. ADRs do not eliminate all the risk inherent in investing in the securities of non-U.S. issuers. However, by investing in ADRs rather than directly in equity securities of non-U.S. issuers, the trust will avoid currency risks during the settlement period for either purchases or sales. EDRs and GDRs are not necessarily denominated in the same currency as the underlying securities which they represent.
For purposes of the trust's investment policies, investments in ADRs, GDRs and similar instruments will be deemed to be investments in the underlying equity securities of non-U.S. issuers. The trust may acquire depositary receipts from banks that do not have a contractual relationship with the issuer of the security underlying the depositary receipt to issue and secure such depositary receipt. To the extent the trust invests in such unsponsored depositary receipts there may be an increased possibility that the trust may not become aware of events affecting the underlying security and thus the value of the related depositary receipt. In addition, certain benefits (i.e., rights offerings) which may be associated with the security underlying the depositary receipt may not inure to the benefit of the holder of such depositary receipt.
MUNICIPAL OBLIGATIONS
The trust may purchase municipal obligations when Pioneer believes that they offer favorable rates of income or capital gain potential when compared to a taxable investment. The term "municipal obligations" generally is understood to include debt obligations issued by municipalities to obtain funds for various public purposes, the interest on which is, in the opinion of bond counsel to the issuer, excluded from gross income for U.S. federal income tax purposes. In addition, if the proceeds from private activity bonds are used for the construction, repair or improvement of privately operated industrial or commercial facilities, the interest paid on such bonds may be excluded from gross income for U.S. federal income tax purposes, although current federal tax laws place substantial limitations on the size of these issues. The trust's distributions of any interest it earns on municipal obligations will be taxable to shareholders as ordinary income.
The two principal classifications of municipal obligations are "general obligation" and "revenue" bonds. General obligation bonds are secured by the issuer's pledge of its faith, credit, and taxing power for the payment of principal and interest. Revenue bonds are payable from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other specific revenue source, but not from the general taxing power. Sizable investments in these obligations could involve an increased risk to the trust should any of the related facilities experience financial difficulties. Private activity bonds are in most cases revenue bonds and do not generally carry the pledge of the credit of the issuing municipality. There are, of course, variations in the security of municipal obligations, both within a particular classification and between classifications.
The mortgage derivatives that the trust may invest in include interests in collateralized mortgage obligations, real estate mortgage investment conduits and stripped mortgage-backed securities.
MORTGAGE-BACKED SECURITIES
The trust may invest in mortgage pass-through certificates and multiple-class pass-through securities, and mortgage derivative securities such as real estate mortgage investment conduits ("REMIC") pass-through certificates, collateralized mortgage obligations (CMOs") and stripped mortgage-backed securities ("SMBS"), interest only mortgage-backed securities and principal only mortgage-backed securities and other types of mortgage-backed securities that may be available in the future. A mortgage-backed security is an obligation of the issuer backed by a mortgage or pool of mortgages or a direct interest in an underlying pool of mortgages. Some mortgage-backed securities, such as CMOs, make payments of both principal and interest at a variety of intervals; others make semiannual interest payments at a predetermined rate and repay principal at maturity (like a typical bond). Mortgage-backed securities are based on different types of mortgages including those on commercial real estate or residential properties. Mortgage-backed securities often have stated maturities of up to thirty years when they are
issued, depending upon the length of the mortgages underlying the securities. In practice, however, unscheduled or early payments of principal and interest on the underlying mortgages may make the securities' effective maturity shorter than this, and the prevailing interest rates may be higher or lower than the current yield of the trust's portfolio at the time the trust receives the payments for reinvestment. Mortgage-backed securities may have less potential for capital appreciation than comparable fixed income securities, due to the likelihood of increased prepayments of mortgages as interest rates decline. If the trust buys mortgage-backed securities at a premium, mortgage foreclosures and prepayments of principal by mortgagors (which may be made at any time without penalty) may result in some loss of the trust's principal investment to the extent of the premium paid.
The value of mortgage-backed securities may also change due to shifts in the market's perception of issuers. In addition, regulatory or tax changes may adversely affect the mortgage securities markets as a whole. Non-governmental mortgage-backed securities may offer higher yields than those issued by government entities, but also may be subject to greater price changes than governmental issues.
GUARANTEED MORTGAGE PASS-THROUGH SECURITIES. Guaranteed mortgage pass-through securities represent participation interests in pools of residential mortgage loans and are issued by U.S. governmental or private lenders and guaranteed by the U.S. government or one of its agencies or instrumentalities, including but not limited to GNMA, FNMA and FHLMC. GNMA certificates are guaranteed by the full faith and credit of the U.S. government for timely payment of principal and interest on the certificates. FNMA certificates are guaranteed by FNMA, a federally chartered and privately owned corporation, for full and timely payment of principal and interest on the certificates. FHLMC certificates are guaranteed by FHLMC, a corporate instrumentality of the U.S. government, for timely payment of interest and the ultimate collection of all principal of the related mortgage loans.
Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers also create pass-through pools of conventional residential mortgage loans. Such issuers may, in addition, be the originators and/or servicers of the underlying mortgage loans as well as the guarantors of the mortgage-related securities. Because there are no direct or indirect government or agency guarantees of payments in pools created by such non-governmental issuers, they generally offer a higher rate of interest than government and government-related pools. Timely payment of interest and principal of these pools may be supported by insurance or guarantees, including individual loan, title, pool and hazard insurance and letters of credit. The insurance and guarantees are issued by governmental entities, private insurers and the mortgage poolers. There can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements.
Mortgage-related securities without insurance or guarantees may be purchased if Pioneer determines that the securities meet the trust's quality standards. Mortgage-related securities issued by certain private organizations may not be readily marketable.
MULTIPLE-CLASS PASS-THROUGH SECURITIES AND CMOS. CMOs and REMIC pass-through or participation certificates may be issued by, among others, U.S. government agencies and instrumentalities as well as private issuers. REMICs are CMO vehicles that qualify for special tax treatment under the Internal Revenue Code of 1986, as amended (the "Code") and invest in mortgages principally secured by interests in real property and other investments permitted by the Code. CMOs and REMIC certificates are issued in multiple classes and the principal of and interest on the mortgage assets may be allocated among the several classes of CMOs or REMIC certificates in various ways. Each class of CMO or REMIC certificate, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Generally, interest is paid or accrues on all classes of CMOs or REMIC certificates on a monthly basis.
Typically, CMOs are collateralized by GNMA, FNMA or FHLMC certificates but also may be collateralized by other mortgage assets such as whole loans or private mortgage pass-through securities. Debt service on CMOs is provided from payments of principal and interest on collateral of mortgaged assets and any reinvestment income thereon.
STRIPPED MORTGAGE-BACKED SECURITIES. SMBS are multiple-class mortgage-backed securities that are created when a U.S. government agency or a financial institution separates the interest and principal components of a mortgage-backed security and sells them as individual securities. The trust invests in SMBS that are usually structured with two classes that receive different proportions of interest and principal distributions on a pool of
mortgage assets. A typical SMBS will have one class receiving some of the interest and most of the principal, while the other class will receive most of the interest and the remaining principal. The holder of the "principal-only" security ("PO") receives the principal payments made by the underlying mortgage-backed security, while the holder of the "interest-only" security ("IO") receives interest payments from the same underlying security. The prices of stripped mortgage-backed securities may be particularly affected by changes in interest rates. As interest rates fall, prepayment rates tend to increase, which tends to reduce prices of IOs and increase prices of POs. Rising interest rates can have the opposite effect. Although the market for these securities is increasingly liquid, Pioneer may determine that certain stripped mortgage-backed securities issued by the U.S. government, its agencies or instrumentalities are not readily marketable. If so, these securities, together with privately-issued stripped mortgage-backed securities, will be considered illiquid for purposes of the trust's limitation on investments in illiquid securities. The yields and market risk of interest only and principal only SMBS, respectively, may be more volatile than those of other fixed income securities.
The trust also may invest in planned amortization class ("PAC") and target amortization class ("TAC") CMO bonds which involve less exposure to prepayment, extension and interest rate risks than other mortgage-backed securities, provided that prepayment rates remain within expected prepayment ranges or "collars." To the extent that the prepayment rates remain within these prepayment ranges, the residual or support tranches of PAC and TAC CMOs assume the extra prepayment, extension and interest rate risks associated with the underlying mortgage assets.
RISK FACTORS ASSOCIATED WITH MORTGAGE-BACKED SECURITIES. Investing in mortgage-backed securities involves certain risks, including the failure of a counterparty to meet its commitments, adverse interest rate changes and the effects of prepayments on mortgage cash flows. In addition, investing in the lowest tranche of CMOs and REMIC certificates involves risks similar to those associated with investing in equity securities. However, due to adverse tax consequences under current tax laws, the trust does not intend to acquire "residual" interests in REMICs. Further, the yield characteristics of mortgage-backed securities differ from those of traditional fixed income securities. The major differences typically include more frequent interest and principal payments (usually monthly), the adjustability of interest rates of the underlying instrument, and the possibility that prepayments of principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a variety of economic, geographic, social and other factors and cannot be predicted with certainty. Both adjustable rate mortgage loans and fixed rate mortgage loans may be subject to a greater rate of principal prepayments in a declining interest rate environment and to a lesser rate of principal prepayments in an increasing interest rate environment. Under certain interest rate and prepayment rate scenarios, the trust may fail to recoup fully its investment in mortgage-backed securities notwithstanding any direct or indirect governmental, agency or other guarantee. When the trust reinvests amounts representing payments and unscheduled prepayments of principal, it may obtain a rate of interest that is lower than the rate on existing adjustable rate mortgage pass-through securities. Thus, mortgage-backed securities, and adjustable rate mortgage pass-through securities in particular, may be less effective than other types of U.S. government securities as a means of "locking in" interest rates.
MORTGAGE DOLLAR ROLLS. The trust may enter into mortgage "dollar rolls" in which the trust sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. During the roll period, the trust loses the right to receive principal and interest paid on the securities sold. However, the trust would benefit to the extent of any difference between the price received for the securities sold and the lower forward price for the future purchase (often referred to as the "drop") or fee income plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. Unless such benefits exceed the income, capital appreciation and gain or loss due to mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique will diminish the investment performance of the trust compared with what such performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the trust. The trust will hold and maintain in a segregated account until the settlement date cash or liquid securities in an amount equal to its forward purchase price.
For financial reporting and tax purposes, the trust treats mortgage dollar rolls as two separate transactions; one involving the purchase of a security and a separate transaction involving a sale. The trust does not currently intend to enter into mortgage dollar rolls that are accounted for as financings.
Mortgage dollar rolls involve certain risks including the following: if the broker-dealer to whom the trust sells the security becomes insolvent, the trust's right to purchase or repurchase the mortgage-related securities subject to the mortgage dollar roll may be restricted and the instrument which the trust is required to repurchase may be worth less than an instrument which the trust originally held. Successful use of mortgage dollar rolls will depend upon Pioneer's ability to manage its interest rate and mortgage prepayments exposure. For these reasons, there is no assurance that mortgage dollar rolls can be successfully employed.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The trust may purchase securities, including U.S. government securities, on a when-issued basis or may purchase or sell securities for delayed delivery. In such transactions, delivery of the securities occurs beyond the normal settlement period, but no payment or delivery is made by the trust prior to the actual delivery or payment by the other party to the transaction. The trust will not earn income on these securities until delivered. The purchase of securities on a when-issued or delayed delivery basis involves the risk that the value of the securities purchased will decline prior to the settlement date. The sale of securities for delayed delivery involves the risk that the prices available in the market on the delivery date may be greater than those obtained in the sale transaction. The trust's obligations with respect to when-issued and delayed delivery transactions will be fully collateralized by segregating liquid assets with a value equal to the trust's obligations. See "Asset Segregation."
PREFERRED SHARES
Preferred shares are equity securities, but they have many characteristics of fixed income securities, such as a fixed dividend payment rate and/or a liquidity preference over the issuer's common shares. However, because preferred shares are equity securities, they may be more susceptible to risks traditionally associated with equity investments than the trust's fixed income investments.
REAL ESTATE INVESTMENT TRUSTS ("REITS") AND ASSOCIATED RISK FACTORS
REITs are companies which invest primarily in income producing real estate or real estate related loans or interests. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. REITs are not taxed on income distributed to shareholders provided they comply with the applicable requirements of the Code. The trust will in some cases indirectly bear its proportionate share of any management and other expenses paid by REITs in which it invests in addition to the expenses paid by the trust. Debt securities issued by REITs are, for the most part, general and unsecured obligations and are subject to risks associated with REITs.
Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. An equity REIT may be affected by changes in the value of the underlying properties owned by the REIT. A mortgage REIT may be affected by changes in interest rates and the ability of the issuers of its portfolio mortgages to repay their obligations. REITs are dependent upon the skills of their managers and are not diversified. REITs are generally dependent upon maintaining cash flows to repay borrowings and to make distributions to shareholders and are subject to the risk of default by lessees or borrowers. REITs whose underlying assets are concentrated in properties used by a particular industry, such as health care, are also subject to risks associated with such industry.
REITs (especially mortgage REITs) are also subject to interest rate risks. When interest rates decline, the value of a REIT's investment in fixed rate obligations can be expected to rise. Conversely, when interest rates rise, the value of a REIT's investment in fixed rate obligations can be expected to decline. If the REIT invests in adjustable rate mortgage loans the interest rates on which are reset periodically, yields on a REIT's investments in such loans will gradually align themselves to reflect changes in market interest rates. This causes the value of such investments to fluctuate less dramatically in response to interest rate fluctuations than would investments in fixed rate obligations.
REITs may have limited financial resources and may trade less frequently and in a more limited volume than larger company securities.
OTHER INVESTMENT COMPANIES
The trust may invest in the securities of other investment companies to the
extent that such investments are consistent with the trust's investment
objective and policies and permissible under the Investment Company Act of 1940,
as amended (the "1940 Act"). Under the 1940 Act, the trust may not acquire the
securities of other domestic or non-U.S. investment companies if, as a result,
(i) more than 10% of the trust's total assets would be invested in securities of
other investment companies, (ii) such purchase would result in more than 3% of
the total outstanding voting securities of any one investment company being held
by the trust, or (iii) more than 5% of the trust's total assets would be
invested in any one investment company. These limitations do not apply to the
purchase of shares of any investment company in connection with a merger,
consolidation, reorganization or acquisition of substantially all the assets of
another investment company. The trust does not currently invest in other
investment companies for which Pioneer or any of its affiliates act as an
investment adviser or distributor. However, Pioneer has applied for, and if
granted would rely upon, an exemptive order from the Securities and Exchange
Commission (the "SEC") that would permit the trust to invest cash balances in
money market funds managed by Pioneer.
The trust, as a holder of the securities of other investment companies, will bear its pro rata portion of the other investment companies' expenses, including advisory fees. These expenses are in addition to the direct expenses of the trust's own operations.
ASSET SEGREGATION
The 1940 Act requires that the trust segregate assets in connection with certain types of transactions that may have the effect of leveraging the trust's portfolio. If the trust enters into a transaction requiring segregation, such as a forward commitment, the custodian or Pioneer will segregate liquid assets in an amount required to comply with the 1940 Act. Such segregated assets will be valued at market daily. If the aggregate value of such segregated assets declines below the aggregate value required to satisfy the 1940 Act, additional liquid assets will be segregated.
INTEREST RATE TRANSACTIONS
INTEREST RATE SWAPS, COLLARS, CAPS AND FLOORS. In order to hedge the value of the trust's portfolio against interest rate fluctuations or to enhance the trust's income, the trust may, but is not required to, enter into various interest rate transactions such as interest rate swaps and the purchase or sale of interest rate caps and floors. To the extent that the trust enters into these transactions, the trust expects to do so primarily to preserve a return or spread on a particular investment or portion of its portfolio or to protect against any increase in the price of securities the trust anticipates purchasing at a later date. The trust intends to use these transactions primarily as a hedge and not as a speculative investment. However, the trust also may invest in interest rate swaps to enhance income or to increase the trust's yield, for example, during periods of steep interest rate yield curves (i.e., wide differences between short-term and long-term interest rates). The trust is not required to hedge its portfolio and may choose not to do so. The trust cannot guarantee that any hedging strategies it uses will work.
In an interest rate swap, the trust exchanges with another party their respective commitments to pay or receive interest (e.g., an exchange of fixed rate payments for floating rate payments). For example, if the trust holds a debt instrument with an interest rate that is reset only once each year, it may swap the right to receive interest at this fixed rate for the right to receive interest at a rate that is reset every week. This would enable the trust to offset a decline in the value of the debt instrument due to rising interest rates but would also limit its ability to benefit from falling interest rates. Conversely, if the trust holds a debt instrument with an interest rate that is reset every week and it would like to lock in what it believes to be a high interest rate for one year, it may swap the right to receive interest at this variable weekly rate for the right to receive interest at a rate that is fixed for one year. Such a swap would protect the trust from a reduction in yield due to falling interest rates and may permit the trust to enhance its income through the positive differential between one week and one year interest rates, but would preclude it from taking full advantage of rising interest rates.
The trust usually will enter into interest rate swaps on a net basis (i.e., the two payment streams are netted out with the trust receiving or paying, as the case may be, only the net amount of the two payments). The net amount of the
excess, if any, of the trust's obligations over its entitlements with respect to each interest rate swap will be accrued on a daily basis, and an amount of cash or liquid instruments having an aggregate net asset value at least equal to the accrued excess will be maintained in a segregated account by the trust's custodian. If the interest rate swap transaction is entered into on other than a net basis, the full amount of the trust's obligations will be accrued on a daily basis, and the full amount of the trust's obligations will be maintained in a segregated account by the trust's custodian.
The trust also may engage in interest rate transactions in the form of purchasing or selling interest rate caps or floors. The trust will not sell interest rate caps or floors that it does not own. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest equal to the difference of the index and the predetermined rate on a notional principal amount (i.e., the reference amount with respect to which interest obligations are determined although no actual exchange of principal occurs) from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest at the difference of the index and the predetermined rate on a notional principal amount from the party selling such interest rate floor. The trust will not enter into caps or floors if, on a net basis, the aggregate notional principal amount with respect to such agreements exceeds the net assets of the trust.
Typically, the parties with which the trust will enter into interest rate transactions will be broker-dealers and other financial institutions. The trust will not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the claims-paying ability of the other party thereto is rated investment grade quality by at least one nationally recognized statistical rating organization at the time of entering into such transaction or whose creditworthiness is believed by Pioneer to be equivalent to such rating. If there is a default by the other party to such a transaction, the trust will have contractual remedies pursuant to the agreements related to the transaction. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. As a result, the swap market has become relatively liquid in comparison with other similar instruments traded in the interbank market. Caps and floors, however, are less liquid than swaps. Certain federal income tax requirements may limit the trust's ability to engage in interest rate swaps.
CREDIT DEFAULT SWAP AGREEMENTS. The trust may enter into credit default swap agreements. The "buyer" in a credit default contract is obligated to pay the "seller" a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation has occurred. If an event of default occurs, the seller must pay the buyer the "par value" (full notional value) of the reference obligation in exchange for the reference obligation. The trust may be either the buyer or seller in the transaction. If the trust is a buyer and no event of default occurs, the trust loses its investment and recovers nothing. However, if an event of default occurs, the buyer receives full notional value for a reference obligation that may have little or no value. As a seller, the trust receives a fixed rate of income throughout the term of the contract, which typically is between six months and three years, provided that there is no default event. If an event of default occurs, the seller must pay the buyer the full notional value of the reference obligation.
Credit default swaps involve greater risks than if the trust had invested in the reference obligation directly. In addition to general market risks, credit default swaps are subject to illiquidity risk, counterparty risk and credit risks. The trust will enter into swap agreements only with counterparties who are rated investment grade quality by at least one nationally recognized statistical rating organization at the time of entering into such transaction or whose creditworthiness is believed by Pioneer to be equivalent to such rating. A buyer also will lose its investment and recover nothing should no event of default occur. If an event of default were to occur, the value of the reference obligation received by the seller, coupled with the periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the trust. When the trust acts as a seller of a credit default swap agreement it is exposed to many of the same risks of leverage described under "Risk Factors--Leverage" and "Leverage" in the prospectus since if an event of default occurs the seller must pay the buyer the full notional value of the reference obligation.
The trust may in the future employ new or additional investment strategies and hedging instruments if those strategies and instruments are consistent with the trust's investment objective and are permissible under applicable regulations governing the trust.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. To hedge against changes in securities prices or currency exchange rates or to seek to increase total return, the trust may purchase and sell various kinds of futures contracts, and purchase and write (sell) call and put options on any of such futures contracts. The trust may also enter into closing purchase and sale transactions with respect to any of such contracts and options. The futures contracts may be based on various securities (such as U.S. government securities), securities indices, non-U.S. currencies and other financial instruments and indices. The trust will engage in futures and related options transactions for bona fide hedging and non-hedging purposes as described below. All futures contracts entered into by the trust are traded on U.S. exchanges or boards of trade that are licensed and regulated by the Commodity Futures Trading Commission (the CFTC) or on non-U.S. exchanges.
FUTURES CONTRACTS. A futures contract may generally be described as an agreement between two parties to buy and sell particular financial instruments for an agreed price during a designated month (or to deliver the final cash settlement price, in the case of a contract relating to an index or otherwise not calling for physical delivery at the end of trading in the contract).
When interest rates are rising or securities prices are falling, the trust can seek to offset a decline in the value of its current portfolio securities through the sale of futures contracts. When interest rates are falling or securities prices are rising, the trust, through the purchase of futures contracts, can attempt to secure better rates or prices than might later be available in the market when it effects anticipated purchases. Similarly, the trust can sell futures contracts on a specified currency to protect against a decline in the value of such currency and a decline in the value of its portfolio securities which are denominated in such currency. The trust can purchase futures contracts on a non-U.S. currency to establish the price in U.S. dollars of a security denominated in such currency that the trust has acquired or expects to acquire.
Positions taken in the futures markets are not normally held to maturity but are instead liquidated through offsetting transactions which may result in a profit or a loss. While futures contracts on securities or currency will usually be liquidated in this manner, the trust may instead make, or take, delivery of the underlying securities or currency whenever it appears economically advantageous to do so. A clearing corporation associated with the exchange on which futures on securities or currency are traded guarantees that, if still open, the sale or purchase will be performed on the settlement date.
HEDGING STRATEGIES. Hedging, by use of futures contracts, seeks to establish with more certainty the effective price, rate of return and currency exchange rate on portfolio securities and securities that the trust owns or proposes to acquire. The trust may, for example, take a "short" position in the futures market by selling futures contracts in order to hedge against an anticipated rise in interest rates or a decline in market prices or non-U.S. currency rates that would adversely affect the value of the trust's portfolio securities. Such futures contracts may include contracts for the future delivery of securities held by the trust or securities with characteristics similar to those of the trust's portfolio securities. Similarly, the trust may sell futures contracts in a non-U.S. currency in which its portfolio securities are denominated or in one currency to hedge against fluctuations in the value of securities denominated in a different currency if there is an established historical pattern of correlation between the two currencies. If, in the opinion of Pioneer, there is a sufficient degree of correlation between price trends for the trust's portfolio securities and futures contracts based on other financial instruments, securities indices or other indices, the trust may also enter into such futures contracts as part of its hedging strategies. Although under some circumstances prices of securities in the trust's portfolio may be more or less volatile than prices of such futures contracts, Pioneer will attempt to estimate the extent of this volatility difference based on historical patterns and compensate for any such differential by having the trust enter into a greater or lesser number of futures contracts or by attempting to achieve only a partial hedge against price changes affecting the trust's portfolio securities. When hedging of this character is successful, any depreciation in the value of portfolio securities will be substantially offset by appreciation in the value of the futures position. On the other hand, any unanticipated appreciation in the value of the trust's portfolio securities would be substantially offset by a decline in the value of the futures position.
On other occasions, the trust may take a "long" position by purchasing futures contracts. This may be done, for example, when the trust anticipates the subsequent purchase of particular securities when it has the necessary cash, but expects the prices or currency exchange rates then available in the applicable market to be less favorable than prices or rates that are currently available.
OPTIONS ON FUTURES CONTRACTS. The acquisition of put and call options on futures contracts will give the trust the right (but not the obligation) for a specified price to sell or to purchase, respectively, the underlying futures contract at any time during the option period. As the purchaser of an option on a futures contract, the trust obtains the benefit of the futures position if prices move in a favorable direction but limits its risk of loss in the event of an unfavorable price movement to the loss of the premium and transaction costs.
The writing of a call option on a futures contract generates a premium which may partially offset a decline in the value of the trust's assets. By writing a call option, the trust becomes obligated, in exchange for the premium, to sell a futures contract (if the option is exercised), which may have a value higher than the exercise price. Conversely, the writing of a put option on a futures contract generates a premium which may partially offset an increase in the price of securities that the trust intends to purchase. However, the trust becomes obligated to purchase a futures contract (if the option is exercised) which may have a value lower than the exercise price. Thus, the loss incurred by the trust in writing options on futures is potentially unlimited and may exceed the amount of the premium received. The trust will incur transaction costs in connection with the writing of options on futures.
The holder or writer of an option on a futures contract may terminate its position by selling or purchasing an offsetting option on the same series. There is no guarantee that such closing transactions can be effected. The trust's ability to establish and close out positions on such options will be subject to the development and maintenance of a liquid market.
OTHER CONSIDERATIONS. The trust will engage in futures and related options transactions only for bona fide hedging or non-hedging purposes in accordance with CFTC regulations which permit principals of an investment company registered under the 1940 Act to engage in such transactions without registering as commodity pool operators. The trust will determine that the price fluctuations in the futures contracts and options on futures used for hedging purposes are substantially related to price fluctuations in securities held by the trust or which the trust expects to purchase. Except as stated below, the trust's futures transactions will be entered into for traditional hedging purposes--i.e., futures contracts will be sold to protect against a decline in the price of securities (or the currency in which they are denominated) that the trust owns, or futures contracts will be purchased to protect the trust against an increase in the price of securities (or the currency in which they are denominated) it intends to purchase. As evidence of this hedging intent, the trust expects that on 75% or more of the occasions on which it takes a long futures or option position (involving the purchase of futures contracts), the trust will have purchased, or will be in the process of purchasing, equivalent amounts of related securities or assets denominated in the related currency in the cash market at the time when the futures or option position is closed out. However, in particular cases, when it is economically advantageous for the trust to do so, a long futures position may be terminated or an option may expire without the corresponding purchase of securities or other assets.
As an alternative to literal compliance with the bona fide hedging definition, a CFTC regulation permits the trust to elect to comply with a different test, under which the sum of the amounts of initial margin deposits on the trust's existing non-hedging futures contracts and premiums paid for options on futures entered into for non-hedging purposes (net of the amount the positions are "in the money") would not exceed 5% of the market value of the trust's total assets. The trust will engage in transactions in futures contracts and related options only to the extent such transactions are consistent with the requirements of the Code for maintaining its qualification as a regulated investment company for federal income tax purposes.
Futures contracts and related options involve brokerage costs, require margin deposits and, in the case of contracts and options obligating the trust to purchase securities or currencies, require the trust to segregate assets to cover such contracts and options.
While transactions in futures contracts and options on futures may reduce certain risks, such transactions themselves entail certain other risks. Thus, while the trust may benefit from the use of futures and options on futures, unanticipated changes in interest rates, securities prices or currency exchange rates may result in a poorer overall performance for the trust than if it had not entered into any futures contracts or options transactions. In the event of an imperfect correlation between a futures position and a portfolio position which is intended to be protected, the desired protection may not be obtained and the trust may be exposed to risk of loss. It is not possible to hedge fully or perfectly against the effect of currency fluctuations on the value of non-U.S. securities because currency movements impact the value of different securities in differing degrees.
FOREIGN CURRENCY TRANSACTIONS
The trust may engage in foreign currency transactions. These transactions may be conducted at the prevailing spot rate for purchasing or selling currency in the foreign exchange market. The trust also has authority to enter into forward foreign currency exchange contracts involving currencies of the different countries in which the trust invests as a hedge against possible variations in the foreign exchange rates between these currencies and the U.S. dollar. This is accomplished through contractual agreements to purchase or sell a specified currency at a specified future date and price set at the time of the contract.
Transaction hedging is the purchase or sale of forward foreign currency contracts with respect to specific receivables or payables of the trust, accrued in connection with the purchase and sale of its portfolio securities quoted in foreign currencies. Portfolio hedging is the use of forward foreign currency contracts to offset portfolio security positions denominated or quoted in such foreign currencies. There is no guarantee that the trust will be engaged in hedging activities when adverse exchange rate movements occur. The trust will not attempt to hedge all of its foreign portfolio positions and will enter into such transactions only to the extent, if any, deemed appropriate by Pioneer.
Hedging against a decline in the value of a currency does not eliminate fluctuations in the prices of portfolio securities or prevent losses if the prices of such securities decline. Such transactions also limit the opportunity for gain if the value of the hedged currency should rise. Moreover, it may not be possible for the trust to hedge against a devaluation that is so generally anticipated that the trust is not able to contract to sell the currency at a price above the devaluation level it anticipates.
The trust may also engage in cross-hedging by using forward contracts in one currency to hedge against fluctuations in the value of securities denominated in a different currency, if Pioneer determines that there is a pattern of correlation between the two currencies. Cross-hedging may also include entering into a forward transaction involving two foreign currencies, using one foreign currency as a proxy for the U.S. dollar to hedge against variations in the other foreign currency, if Pioneer determines that there is a pattern of correlation between the proxy currency and the U.S. dollar.
The cost to the trust of engaging in foreign currency transactions varies with such factors as the currency involved, the size of the contract, the length of the contract period, differences in interest rates between the two currencies and the market conditions then prevailing. Since transactions in foreign currency and forward contracts are usually conducted on a principal basis, no fees or commissions are involved. The trust may close out a forward position in a currency by selling the forward contract or by entering into an offsetting forward contract.
The precise matching of the forward contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. Using forward contracts to protect the value of the trust's portfolio securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange which the trust can achieve at some future point in time. The precise projection of short-term currency market movements is not possible, and short-term hedging provides a means of fixing the U.S. dollar value of only a portion of the trust's foreign assets.
While the trust will enter into forward contracts to reduce currency exchange rate risks, transactions in such contracts involve certain other risks. While the trust may benefit from such transactions, unanticipated changes in currency prices may result in a poorer overall performance for the trust than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between the trust's portfolio holdings of securities quoted or denominated in a particular currency and forward contracts entered into by the trust. Such imperfect correlation may cause the trust to sustain losses which will prevent the trust from achieving a complete hedge or expose the trust to risk of foreign exchange loss.
Over-the-counter markets for trading foreign forward currency contracts offer less protection against defaults than is available when trading in currency instruments on an exchange. Since a forward foreign currency exchange contract is not guaranteed by an exchange or clearinghouse, a default on the contract would deprive the trust of unrealized profits or force the trust to cover its commitments for purchase or resale, if any, at the current market price.
If the trust enters into a forward contract to purchase foreign currency, the custodian or Pioneer will segregate liquid assets.
OPTIONS ON SECURITIES AND SECURITIES INDICES
The trust may purchase put and call options on any security in which it may invest or options on any securities index based on securities in which it may invest. The trust would also be able to enter into closing sale transactions in order to realize gains or minimize losses on options it has purchased.
WRITING CALL AND PUT OPTIONS ON SECURITIES. A call option written by the trust obligates the trust to sell specified securities to the holder of the option at a specified price if the option is exercised at any time before the expiration date. All call options written by the trust are covered, which means that the trust will own the securities subject to the options as long as the options are outstanding, or the trust will use the other methods described below. The trust's purpose in writing covered call options is to realize greater income than would be realized on portfolio securities transactions alone. However, the trust may forgo the opportunity to profit from an increase in the market price of the underlying security.
A put option written by the trust would obligate the trust to purchase specified securities from the option holder at a specified price if the option is exercised at any time before the expiration date. All put options written by the trust would be covered, which means that the trust would have segregated assets with a value at least equal to the exercise price of the put option. The purpose of writing such options is to generate additional income for the trust. However, in return for the option premium, the trust accepts the risk that it may be required to purchase the underlying security at a price in excess of its market value at the time of purchase.
Call and put options written by the trust will also be considered to be covered to the extent that the trust's liabilities under such options are wholly or partially offset by its rights under call and put options purchased by the trust. In addition, a written call option or put may be covered by entering into an offsetting forward contract and/or by purchasing an offsetting option or any other option which, by virtue of its exercise price or otherwise, reduces the trust's net exposure on its written option position.
WRITING CALL AND PUT OPTIONS ON SECURITIES INDICES. The trust may also write
(sell) covered call and put options on any securities index composed of
securities in which it may invest. Options on securities indices are similar to
options on securities, except that the exercise of securities index options
requires cash payments and does not involve the actual purchase or sale of
securities. In addition, securities index options are designed to reflect price
fluctuations in a group of securities or segments of the securities market
rather than price fluctuations in a single security.
The trust may cover call options on a securities index by owning securities whose price changes are expected to be similar to those of the underlying index, or by having an absolute and immediate right to acquire such securities without additional cash consideration (or for additional consideration if cash in such amount is segregated) upon conversion or exchange of other securities in its portfolio. The trust may cover call and put options on a securities index by segregating assets with a value equal to the exercise price.
PURCHASING CALL AND PUT OPTIONS. The trust would normally purchase call options in anticipation of an increase in the market value of securities of the type in which it may invest. The purchase of a call option would entitle the trust, in return for the premium paid, to purchase specified securities at a specified price during the option period. The trust would ordinarily realize a gain if, during the option period, the value of such securities exceeded the sum of the exercise price, the premium paid and transaction costs; otherwise the trust would realize either no gain or a loss on the purchase of the call option.
The trust would normally purchase put options in anticipation of a decline in the market value of securities in its portfolio ("protective puts") or in securities in which it may invest. The purchase of a put option would entitle the trust, in exchange for the premium paid, to sell specified securities at a specified price during the option period. The purchase of protective puts is designed to offset or hedge against a decline in the market value of the trust's holdings. Put options may also be purchased by the trust for the purpose of affirmatively benefiting from a decline in the price of securities which it does not own. The trust would ordinarily realize a gain if, during the option period, the value of the underlying securities decreased below the exercise price sufficiently to more than cover the
premium and transaction costs; otherwise the trust would realize either no gain or a loss on the purchase of the put option. Gains and losses on the purchase of protective put options would tend to be offset by countervailing changes in the value of the underlying portfolio securities.
The trust may terminate its obligations under an exchange-traded call or put option by purchasing an option identical to the one it has written. Obligations under over-the-counter options may be terminated only by entering into an offsetting transaction with the counterparty to such option. Such purchases are referred to as "closing purchase transactions."
RISKS OF TRADING OPTIONS. There is no assurance that a liquid secondary market on an options exchange will exist for any particular exchange-traded option, or at any particular time. If the trust is unable to effect a closing purchase transaction with respect to covered options it has written, the trust will not be able to sell the underlying securities or dispose of its segregated assets until the options expire or are exercised. Similarly, if the trust is unable to effect a closing sale transaction with respect to options it has purchased, it will have to exercise the options in order to realize any profit and will incur transaction costs upon the purchase or sale of underlying securities.
Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening or closing
transactions or both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options; (iv) unusual
or unforeseen circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or the Options Clearing Corporation (OCC) may not
at all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or in
that class or series of options) would cease to exist, although outstanding
options on that exchange, if any, that had been issued by the OCC as a result of
trades on that exchange would continue to be exercisable in accordance with
their terms.
The trust may purchase and sell both options that are traded on U.S. and non-U.S. exchanges and options traded over the counter with broker-dealers who make markets in these options. The ability to terminate over-the-counter options is more limited than with exchange-traded options and may involve the risk that broker-dealers participating in such transactions will not fulfill their obligations.
Transactions by the trust in options on securities and indices will be subject to limitations established by each of the exchanges, boards of trade or other trading facilities governing the maximum number of options in each class which may be written or purchased by a single investor or group of investors acting in concert. Thus, the number of options which the trust may write or purchase may be affected by options written or purchased by other investment advisory clients of Pioneer. An exchange, board of trade or other trading facility may order the liquidations of positions found to be in excess of these limits, and it may impose certain other sanctions.
The writing and purchase of options is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. The successful use of protective puts for hedging purposes depends in part on Pioneer's ability to predict future price fluctuations and the degree of correlation between the options and securities markets.
The hours of trading for options may not conform to the hours during which the underlying securities are traded. To the extent that the options markets close before the markets for the underlying securities, significant price movements can take place in the underlying markets that cannot be reflected in the options markets.
In addition to the risks of imperfect correlation between the trust's portfolio and the index underlying the option, the purchase of securities index options involves the risk that the premium and transaction costs paid by the trust in purchasing an option will be lost. This could occur as a result of unanticipated movements in the price of the securities comprising the securities index on which the option is based.
INVESTMENT RESTRICTIONS
The following are the trust's fundamental investment restrictions. These restrictions may not be changed without the approval of the holders of a majority of the trust's outstanding voting securities (which for this purpose and under
the 1940 Act means the lesser of (i) 67% of the common shares represented at a meeting at which more than 50% of the outstanding common shares are represented or (ii) more than 50% of the outstanding common shares). If the trust were to issue a class of preferred shares, the investment restrictions could not be changed without the approval of a majority of the outstanding common and preferred shares, voting together as a class, and the approval of a majority of the outstanding preferred shares, voting separately by class. Statements in italics are not part of the restriction.
The trust may not:
(1) Issue senior securities, except as permitted by the 1940 Act and the rules and interpretive positions of the SEC thereunder. SENIOR SECURITIES THAT THE TRUST MAY ISSUE IN ACCORDANCE WITH THE 1940 ACT INCLUDE PREFERRED SHARES, BORROWING, FUTURES, WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD FOREIGN CURRENCY EXCHANGE TRANSACTIONS.
(2) Borrow money, except as permitted by the 1940 Act and the rules and interpretive positions of the SEC thereunder.
(3) Invest in real estate, except that the trust may invest in securities of issuers that invest in real estate or interests therein, securities that are secured by real estate or interests therein, securities of real estate investment trusts and mortgage-backed securities.
(4) Make loans, except by the purchase of debt obligations, loans or direct claim against a borrower, by entering into repurchase agreements or through the lending of portfolio securities.
(5) Invest in commodities or commodity contracts, except that the trust may invest in currency instruments and contracts and financial instruments and contracts that might be deemed to be commodities and commodity contracts. A FUTURES CONTRACT, FOR EXAMPLE, MAY BE DEEMED TO BE A COMMODITY CONTRACT.
(6) Act as an underwriter, except as it may be deemed to be an underwriter in a sale of restricted securities held in its portfolio.
(7) With respect to 75% of its total assets, purchase securities of an issuer (other than the U.S. government, its agencies or instrumentalities), if
(a) such purchase would cause more than 5% of the trust's total assets, taken at market value, to be invested in the securities of such issuer, or
(b) such purchase would at the time result in more than 10% of the outstanding voting securities of such issuer being held by the trust.
(8) Concentrate its investments in securities of companies in any particular industry. IN THE OPINION OF THE SEC, INVESTMENTS ARE CONCENTRATED IN A PARTICULAR INDUSTRY IF SUCH INVESTMENTS AGGREGATE 25% OR MORE OF THE TRUST'S TOTAL ASSETS. THE TRUST'S POLICY DOES NOT APPLY TO INVESTMENTS IN U.S. GOVERNMENT SECURITIES.
All other investment policies of the trust in the prospectus under the heading "Investment Objective and Principal Investment Strategies" and in this statement of additional information under the heading "Investment Objective and Policies" are considered non-fundamental and may be changed by the Board of Trustees without prior approval of the trust's outstanding voting shares.
The trust has adopted the following non-fundamental policy: the trust will not incur leverage (whether through the issuance of preferred shares or borrowing) in an amount (at the time of incurrence) greater than 33 1/3% of the trust's total assets.
Under the 1940 Act, the trust may invest up to 10% of its total assets in the aggregate in shares of other investment companies and up to 5% of its total assets in any one investment company, provided the investment does not represent more than 3% of the voting stock of the acquired investment company at the time such shares are purchased. As a shareholder in any investment company, the trust will bear its ratable share of that investment
company's expenses, and would remain subject to payment of the trust's advisory fees and other expenses with respect to assets so invested. Holders of common shares would therefore be subject to duplicative expenses to the extent the trust invests in other investment companies. In addition, the securities of other investment companies may also be leveraged and will therefore be subject to the same leverage risks described herein and in the prospectus. As described in the prospectus in the section entitled "Risks," the net asset value and market value of leveraged shares will be more volatile and the yield to shareholders will tend to fluctuate more than the yield generated by unleveraged shares.
In addition, to comply with federal tax requirements for qualification as a
"regulated investment company," the trust's investments will be limited in a
manner such that at the close of each quarter of each tax year, (a) no more than
25% of the value of the trust's total assets are invested in the securities
(other than United States government securities or securities of other regulated
investment companies) of a single issuer or two or more issuers controlled by
the trust and engaged in the same, similar or related trades or businesses and
(b) with regard to at least 50% of the trust's total assets, no more than 5% of
its total assets are invested in the securities (other than United States
government securities or securities of other regulated investment companies) of
a single issuer. These tax-related limitations may be changed by the Trustees to
the extent appropriate in light of changes to applicable tax requirements.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The trust's Board of Trustees provides broad supervision over the trust's affairs. The officers of the trust are responsible for the trust's operations. The trust's Trustees and officers are listed below, together with their principal occupations during the past five years. Asterisks indicates those Trustees who are interested persons of the trust within the meaning of the 1940 Act, and they are referred to as Interested Trustees. Trustees who are not interested persons of the trust are referred to as Independent Trustees. Each of the Trustees serves as a trustee of each of the 60 U.S. registered investment portfolios for which Pioneer serves as investment adviser (the "Pioneer Funds"). The address for all Interested Trustees and all officers of the trust is 60 State Street, Boston, Massachusetts 02109.
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
POSITIONS TERM OF OFFICE
NAME, AGE AND HELD WITH THE AND LENGTH OF PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD BY
ADDRESS TRUST SERVICE FIVE YEARS THIS TRUSTEE
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
INTERESTED TRUSTEES:
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
*John F. Cogan, Jr. Trustee and Trustee since Deputy Chairman and a Director of Director of Harbor Global
(75) President March, 2002. Pioneer Global Asset Management Company, Ltd.
Term expires in S.p.A. ("PGAM"); Non-Executive
2004. Chairman and a Director of
Pioneer Investment Management USA
Inc. ("PIM-USA"); Chairman and a
Director of Pioneer; President of
all of the Pioneer
Funds; and Of Counsel
(since 2000, Partner
prior to 2000), Hale and
Dorr LLP (counsel to
PIM-USA the Pioneer
Funds)
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
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**Daniel T. Geraci Trustee and Trustee since Director and CEO-US of PGAM since None
(44) Executive January, 2002. November 2001; Director, Chief
Vice President Term expires in Executive Officer and President
2005. of PIM-USA since October 2001;
Director of Pioneer
Investment Management
Shareholder Services,
Inc. (PIMSS) since
October 2001; President
and a Director of
Pioneer, Pioneer Funds
Distributor, Inc. and
Pioneer International
Corporation since
October 2001; Executive
Vice President of all of
the Pioneer Funds since
October 2001; President
of Fidelity Private
Wealth Management Group
from 2000 through
October 2001; and
Executive Vice
President--Distribution
and Marketing of
Fidelity Investments
Institutional Services
and Fidelity Investments
Canada Ltd. prior to
2000
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
INDEPENDENT
TRUSTEES:
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
Mary K. Bush (54) Trustee Trustee since President, Bush & Co. Director and/or Trustee of
4201 CATHEDRAL March, 2002. (international financial advisory Brady Corporation
AVENUE, NW, Term expires in firm) (industrial identification
WASHINGTON, DC 20016 2003. and specialty coated
material products
manufacturer), Mastec Inc.
(communications and energy
infrastructure), Mortgage
Guaranty Insurance
Corporation, R.J Reynolds
Tobacco Holdings, Inc.
(tobacco) and Student Loan
Marketing Association
(secondary marketing of
student loans)
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
Richard H. Egdahl, Trustee Trustee since Alexander Graham Bell Professor None
M.D. (75) March, of Health Care Entrepreneurship,
BOSTON UNIVERSITY 2002.Term Boston University; Professor of
HEALTHCARE expires in 2004. Management, Boston University
ENTREPRENEURSHIP School of Management; Professor
PROGRAM, 53 BAY of Public Health, Boston
STATE ROAD, BOSTON, University School of Public
MA 02215 Health; Professor of Surgery,
Boston University School of
Medicine; University Professor,
Boston University
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
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Margaret B.W. Trustee Trustee since Founding Director, The Winthrop None
Graham (54) March, 2002. Group, Inc. (consulting firm);
1001 SHERBROOKE Term expires in Professor of Management, Faculty
STREET WEST, 2005. of Management, McGill University
MONTREAL, QUEBEC,
CANADA
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
Marguerite A. Piret Trustee Trustee since President, Newbury, Piret & Director, Organogenesis
(53) March, 2002. Company, Inc. (merchant banking Inc. (tissue engineering
ONE BOSTON PLACE, Term expires in firm) company)
26TH FLOOR, BOSTON, 2003.
MA 02108
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
Stephen K. West (73) Trustee Trustee since Of Counsel, Sullivan & Cromwell Director, Dresdner RCM
125 BROAD STREET, March, 2002. (law firm) Global Strategic Income
NEW YORK, NY 10004 Term expires in Fund, Inc. and The Swiss
2004. Helvetia Fund, Inc.
(closed-end investment
companies), AMVESCAP PLC
(investment managers) and
First ING Life Insurance
Company of New York
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
John Winthrop (65) Trustee Trustee since President, John Winthrop & Co., Director of NUI Corp.
ONE NORTH ADGERS March, Term Inc. (private investment firm) (energy sales, services and
WHARF, CHARLESTON, expires in 2005. distribution)
SC 29401
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
TRUST OFFICERS:
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
Joseph P. Barri (55) Secretary Since January, Partner, Hale and Dorr LLP; None
2002. Serves at Secretary of all of the Pioneer
the discretion Funds
of Board.
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
Dorothy E. Bourassa Assistant Since January, Secretary of PIM-USA; Senior Vice None
(54) Secretary 2002. Serves at President-Legal of Pioneer; and
the discretion Secretary/Clerk of most of
of Board. PIM-USA's subsidiaries since
October 2000; Assistant
Secretary of all of the
Pioneer Funds since
November 2000; Senior
Counsel, Assistant Vice
President and Director
of Compliance of PIM-USA
from April 1998 through
October 2000; Vice
President and Assistant
General Counsel, First
Union Corporation from
December 1996 through
March 1998
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
Vincent Nave (56) Treasurer Since January, Vice President-Fund Accounting None
2002. Serves at and Custody Services of Pioneer
the discretion (Manager from September 1996 to
of Board. February 1999); and Treasurer of
all of the Pioneer Funds
(Assistant Treasurer from June
1999 to November 2000)
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
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Luis I. Presutti Assistant Since January, Assistant Vice President-Fund None
(37) Treasurer 2002. Serves at Accounting, Administration and
the discretion Custody Services of Pioneer (Fund
of Board. Accounting Manager from 1994 to
1999); and Assistant Treasurer of
all of the Pioneer Funds since
November 2000
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
John F. Daly III Assistant Since January, Global Custody and Settlement None
(36) Treasurer 2002. Serves at Division Manager of PIM-USA; and
the discretion Assistant Treasurer of all of the
of Board. Pioneer Funds since November 2000
--------------------- --------------- ----------------- ----------------------------------- -----------------------------
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*Mr. Cogan is an Interested Trustee because he is an officer or director of the trust's investment adviser and certain of its affiliates **Mr. Geraci is an Interested Trustee because he is an officer, director and employee of the trust's investment adviser and its affiliates.
The outstanding capital stock of the investment adviser is indirectly majority owned by UniCredito Italiano S.p.A. ("UniCredito"), one of the largest banking groups in Italy.
The trust's Board of Trustees consists of 8 members. The term of one class expires each year commencing with the first annual meeting following this public offering and no term shall continue for more than three years after the applicable election. The terms of Ms. Bush and Ms. Piret expire at the first annual meeting following this public offering, the terms of Mr. Cogan, Dr. Egdahl and Mr. West expire at the second annual meeting, and the terms of Mr. Geraci, Ms. Graham and Mr. Winthrop expire at the third annual meeting. Subsequently, each class of Trustees will stand for election at the conclusion of its respective term. Such classification may prevent replacement of a majority of the Trustees for up to a two-year period.
BOARD COMMITTEES
The Board of Trustees has an Audit Committee, which is comprised of Ms. Piret (chairperson), Mr. West and Mr. Winthrop; a Nominating Committee, which is comprised of Ms. Bush and Dr. Egdahl; a Valuation Committee, which is comprised of Ms. Bush, Ms. Piret and Mr. Winthrop; and an Independent Trustees Committee, which is comprised of all the trust's Independent Trustees. Ms. Graham is the chairperson of the Independent Trustees Committee.
The Board of Trustees has adopted a charter for the Audit Committee. In accordance with its charter, the purposes of the Audit Committee are:
|X| act as a liaison between the trust's independent auditors and the full Board of Trustees of the trust;
|X| discuss with the trust's independent auditors their judgments about the quality of the trust's accounting principles and underlying estimates as applied in the trust's financial reporting;
|X| review and assess the renewal materials of all related party contracts and agreements, including investment advisory agreements, underwriting contracts, administration agreements, and transfer agency contracts, among any other instruments and agreements that may be appropriate from time to time;
|X| review and assess from time to time, as it deems necessary and appropriate:
|X| brokerage and soft dollar arrangements of the trust and
|X| the utilization of any line of credit;
|X| review and approve insurance coverage and allocations of premiums between the management and the trust among the Pioneer Funds;
|X| review and approve expenses under the administration agreement between Pioneer and the trust; and
|X| ensure that the independent auditors submit on a periodic basis to the Audit Committee a formal written statement delineating all relationships between the auditors and the trust or Pioneer; to actively engage in a dialogue with the independent auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent auditors; and to recommend that the Trustees take appropriate action in response to the independent auditors' report to satisfy itself of the independent auditors' independence.
The Nominating Committee reviews the qualifications of any candidate recommended by the Independent Trustees to serve as an Independent Trustee and makes a recommendation regarding that person's qualifications. The Committee does not accept nominations from shareholders.
The Valuation Committee reviews the valuation assigned to certain securities by Pioneer in accordance with the trust's valuation procedures.
The Independent Trustees Committee reviews the trust's management contract and other related party contracts annually and is also responsible for any other action required to be taken, under the 1940 Act, by the Independent Trustees acting alone.
The trust's Declaration of Trust provides that the trust will indemnify the Trustees and officers against liabilities and expenses incurred in connection with any litigation in which they may be involved because of their offices with the trust, unless it is determined in the manner specified in the Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the trust or that such indemnification would relieve any officer or Trustee of any liability to the trust or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his or her duties.
COMPENSATION OF OFFICERS AND TRUSTEES
The trust pays no salaries or compensation to any of its officers. The Pioneer Funds, including the trust, compensate their trustees as follows:
|X| If the Pioneer fund has assets greater than $250 million, the Pioneer fund
pays each Independent Trustee an annual base fee calculated on the basis of
the Pioneer fund's net assets.
|X| If the Pioneer fund has assets less than $250 million, the Pioneer fund
pays each Independent Trustee an annual fee of $1,000.
|X| If the Pioneer fund has assets greater than $50 million, the Pioneer fund
pays each Interested Trustee an annual fee of $500, and if the Pioneer fund
has assets less than $50 million, the Pioneer fund pays each Interested
Trustee and annual fee of $200 (Pioneer reimburses the fund for these
fees).
|X| Each Pioneer fund with assets greater than $250 million pays each
Independent Trustee who serves on a board committee an annual committee fee
based the Pioneer fund's net assets (with additional compensation for
chairpersons of such committees).
The following table sets forth certain information with respect to the compensation paid to each Trustee by the trust and the Pioneer funds as a group. Compensation from the trust is for the current calendar year and is estimated. Total compensation from the Pioneer Funds as a group is for the calendar year ended December 31, 2001.
PENSION OR TOTAL COMPENSATION
RETIREMENT BENEFITS FROM THE TRUST AND
AGGREGATE ACCRUED AS PART OF ESTIMATED ANNUAL OTHER PIONEER
COMPENSATION FROM TRUST EXPENSES BENEFIT UPON RETIREMENT FUNDS**
NAME OF TRUSTEE TRUST*
INTERESTED TRUSTEES:
John F. Cogan, Jr.*** $375.00 $0.00 $0.00 $18,000.00
Daniel T. Geraci*** 375.00 0.00 0.00 4,500.00
INDEPENDENT TRUSTEES:
Mary K. Bush 750.00 0.00 0.00 91,250.00
Richard H. Egdahl, M.D. 750.00 0.00 0.00 91,250.00
Margaret B.W. Graham 750.00 0.00 0.00 99,750.00
Marguerite A. Piret 750.00 0.00 0.00 116,750.00
Stephen K. West 750.00 0.00 0.00 108,250.00
John Winthrop 750.00 0.00 0.00 104,000.00
------ ---- ---- ----------
$5,250.00 $0.00 $0.00 $633,750.00
--------- ----- ----- -----------
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* Estimated for the calendar year ending December 31, 2002. ** For the calendar year ended December 31, 2001. There are 60 U.S. registered investment portfolios in the Pioneer Family of Funds. *** Under the management contract, Pioneer reimburses the trust for any Trustee fees paid by the trust.
OWNERSHIP OF SHARES OF THE TRUST AND OTHER PIONEER FUNDS
The following table indicates the value of shares that each Trustee beneficially owns in the trust and the Pioneer Funds in the aggregate. The value of shares of the trust and any other closed-end fund are determined based on closing market price on December 31, 2001. The value of shares of any Pioneer fund that is an open-end investment company is determined on the basis of the net asset value of the class of shares held as of December 31, 2001. The value of the shares held are stated in ranges in accordance with the requirements of the SEC. The table reflects the Trustee's beneficial ownership of shares of the Pioneer Funds. Beneficial ownership is determined in accordance with the rules of the SEC.
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AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES
DOLLAR RANGE OF EQUITY IN ALL REGISTERED INVESTMENT COMPANIES IN THE
NAME OF TRUSTEE SECURITIES IN THE TRUST PIONEER FAMILY OF FUNDS
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INTERESTED TRUSTEES:
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Mr. Cogan none over $100,000
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Mr. Geraci none none
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INDEPENDENT TRUSTEES:
----------------------------- --------------------------- -----------------------------------------------
Ms. Bush none $10,001-$50,000
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Dr. Egdahl none $10,001-$50,000
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Ms. Graham none $10,001-$50,000
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Ms. Piret none $50,001-$100,000
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Mr. West none $50,001-$100,000
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Mr. Winthrop none over $100,000
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|
MATERIAL RELATIONSHIPS OF THE INDEPENDENT TRUSTEES. For purposes of the
statements below:
|X| the IMMEDIATE FAMILY MEMBERS of any person includes their spouse, children
in the person's household (including step and adoptive children) and any
dependent of the person.
|X| an entity in a CONTROL RELATIONSHIP means any person who controls, is controlled by or is under common control with the named person. For example, UniCredito is an entity that is in a control relationship with Pioneer.
|X| a RELATED FUND is a registered investment company or an entity exempt from the definition of an investment company pursuant to Sections 3(c)(1) or 3(c)(7) of the 1940 Act, for which Pioneer or any of its affiliates act as
investment adviser or for which Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") or UBS Warburg LLC ("UBS Warburg") or any of its affiliates act as principal underwriter. For example, the trust's related funds include all of the Pioneer Funds and any non-U.S. funds managed by Pioneer or its affiliates.
As of December 31, 2001, none of the Independent Trustees, nor any of their immediate family members, beneficially own any securities issued by Pioneer, UniCredito or any other entity in a control relationship to Pioneer or Merrill Lynch or UBS Warburg or any person in a control relationship to Merrill Lynch or UBS Warburg. During the calendar years 2000 and 2001, none of the Independent Trustees, nor any of their immediately family members, had any direct or indirect interest (the value of which exceeded $60,000), whether by contract, arrangement or otherwise, in Pioneer, UniCredito, or any other entity in a control relationship to Pioneer or Merrill Lynch or UBS Warburg or any person that controls Merrill Lynch or UBS Warburg. During the calendar years 2000 and 2001, none of the Independent Trustees, nor any of their immediately family member, had an interest in a transaction or a series of transactions in which the aggregate amount involved exceeded $60,000 and to which any of the following were a party (each a "fund related party"):
|X| the trust
|X| an officer of the trust
|X| a related fund
|X| an officer of any related fund
|X| Pioneer
|X| Merrill Lynch or UBS Warburg
|X| an officer of Merrill Lynch or UBS Warburg
|X| any affiliate of Pioneer, Merrill Lynch or UBS Warburg
|X| an officer of any such affiliate
During the calendar years 2000 and 2001, none of the Independent Trustees, nor any of their immediate family members, had any relationship (the value of which exceeded $60,000) with any fund related party, including, but not limited to, relationships arising out of (i) the payments for property and services, (ii) the provision of legal services, (iii) the provision of investment banking services (other than as a member of the underwriting syndicate) or (iv) the provision of consulting services, except that Mr. West, an Independent Trustee, is Of Counsel to Sullivan & Cromwell and acts as counsel to the Independent Trustees and the Independent Trustees of the other Pioneer Funds. In addition, from time to time, Sullivan & Cromwell represents certain of the representatives of the underwriters and their affiliates. The aggregate compensation paid to Sullivan & Cromwell by the Pioneer Funds exceeded $60,000 in each of 2000 and 2001.
During the calendar years 2000 and 2001, none of the Independent Trustees, nor
any of their immediate family members, served as a member of a board of
directors on which an officer of any of the following entities also serves as a
director:
|X| Pioneer
|X| Merrill Lynch or UBS Warburg
|X| UniCredito
|X| any other entity in a control relationship with Pioneer or Merrill Lynch
or UBS Warburg
None of the trust's Trustees or officers has any arrangement with any other person pursuant to which that Trustee or officer serves on the Board of Trustees. During the calendar years 2000 and 2001, none of the Independent Trustees, nor any of their immediate family members, had any position, including as an officer, employee, director or partner, with any of the following:
|X| the trust
|X| any related fund
|X| Pioneer
|X| Merrill Lynch or UBS Warburg
|X| any affiliated person of the trust
|X| UniCredito
|X| any other entity in a control relationship to the trust
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE MANAGEMENT CONTRACT. The 1940 Act requires that the trust's management contract be approved initially and, after its initial two-year term, annually both by the Board of Trustees and a majority of the Independent Trustees voting separately. The Independent Trustees have determined that the terms of the trust's management contract are fair and reasonable and that the agreement is in the trust's best interests. The Independent Trustees believe that the management contract will enable the trust to enjoy high quality investment advisory services at a cost which they deem appropriate, reasonable and in the best interests of the trust and its shareholders. In making such determinations, the Independent Trustees met independently from the interested Trustees of the trust and any officers of Pioneer or its affiliates. The Independent Trustees also relied upon the assistance of counsel to the Independent Trustees and counsel to the trust.
In evaluating the management contract, the Independent Trustees reviewed materials furnished by Pioneer and discussed with representatives of Pioneer the trust's operations and the Pioneer's ability to provide advisory and other services to the trust. The Independent Trustees also reviewed, among other things:
|X| the investment performance of other Pioneer funds with similar investment strategies;
|X| the proposed fees to be charged by Pioneer for investment advisory services;
|X| the trust's projected total operating expenses;
|X| the fees and total expenses of investment companies with similar objectives and strategies managed by other investment advisers;
|X| the experience of the investment advisory and other personnel providing services to the trust and the historical quality of the services provided by Pioneer; and
|X| Pioneer's policy with respect to soft dollar benefits generated by the trust's portfolio transactions.
The Independent Trustees considered the following as relevant to their recommendations: (1) the favorable history, reputation, qualification and background of Pioneer and UniCredito, as well as the qualifications of their personnel and their respective financial conditions; (2) that the fee and expense ratios of the trust are reasonable given the quality of services expected to be provided and are comparable to the fee and expense ratios of similar investment companies; (3) the relative performance of other funds managed by Pioneer with similar objectives compared to the results of other comparable investment companies and unmanaged indices; and (4) other factors that the Independent Trustees deemed relevant. The Independent Trustees deemed each of these factors to be relevant to their consideration of the management contract.
CODE OF ETHICS
The trust and Pioneer have adopted a code of ethics under Rule 17j-1 of the 1940 Act which is applicable to officers, directors/trustees and designated employees of Pioneer and PIML. 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 trust, and is designed to prescribe means reasonably necessary to prevent conflicts of interest from arising in connection with personal securities transactions. The code is filed as an exhibit to the trust's registration statement. Consequently, it is on public file with and available from the SEC at the address or website listed in the prospectus.
INVESTMENT ADVISER
The trust has contracted with Pioneer to act as its investment adviser. Pioneer is an indirect, majority owned subsidiary of UniCredito. Pioneer is part of the global asset management group providing investment management and financial services to mutual funds, institutional and other clients. As of December 31, 2001, assets under management were approximately $99 billion worldwide, including over $19 billion in assets under management by Pioneer. Certain Trustees or officers of the trust are also directors and/or officers of certain of UniCredito's subsidiaries. Pioneer has entered into an agreement with its affiliate, PIML, pursuant to which PIML provides certain services and personnel to Pioneer.
As the trust's investment adviser, Pioneer provides the trust with investment research, advice and supervision and furnishes the trust with an investment program consistent with the trust's investment objective and policies, subject to the supervision of the trust'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 trust's securities transactions, and reports to the Trustees on the trust's investments and performance.
Under the management contract, Pioneer is not liable to the trust except by willful malfeasance, bad faith, gross negligence or reckless disregard of its duties and obligations. In providing its services to the trust, Pioneer may draw upon the research and investment management expertise of Pioneer's affiliate, PIML.
Pioneer has also entered into an administration agreement with the trust pursuant to which Pioneer provides certain administrative services to the trust. Under the administration agreement, the trust will reimburse Pioneer for its cost of providing administrative services to the trust, but the trust will not reimburse Pioneer for the fees of any sub-administrator retained by Pioneer. Pioneer has retained Princeton Administrators L.P. (Princeton), an affiliate of Merrill Lynch, to provide certain administrative services to the trust on Pioneer's behalf. Pioneer will pay Princeton a fee for such services. The administration agreement may be terminated by the trust or Pioneer (without penalty) at any time upon not less than 60 days' prior written notice to the other party to the agreement.
PIMSS has entered into a transfer agency agreement with the trust pursuant to which PIMSS provides certain transfer agency services to the trust. Under the transfer agency agreement, the trust will reimburse PIMSS for its cost of providing such services to the trust. PIMSS has retained Mellon Investor Services LLC (Mellon) to provide sub-transfer agent, registrar, shareholder servicing agent and dividend dispersing agent services for the trust. The trust will pay Mellon a fee for such services. The transfer agency agreement may be terminated by the trust or PIMSS (without penalty) at any time upon not less than 60 days' prior written notice to the other party to the agreement.
DIRECT REGISTRATION OF TRUST SHARES. Through Mellon, the trust has made its common shares eligible for inclusion in the direct registration system (DRS) administered by The Depository Trust Company (DTC), wherein Mellon will process transfers of common shares utilizing DTC's Profile Modification System.
COMPENSATION AND EXPENSES
Under the management contract, the trust will pay to Pioneer monthly, as compensation for the services rendered and expenses paid by it, a fee equal on an annual basis to 0.60% of the trust's average weekly managed assets. Because the fees paid to Pioneer are determined on the basis of the trust's managed assets, Pioneer's interest in determining whether to leverage the trust may differ from the interests of the trust. The advisory fee payable by the trust to Pioneer is higher than the fees paid by most U.S. investment companies.
The trust's average weekly managed assets are determined for the purpose of calculating the advisory fee by taking the average of all the weekly determinations of total assets during a given calendar month. The fee is payable for each calendar month as soon as practicable after the end of that month.
Under the terms of its management contract with the trust, Pioneer pays all the operating expenses, including executive salaries and the rental of office space, relating to its services for the trust, with the exception of the following, which are to be paid by the trust: (a) charges and expenses 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 administrator, custodian, transfer agent, plan agent, dividend disbursing agent and registrar appointed by the trust; (d) issue and transfer taxes chargeable to the trust in connection with securities transactions to which the trust 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 trust to federal, state or other governmental agencies; (f) fees and expenses involved in registering and maintaining registrations of the trust 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 trust and the Trustees; (i) compensation of those Trustees of the trust who are not affiliated with or interested persons of Pioneer or the trust (other than as Trustees); (j) the cost of preparing and printing share certificates; (k) interest on borrowed money, if any; and (l) the fees and other expenses of listing the trust's shares on the New York Stock Exchange or any other national stock exchange. In addition, the trust shall pay all brokers' and underwriting commissions chargeable to the trust in connection with securities transactions to which the trust is a party.
DURATION AND TERMINATIONS; NONEXCLUSIVE SERVICES
The economic terms of the investment advisory agreement were approved by the trust's Board of Trustees at a meeting of the Board of Trustees held on March 12, 2002, including a majority of the Trustees who are not parties to the agreement or interested persons of any such party (as such term is defined in the 1940 Act). The 1940 Act requires that the investment advisory agreement be approved by a majority of the trust's Board of Trustees, including a majority of the Trustees who are not interested persons as that term is defined in the 1940 Act, at an in person meeting of the Board of Trustees.
The investment advisory agreement was approved by the sole common shareholder of the trust as of March 18, 2002.
Unless earlier terminated as described below, the management contract will remain in effect for two years from the date of its execution and from year to year thereafter if approved annually (i) by a majority of the Independent Trustees of the trust and (ii) by the Board of Trustees or by a majority of the outstanding voting securities of the trust. The management contract may be terminated without penalty on 60 days' written notice by either party thereto or by a vote of a majority of the outstanding voting securities of the trust and will terminate in the event it is assigned (as defined in the 1940 Act). The services of Pioneer are not deemed to be exclusive, and nothing in the relevant agreement will prevent Pioneer or its affiliates from providing similar services to other investment companies and other clients (whether or not their investment objectives and policies are similar to those of the trust) or from engaging in other activities.
POTENTIAL CONFLICTS OF INTEREST
The trust is managed by Pioneer which also serves as investment adviser to other Pioneer funds and other accounts with investment objectives identical or similar to those of the trust. Securities frequently meet the investment objectives of the trust, the other Pioneer 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 funds or a private account managed by Pioneer seeks to acquire the same security at about the same time, the trust 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 trust 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 trust. 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 funds may have the same or similar investment objective and policies as the trust, their portfolios do not generally consist of the same investments as the trust or each other, and their performance results are likely to differ from those of the trust.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on behalf of the trust by Pioneer pursuant to authority contained in the trust's management contract. Securities purchased and sold on behalf of the trust normally will be traded in the over-the-counter market on a net basis (i.e., without commission) through dealers acting for their own account and not as brokers or otherwise through transactions directly with the issuer of the instrument. The cost of securities purchased from underwriters includes an underwriter's commission or concession, and the prices at which securities are purchased and sold from and to dealers include a dealer's markup or markdown. Pioneer normally seeks to deal directly with the primary market makers unless, in its opinion, better prices are available elsewhere. Some securities are purchased and sold on an exchange or in over-the-counter transactions conducted on an agency basis involving a commission. Pioneer seeks to obtain the best execution on portfolio trades. The price of securities and any commission rate paid are always factors, but frequently not the only factors, in judging best execution. In selecting brokers or dealers, Pioneer considers various relevant factors, including, but not limited to, the size and type of the transaction; the nature and character of the markets for the security to be purchased or sold; the execution efficiency, settlement capability and financial condition of the dealer; the dealer's execution services rendered on a continuing basis; and the reasonableness of any dealer spreads. Transactions in non-U.S. equity securities are executed by broker-dealers in non-U.S. countries in which commission rates may not be negotiable (as such rates are in the U.S.).
Pioneer may select broker-dealers that provide brokerage and/or research services to the trust and/or other investment companies or other accounts managed by Pioneer. In addition, consistent with Section 28(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), if Pioneer determines in good faith that the amount of commissions charged by a broker-dealer is reasonable in relation to the value of the brokerage and research services provided by such broker, the trust may pay commissions to such broker-dealer in an amount greater than the amount another firm may charge. Such services may include advice concerning the value of securities; the advisability of investing in, purchasing or selling securities; the availability of securities or the purchasers or sellers of securities; providing stock quotation services, credit rating service information and comparative fund statistics; furnishing analyses, electronic information services, manuals and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and performance of accounts and particular investment decisions; and effecting securities transactions and performing functions incidental thereto (such as clearance and settlement). Pioneer maintains a listing of broker-dealers who provide such services on regular basis. However, because many transactions on behalf of the trust and other investment companies or accounts managed by Pioneer are placed with broker-dealers (including broker-dealers on the listing) without regard to the furnishing of such services, it is not possible to estimate the proportion of such transactions directed to such dealers solely because such services were provided. Pioneer believes that no exact dollar value can be calculated for such services.
The research received from broker-dealers may be useful to Pioneer in rendering investment management services to the trust as well as other investment companies or other accounts managed by Pioneer, although not all such research may be useful to the trust. Conversely, such information provided by brokers or dealers who have executed transaction orders on behalf of such other accounts may be useful to Pioneer in carrying out its obligations to the trust. The receipt of such research has not reduced Pioneer's normal independent research activities; however, it enables Pioneer to avoid the additional expenses which might otherwise be incurred if it were to attempt to develop comparable information through its own staff.
In circumstances where two or more broker-dealers offer comparable prices and executions, preference may be given to a broker-dealer which has sold shares of the trust as well as shares of other investment companies managed by Pioneer. This policy does not imply a commitment to execute all portfolio transactions through all broker-dealers that sell shares of the trust. The Pioneer funds have entered into third-party brokerage and/or expense offset arrangements to reduce the funds' total operating expenses. Pursuant to third-party brokerage arrangements, certain of the funds that invest primarily in U.S. equity securities may incur lower custody fees by directing brokerage to third-party broker-dealers. Pursuant to expense offset arrangements, the funds incur lower transfer agency expenses by maintaining their cash balances with the custodian.
The Board of Trustees periodically reviews Pioneer's performance of its responsibilities in connection with the placement of portfolio transactions on behalf of the trust.
REPURCHASE OF COMMON SHARES
The trust is a closed-end investment company and as such its shareholders will not have the right to cause the trust to redeem their shares. Instead, the trust's common shares will trade in the open market at a price that will be a function of several factors, including dividend levels (which are in turn affected by expenses), net asset value, call protection, dividend stability, relative demand for and supply of such shares in the market, general market and economic conditions and other factors. Shares of closed-end funds frequently trade at a discount to their net asset value. Common shares of closed-end investment companies like the trust that invest predominantly in high yield securities have during some periods traded at prices higher than their net asset value (at a "premium") and during other periods traded at prices lower than their net asset value (at a "discount"). This is in part because the market price reflects the dividend yield on the common shares. When the yield on the net asset value per share is higher than yields generally available in the market for comparable securities, the market price will tend to reflect this by trading higher than the net asset value per share to adjust the yield to a comparable market rate. To the extent the common shares do trade at a discount, the trust's Board of Trustees may from time to time engage in open market repurchases or tender offers for shares after balancing the benefit to shareholders of the increase in the net asset value per share resulting from such purchases against the decrease in the assets of the trust and potential increase in the expense ratio of expenses to assets of the trust and consequent reduction in yield. The Board of Trustees believes that in addition to the beneficial effects described above, any such purchases or tender offers may result in the temporary narrowing of any discount but will not have any long-term effect on the level of any discount.
At any time when the trust's preferred shares are outstanding, the trust may not purchase, redeem or otherwise acquire any of its common shares unless (1) all accrued preferred shares dividends have been paid and (2) at the time of such purchase, redemption or acquisition, the net asset value of the trust's portfolio (determined after deducting the acquisition price of the common shares) is at least 200% of the liquidation value of the outstanding preferred shares (expected to equal the original purchase price per share plus any accrued and unpaid dividends thereon). Any service fees incurred in connection with any tender offer made by the trust will be borne by the trust and will not reduce the stated consideration to be paid to tendering shareholders.
Subject to its investment restrictions, the trust may borrow to finance the repurchase of shares or to make a tender offer. Interest on any borrowings to finance share repurchase transactions or the accumulation of cash by the trust in anticipation of share repurchases or tenders will reduce the trust's net income. Any share repurchase, tender offer or borrowing that might be approved by the trust's Board of Trustees would have to comply with the Exchange Act, the 1940 Act and the rules and regulations thereunder.
Although the decision to take action in response to a discount from net asset value will be made by the Board of Trustees at the time it considers such issue, it is the board's present policy, which may be changed by the Board of Trustees, not to authorize repurchases of common shares or a tender offer for such shares if: (1) such transactions, if consummated, would (a) result in the delisting of the common shares from the New York Stock Exchange, or (b) impair the trust's status as a regulated investment company under the Code, (which would make the trust a taxable entity, causing the trust's income to be taxed at the corporate level in addition to the taxation of shareholders who receive dividends from the trust) or as a registered closed-end investment company under the 1940 Act; (2) the trust would not be able to liquidate portfolio securities in an orderly manner and consistent with the trust's investment objective and policies in order to repurchase shares; or (3) there is, in the board's judgment, any (a) material legal action or proceeding instituted or threatened challenging such transactions or otherwise materially adversely affecting the trust, (b) general suspension of or limitation on prices for trading securities on the New York Stock Exchange, (c) declaration of a banking moratorium by federal or state authorities or any suspension of payment by United States or New York banks, (d) material limitation affecting the trust or the issuers of its portfolio securities by federal or state authorities on the extension of credit by lending institutions or on the exchange of foreign currency, (e) commencement of war, armed hostilities or other international or national calamity directly or indirectly involving the United States, or (f) other event or condition which would have a material adverse effect (including any adverse tax effect) on the trust or its shareholders if shares were repurchased. The Board of Trustees may in the future modify these conditions in light of experience.
The repurchase by the trust of its shares at prices below net asset value will result in an increase in the net asset value of those shares that remain outstanding. However, there can be no assurance that share repurchases or tender offers at or below net asset value will result in the trust's shares trading at a price equal to their net asset value. Nevertheless, the fact that the trust's shares may be the subject of repurchase or tender offers from time to time, or
that the trust may be converted to an open-end investment company, may reduce any spread between market price and net asset value that might otherwise exist.
In addition, a purchase by the trust of its common shares will decrease the trust's total assets which would likely have the effect of increasing the trust's expense ratio. Any purchase by the trust of its common shares at a time when preferred shares are outstanding will increase the leverage applicable to the outstanding common shares then remaining.
Before deciding whether to take any action if the common shares trade below net asset value, the trust's Board of Trustees would likely consider all relevant factors, including the extent and duration of the discount, the liquidity of the trust's portfolio, the impact of any action that might be taken on the trust or its shareholders and market considerations. Based on these considerations, even if the trust's shares should trade at a discount, the Board of Trustees may determine that, in the interest of the trust and its shareholders, no action should be taken.
U.S. FEDERAL INCOME TAX MATTERS
The following is a summary discussion of certain U.S. federal income tax consequences that may be relevant to a shareholder of acquiring, holding and disposing of common shares of the trust. This discussion only addresses U.S. federal income tax consequences to U.S. shareholders who hold their shares as capital assets and does not address all of the U.S. federal income tax consequences that may be relevant to particular shareholders in light of their individual circumstances. This discussion also does not address the tax consequences to shareholders who are subject to special rules, including, without limitation, financial institutions, insurance companies, dealers in securities or foreign currencies, foreign holders, persons who hold their shares as or in a hedge against currency risk, a constructive sale, or conversion transaction, holders who are subject to the alternative minimum tax, or tax-exempt or tax-deferred plans, accounts, or entities. In addition, the discussion does not address any state, local, or foreign tax consequences, and it does not address any federal tax consequences other than U.S. federal income tax consequences. The discussion reflects applicable tax laws of the United States as of the date of this statement of additional information, which tax laws may be changed or subject to new interpretations by the courts or the Internal Revenue Service (the "IRS") retroactively or prospectively. No attempt is made to present a detailed explanation of all U.S. federal income tax concerns affecting the trust and its shareholders, and the discussion set forth herein does not constitute tax advice. Investors are urged to consult their own tax advisers to determine the tax consequences to them of investing in the trust, including the applicable federal, state, local and foreign tax consequences to them and the effect of possible changes in tax laws.
The trust intends to elect be treated and to qualify each year as a "regulated investment company" under Subchapter M of the Code and to comply with applicable distribution requirements so that it generally will not pay U.S. federal income tax on income and capital gains distributed to shareholders. In order to qualify as a regulated investment company under Subchapter M of the Code, which this discussion assumes, the trust must, among other things, derive at least 90% of its gross income for each taxable year from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including gains from options, futures and forward contracts) derived with respect to its business of investing in such stock, securities or currencies (the "90% income test") and satisfy certain quarterly diversification requirements. For purposes of the 90% income test, the character of income earned by certain entities in which the trust invests that are not treated as corporations (e.g., partnerships or trusts) for U.S. federal income tax purposes will generally pass through to the trust. Consequently, the trust may be required to limit its equity investments in such entities that earn fee income, rental income or other nonqualifying income.
If the trust qualifies as a regulated investment company and, for each taxable year, it distributes to its shareholders an amount equal to or exceeding the sum of (i) 90% of its "investment company taxable income" as that term is defined in the Code (which includes, among other things, dividends, taxable interest, and the excess of any net short-term capital gains over net long-term capital losses, as reduced by certain deductible expenses) without regard to the deduction for dividends paid and (ii) 90% of the excess of its gross tax-exempt interest, if any, over certain disallowed deductions, the trust will generally be relieved of U.S. federal income tax on any income of the trust, including long-term capital gains, distributed to shareholders. However, if the trust retains any investment company taxable income or "net capital gain" (the excess of net long-term capital gain over net short-term capital loss), it generally will be subject to U.S. federal income tax at regular corporate rates on the amount retained. The trust intends to distribute at least annually all or substantially all of its investment company taxable income, net tax-exempt
interest, and net capital gain. If for any taxable year the trust did not qualify as a regulated investment company, it would be treated as a corporation subject to U.S. federal income tax.
Under the Code, the trust will be subject to a nondeductible 4% federal excise tax on a portion of its undistributed ordinary income and capital gains if it fails to meet certain distribution requirements with respect to each calendar year. The trust intends to make distributions in a timely manner and accordingly does not expect to be subject to the excise tax, but, as described below, there can be no assurance that the trust's distributions will be sufficient to avoid entirely this tax.
Commencing within approximately 90 days from the date of this statement of additional information, the trust intends to declare a dividend from all or a portion of its net investment income monthly. The trust intends to distribute any net short- and long-term capital gains at least annually. Dividends from income and/or capital gains may also be paid at such other times as may be necessary for the trust to avoid U.S. federal income or excise tax.
Unless a shareholder is ineligible to participate or elects otherwise, distributions will be automatically reinvested in additional common shares of the trust pursuant to the Automatic Dividend Reinvestment Plan (the "Plan"). For U.S. federal income tax purposes, such distributions generally are taxable whether a shareholder takes them in cash or they are reinvested pursuant to the Plan in additional shares of the trust. In general, assuming there are sufficient earnings and profits, dividends from investment company taxable income are taxable as ordinary income, and designated dividends from net capital gain, if any, are taxable as long-term capital gains for U.S. federal income tax purposes without regard to the length of time the shareholder has held shares of the trust. Distributions by the trust in excess of the trust's current and accumulated earnings and profits will be treated as a return of capital to the extent of (and in reduction of) the shareholder's tax basis in its shares, and any such amount in excess of that basis will be treated as gain from the sale of the shares as discussed below. The U.S. federal income tax status of all distributions will be reported to shareholders annually.
If the trust retains any net capital gain, the trust may designate the retained amount as undistributed capital gains in a notice to shareholders who, if subject to U.S. federal income tax on long-term capital gains, (i) will be required to include in income for U.S. federal income tax purposes, as long-term capital gain, their proportionate shares of such undistributed amount, and (ii) will be entitled to credit their proportionate shares of the tax paid by the trust on the undistributed amount against their U.S. federal income tax liabilities, if any, and to claim refunds to the extent the credit exceeds such liabilities.
Any dividend declared by the trust as of a record date in October, November or December and paid during the following January will be treated for U.S. federal income tax purposes as received by shareholders on December 31 of the calendar year in which it is declared.
Foreign exchange gains and losses realized by the trust in connection with certain transactions involving foreign currency-denominated debt securities, certain options and futures contracts relating to foreign currency, foreign currency forward contracts, foreign currencies, or payables or receivables denominated in a foreign currency are subject to Section 988 of the Code, which generally causes such gains and losses to be treated as ordinary income and losses and may affect the amount, timing and character of distributions to shareholders. Under future Treasury regulations, any such transactions that are not directly related to the trust's investments in stock or securities (or its options contracts or futures contracts with respect to stock or securities) may have to be limited in order to enable the trust to satisfy the 90% income test. If the net foreign exchange loss for a year were to exceed the trust's investment company taxable income (computed without regard to such loss), the resulting ordinary loss for such year would not be deductible by the trust or its shareholders in future years.
If the trust acquires any equity interest (under future Treasury regulations, generally including not only stock but also an option to acquire stock such as is inherent in a convertible bond) in certain foreign corporations that receive at least 75% of their annual gross income from passive sources (such as interest, dividends, certain rents and royalties, or capital gains) or that hold at least 50% of their assets in investments producing such passive income ("passive foreign investment companies"), the trust could be subject to U.S. federal income tax and additional interest charges on "excess distributions" received from such companies or on gain from the disposition of stock in such companies, even if all income or gain actually received by the trust is timely distributed to its shareholders. The trust would not be able to pass through to its shareholders any credit or deduction for such a tax. An election may generally be available that would ameliorate these adverse tax consequences, but any such election could require
the trust to recognize taxable income or gain (subject to tax distribution requirements) without the concurrent receipt of cash. These investments could also result in the treatment of associated capital gains as ordinary income. The trust may limit and/or manage its holdings in passive foreign investment companies to limit its tax liability or maximize its return from these investments.
The trust may invest to a significant extent in debt obligations that are in the lowest rating categories or are unrated, including debt obligations of issuers not currently paying interest or who are in default. Investments in debt obligations that are at risk of or in default present special tax issues for the trust. Tax rules are not entirely clear about issues such as when and to what extent deductions may be taken for bad debts or worthless securities and how payments received on obligations in default should be allocated between principal and income. These and other issues will be addressed by the trust, in the event it invests in such securities, in order to seek to ensure that it distributes sufficient income to preserve its status as a regulated investment company and does not become subject to U.S. federal income or excise tax.
If the trust utilizes leverage through borrowing, a failure by the trust to meet the asset coverage requirements imposed by the 1940 Act or by any rating organization that has rated such leverage or additional restrictions that may be imposed by certain lenders on the payment of dividends or distributions potentially could limit or suspend the trust's ability to make distributions on its common shares. Such a suspension or limitation could prevent the trust from distributing at least 90% of its net income as is required under the Code and therefore might jeopardize the trust's reduction or exemption from corporate taxation as a regulated investment company and/or might subject the trust to the 4% excise tax. Upon any failure to meet such asset coverage requirements, the trust may, in its sole discretion, purchase or redeem shares of preferred stock in order to maintain or restore the requisite asset coverage and avoid the adverse consequences to the trust and its shareholders of failing to satisfy the distribution requirement. There can be no assurance, however, that any such action would achieve these objectives. The trust will endeavor to avoid restrictions on its ability to distribute dividends.
If the trust invests in certain pay-in-kind securities, zero coupon securities, deferred interest securities or, in general, any other securities with original issue discount (or with market discount if the trust elects to include market discount in income currently), the trust generally must accrue income on such investments for each taxable year, which generally will be prior to the receipt of the corresponding cash payments. However, the trust must distribute, at least annually, all or substantially all of its net income, including such accrued income, to shareholders to qualify as a regulated investment company under the Code and avoid U.S. federal income and excise taxes. Therefore, the trust may have to dispose of its portfolio securities under disadvantageous circumstances to generate cash, or may have to leverage itself by borrowing the cash, to satisfy distribution requirements.
At the time of an investor's purchase of the trust's shares, a portion of the purchase price may be attributable to realized or unrealized appreciation in the trust's portfolio or undistributed taxable income of the trust. Consequently, subsequent distributions by the trust with respect to these shares from such appreciation or income may be taxable to such investor even if the net asset value of the investor's shares is, as a result of the distributions, reduced below the investor's cost for such shares and the distributions economically represent a return of a portion of the investment.
Sales and other dispositions of the trust's shares generally are taxable events for shareholders that are subject to tax. Shareholders should consult their own tax advisers with reference to their individual circumstances to determine whether any particular transaction in the trust's shares is properly treated as a sale for tax purposes, as the following discussion assumes, and the tax treatment of any gains or losses recognized in such transactions. In general, if trust shares are sold, the shareholder will recognize gain or loss equal to the difference between the amount realized on the sale and the shareholder's adjusted basis in the shares. Such gain or loss generally will be treated as long-term gain or loss if the shares were held for more than one year and otherwise generally will be treated as short-term gain or loss. Any loss recognized by a shareholder upon the sale or other disposition of shares with a tax holding period of six months or less generally will be treated as a long-term capital loss to the extent of any amounts treated as distributions of long-term capital gain with respect to such shares. Losses on sales or other dispositions of shares may be disallowed under "wash sale" rules in the event of other investments in the trust (including those made pursuant to reinvestment of dividends and/or capital gain distributions) within a period of 61 days beginning 30 days before and ending 30 days after a sale or other disposition of shares.
Options written or purchased and futures contracts entered into by the trust on certain securities, indices and foreign currencies, as well as certain forward foreign currency contracts, may cause the trust to recognize gains or losses
from marking-to-market even though such options may not have lapsed, been closed out, or exercised, or such futures or forward contracts may not have been performed or closed out. The tax rules applicable to these contracts may affect the characterization of some capital gains and losses recognized by the trust as long-term or short-term. Certain options, futures and forward contracts relating to foreign currency may be subject to Section 988, as described above, and accordingly may produce ordinary income or loss. Additionally, the trust may be required to recognize gain if an option, futures contract, forward contract, short sale or other transaction that is not subject to the mark-to-market rules is treated as a "constructive sale" of an "appreciated financial position" held by the trust under Section 1259 of the Code. Any net mark-to-market gains and/or gains from constructive sales may also have to be distributed to satisfy the distribution requirements referred to above even though the trust may receive no corresponding cash amounts, possibly requiring the disposition of portfolio securities or borrowing to obtain the necessary cash. Losses on certain options, futures or forward contracts and/or offsetting positions (portfolio securities or other positions with respect to which the trust's risk of loss is substantially diminished by one or more options, futures or forward contracts) may also be deferred under the tax straddle rules of the Code, which may also affect the characterization of capital gains or losses from straddle positions and certain successor positions as long-term or short-term. Certain tax elections may be available that would enable the trust to ameliorate some adverse effects of the tax rules described in this paragraph. The tax rules applicable to options, futures, forward contracts and straddles may affect the amount, timing and character of the trust's income and gains or losses and hence of its distributions to shareholders.
The trust may invest in REITs that hold residual interests in REMICs. Under Treasury regulations that have not yet been issued, but may apply retroactively, a portion of the trust's income from a REIT that is attributable to the REIT's residual interest in a REMIC (referred to in the Code as an "excess inclusion") will be subject to federal income tax in all events. These regulations are also expected to provide that excess inclusion income of a regulated investment company, such as the trust, will be allocated to shareholders of the regulated investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related REMIC residual interest directly. In general, excess inclusion income allocated to shareholders (i) cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions), (ii) will constitute unrelated business taxable income to entities (including a qualified pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to tax on unrelated business income, thereby potentially requiring such an entity that is allocated excess inclusion income, and otherwise might not be required to file a tax return, to file a tax return and pay tax on such income, and (iii) in the case of a foreign shareholder, will not qualify for any reduction in U.S. federal withholding tax. In addition, if at any time during any taxable year a "disqualified organization" (as defined in the Code) is a record holder of a share in a regulated investment company, then the regulated investment company will be subject to a tax equal to that portion of its excess inclusion income for the taxable year that is allocable to the disqualified organization, multiplied by the highest federal income tax rate imposed on corporations. Pioneer does not intend on behalf of the trust to invest in REITs, a substantial portion of the assets of which consists of residual interest in REMICs.
The trust's distributions to its corporate shareholders would potentially qualify in their hands for the corporate dividends-received deduction subject to certain holding period requirements and limitations on debt financings under the Code, only to the extent the trust earned dividend income from stock investments in U.S. domestic corporations and certain other requirements are satisfied. The trust is permitted to acquire stocks of U.S. domestic corporations, and it is therefore possible that a small portion of the trust's distributions, from the dividends attributable to such stocks, may qualify for the dividends-received deduction. Such qualifying portion, if any, may affect a corporate shareholder's liability for alternative minimum tax and/or result in basis reductions and other consequences in certain circumstances.
The Internal Revenue Service has taken the position that if a regulated investment company has two classes of shares, it must designate distributions made to each class in any year as consisting of no more than such class's proportionate share of particular types of income, including dividends qualifying for the corporate dividends-received deduction (if any) and net capital gains. A class's proportionate share of a particular type of income is determined according to the percentage of total dividends paid by the regulated investment company during the year to such class. Consequently, if both common shares and preferred shares are outstanding, the trust intends to designate distributions made to the classes of particular types of income in accordance with the classes' proportionate shares of such income. Thus, the trust will designate dividends qualifying for the corporate dividends-received deduction (if any), income not qualifying for the dividends-received deduction and net
capital gains in a manner that allocates such income between the holders of common shares and preferred shares in proportion to the total dividends paid to each class during or for the taxable year, or otherwise as required by applicable law.
The trust may be subject to withholding and other taxes imposed by foreign countries, including taxes on interest, dividends and capital gains with respect to its investments in those countries, which would, if imposed, reduce the yield on or return from those investments. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes in some cases. The trust does not expect to satisfy the requirements for passing through to its shareholders their pro rata shares of qualified foreign taxes paid by the trust, with the general result that shareholders would not include such taxes in their gross incomes and would not be entitled to a tax deduction or credit for such taxes on their own tax returns.
Federal law requires that the trust withhold (as "backup withholding") on reportable payments, including dividends, capital gain distributions and the proceeds of sales or other dispositions of the trust's shares paid to certain shareholders who have not complied with IRS regulations. In order to avoid this withholding requirement, shareholders must certify on their Account Applications, or on separate IRS Forms W-9, that the Social Security Number or other Taxpayer Identification Number they provide is their correct number and that they are not currently subject to backup withholding, or that they are exempt from backup withholding. The trust may nevertheless be required to withhold if it receives notice from the IRS or a broker that the number provided is incorrect or backup withholding is applicable as a result of previous underreporting of income.
The description of certain federal tax provisions above relates only to
U.S. federal income tax consequences for shareholders who are U.S. persons,
i.e., U.S. citizens or residents or U.S. corporations, partnerships, trusts or
estates, and who are subject to U.S. federal income tax. Investors other than
U.S. persons may be subject to different U.S. tax treatment, including a
non-resident alien U.S. withholding tax on amounts treated as ordinary dividends
from the trust and, unless an effective IRS Form W-8BEN or other authorized
withholding certificate is on file, to backup withholding on certain other
payments from the trust. Shareholders should consult their own tax advisers on
these matters and on any specific questions as to U.S. federal, foreign, state,
local and other applicable tax laws.
PERFORMANCE-RELATED, COMPARATIVE AND OTHER INFORMATION
PERFORMANCE-RELATED INFORMATION. The trust may quote certain performance-related information and may compare certain aspects of its portfolio and structure to other similar closed-end funds as categorized by Lipper, Inc. (Lipper), Morningstar Inc. or other independent services. Comparison of the trust to an alternative investment should be made with consideration of differences in features and expected performance. The trust may obtain data from sources or reporting services, such as Bloomberg Financial and Lipper, that the trust believes to be generally accurate.
From time to time, the trust and/or Pioneer may report to shareholders or to the public in advertisements concerning Pioneer's performance as an advisor to Pioneer mutual funds and clients other than the trust, or on the comparative performance or standing of Pioneer in relation to other money managers. Pioneer may also provide to current or prospective private account clients, in connection with standardized performance information for the trust, performance information for the trust gross of fees and expenses for the purpose of assisting such clients in evaluating similar performance information provided by other investment managers or institutions. Comparative information may be compiled or provided by independent ratings services or by news organizations. Performance information for the trust or for other Pioneer mutual funds or accounts managed by Pioneer may also be compared to various unmanaged indexes or to other benchmarks, some of which may not be available for direct investment. Any performance information, whether related to the trust or Pioneer, should be considered in light of the trust's investment objective and policies, the characteristics and quality of the trust, and the market conditions during the time period indicated, and it should not be considered to be representative of what may be achieved in the future. Pioneer may provide its opinion with respect to general economic conditions including such matters as trends in default rates or economic cycles.
Past performance is not indicative of future results. At the time common shareholders sell their shares, they may be worth more or less than their original investment. At any time in the future, yields and total return may be higher or lower than past yields and total return, and there can be no assurance that any historical results will continue.
PIONEER. From time to time, Pioneer or the trust may use, in advertisements or information furnished to present or prospective shareholders, information regarding Pioneer including, without limitation, information regarding Pioneer's investment style, countries of operation, organization, professional staff, clients (including other registered investment companies), assets under management and performance record. These materials may refer to opinions or rankings of Pioneer's overall investment management performance contained in third-party reports or publications. Pioneer's U.S. mutual fund investment history includes creating in 1928 one of the first mutual funds. Pioneer has traditionally served a mutual fund and an institutional clientele. As of December 31, 2001, Pioneer and its affiliates managed approximately $98 billion in assets worldwide, including over $19 billion in assets under management by Pioneer for U.S. investors. Pioneer and its affiliates manage over 100 mutual funds registered in the United States or other jurisdictions and employ over 1,200 multicultural professionals in 12 countries. Pioneer and its affiliates utilize a network of 3,000 distributors worldwide.
Advertisements for the trust may make reference to certain other open- or closed-end investment companies managed by Pioneer. In 1999, 1999 and 2000, Pioneer introduced Pioneer Strategic Income Fund, Pioneer Strategic Income VCT Portfolio and Pioneer High Yield VCT Portfolio. In 2000 Pioneer introduced Pioneer High Yield Fund, and pursuant to an agreement and plan of reorganization, that Pioneer fund acquired all of the assets of Third Avenue High Yield Fund. (In the reorganization, Third Avenue High Yield Fund exchanged all of its assets for Class A shares of Pioneer High Yield Fund. The performance of each class of Pioneer High Yield Fund from February 12, 1998 to February 25, 2000 includes the performance of Third Avenue High Yield Fund's single class.) Each of the referenced Pioneer funds is an open-end investment company that does not employ leverage. The investment objective, policies and restrictions applicable to each of these funds differ in material respects from the trust's objective, policies and restrictions. These differences may affect performance.
Pioneer may present an investment allocation model demonstrating the trust's weightings in investment types, sectors or rating categories such as U.S. high yield, emerging markets or investment grade securities. The model allocations are representative of the trust's investment strategy, Pioneer's analysis of the market for high yield securities as of the date of the model and certain factors that may alter the allocation percentages include global economic conditions, individual company fundamentals or changes in market valuations. Such models may also indicate an expected or targeted weighted average rating of the trust's portfolio.
COMPARATIVE INFORMATION. From time to time, the trust's advertisements or information furnished to present or prospective shareholders may refer to the returns and yields offered by various types of investments, as well as the yield spreads on such investments. For instance, such advertisements may refer to the spread in corporate bond yield and government bond yield, or the yield of other types of investments. For purposes of advertisements or related materials, yields and returns may be measured by various indices such as the Lehman Municipal Bond Index, the Merrill Lynch Global Bond Index, the Merrill Lynch Government Master Index, the Merrill Lynch Mortgage Master Index or other such indices. Advertisements and related materials may also note Pioneer's belief that yields on short-term, intermediate- and long-term bonds offer attractive current yields and set forth yields on other investments, including without limitation, 3-month T-Bills, 10-year Treasury bonds and 30-year Treasury bonds.
The trust's advertising materials may also compare the performance of investment companies with differing investment styles, objectives or portfolio securities. Returns for investment companies that invest primarily in bonds may be compared with the returns of investment companies that invest primarily in equities. Such material may also assert that, in an uncertain equity environment, bonds can provide an attractive alternative to equity investments. The trust's advertising materials may also include comparative graphics, for example:
HIGH YIELD'S HISTORICALLY WIDE SPREADS*
[plot points for 670-basis point spread between (1) high yield securities and
(2) U.S. Treasury securities]
Date %(1) %(2) 2/29/88 12.83 8.15 2/28/90 15.66 8.52 2/29/92 12.37 7.26 2/28/94 9.27 6.14 2/29/96 9.78 6.12 2/28/98 8.87 5.62 2/29/00 11.63 6.42 |
2/28/02 12.50 5.80
*PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Merrill Lynch High Yield Master II Index and Merrill Lynch U.S. Current 10 Year Treasury Index; each is an unmanaged representation of its respective securities. It is not possible to invest directly in an index. Does not represent the performance of any Pioneer mutual fund. Treasury securities are guaranteed as to the timely payment of interest and principal; high yield corporate bonds are not. Investments in lower rated bonds may be more volatile and less liquid than more highly rated bonds. Chart prepared by Pioneer. Source: Pioneer Research.
THE TRUST. The trust's expected listing of its common shares on the New York Stock Exchange is expected to provide liquidity, convenience and daily price visibility through electronic services and in newspaper stock tables.
The trust, in its advertisements, may refer to pending legislation from time to time and the possible impact of such legislation on investors, investment strategy and related matters. The trust may be a suitable investment for a shareholder who is thinking of adding bond investments to his portfolio to balance the appreciated stocks that the shareholder is holding.
EXPERTS
The statements of assets and liabilities and operations of the trust as of April 22, 2002 appearing in this statement of additional information has been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and is included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. Ernst & Young LLP, located at 200 Clarendon Street, Boston, Massachusetts 02116-5072, provides accounting and auditing services to the trust.
ADDITIONAL INFORMATION
A Registration Statement on Form N-2, including amendments thereto, relating to the shares offered hereby, has been filed by the trust with the Securities and Exchange Commission (the "Commission"), Washington, D.C. The prospectus and this statement of additional information do not contain all of the information set forth in the Registration Statement, including any exhibits and schedules thereto. For further information with respect to the trust and the shares offered hereby, reference is made to the Registration Statement. Statements contained in the prospectus and this statement of additional information as to the contents of any contract or other document referred to are not necessarily complete and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. A copy of the Registration Statement may be inspected without charge at the Commission's principal office in Washington, D.C., and copies of all or any part thereof may be obtained from the Commission upon the payment of certain fees prescribed by the Commission.
FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT
PIONEER HIGH INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES
APRIL 22, 2002
ASSETS:
Cash.....................................................$ 100,003
Receivable from Investment
Adviser.................................................. 40,000
Deferred offering costs.................................. 689,500
------------
Total assets............................................. 829,503
------------
LIABILITIES:
Accrued organizational
expenses................................................. 40,000
Accrued offering costs................................... 689,500
------------
Total liabilities........................................ 729,500
------------
Net Assets (6,981 shares issued and outstanding;
unlimited shares authorized)...............$ 100,003
------------
Net asset value per share $ 14.325
------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
MARCH 18 THROUGH APRIL 22, 2002
Investment income........................................$ -
----------
Organizational
expenses................................................. 40,000
Less: Reimbursement from Investment
Adviser.................................................. 40,000
----------
Net
Expenses................................................. -
----------
Net Investment Income....................................$ -
==========
|
NOTES
1. ORGANIZATION
Pioneer High Income Trust (the "Trust") is a diversified, closed-end management investment company organized on January 30, 2002, which has had no operations other than the sale and issuance of 6,981 shares at an aggregate purchase price of $100,003 to Pioneer Investment Management, Inc. (the "Investment Adviser") on March 18, 2002. The Investment Adviser has agreed to reimburse the amount by which the aggregate of all of the Trust's organizational expenses and all offering costs (other than the sales load) exceeds $0.03 per share. Accordingly, the Trust's share of offering costs will be recorded as a reduction of the proceeds from the sale of its Common Shares upon the commencement of the Trust's operations. Estimated offering costs to be borne by the Trust total $689,500. Additionally, if the Trust completes an offering of Preferred Shares, the Trust will also pay expenses in connection with such offering.
2. ACCOUNTING POLICIES
The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from these estimates.
3. AGREEMENTS
The Trust has entered into an Investment Advisory Agreement with the Investment Adviser, which provides for payment of a monthly fee computed at the annual rate of 0.60% of the Trust's average weekly Total Managed Assets. Pioneer Investment Management Shareholder Services, Inc., a majority owned indirect subsidiary of UniCredito Italiano S.p.A, has contracted with the Trust to provide transfer agent and shareholder services to the Trust at negotiated rates.
The Investment Adviser has also entered into an Administration Agreement with the Trust pursuant to which the Investment Adviser provides certain administrative services to the Trust. Under the Administration Agreement, the Trust will reimburse the Investment Adviser for its cost of providing administrative services to the Trust, excluding the sub-administrative fee described below. The Investment Adviser has entered into an Administration Agreement with Princeton Administrators, L.P. (the "Administrator"). The Investment Adviser will pay the Administrator a monthly fee computed at the annual rate of 0.10% of the Trust's average weekly Total Managed Assets, subject to a monthly minimum fee of $10,000. "Total Managed Assets" means the total assets of the Trust (including any assets attributable to leverage) minus accrued liabilities (other than liabilities representing leverage). For purposes of calculating "Total Managed Assets," the liquidation preference of any preferred shares outstanding is not considered a liability.
4. FEDERAL INCOME TAXES
The Trust intends to qualify as a "regulated investment company" and to comply with the applicable provisions of the Internal Revenue Code of 1986, as amended, such that it will not be subject to Federal income tax on taxable income (including realized capital gains) that is distributed to shareholders.
Report of Independent Auditors
To the Shareholder and
Board of Trustees of
Pioneer High Income Trust
We have audited the accompanying statement of assets and liabilities of Pioneer High Income Trust (the "Fund") as of April 22, 2002 and the related statement of operations for the period from March 18, 2002 (date of capitalization) through April 22, 2002. These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above presents fairly, in all material respects, the financial position of Pioneer High Income Trust at April 22, 2002, and the results of its operations for the period from March 18, 2002 (date of capitalization) through April 22, 2002, in conformity with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
Boston, Massachusetts
April 23, 2002
APPENDIX A - DESCRIPTION OF RATINGS1
MOODY'S PRIME RATING SYSTEM
Moody's short-term ratings are opinions of the ability of issuers to honor senior financial obligations and contracts. Such obligations generally have an original maturity not exceeding one year, unless explicitly noted.
Moody's employs the following designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers:
Prime-1: Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics:
Leading market positions in well-established industries. High rates of return on
funds employed.
Conservative capitalization structure with moderate reliance on debt and ample
asset protection.
Broad margins in earnings coverage of fixed financial charges and high internal
cash generation.
Well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2: Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation than is the case for Prime-2 securities. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt-protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuers rated Not Prime do not fall within any of the Prime rating categories.
In addition, in certain countries the prime rating may be modified by the issuer's or guarantor's senior unsecured long-term debt rating.
MOODY'S DEBT RATINGS
Aaa: Bonds and preferred stock which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds and preferred stock which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa securities.
1The ratings indicated herein are believed to be the most recent ratings available at the date of this statement of additional information for the securities listed. Ratings are generally given to securities at the time of issuance. While the rating agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings indicated do not necessarily represent ratings which will be given to these securities on the date of the fund's fiscal year-end.
A: Bonds and preferred stock which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future.
Baa: Bonds and preferred stock which are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.
Ba: Bonds and preferred stock which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B: Bonds and preferred stock which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Caa: Bonds and preferred stock which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
Ca: Bonds and preferred stock which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds and preferred stock which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Moody's assigns ratings to individual debt securities issued from medium-term note (MTN) programs, in addition to indicating ratings to MTN programs themselves. Notes issued under MTN programs with such indicated ratings are rated at issuance at the rating applicable to all pari passu notes issued under the same program, at the program's relevant indicated rating, provided such notes do not exhibit any of the characteristics listed below. For notes with any of the following characteristics, the rating of the individual note may differ from the indicated rating of the program:
1) Notes containing features which link the cash flow and/or market value to the
credit performance of any third party or parties.
2) Notes allowing for negative coupons, or negative principal.
3) Notes containing any provision which could obligate the investor to make any
additional payments.
Market participants must determine whether any particular note is rated, and if so, at what rating level.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
STANDARD & POOR'S SHORT-TERM ISSUE CREDIT RATINGS
A-1: A short-term obligation rated A-1 is rated in the highest category by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
B: A short-term obligation rated B is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.
C: A short-term obligation rated C is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated D is in payment default. The D rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.
STANDARD & POOR'S LONG-TERM ISSUE CREDIT RATINGS
Issue credit ratings are based, in varying degrees, on the following considerations:
o Likelihood of payment-capacity and willingness of the obligor to meet
its financial commitment on an obligation in accordance with the terms of
the obligation;
o Nature of and provisions of the obligation;
o Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the
laws of bankruptcy and other laws affecting creditors' rights.
The issue rating definitions are expressed in terms of default risk. As such, they pertain to senior obligations of an entity. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation applies when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.) Accordingly, in the case of junior debt, the rating may not conform exactly with the category definition.
AAA: An obligation rated AAA has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong.
AA: An obligation rated AA differs from the highest rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB: An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: A subordinated debt or preferred stock obligation rated C is CURRENTLY HIGHLY VULNERABLE to nonpayment. The C rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued. A C also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying.
D: An obligation rated D is in payment default. The D rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
r: This symbol is attached to the ratings of instruments with significant noncredit risks. It highlights risks to principal or volatility of expected returns which are not addressed in the credit rating.
N.R.: This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor's does not rate a particular obligation as a matter of policy.
LOCAL CURRENCY AND FOREIGN CURRENCY RISKS
Country risk considerations are a standard part of Standard & Poor's analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligor's capacity to repay foreign currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign government's own relatively lower capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer.
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. Financial statements.
The Registrant's statements of assets and liabilities and operations dated April 22, 2002, notes to that financial statement and report of independent public accountants thereon are included in the Registrant's prospectus.
2. Exhibits:
a.1. Agreement and Declaration of Trust.(3)
a.2. Certificate of Trust.(1)
b. By-Laws.(1)
c. None.
d. Specimen Share Certificate.(3)
e. Automatic Dividend Reinvestment Plan.(3)
f. None.
g. Investment Advisory Agreement with Pioneer Investment
Management, Inc.(3)
h. Purchase Agreement between the Registrant and Pioneer
Investment Management, Inc.(3)
i. None.
j. Custodian Agreement.(3)
k.1. Administration Agreement with Pioneer Investment Management,
Inc.(3)
k.2. Administration Agreement between Pioneer Investment Management,
Inc. and Princeton Administrators L.P.(3)
k.3. Investment Company Service Agreement with Pioneer Investment
Management Shareholder Services, Inc.(3)
k.4. Sub-Transfer Agent Services Agreement between Pioneer
Investment Management Shareholder Services, Inc. and Mellon
Investor Services LLC.(3)
l. Opinion of Counsel.(3)
m. None.
n. Consent of Independent Public Accountants.(3)
o. Not applicable.
p. Share Purchase Agreement.(3)
q. None.
r. Not applicable.
s Code of Ethics.(2)
t. Powers of Attorney.(2)
(1) Incorporated herein by reference from the exhibits filed
in the Registrant's Registration Statement on Form N-2 (File No.
333-83402) (the "Registration Statement") as filed with the
Securities and Exchange Commission (the "SEC") on February 26,
2002 (Accession No. 0001016964-02-500033).
(2) Incorporated herein by reference from the exhibits filed
in Pre-Effective Amendment No. 1 to the Registration Statement
as filed with the the SEC on March 28, 2002 (Accession No.
0001016964-02-500062).
(3) Filed herewith.
ITEM 25. MARKETING ARRANGEMENTS
Reference is made to the underwriting agreement for the Registrant's shares of beneficial interest filed herewith.
ITEM 25. OTHER EXPENSES AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in connection with the offering described in this Registration Statement:
Registration fees $ 47,610
New York Stock Exchange listing fee 174,862
Printing (other than certificates) 153,821
Engraving and printing certificates 2,600
Accounting fees and expenses 20,000
Legal fees and expenses 90,000
NASD fee 600
Miscellaneous 200,000
Total $689,493
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ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
None.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
As of March 28, 2002, the number or record holders of each class of securities
of the Registrant was
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Common Shares (no par value) 1
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ITEM 29. INDEMNIFICATION
The Registrant's Agreement and Declaration of Trust (the "Declaration"), dated January 30, 2002, provides that every person who is, or has been, a Trustee or an officer, employee or agent of the Registrant (including any individual who serves at its request as director, officer, partner, trustee or the like of another organization in which it has any interest as a shareholder, creditor or otherwise) ("Covered Person") shall be indemnified by the Registrant or the appropriate series of the Registrant 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 a Covered Person and against amounts paid or incurred by him in the settlement thereof; provided that no indemnification shall be provided to a Covered Person (i) who shall have been adjudicated by a court or body before which the proceeding was brought (A) to be liable to the Registrant or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office, or (B) not to have acted in good faith in the reasonable belief that his action was in the best interest of the Registrant; or (ii) in the event of a settlement, unless there has been a determination that such Covered Person did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
The Declaration also provides that if any shareholder or former shareholder of any series of the Registrant shall be held personally liable solely by reason of his being or having been a shareholder and not because of his acts or omissions or for some other reason, the shareholder or former shareholder (or his heirs, executors, administrators or other legal representatives or in the case of any entity, its general successor) shall be entitled out of the assets belonging to the applicable series of the Registrant to be held harmless from and indemnified against all loss and expense arising from
such liability. The Registrant, on behalf of its affected series, shall, upon request by such shareholder, assume the defense of any claim made against such shareholder for any act or obligation of the series and satisfy any judgment thereon from the assets of the series.
Insofar as indemnification for liability arising under the Securities Act of 1933, as amended (the "1933 Act"), may be available to Trustees, 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 SEC such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant's expenses incurred or paid by a Trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such Trustee, 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 1933 Act and will be governed by the final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Pioneer Investment Management, Inc. ("Pioneer Investments") is a registered investment adviser under the Investment Advisers Act of 1940, as amended, and is an indirect, majority owned subsidiary of UniCredito Italiano S.p.A ("UniCredito"). Pioneer Investments manages investment companies, pension and profit sharing plans, trusts, estates or charitable organizations and other corporations or business entities.
To the knowledge of the Registrant, none of Pioneer Investments' directors or executive officers is or has been during their employment with Pioneer Investments engaged in any other business, profession, vocation or employment of a substantial nature for the past two fiscal years, except as noted below. Certain directors and officers, however, may hold or may have held various positions with, and engage or have engaged in business for, the investment companies that Pioneer Investments manages and/or other UniCredito subsidiaries.
OTHER BUSINESS, PROFESSION, VOCATION OR
EMPLOYMENT OF SUBSTANTIAL NATURE WITHIN
NAME OF TRUSTEE/OFFICER LAST TWO FISCAL YEARS
John F. Cogan, Jr. Of Counsel to Hale and Dorr LLP, 60 State
Street, Boston, Massachusetts 02109
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ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records are maintained at the Registrant's office at 60 State Street, Boston, Massachusetts 02109; contact the Treasurer.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
1. The Registrant undertakes to suspend the offering of shares until the prospectus is amended if (1) subsequent to the effective date of its registration statement, the net asset value declines more than ten percent from its net asset value as of the effective date of the registration statement or(2) the net asset value increases to an amount greater than its net proceeds as stated in the prospectus.
2. Not applicable.
3. Not applicable.
4. Not applicable.
5. (a) For the purposes of determining any liability under the 1933 Act, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant under Rule 497(h) under the 1933 Act shall be deemed to be part of the Registration Statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the 1933 Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.
6. The Registrant undertakes to send by first class mail or other means designed to ensure equally prominent delivery within two business days of receipt of a written or oral request the Registrant's statement of additional information.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or Investment Company Act of 1940, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston and Commonwealth of Massachusetts, on the 25th day of April, 2002.
PIONEER HIGH INCOME TRUST
By /s/ Daniel T. Geraci Daniel T. Geraci Executive Vice President and Trustee |
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 date indicated:
Signature Title
John F. Cogan, Jr.* Chairman of the Board )
John F. Cogan, Jr. and President )
(Principal Executive )
Officer) )
)
)
Vincent Nave* Chief Financial Officer )
Vincent Nave and Treasurer (Principal )
Financial and Accounting )
Officer) )
)
)
Trustees: )
)
)
Mary K. Bush* )
Mary K. Bush )
)
)
John F. Cogan, Jr.* )
John F. Cogan, Jr. )
)
)
)
Richard H. Egdahl* )
Richard H. Egdahl )
)
)
Margaret B. W. Graham* )
Margaret B. W. Graham )
)
)
Marguerite A. Piret* )
Marguerite A. Piret )
)
)
/s/ Daniel T. Geraci )
Daniel T. Geraci )
)
)
Stephen K. West* )
Stephen K. West )
)
)
John Winthrop* )
John Winthrop )
)
)
*By: /s/ Daniel T. Geraci Dated: April 25, 2002)
Daniel T. Geraci
Attorney-in-fact
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Exhibit Index
Exhibit
Number Document Title
a.1. Agreement and Declaration of Trust
|
d. Specimen Share Certificate
e. Automatic Dividend Reinvestment Plan
g. Investment Advisory Agreement with Pioneer Investment Management, Inc.
h. Purchase Agreement between the Registrant and Pioneer Investment Management, Inc.
j. Custodian Agreement
k.1. Administration Agreement with Pioneer Investment Management, Inc.
k.2. Administration Agreement between Pioneer Investment Management, Inc. and Princeton Administrators L.P.
k.3. Investment Company Service Agreement with Pioneer Investment Management Shareholder Services, Inc.
k.4. Sub-Transfer Agent Services Agreement between Pioneer Investment Management Shareholder Services, Inc. and Mellon Investor Services LLC
l. Opinion of Counsel
n. Consent of Independent Public Accountants
p. Share Purchase Agreement
PIONEER HIGH INCOME TRUST
AGREEMENT AND
DECLARATION OF TRUST
This AGREEMENT AND DECLARATION OF TRUST is made on January 30, 2002 by the undersigned (together with all other persons from time to time duly elected, qualified and serving as Trustees in accordance with the provisions of Article II hereof, the "Trustees");
NOW, THEREFORE, the Trustees declare that all money and property contributed to the Trust shall be held and managed in trust pursuant to this Agreement and Declaration of Trust.
ARTICLE I
NAME AND DEFINITIONS
Section 1. NAME. The name of the Trust created by this Agreement and Declaration of Trust is "Pioneer High Income Trust."
Section 2. DEFINITIONS. Unless otherwise provided or required by the context:
(a) "ADMINISTRATOR" means the party, other than the Trust, to the contract described in Article III, Section 3 hereof.
(b) "BY-LAWS" means the By-laws of the Trust adopted by the Trustees, as amended from time to time, which By-laws are expressly herein incorporated by reference as part of the "governing instrument" within the meaning of the Delaware Act.
(c) "CLASS" means the class of Shares of a Series established pursuant to Article V.
(d) "COMMISSION," "INTERESTED PERSON" and "PRINCIPAL UNDERWRITER" have the meanings provided in the 1940 Act. Except as such term may be otherwise defined by the Trustees in conjunction with the establishment of any Series of Shares, the term "VOTE OF A MAJORITY OF THE SHARES OUTSTANDING AND ENTITLED TO VOTE" shall have the same meaning as is assigned to the term "VOTE OF A MAJORITY OF THE OUTSTANDING VOTING SECURITIES" in the 1940 Act.
(e) "COVERED PERSON" means a person so defined in Article IV, Section 2.
(f) "CUSTODIAN" means any Person other than the Trust who has custody of any
Trust Property as required by Section 17(f) of the 1940 Act, but does not
include a system for the central handling of securities described in said
Section 17(f).
(g) "DECLARATION" shall mean this Agreement and Declaration of Trust, as amended or restated from time to time. Reference in this Declaration of Trust to "Declaration," "hereof," "herein," and "hereunder" shall be deemed to refer to this Declaration rather than exclusively to the article or section in which such words appear.
(h) "DELAWARE ACT" means Chapter 38 of Title 12 of the Delaware Code entitled "Treatment of Delaware Business Trusts," as amended from time to time.
(i) "DISTRIBUTOR" means the party or parties, other than the Trust, to the contract described in Article III, Section 1 hereof.
(j) "HIS" shall include the feminine and neuter, as well as the masculine, genders.
(k) "INVESTMENT ADVISER" means the party, other than the Trust, to the contract described in Article III, Section 2 hereof.
(l) "NET ASSET VALUE" means the net asset value of each Series of the Trust, determined as provided in Article VI, Section 3.
(m) "PERSON" means and includes individuals, corporations, partnerships, trusts, associations, joint ventures, estates and other entities, and governments and agencies and political subdivisions, thereof, whether domestic or foreign.
(n) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(o) "SERIES" means a series of Shares established pursuant to Article V.
(p) "SHAREHOLDER" means a record owner of Outstanding Shares;
(q) "SHARES" means the transferable units of interest into which the beneficial interest of each Series or Class is divided from time to time (including whole Shares and fractions of Shares). In addition, Shares shall also mean preferred shares or preferred units of beneficial interest which may be issued from time to time. "Outstanding Shares" means Shares shown in the books of the Trust or its transfer agent as then issued and outstanding, but does not include Shares which have been repurchased or redeemed by the Trust and which are held in the treasury of the Trust.
(r) "TRANSFER AGENT" means any Person other than the Trust who maintains the Shareholder records of the Trust, such as the list of Shareholders, the number of Shares credited to each account, and the like.
(s) "TRUST" means Pioneer High Income Trust established hereby, and reference to the Trust, when applicable to one or more Series, refers to that Series.
(t) "TRUSTEE" means the person who has signed this Declaration of Trust, so long as he shall continue in office in accordance with the terms hereof, and all other persons who may from time to time be duly qualified and serving as Trustees in accordance with Article II, in all cases in their capacities as Trustees hereunder.
(u) "TRUST PROPERTY" means any and all property, real or personal, tangible or intangible, which is owned or held by or for the Trust or any Series or the Trustees on behalf of the Trust or any Series.
(v) The "1940 ACT" means the Investment Company Act of 1940, as amended from time to time, including the rules, regulations and interpretive provisions of the Securities and Exchange Commission thereunder.
ARTICLE II
THE TRUSTEES
Section 1. MANAGEMENT OF THE TRUST. The business and affairs of the Trust shall be managed by or under the direction of the Trustees, and they shall have all powers necessary or desirable to carry out that responsibility. The Trustees may execute all instruments and take all action they deem necessary or desirable to promote the interests of the Trust. Any determination made by the Trustees in good faith as to what is in the interests of the Trust shall be conclusive. In construing the provisions of this Declaration, the presumption shall be in favor of a grant of power to the Trustees.
Section 2. POWERS. The Trustees in all instances shall act as principals, free of the control of the Shareholders. The Trustees shall have full power and authority to take or refrain from taking any action and to execute any contracts and instruments that they may consider necessary or desirable in the management of the Trust. The Trustees shall not in any way be bound or limited by current or future laws or customs applicable to trust investments, but shall have full power and authority to make any investments which they, in their sole discretion, deem proper to accomplish the purposes of the Trust. The Trustees may exercise all of their powers without recourse to any court or other authority. Subject to any applicable limitation herein or in the By-laws or resolutions of the Trust, the Trustees shall have power and authority, without limitation:
(a) To operate as and carry on the business of an investment company, and exercise all the powers necessary and appropriate to the conduct of such operations.
(b) To invest in, hold for investment, or reinvest in, cash; securities of any type, including, but not limited to, common, preferred and preference stocks; warrants; subscription rights; profit-sharing interests or participations and all other contracts for or evidence of equity interests; bonds, debentures, bills, time notes and all other evidences of indebtedness; negotiable or non-negotiable instruments; government securities, including securities of any state, municipality or other political subdivision thereof, or any governmental or quasi-governmental agency or instrumentality; and money market instruments including bank certificates of deposit, finance paper, commercial paper, bankers' acceptances and all kinds of repurchase agreements, of any corporation, company, trust, association, firm or other business organization however established, and of any country, state, municipality or other political subdivision, or any governmental or quasi-governmental agency or instrumentality; or any other security, property or instrument in which the Trust or any of its Series shall be authorized to invest.
(c) To acquire (by purchase, subscription or otherwise), to hold, to trade in and deal in, to acquire any rights or options to purchase or sell, to sell or otherwise dispose of, to lend and to pledge any such securities, to enter into repurchase agreements, reverse repurchase agreements, firm commitment agreements, forward foreign currency exchange contracts, interest rate mortgage or currency swaps and interest rate caps, floors and collars, to purchase and sell options on securities, securities indices, currency, swaps and other financial assets, futures contracts and options on futures contracts of all descriptions and to engage in all types of hedging, risk-management or income enhancement transactions.
(d) To exercise all rights, powers and privileges of ownership or interest in all securities, repurchase agreements and other assets included in the Trust Property, including the right to vote thereon and otherwise act with respect thereto and to do all acts for the preservation, protection, improvement and enhancement in value of all such securities, repurchase agreements and other assets.
(e) To acquire (by purchase, lease or otherwise) and to hold, use, maintain, develop and dispose of (by sale or otherwise) any property, real or personal, including cash or foreign currency, and any interest therein.
(f) To borrow money or other property in the name of the Trust exclusively for Trust purposes and in this connection issue notes or other evidence of indebtedness; to secure borrowings by mortgaging, pledging or otherwise subjecting as security the Trust Property; and to endorse, guarantee, or undertake the performance of any obligation or engagement of any other Person and to lend Trust Property.
(g) To aid by further investment any corporation, company, trust, association or firm, any obligation of or interest in which is included in the Trust Property or in the affairs of which the Trustees have any direct or indirect interest; to do all acts and things designed to protect, preserve, improve or enhance the value of such obligation or interest; and to guarantee or become surety on any or all of the contracts, stocks, bonds, notes, debentures and other obligations of any such corporation, company, trust, association or firm.
(h) To adopt By-laws not inconsistent with this Declaration providing for the conduct of the business of the Trust and to amend and repeal them to the extent such right is not reserved to the Shareholders.
(i) To elect and remove such officers and appoint and terminate such agents as they deem appropriate.
(j) To employ as custodian of any assets of the Trust, subject to any provisions herein or in the By-laws, one or more banks, trust companies or companies that are members of a national securities exchange, or other entities permitted by the Commission to serve as such.
(k) To retain one or more transfer agents and shareholder servicing agents, or both.
(l) To provide for the distribution of Shares either through a Principal Underwriter as provided herein or by the Trust itself, or both, or pursuant to a distribution plan of any kind.
(m) To set record dates in the manner provided for herein or in the By-laws.
(n) To delegate such authority as they consider desirable to any officers of the Trust and to any agent, independent contractor, manager, investment adviser, custodian or underwriter.
(o) To hold any security or other property (i) in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form, or
(ii) either in the Trust's or Trustees' own name or in the name of a custodian
or a nominee or nominees, subject to safeguards according to the usual practice
of business trusts or investment companies.
(p) To establish separate and distinct Series with separately defined investment objectives and policies and distinct investment purposes, and with separate Shares representing beneficial interests in such Series, and to establish separate Classes, all in accordance with the provisions of Article V.
(q) To the full extent permitted by Section 3804 of the Delaware Act, to allocate assets, liabilities and expenses of the Trust to a particular Series and assets, liabilities and expenses to a particular Class or to apportion the same between or among two or more Series or Classes, provided that any liabilities or expenses incurred by a particular Series or Class shall be payable solely out of the assets belonging to that Series or Class as provided for in Article V, Section 4.
(r) To consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or concern whose securities are held by the Trust; to consent to any contract, lease, mortgage, purchase, or sale of property by such corporation or concern; and to pay calls or subscriptions with respect to any security held in the Trust.
(s) To compromise, arbitrate, or otherwise adjust claims in favor of or against the Trust or any matter in controversy including, but not limited to, claims for taxes.
(t) To make distributions of income, capital gains, returns of capital (if any) and redemption proceeds to Shareholders in the manner hereinafter provided for.
(u) To establish committees for such purposes, with such membership, and with such responsibilities as the Trustees may consider proper, including a committee consisting of fewer than all of the Trustees then in office, which may act for and bind the Trustees and the Trust with respect to the institution, prosecution, dismissal, settlement, review or investigation of any legal action, suit or proceeding, pending or threatened.
(v) To issue, sell, repurchase, redeem, cancel, retire, acquire, hold, resell, reissue, dispose of and otherwise deal in Shares; to establish terms and conditions regarding the issuance, sale, repurchase, redemption, cancellation, retirement, acquisition, holding, resale, reissuance, disposition of or dealing in Shares; and, subject to Articles V and VI, to apply to any such repurchase, redemption, retirement, cancellation or acquisition of Shares any funds or property of the Trust or of the particular Series with respect to which such Shares are issued.
(w) To carry on any other business in connection with or incidental to any of the foregoing powers, to do everything necessary or desirable to accomplish any purpose or to further any of the foregoing powers, and to take every other action incidental to the foregoing business or purposes, objects or powers.
(x) To invest part or all of the Trust Property (or part or all of the assets of any Series), or to dispose of part or all of the Trust Property (or part or all of the assets of any Series) and invest the proceeds of such disposition, in securities issued by one or more other investment companies registered under the 1940 Act all without any requirement of approval by Shareholders. Any such other investment company may (but need not) be a trust (formed under the laws of the State of New York or of any other state) which is classified as a partnership for federal income tax purposes.
(y) To sell or exchange any or all of the assets of the Trust, subject to Article IX, Sections 4, 6 and 7.
(z) To enter into joint ventures, partnerships and other combinations and associations.
(aa) To join with other security holders in acting through a committee, depositary, voting trustee or otherwise, and in that connection to deposit any security with, or transfer any security to, any such committee, depositary or trustee, and to delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Trustees shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such Committee, depositary or trustee as the Trustees shall deem proper.
(bb) To purchase and pay for entirely out of Trust Property such insurance as the Trustees may deem necessary or appropriate for the conduct of the business, including, without limitation, insurance policies insuring the assets of the Trust or payment of distributions and principal on its portfolio investments, and, subject to applicable law and any restrictions set forth in the By-laws, insurance policies insuring the Shareholders, Trustees, officers, employees, agents, investment advisers, Principal Underwriters, or independent contractors of the Trust, individually, against all claims and liabilities of every nature arising by reason of holding Shares, holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such Person as Trustee, officer, employee, agent, investment adviser, Principal underwriter, or independent contractor, including any action taken or omitted that may be determined to constitute negligence, whether or not the Trust would have the power to indemnify such Person against liability.
(cc) To adopt, establish and carry out pension, profit-sharing, share bonus, share purchase, savings, thrift and other retirement, incentive and benefit plans and trusts, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust.
(dd) To enter into contracts of any kind and description.
(ee) To interpret the investment policies, practices or limitations of any Series or Class.
(ff) To guarantee indebtedness and contractual obligations of others.
The clauses above shall be construed as objects and powers, and the enumeration of specific powers shall not limit in any way the general powers of the Trustees. Any action by one or more of the Trustees in their capacity as such hereunder shall be deemed an action on behalf of the Trust or the applicable Series, and not an action in an individual capacity. No one dealing with the Trustees shall be under any obligation to make any inquiry concerning the authority of the Trustees, or to see to the application of any payments made or property transferred to the Trustees or upon their order. In construing this Declaration, the presumption shall be in favor of a grant of power to the Trustees.
Section 3. CERTAIN TRANSACTIONS. Except as prohibited by applicable law, the Trustees may, on behalf of the Trust, buy any securities from or sell any securities to, or lend any assets of the Trust to, any Trustee or officer of the Trust or any firm of which any such Trustee or officer is a member acting as principal, or have any such dealings with any investment adviser, administrator, distributor or transfer agent for the Trust or with any Interested Person of such person. The Trust may employ any such person or entity in which such person is an Interested Person, as broker, legal counsel, registrar, investment adviser, administrator, distributor, transfer agent, dividend disbursing agent, custodian or in any other capacity upon customary terms.
Section 4. INITIAL TRUSTEE(S); ELECTION AND NUMBER OF TRUSTEES. The initial Trustee(s) shall be the persons initially signing this Declaration. The number of Trustees (other than the initial Trustees) shall be fixed from time to time by a majority of the Trustees then in office; provided, that there shall be at least one (1) Trustee and no more than fifteen (15).
Section 5. TERM OF OFFICE OF TRUSTEES; CLASSES.
(a) Subject to the voting rights established with respect to a particular Series or Class, each Trustee shall hold office for life or until his successor is elected or the Trust terminates. Notwithstanding the foregoing but subject to the voting rights established with respect to a particular Series or Class, (1) any Trustee may resign by delivering to the other Trustees or to any Trust officer a written resignation effective upon such delivery or a later date specified therein; (2) any Trustee may be removed with cause at any time by a written instrument signed by at least three-quarters of the then Trustees, specifying the effective date of removal; (3) any Trustee who requests to be retired, or who is declared bankrupt or has become physically or mentally incapacitated or is otherwise unable to serve, may be retired by a written instrument signed by a majority of the other Trustees, specifying the effective date of retirement; and (4) any Trustee may be removed, with or without cause, by a vote of at least a majority of the then Trustees if such removal is approved by the holders of at least three-quarters of the Outstanding Shares entitled to vote with respect to the election of such Trustee and present in person or by proxy at a meeting of the Shareholders called for such purpose.
(b) The Board of Trustees shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of trustees constituting the entire Board of Trustees. Within the limits above specified, the number of the Trustees in each class shall be determined by resolution of the Board of Trustees. The Trustees may also determine by resolution those Trustees in each Class that shall be elected by Shareholders of a particular class of Shares (e.g., by a class of preferred Shares). The term of office of the 1st class shall expire on the date of the 1st annual meeting of Shareholders or special meeting in lieu thereof following the effective date of the Registration Statement relating to the Shares under the Securities Act. The term of the 2nd class shall expire on the date of the 2nd annual meeting of Shareholders or special meeting in lieu thereof following the effective date of the Registration Statement relating to the Shares under the Securities Act. The term of the 3rd class shall expire on the date of the 3rd annual meeting of Shareholders or special meeting in lieu thereof following the effective date of the Registration Statement relating to the Shares under the Securities Act. Upon expiration of the term of office of each class as set forth above, the number of Trustees in such class, as determined by the Board of Trustees, shall be elected for a term expiring on the date of the 3rd annual meeting of Shareholders or special meeting in lieu thereof following such expiration to succeed the Trustees whose terms of office expire. The Trustees shall be elected at an annual meeting of the Shareholders or special meeting in lieu thereof called for that purpose.
Section 6. VACANCIES; APPOINTMENT OF TRUSTEES. Whenever a vacancy shall exist in the Board of Trustees, regardless of the reason for such vacancy, the remaining Trustees shall appoint any person as they determine in their sole discretion to fill that vacancy, consistent with the limitations under the 1940 Act, provided, that if the Shareholders of any Class or Series of Shares are entitled separately to elect one or more Trustees, a majority of the remaining Trustees or the sole remaining Trustee elected by that Class or Series may fill any vacancy among the number of Trustees elected by that Class or Series. Such appointment shall be made by a written instrument signed by a majority of the Trustees or by a resolution of the Trustees, duly adopted and recorded in the records of the Trust, specifying the effective date of the appointment. The Trustees may appoint a new Trustee as provided above in anticipation of a vacancy expected to occur because of the retirement, resignation or removal of a Trustee, or an increase in number of Trustees, provided that such appointment shall become effective only at or after the expected vacancy occurs. As soon as any such Trustee has accepted his appointment in writing, the trust estate shall vest in the new Trustee, together with the continuing Trustees, without any further act or conveyance, and he shall be deemed a Trustee hereunder. The Trustees' power of appointment is subject to Section 16(a) of the 1940 Act. Whenever a vacancy in the number of Trustees shall occur, until such vacancy is filled as provided in this Article II, the Trustees in office, regardless of their number, shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by the Declaration. The death, declination to serve, resignation, retirement, removal or incapacity of one or more Trustees, or all of them, shall not operate to annul the Trust or to revoke any existing agency created pursuant to the terms of this Declaration of Trust.
Section 7. TEMPORARY VACANCY OR ABSENCE. Whenever a vacancy in the Board of Trustees shall occur, until such vacancy is filled, or while any Trustee is absent from his domicile (unless that Trustee has made arrangements to be informed about, and to participate in, the affairs of the Trust during such absence), or is physically or mentally incapacitated, the remaining Trustees shall have all the powers hereunder and their certificate as to such vacancy, absence, or incapacity shall be conclusive. Any Trustee may, by power of attorney, delegate his powers as Trustee for a period not exceeding six (6) months at any one time to any other Trustee or Trustees.
Section 8. CHAIRMAN. The Trustees shall appoint one of their number to be Chairman of the Board of Trustees. The Chairman shall preside at all meetings of the Trustees, shall be responsible for the execution of policies established by the Trustees and the administration of the Trust, and may be the chief executive, financial and/or accounting officer of the Trust.
Section 9. ACTION BY THE TRUSTEES.
(a) Except as expressly provided in this Agreement, the Trustees shall act by majority vote at a meeting duly called at which a quorum is present, including a meeting held by conference telephone, teleconference or other electronic media or communication equipment by means of which all persons participating in the meeting can communicate with each other; or by written consent of a majority of Trustees (or such greater number as may be required by applicable law) without a meeting. A majority of the Trustees shall constitute a quorum at any meeting. Meetings of the Trustees may be called orally or in writing by the President or by any one of the Trustees. Notice of the time, date and place of all Trustees' meetings shall be given to each Trustee as set forth in the By-laws; provided, however, that no notice is required if the Trustees provide for regular or stated meetings. Notice need not be given to any Trustee who attends the meeting without objecting to the lack of notice or who signs a waiver of notice either before or after the meeting. Except as expressly provided in this Agreement, the Trustees by majority vote may delegate to any Trustee or Trustees or committee authority to approve particular matters or take particular actions on behalf of the Trust. Any written consent or waiver may be provided and delivered to the Trust by facsimile or other similar electronic mechanism.
(b) A Trustee who with respect to the Trust is not an Interested Person shall be deemed to be independent and disinterested when making any determinations or taking any action as a Trustee, whether pursuant to the 1940 Act, the Delaware Act or otherwise.
Section 10. OWNERSHIP OF TRUST PROPERTY. The Trust Property of the Trust and of each Series shall be held separate and apart from any assets now or hereafter held in any capacity other than as Trustee hereunder by the Trustees or any successor Trustees. Legal title in and beneficial ownership of all of the assets of the Trust shall at all times be considered as vested in the Trust, except that the Trustees may cause legal title in and beneficial ownership of any Trust Property to be held by, or in the name of one or more of the Trustees acting for and on behalf of the Trust, or in the name of any person as nominee acting for and on behalf of the Trust. No Shareholder shall be deemed to have a severable ownership in any individual asset of the Trust or of any Series or any right of partition or possession thereof, but each Shareholder shall have, as provided in Article V, a proportionate undivided beneficial interest in the Trust or Series or Class thereof represented by Shares. The Shares shall be personal property giving only the rights specifically set forth in this Trust Instrument. The Trust, or at the determination of the Trustees one or more of the Trustees or a nominee acting for and on behalf of the Trust, shall be deemed to hold legal title and beneficial ownership of any income earned on securities of the Trust issued by any business entities formed, organized, or existing under the laws of any jurisdiction, including the laws of any foreign country. Upon the resignation or removal of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute and deliver such documents as the remaining Trustees shall require for the purpose of conveying to the Trust or the remaining Trustees any Trust Property held in the name of the resigning or removed Trustee. Upon the incapacity or death of any Trustee, his legal representative shall execute and deliver on his behalf such documents as the remaining Trustees shall require as provided in the preceding sentence.
Section 11. EFFECT OF TRUSTEES NOT SERVING. The death, resignation, retirement, removal, incapacity or inability or refusal to serve of the Trustees, or any one of them, shall not operate to annul the Trust or to revoke any existing agency created pursuant to the terms of this Declaration.
Section 12. TRUSTEES, ETC. AS SHAREHOLDERS. Subject to any restrictions in the By-laws, any Trustee, officer, agent or independent contractor of the Trust may acquire, own and dispose of Shares to the same extent as any other Shareholder; the Trustees may issue and sell Shares to and buy Shares from any such person or any firm or company in which such person is interested, subject only to any general limitations herein.
Section 13. SERIES TRUSTEES. In connection with the establishment of one or more Series or Classes, the Trustees establishing such Series or Class may appoint, to the extent permitted by the Delaware Act, separate Trustees with respect to such Series or Classes (the "Series Trustees"). Series Trustees may, but are not required to, serve as Trustees of the Trust or any other Series or Class of the Trust. The Series Trustees shall have, to the exclusion of any other Trustee of the Trust, all the powers and authorities of Trustees hereunder with respect to such Series or Class, but shall have no power or authority with respect to any other Series or Class. Any provision of this Declaration relating to election of Trustees by Shareholders only shall entitle the Shareholders of a Series or Class for which Series Trustees have been appointed to vote with respect to the election of such Series Trustees and the Shareholders of any other Series or Class shall not be entitled to participate in such vote. In the event that Series Trustees are appointed, the Trustees initially appointing such Series Trustees shall, without the approval of any Outstanding Shares, amend either the Declaration or the By-laws to provide for the respective responsibilities of the Trustees and the Series Trustees in circumstances where an action of the Trustees or Series Trustees affects all Series of the Trust or two or more Series represented by different Trustees.
ARTICLE III
CONTRACTS WITH SERVICE PROVIDERS
Section 1. UNDERWRITING CONTRACT. The Trustees may in their discretion from time to time enter into an exclusive or non-exclusive underwriting or distribution contract or contracts providing for the sale of the Shares whereby the Trustees may either agree to sell the Shares to the other party to the contract or appoint such other party as their sales agent for the Shares, and in either case on such terms and conditions, if any, as may be prescribed in the By-laws, and such further terms and conditions as the Trustees may in their discretion determine not inconsistent with the provisions of this Article III or of the By-laws; and such contract may also provide for the repurchase of the Shares by such other party as agent of the Trustees.
Section 2. ADVISORY OR MANAGEMENT CONTRACT. The Trustees may in their discretion from time to time enter into one or more investment advisory or management contracts or, if the Trustees establish multiple Series, separate investment advisory or management contracts with respect to one or more Series whereby the other party or parties to any such contracts shall undertake to furnish the Trust or such Series management, investment advisory, administration, accounting, legal, statistical and research facilities and services, promotional or marketing activities, and such other facilities and services, if any, as the Trustees shall from time to time consider desirable and all upon such terms and conditions as the Trustees may in their discretion determine. Notwithstanding any provisions of the Declaration, the Trustees may authorize the Investment Advisers or persons to whom the Investment Adviser delegates certain or all of their duties, or any of them, under any such contracts (subject to such general or specific instructions as the Trustees may from time to time adopt) to effect purchases, sales, loans or exchanges of portfolio securities and other investments of the Trust on behalf of the Trustees or may authorize any officer, employee or Trustee to effect such purchases, sales, loans or exchanges pursuant to recommendations of such Investment Advisers, or any of them (and all without further action by the Trustees). Any such purchases, sales, loans and exchanges shall be deemed to have been authorized by all of the Trustees.
Section 3. ADMINISTRATION AGREEMENT. The Trustees may in their discretion from time to time enter into an administration agreement or, if the Trustees establish multiple Series or Classes, separate administration agreements with respect to each Series or Class, whereby the other party to such agreement shall undertake to manage the business affairs of the Trust or of a Series or Class thereof of the Trust and furnish the Trust or a Series or a Class thereof with office facilities, and shall be responsible for the ordinary clerical, bookkeeping and recordkeeping services at such office facilities, and other facilities and services, if any, and all upon such terms and conditions as the Trustees may in their discretion determine.
Section 4. SERVICE AGREEMENT. The Trustees may in their discretion from time to time enter into service agreements with respect to one or more Series or Classes of Shares whereby the other parties to such Service Agreements will provide administration and/or support services pursuant to administration plans and service plans, and all upon such terms and conditions as the Trustees in their discretion may determine.
Section 5. TRANSFER AGENT. The Trustees may in their discretion from time to time enter into a transfer agency and shareholder service contract whereby the other party to such contract shall undertake to furnish transfer agency and shareholder services to the Trust. The contract shall have such terms and conditions as the Trustees may in their discretion determine not inconsistent with the Declaration. Such services may be provided by one or more Persons.
Section 6. CUSTODIAN. The Trustees may appoint or otherwise engage one or more banks or trust companies, each having aggregate capital, surplus and undivided profits (as shown in its last published report) of at least two million dollars ($2,000,000), or any other entity satisfying the requirements of the 1940 Act, to serve as Custodian with authority as its agent, but subject to such restrictions, limitations and other requirements, if any, as may be contained in the By-laws of the Trust. The Trustees may also authorize the Custodian to employ one or more sub-custodians, including such foreign banks and securities depositories as meet the requirements of applicable provisions of the 1940 Act, and upon such terms and conditions as may be agreed upon between the Custodian and such sub-custodian, to hold securities and other assets of the Trust and to perform the acts and services of the Custodian, subject to applicable provisions of law and resolutions adopted by the Trustees.
Section 7. AFFILIATIONS OF TRUSTEES OR OFFICERS, ETC. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust or any Series thereof is a shareholder, director, officer, partner, trustee, employee, manager, adviser or distributor of or for any partnership, corporation, trust, association or other organization or of or for any parent or affiliate of any organization, with which a contract of the character described in this Article III or for services as Custodian, Transfer Agent or disbursing agent or for related services may have been or may hereafter be made, or that any such organization, or any parent or affiliate thereof, is a Shareholder of or has an interest in the Trust, or that
(ii) any partnership, corporation, trust, association or other organization with which a contract of the character described in Sections 1, 2, 3 or 4 of this Article III or for services as Custodian, Transfer Agent or disbursing agent or for related services may have been or may hereafter be made also has any one or more of such contracts with one or more other partnerships, corporations, trusts, associations or other organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any Shareholder, Trustee or officer of the Trust from voting upon or executing the same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE IV
COMPENSATION, LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. COMPENSATION. The Trustees as such shall be entitled to reasonable compensation from the Trust, and they may fix the amount of such compensation. Nothing herein shall in any way prevent the employment of any Trustee for advisory, management, legal, accounting, investment banking or other services and payment for the same by the Trust.
Section 2. LIMITATION OF LIABILITY. All persons contracting with or having any claim against the Trust or a particular Series shall look only to the assets of all Series or such particular Series for payment under such contract or claim; and neither the Trustees nor, when acting in such capacity, any of the Trust's officers, employees or agents, whether past, present or future, shall be personally liable therefor. Every written instrument or obligation on behalf of the Trust or any Series shall contain a statement to the foregoing effect, but the absence of such statement shall not operate to make any Trustee or officer of the Trust liable thereunder. Provided they have exercised reasonable care and have acted under the reasonable belief that their actions are in the best interest of the Trust, the Trustees and officers of the Trust shall not be responsible or liable for any act or omission or for neglect or wrongdoing of them or any officer, agent, employee, investment adviser or independent contractor of the Trust, but nothing contained in this Declaration or in the Delaware Act shall protect any Trustee or officer of the Trust against liability to the Trust or to Shareholders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
Section 3. INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in subsection (b) below:
(i) every person who is, or has been, a Trustee or an officer, employee or agent of the Trust (including any individual who serves at its request as director, officer, partner, trustee or the like of another organization in which it has any interest as a shareholder, creditor or otherwise) ("Covered Person") shall be indemnified by the Trust or the appropriate Series 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 a Covered Person and against amounts paid or incurred by him in the settlement thereof; and
(ii) as used herein, the words "claim," "action," "suit," or "proceeding" shall apply to all claims, actions, suits or proceedings (civil, criminal or other, including appeals), actual or threatened, and the words "liability" and "expenses" shall include, without limitation, attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the proceeding was brought (A) to be liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office, or (B) not to have acted in good faith in the reasonable belief that his action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a determination that such Covered Person did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office; (A) by the court or other body approving the settlement; (B) by at least a majority of those Trustees who are neither Interested Persons of the Trust nor are parties to the matter based upon a review of readily available facts (as opposed to a full trial-type inquiry); (C) by written opinion of independent legal counsel based upon a review of readily available facts (as opposed to a full trial-type inquiry) or (D) by a vote of a majority of the Outstanding Shares entitled to vote (excluding any Outstanding Shares owned of record or beneficially by such individual).
(c) The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not be exclusive of or affect any other rights to which any Covered Person may now or hereafter be entitled, and shall inure to the benefit of the heirs, executors and administrators of a Covered Person.
(d) To the maximum extent permitted by applicable law, expenses in connection
with the preparation and presentation of a defense to any claim, action, suit or
proceeding of the character described in subsection (a) of this Section may be
paid by the Trust or applicable Series from time to time prior to final
disposition thereof upon receipt of an undertaking by or on behalf of such
Covered Person that such amount will be paid over by him to the Trust or
applicable Series if it is ultimately determined that he is not entitled to
indemnification under this Section; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such undertaking,
(ii) the Trust is insured against losses arising out of any such advance
payments or (iii) either a majority of the Trustees who are neither Interested
Persons of the Trust nor parties to the matter, or independent legal counsel in
a written opinion, shall have determined, based upon a review of readily
available facts (as opposed to a full trial-type inquiry) that there is reason
to believe that such Covered Person will not be disqualified from
indemnification under this Section.
(e) Any repeal or modification of this Article IV by the Shareholders, or adoption or modification of any other provision of the Declaration or By-laws inconsistent with this Article, shall be prospective only, to the extent that such repeal, or modification would, if applied retrospectively, adversely affect any limitation on the liability of any Covered Person or indemnification available to any Covered Person with respect to any act or omission which occurred prior to such repeal, modification or adoption. Any such repeal or modification by the Shareholders shall require a vote of at least two-thirds of the Outstanding Shares entitled to vote and present in person or by proxy at any meeting of the Shareholders.
Section 4. INDEMNIFICATION OF SHAREHOLDERS. If any Shareholder or former Shareholder of any Series shall be held personally liable solely by reason of his being or having been a Shareholder and not because of his acts or omissions or for some other reason, the Shareholder or former Shareholder (or his heirs, executors, administrators or other legal representatives or in the case of any entity, its general successor) shall be entitled out of the assets belonging to the applicable Series to be held harmless from and indemnified against all loss and expense arising from such liability. The Trust, on behalf of the affected Series, shall, upon request by such Shareholder, assume the defense of any claim made against such Shareholder for any act or obligation of the Series and satisfy any judgment thereon from the assets of the Series.
Section 5. NO BOND REQUIRED OF TRUSTEES. No Trustee shall be obligated to give any bond or other security for the performance of any of his duties hereunder.
Section 6. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC. No purchaser, lender, transfer agent or other Person dealing with the Trustees or any officer, employee or agent of the Trust or a Series thereof shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trustees or by said officer, employee or agent or be liable for the application of money or property paid, loaned, or delivered to or on the order of the Trustees or of said officer, employee or agent. Every obligation, contract, instrument, certificate, Share, other security of the Trust or a Series thereof or undertaking, and every other act or thing whatsoever executed in connection with the Trust shall be conclusively presumed to have been executed or done by the executors thereof only in their capacity as Trustees under this Declaration or in their capacity as officers, employees or agents of the Trust or a Series thereof. Every written obligation, contract, instrument, certificate, Share, other security of the Trust or a Series thereof or undertaking made or issued by the Trustees may recite that the same is executed or made by them not individually, but as Trustees under the Declaration, and that the obligations of the Trust or a Series thereof under any such instrument are not binding upon any of the Trustees or Shareholders individually, but bind only the Trust Property or the Trust Property of the applicable Series, and may contain any further recital which they may deem appropriate, but the omission of such recital shall not operate to bind the Trustees individually. The Trustees shall at all times maintain insurance for the protection of the Trust Property or the Trust Property of the applicable Series, its Shareholders, Trustees, officers, employees and agents in such amount as the Trustees shall deem adequate to cover possible tort liability, and such other insurance as the Trustees in their sole judgment shall deem advisable.
Section 7. RELIANCE ON EXPERTS, ETC. Each Trustee, officer or employee of the Trust or a Series thereof shall, in the performance of his duties, powers and discretions hereunder be fully and completely justified and protected with regard to any act or any failure to act resulting from reliance in good faith upon the books of account or other records of the Trust or a Series thereof, upon an opinion of counsel, or upon reports made to the Trust or a Series thereof by any of its officers or employees or by the Investment Adviser, the Administrator, the Distributor, Transfer Agent, selected dealers, accountants, appraisers or other experts or consultants selected with reasonable care by the Trustees, officers or employees of the Trust, regardless of whether such counsel or expert may also be a Trustee.
ARTICLE V
SERIES; CLASSES; SHARES; OTHER SECURITIES
Section 1. ESTABLISHMENT OF SERIES OR CLASS. The Trust shall consist of one or more Series. Without limiting the authority of the Trustees to establish and designate any further Series or Classes, the Trustees hereby establish a single Series, designated Pioneer High Income Trust, and one Class of Shares, designated as the common shares. Each additional Series shall be established and is effective upon the adoption of a resolution of a majority of the Trustees or any alternative date specified in such resolution. The Trustees may designate the relative rights and preferences of the Shares of each Series. The Trustees may divide the Shares of any Series into Classes. Any Shares of any further Series and Classes that may from time to time be established and designated by the Trustees shall be established and designated, and the variations in the relative rights and preferences as between the different Series shall be fixed and determined, by the Trustees; provided, that all Shares shall be identical except for such variations as shall be fixed and determined between different Series or Classes by the Trustees in establishing and designating such Class or Series. Unless otherwise designated by the Trustees in the By-laws or resolutions establishing a Class, the purchase price, the method of determining the net asset value, and the relative liquidation, voting, dividend and other rights and preferences of holders of a Class shall be as set forth in the Trust's Registration Statement on Form N-2 under the Securities Act of 1933 and/or the 1940 Act relating to the issuance of Shares of such Class. To the extent that the Trustees authorized and issue preferred Shares of any Class or Series, they are hereby authorized and empowered to amend or supplement this Declaration, including an amendment or modification to the rights of any Shares outstanding at the time of such amendment or supplement, as they deem necessary or appropriate, including to comply with the requirements of the 1940 Act or requirements imposed by the rating agencies or other Persons, all without the approval of Shareholders. Any such supplement or amendment shall be filed as is necessary. The Trustees are also authorized to take such actions and retain such persons as they see fit to offer and sell such securities.
All references to Shares in this Declaration shall be deemed to be Shares of any or all Series or Classes as the context may require. The Trust shall maintain separate and distinct records for each Series and hold and account for the assets thereof separately from the other assets of the Trust or of any other Series. A Series may issue any number of Shares or any Class thereof and need not issue Shares. Except as otherwise provided with respect to a specific Class, each Share of a Series shall represent an equal beneficial interest in the net assets of such Series. Each holder of Shares of a Series or a Class thereof shall be entitled to receive his pro rata share of all distributions made with respect to such Series or Class. Upon redemption of his Shares, such Shareholder shall be paid solely out of the funds and property of such Series. The Trustees may adopt and change the name of any Series or Class.
Section 2. SHARES. The beneficial interest in the Trust shall be divided into transferable Shares of one or more separate and distinct Series or Classes established by the Trustees. The number of Shares of each Series and Class is unlimited and each Share shall have no par value per Share or such other amount as the Trustees may establish. All Shares issued hereunder shall be fully paid and nonassessable. Shareholders shall have no preemptive or other right to subscribe to any additional Shares or other securities issued by the Trust. The Trustees shall have full power and authority, in their sole discretion and without obtaining Shareholder approval, to issue original or additional Shares at such times and on such terms and conditions as they deem appropriate; to issue fractional Shares and Shares held in the treasury; to establish and to change in any manner Shares of any Series or Classes with such preferences, rights upon liquidation, redemption rights, terms of conversion, voting powers, and other rights and privileges as the Trustees may determine (but the Trustees may not change Outstanding Shares in a manner materially adverse to the Shareholders of such Shares); to divide or combine the Shares of any Series or Classes into a greater or lesser number; to classify or reclassify any unissued Shares of any Series or Classes into one or more Series or Classes of Shares; to abolish any one or more Series or Classes of Shares; to issue Shares to acquire other assets (including assets subject to, and in connection with, the assumption of liabilities) and businesses; and to take such other action with respect to the Shares as the Trustees may deem desirable. Shares held in the treasury shall not confer any voting rights on the Trustees and shall not be entitled to any dividends or other distributions declared with respect to the Shares.
Section 3. INVESTMENT IN THE TRUST. The Trustees shall accept investments in any Series or Class from such persons and on such terms as they may from time to time authorize. At the Trustees' discretion, such investments, subject to applicable law, may be in the form of cash or securities in which that Series is authorized to invest, valued as provided in Article VI, Section 3. Investments in a Series shall be credited to each Shareholder's account in the form of full Shares at the Net Asset Value per Share next determined after the investment is received or accepted as may be determined by the Trustees; provided, however, that the Trustees may, in their sole discretion, (a) impose a sales charge upon investments in any Series or Class, (b) issue fractional Shares, (c) determine the Net Asset Value per Share of the initial capital contribution or (d) authorize the issuance of Shares at a price other than Net Asset Value to the extent permitted by the 1940 Act or any rule, order or interpretation of the Commission thereunder. The Trustees shall have the right to refuse to accept investments in any Series at any time without any cause or reason therefor whatsoever.
Section 4. ASSETS AND LIABILITIES OF SERIES. All consideration received by the Trust for the issue or sale of Shares of a particular Series, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits, and proceeds thereof (including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be), shall be held and accounted for separately from the assets of every other Series and are referred to as "assets belonging to" that Series. The assets belonging to a Series shall belong only to that Series for all purposes, and to no other Series, subject only to the rights of creditors of that Series. Any assets, income, earnings, profits, and proceeds thereof, funds, or payments which are not readily identifiable as belonging to any particular Series shall be allocated by the Trustees between and among one or more Series as the Trustees deem fair and equitable. Each such allocation shall be conclusive and binding upon the Shareholders of all Series for all purposes, and such assets, earnings, income, profits or funds, or payments and proceeds thereof shall be referred to as assets belonging to that Series. The assets belonging to a Series shall be so recorded upon the books of the Trust, and shall be held by the Trustees in trust for the benefit of the Shareholders of that Series. The assets belonging to a Series shall be charged with the liabilities of that Series and all expenses, costs, charges and reserves attributable to that Series, except that liabilities and expenses allocated solely to a particular Class shall be borne by that Class. Any general liabilities, expenses, costs, charges or reserves of the Trust which are not readily identifiable as belonging to any particular Series or Class shall be allocated and charged by the Trustees between or among any one or more of the Series or Classes in such manner as the Trustees deem fair and equitable. Each such allocation shall be conclusive and binding upon the Shareholders of all Series or Classes for all purposes.
Without limiting the foregoing, but subject to the right of the Trustees to allocate general liabilities, expenses, costs, charges or reserves as herein provided, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular Series shall be enforceable against the assets of such Series only, and not against the assets of any other Series. Notice of this contractual limitation on liabilities among Series may, in the Trustees' discretion, be set forth in the certificate of trust of the Trust (whether originally or by amendment) as filed or to be filed in the Office of the Secretary of State of the State of Delaware pursuant to the Delaware Act, and upon the giving of such notice in the certificate of trust, the statutory provisions of Section 3804 of the Delaware Act relating to limitations on liabilities among Series (and the statutory effect under Section 3804 of setting forth such notice in the certificate of trust) shall become applicable to the Trust and each Series. Any person extending credit to, contracting with or having any claim against any Series may look only to the assets of that Series to satisfy or enforce any debt, with respect to that Series. No Shareholder or former Shareholder of any Series shall have a claim on or any right to any assets allocated or belonging to any other Series.
Section 5. OWNERSHIP AND TRANSFER OF SHARES. The Trust or a transfer or similar agent for the Trust shall maintain a register containing the names and addresses of the Shareholders of each Series and Class thereof, the number of Shares of each Series and Class held by such Shareholders, and a record of all Share transfers. The register shall be conclusive as to the identity of Shareholders of record and the number of Shares held by them from time to time. The Trustees may authorize the issuance of certificates representing Shares and adopt rules governing their use. The Trustees may make rules governing the transfer of Shares, whether or not represented by certificates. Except as otherwise provided by the Trustees, Shares shall be transferable on the books of the Trust only by the record holder thereof or by his duly authorized agent upon delivery to the Trustees or the Trust's transfer agent of a duly executed instrument of transfer, together with a Share certificate if one is outstanding, and such evidence or the genuineness of each such execution and authorization and of such other matters as may be required by the Trustees. Upon such delivery, and subject to any further requirements specified by the Trustees or contained in the By-laws, the transfer shall be recorded on the books of the Trust. Until a transfer is so recorded, the Shareholder of record of Shares shall be deemed to be the holder of such Shares for all purposes hereunder and neither the Trustees nor the Trust, nor any transfer agent or registrar or any officer, employee or agent of the Trust, shall be affected by any notice of a proposed transfer.
Section 6. STATUS OF SHARES; LIMITATION OF SHAREHOLDER LIABILITY. Shares shall be deemed to be personal property giving Shareholders only the rights provided in this Declaration. Every Shareholder, by virtue of having acquired a Share, shall be held expressly to have assented to and agreed to be bound by the terms of this Declaration and to have become a party hereto. No Shareholder shall be personally liable for the debts, liabilities, obligations and expenses incurred by, contracted for, or otherwise existing with respect to, the Trust or any Series. The death, incapacity, dissolution, termination or bankruptcy of a Shareholder during the existence of the Trust shall not operate to terminate the Trust, nor entitle the representative of any such Shareholder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees, but entitles such representative only to the rights of such Shareholder under this Trust. Ownership of Shares shall not entitle the Shareholder to any title in or to the whole or any part of the Trust Property or right to call for a partition or division of the same or for an accounting, nor shall the ownership of Shares constitute the Shareholders as partners. Neither the Trust nor the Trustees shall have any power to bind any Shareholder personally or to demand payment from any Shareholder for anything, other than as agreed by the Shareholder. Shareholders shall have the same limitation of personal liability as is extended to shareholders of a private corporation for profit incorporated in the State of Delaware. Every written obligation of the Trust or any Series shall contain a statement to the effect that such obligation may only be enforced against the assets of the appropriate Series or all Series; however, the omission of such statement shall not operate to bind or create personal liability for any Shareholder or Trustee.
Section 7. OTHER SECURITIES. The Trustees may authorize and issue such other securities of the Trust other than Shares as they determine to be necessary, desirable or appropriate, having such terms, rights, preferences, privileges, limitations and restrictions as the Trustees see fit, including preferred interests, debt securities or other senior securities.
ARTICLE VI
DISTRIBUTIONS AND REDEMPTIONS
Section 1. DISTRIBUTIONS. The Trustees or a committee of one or more Trustees or one or more officers may declare and pay dividends and other distributions, including dividends on Shares of a particular Series or Class and other distributions from the assets belonging to that Series. No dividend or distribution, including, without limitation, any distribution paid upon termination of the Trust or of any Series (or Class) with respect to, nor any redemption or repurchase of, the Shares of any Series (or Class) shall be effected by the Trust other than from the assets held with respect to such Series, nor shall any Shareholder of any particular Series otherwise have any right or claim against the assets held with respect to any other Series except to the extent that such Shareholder has such a right or claim hereunder as a Shareholder of such other Series. The Trustees shall have full discretion to determine which items shall be treated as income and which items as capital; and each such determination and allocation shall be conclusive and binding upon the Shareholders. The amount and payment of dividends or distributions and their form, whether they are in cash, Shares or other Trust Property, shall be determined by the Trustees. Dividends and other distributions may be paid pursuant to a standing resolution adopted once or more often as the Trustees determine. Except as provided with respect to a particular Class in the By-laws or the resolutions establishing such Class, all dividends and other distributions on Shares of a particular Series shall be distributed pro rata to the Shareholders of that Series in proportion to the number of Shares of that Series they held on the record date established for such payment. The Trustees may adopt and offer to Shareholders such dividend reinvestment plans, cash dividend payout plans or similar plans as the Trustees deem appropriate.
Section 2. REDEMPTIONS. Except as provided with respect to a particular Class in the By-laws or the resolutions establishing such Class, Shares of the Trust will not be redeemed or repurchased by the Trust, except as the Trustees shall determine from time to time and the Trust shall be under no obligation to redeem or repurchase Shares. The Trustees may specify conditions, prices, and places of redemption, may specify binding requirements for the proper form or forms of requests for redemption and may specify the amount of any deferred sales charge to be withheld from redemption proceeds. Payment of the redemption price may be wholly or partly in securities or other assets at the value of such securities or assets used in such determination of Net Asset Value, or may be in cash. Upon redemption, Shares may be reissued from time to time. The Trustees may require Shareholders to redeem Shares for any reason under terms set by the Trustees, including, but not limited to, the failure of a Shareholder to supply a taxpayer identification number if required to do so, or to have the minimum investment required, or to pay when due for the purchase of Shares issued to him. To the extent permitted by law, the Trustees may retain the proceeds of any redemption of Shares required by them for payment of amounts due and owing by a Shareholder to the Trust or any Series or Class or any governmental authority. Notwithstanding the foregoing, the Trustees may postpone payment of the redemption price and may suspend the right of the Shareholders to require any Series or Class to redeem Shares during any period of time when and to the extent permissible under the 1940 Act.
Section 3. DETERMINATION OF NET ASSET VALUE. The Trustees shall cause the Net Asset Value of Shares of each Series or Class to be determined from time to time in a manner consistent with applicable laws and regulations. The Trustees may delegate the power and duty to determine Net Asset Value per Share to one or more Trustees or officers of the Trust or to a custodian, depository or other agent appointed for such purpose. The Net Asset Value of Shares shall be determined separately for each Series or Class at such times as may be prescribed by the Trustees or, in the absence of action by the Trustees, as of the close of regular trading on the New York Stock Exchange on each day for all or part of which such Exchange is open for unrestricted trading. Section 4. SUSPENSION OF RIGHT OF REDEMPTION. If, as referred to in Section 2 of this Article, the Trustees postpone payment of the redemption price and suspend the right of Shareholders to redeem their Shares, such suspension shall take effect at the time the Trustees shall specify, but not later than the close of business on the business day next following the declaration of suspension. Thereafter Shareholders shall have no right of redemption or payment until the Trustees declare the end of the suspension. If the right of redemption is suspended, a Shareholder may either withdraw his request for redemption or receive payment based on the Net Asset Value per Share next determined after the suspension terminates.
Section 5. REPURCHASE BY AGREEMENT. The Trust may repurchase Shares directly, or through the Distributor or another agent designated for the purpose, by agreement with the owner thereof at a price not exceeding the Net Asset Value per Share determined as of the time when the purchase or contract of purchase is made or the Net Asset Value as of any time which may be later determined, provided payment is not made for the Shares prior to the time as of which such Net Asset Value is determined.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. VOTING POWERS. Subject to the voting rights established with respect to a particular Class in the By-laws or the resolutions establishing such Class, the Shareholders shall have power to vote only with respect to (a) the election of Trustees as provided in Section 2 of this Article; (b) the removal of Trustees as provided in Article II, Section 5(b); (c) any investment advisory or management contract to the extent required by the 1940 Act; (d) the amendment of this Declaration to the extent and as provided in Article X, Section 10; (d) termination of the Trust to the extent provided in Article IX, Section 4, (f) the conversion of the Trust to an open-end investment company to the extent provided in Article IX, Section 5, (g) the reorganization of the Trust to the extent provided in Article IX, Section 6; (h) to approve a transaction subject to Article IX, Section 7, and (i) such additional matters relating to the Trust as may be required or authorized by law, this Declaration, or the By-laws or any registration of the Trust with the Commission or any State, or as the Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall be voted by individual Series or Class, except (a) as provided with respect to a particular Class in the By-laws or the resolutions establishing such Class, (b) when required by the 1940 Act, Shares shall be voted in the aggregate and not by individual Series or Class, and (c) when the Trustees have determined that the matter affects the interests of more than one Series or Class, then the Shareholders of all such Series or Classes shall be entitled to vote thereon. As determined by the Trustees without the vote or consent of shareholders and except as provided with respect to a particular Class in the By-laws or the resolutions establishing such Class, on any matter submitted to a vote of Shareholders either (i) each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote or (ii) each dollar of net asset value (number of Shares owned times net asset value per share of such Series or Class, as applicable) shall be entitled to one vote on any matter on which such Shares are entitled to vote and each fractional dollar amount shall be entitled to a proportionate fractional vote. Without limiting the power of the Trustees in any way to designate otherwise in accordance with the preceding sentence, the Trustees hereby establish that each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote. There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy or in any manner provided for in the By-laws. The By-laws may provide that proxies may be given by any electronic or telecommunications device or in any other manner, but if a proposal by anyone other than the officers or Trustees is submitted to a vote of the Shareholders of any Series or Class, or if there is a proxy contest or proxy solicitation or proposal in opposition to any proposal by the officers or Trustees, Shares may be voted only in person or by written proxy. Until Shares of a Series are issued, as to that Series the Trustees may exercise all rights of Shareholders and may take any action required or permitted to be taken by Shareholders by law, this Declaration or the By-laws. Meetings of Shareholders shall be called and notice thereof and record dates therefor shall be given and set as provided in the By-laws.
Section 2. QUORUM; REQUIRED VOTE. One-third of the Outstanding Shares of each Series or Class, or one-third of the Outstanding Shares of the Trust, entitled to vote in person or by proxy shall be a quorum for the transaction of business at a Shareholders' meeting with respect to such Series or Class, or with respect to the entire Trust, respectively. Any lesser number shall be sufficient for adjournments. Any adjourned session of a Shareholders' meeting may be held within a reasonable time without further notice. Except when a larger vote is required by law, this Declaration or the By-laws, a majority of the Shares voting at a Shareholders' meeting in person or by proxy shall decide any matters to be voted upon with respect to the entire Trust and a plurality of such Shares shall elect a Trustee; provided, that if this Declaration or applicable law permits or requires that Shares be voted on any matter by individual Series or Classes, then a majority of the Shares of that Series or Class (or, if required by law, a majority of the Shares outstanding and entitled to vote of that Series or Class) voting at a Shareholders' meeting in person or by proxy on the matter shall decide that matter insofar as that Series or Class is concerned; and provide further that if this Declaration (including any terms of a class of preferred Shares) or applicable law require that the Shareholders of one or more specific Class elect one or more Trustees, such Trustees shall be elected by a plurality of the Shares of such Class.
Section 3. RECORD DATES. For the purpose of determining the Shareholders of any Series (or Class) who are entitled to receive payment of any dividend or of any other distribution, the Trustees may from time to time fix a date, which shall be before the date for the payment of such dividend or such other payment, as the record date for determining the Shareholders of such Series (or Class) having the right to receive such dividend or distribution. Without fixing a record date, the Trustees may for distribution purposes close the register or transfer books for one or more Series (or Classes) any time prior to the payment of a distribution. Nothing in this Section shall be construed as precluding the Trustees from setting different record dates for different Series (or Classes).
Section 4. ADDITIONAL PROVISIONS. The By-laws may include further provisions for Shareholders' votes and meetings and related matters.
ARTICLE VIII
EXPENSES OF THE TRUST AND SERIES
Section 1. PAYMENT OF EXPENSES BY THE TRUST. Subject to Article V, Section 4, the Trust or a particular Series shall pay, or shall reimburse the Trustees from the assets belonging to all Series or the particular Series, for their expenses (or the expenses of a Class of such Series) and disbursements, including, but not limited to, interest charges, taxes, brokerage fees and commissions; expenses of issue, repurchase and redemption of Shares; certain insurance premiums; applicable fees, interest charges and expenses of third parties, including the Trust's investment advisers, managers, administrators, distributors, custodians, transfer agents and fund accountants; fees of pricing, interest, dividend, credit and other reporting services; costs of membership in trade associations; telecommunications expenses; funds transmission expenses; auditing, legal and compliance expenses; costs of forming the Trust and its Series and maintaining its existence; costs of preparing and printing the prospectuses of the Trust and each Series, statements of additional information and Shareholder reports and delivering them to Shareholders; expenses of meetings of Shareholders and proxy solicitations therefor; costs of maintaining books and accounts; costs of reproduction, stationery and supplies; fees and expenses of the Trustees; compensation of the Trust's officers and employees and costs of other personnel performing services for the Trust or any Series; costs of Trustee meetings; Commission registration fees and related expenses; state or foreign securities laws registration fees and related expenses; and for such non-recurring items as may arise, including litigation to which the Trust or a Series (or a Trustee or officer of the Trust acting as such) is a party, and for all losses and liabilities by them incurred in administering the Trust. The Trustees shall have a lien on the assets belonging to the appropriate Series, or in the case of an expense allocable to more than one Series, on the assets of each such Series, prior to any rights or interests of the Shareholders thereto, for the reimbursement to them of such expenses, disbursements, losses and liabilities.
Section 2. PAYMENT OF EXPENSES BY SHAREHOLDERS. The Trustees shall have the power, as frequently as they may determine, to cause each Shareholder, or each Shareholder of any particular Series, to pay directly, in advance or arrears, for charges of the Trust's custodian or transfer, shareholder servicing or similar agent, an amount fixed from time to time by the Trustees, by setting off such charges due from such Shareholder from declared but unpaid dividends owed such Shareholder and/or by reducing the number of Shares in the account of such Shareholder by that number of full and/or fractional Shares which represents the outstanding amount of such charges due from such Shareholder.
ARTICLE IX
MISCELLANEOUS
Section 1. TRUST NOT A PARTNERSHIP. This Declaration creates a trust and not a partnership. No Trustee shall have any power to bind personally either the Trust's officers or any Shareholder.
Section 2. TRUSTEE ACTION. The exercise by the Trustees of their powers and discretion hereunder in good faith and with reasonable care under the circumstances then prevailing shall be binding upon everyone interested. Subject to the provisions of Article IV, the Trustees shall not be liable for errors of judgment or mistakes of fact or law.
Section 3. RECORD DATES. The Trustees may fix in advance a date up to ninety
(90) days before the date of any Shareholders' meeting, or the date for the
payment of any dividends or other distributions, or the date for the allotment
of rights, or the date when any change or conversion or exchange of Shares shall
go into effect as a record date for the determination of the Shareholders
entitled to notice of, and to vote at, any such meeting, or entitled to receive
payment of such dividend or other distribution, or to receive any such allotment
of rights, or to exercise such rights in respect of any such change, conversion
or exchange of Shares.
Section 4. TERMINATION OF THE TRUST.
(a) This Trust shall have perpetual existence. Subject to the affirmative vote of not less than three-quarters of the Shares outstanding and entitled to vote of the Trust or of each Series to be affected, the Trustees may:
(i) sell and convey all or substantially all of the assets of all Series or any affected Series to another Series or to any other corporation, association, trust or other organization, or a series thereof, for adequate consideration, which may include the assumption of all outstanding obligations, taxes and other liabilities, accrued or contingent, of the Trust or any affected Series, and which may include shares of or interests in such Series, entity, or series thereof;
(ii) merge with or into, consolidate or exchange Shares with any other entity; or
(iii) at any time sell and convert into money all or substantially all of the assets of all Series or any affected Series.
PROVIDED, HOWEVER, if at least three-quarters of the Trustees then in office have approved the transactions in (i) or (ii) above, then such actions may be approved by the affirmative vote of a majority of the Shares outstanding and entitled to vote of the Trust or the affected Series.
Upon making reasonable provision for the payment of all known liabilities of all Series or any affected Series in either (i) or (ii), by such assumption or otherwise, the Trustees shall distribute the remaining proceeds or assets (as the case may be) ratably among the Shareholders of all Series or any affected Series; however, the payment to any particular Class of such Series may be reduced by any fees, expenses or charges allocated to that Class.
(b) Upon completion of the distribution of the remaining proceeds or assets pursuant to subsection (a), the Trust or affected Series shall terminate and the Trustees and the Trust shall be discharged of any and all further liabilities and duties hereunder with respect thereto and the right, title and interest of all parties therein shall be canceled and discharged. Upon termination of the Trust, following completion of winding up of its business, the Trustees shall cause a certificate of cancellation of the Trust's certificate of trust to be filed in accordance with the Delaware Act, which certificate of cancellation may be signed by any one Trustee.
Section 5. CONVERSION TO AN OPEN-END INVESTMENT COMPANY. Notwithstanding any other provisions of this Declaration or the By-Laws of the Trust, a favorable vote of a majority of the Trustees then in office followed by the favorable vote of the holders of not less than three-quarters of the Shares of each affected class or series outstanding, voting as separate classes or series, shall be required to approve, adopt or authorize an amendment to this Declaration that makes the Shares a "redeemable security" as that term is defined in the 1940 Act, unless such amendment has been approved by three-quarters of the Trustees, in which case approval by a vote of a majority of the Shares outstanding and entitled to vote shall be required. Upon the adoption of a proposal to convert the Trust from a "closed-end company" to an "open-end company" as those terms are defined by the 1940 Act and the necessary amendments to this Declaration to permit such a conversion of the Trust's outstanding Shares entitled to vote, the Trust shall, upon complying with any requirements of the 1940 Act and state law, become an "open-end" investment company. Such affirmative vote or consent shall be in addition to the vote or consent of the holders of the Shares otherwise required by law, or any agreement between the Trust and any national securities exchange.
Section 6. REORGANIZATION.
(a) Except as provided in clause (b) of this Section 6 or in Sections 4 or 7 of this Article IX, the Trust may merge or consolidate with any other corporation, association, trust or other organization or may sell, lease or exchange all or substantially all of the Trust Property or the property, including its good will, upon such terms and conditions and for such consideration when and as authorized by a majority of the Trustees and approved by a vote of a majority of the Shares outstanding and entitled to vote and any such merger, consolidation, sale, lease or exchange shall be determined for all purposes to have been accomplished under and pursuant to the statutes of the State of Delaware.
(b) Notwithstanding anything else herein, to change the Trust's form or place of
organization the Trustees may, without Shareholder approval unless such approval
is required by applicable law, (i) cause the Trust to merge or consolidate with
or into one or more entities, if the surviving or resulting entity is the Trust
or any other corporation, association, trust or other organization, or a series
thereof, (ii) cause the Shares to be exchanged under or pursuant to any state or
federal statute to the extent permitted by law, or (iii) cause the Trust to
incorporate under the laws of Delaware or any other U.S. jurisdiction. Any
agreement of merger or consolidation or certificate of merger may be signed by a
majority of Trustees and facsimile signatures conveyed by electronic or
telecommunication means shall be valid.
(c) Pursuant to and in accordance with the provisions of Section 3815(f) of the
Delaware Act, an agreement of merger or consolidation approved by the Trustees,
and if applicable, Shareholders in accordance with this Section 6 may effect any
amendment to the Declaration or effect the adoption of a new trust instrument of
the Trust if it is the surviving or resulting trust in the merger or
consolidation.
(d) The Trustees may create one or more business trusts to which all or any part of the assets, liabilities, profits or losses of the Trust or any Series or Class thereof may be transferred and may provide for the conversion of Shares in the Trust or any Series or Class thereof into beneficial interests in any such newly created trust or trusts or any series or classes thereof.
Section 7. CERTAIN TRANSACTIONS.
(a) Notwithstanding any other provision of this Declaration and subject to the exceptions provided in paragraph (d) of this Section, the types of transactions described in paragraph (c) of this Section shall require the affirmative vote or consent of a majority of the Trustees then in office followed by the affirmative vote or consent of holders of not less than three-quarters of the Shares of each affected class or series outstanding, votes voting as separate classes or series, when a Principal Shareholder (as defined in paragraph (b) of this Section) is a party to the transaction. Such affirmative vote or consent shall be in addition to the vote or consent of the holders of Shares otherwise required by law or by the terms of any class or series of preferred stock, whether now or hereafter authorized, or any agreement between the Trust and any national securities exchange.
(b) The term "Principal Shareholder" shall mean any corporation, Person or other
entity which is the beneficial owner, directly or indirectly, of five percent
(5%) or more of the outstanding Shares of any class or series and shall include
any affiliate or associates, as such terms are defined in clause (ii) below, of
a Principal Shareholder. For the purpose of this Section, in addition to the
Shares which a corporation, Person or other entity beneficially owns directly,
(a) any corporation, Person or other entity shall be deemed to be the beneficial
owner of any Shares (i) which it has the right to acquire pursuant to any
agreement or upon exercise of conversion rights or warrants, or otherwise (but
excluding share options granted by the Trust) or (ii) which are beneficially
owned, directly or indirectly (including Shares deemed owned through application
of clause (i) above, by any other corporation, Person or entity with which its
"affiliate" or "associate" (as defined below) has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
Shares, of which is its "affiliate" or "associate" as those terms are defined in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, and (b) the outstanding Shares shall include Shares deemed owned
through application of clauses (i) and (ii) above but shall not include any
other Shares which may be issuable pursuant to any agreement, or upon exercise
of conversion rights or warrants, or otherwise.
(c) This Section shall apply to the following transactions:
(i) The merger or consolidation of the Trust or any subsidiary of the Trust with or into any Principal Shareholder.
(ii) The issuance of any securities of the Trust to any Principal Shareholder for cash (other than pursuant to any automatic dividend reinvestment plan).
(iii) The sale, lease or exchange to the Trust or any subsidiary thereof, in exchange for securities of the Trust, of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period.)
(iv) The sale, lease or exchange to the Trust or any subsidiary thereof, in exchange for securities of the Trust, of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period).
(d) The provisions of this Section shall not be applicable to (i) any of the transactions described in paragraph (c) of this Section if three-quarters of the Trustees shall by resolution have approved a memorandum of understanding with such Principal Shareholder with respect to and substantially consistent with such transaction, in which case approval by the vote of a majority of the Shares outstanding and entitled to vote shall be the only vote of Shareholders required by this Section, or (ii) any such transaction with any entity of which a majority of the outstanding shares of all classes and series of a stock normally entitled to vote in elections of directors is owner of record or beneficially by the Trust and its subsidiaries.
(e) The Board of Trustees shall have the power and duty to determine for the
purposes of this Section on the basis of information known to the Trust whether
(i) a corporation, person or entity beneficially owns five percent (5%) or more
of the outstanding Shares of any class or series, (ii) a corporation, person or
entity is an "affiliate" or "associate" (as defined above) of another, (iii) the
assets being acquired or leased to or by the Trust or any subsidiary thereof
constitute a substantial part of the assets of the Trust and have an aggregate
fair market value of less than $1,000,000, and (iv) the memorandum of
understanding referred to in paragraph (d) hereof is substantially consistent
with the transaction covered thereby. Any such determination shall be conclusive
and binding for all purposes of this Section.
Section 8. DECLARATION OF TRUST. The original or a copy of this Declaration of Trust and of each amendment hereto or Declaration of Trust supplemental shall be kept at the office of the Trust where it may be inspected by any Shareholder. Anyone dealing with the Trust may rely on a certificate by a Trustee or an officer of the Trust as to the authenticity of the Declaration of Trust or any such amendments or supplements and as to any matters in connection with the Trust. The masculine gender herein shall include the feminine and neuter genders. Headings herein are for convenience only and shall not affect the construction of this Declaration of Trust. This Declaration of Trust may be executed in any number of counterparts, each of which shall be deemed an original.
Section 9. APPLICABLE LAW. This Declaration and the Trust created hereunder are governed by and construed and administered according to the Delaware Act and the applicable laws of the State of Delaware; provided, however, that there shall not be applicable to the Trust, the Trustees or this Declaration of Trust (a) the provisions of Section 3540 of Title 12 of the Delaware Code, or (b) any provisions of the laws (statutory or common) of the State of Delaware (other than the Delaware Act) pertaining to trusts which relate to or regulate (i) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee fees and charges, (ii) affirmative requirements to post bonds for trustees, officers, agents or employees of a trust, (iii) the necessity for obtaining court or other governmental approval concerning the acquisition, holding or disposition of real or personal property, (iv) fees or other sums payable to trustees, officers, agents or employees of a trust, (v) the allocation of receipts and expenditures to income or principal, (vi) restrictions or limitations on the permissible nature, amount or concentration of trust investments or requirements relating to the titling, storage or other manner of holding of trust assets, or (vii) the establishment of fiduciary or other standards of responsibilities or limitations on the acts or powers of trustees, which are inconsistent with the limitations or liabilities or authorities and powers of the Trustees set forth or referenced in this Declaration. The Trust shall be of the type commonly called a Delaware business trust, and, without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a trust under Delaware law. The Trust specifically reserves the right to exercise any of the powers or privileges afforded to trusts or actions that may be engaged in by trusts under the Delaware Act, and the absence of a specific reference herein to any such power, privilege or action shall not imply that the Trust may not exercise such power or privilege or take such actions.
Section 10. AMENDMENTS.
(a) The Trustees may, without any Shareholder vote, amend or otherwise supplement this Declaration by making an amendment, a Declaration of Trust supplemental hereto or an amended and restated trust instrument; provided, that Shareholders shall have the right to vote on any amendment (a) which would affect the voting rights of Shareholders granted in Article VII, Section l, (b) to this Section 10, (c) required to be approved by Shareholders by law or by the Trust's registration statement(s) filed with the Commission, and (d) submitted to them by the Trustees in their discretion. Any amendment submitted to Shareholders which the Trustees determine would affect the Shareholders of any Series shall be authorized by vote of the Shareholders of such Series and no vote shall be required of Shareholders of a Series not affected. Notwithstanding anything else herein, any amendment to Article IV which would have the effect of reducing the indemnification and other rights provided thereby to Trustees, officers, employees, and agents of the Trust or to Shareholders or former Shareholders, and any repeal or amendment of this sentence shall each require the affirmative vote of the holders of two-thirds of the Outstanding Shares of the Trust entitled to vote thereon and no such amendment shall effect the right to indemnification of any person who is no longer a Trustee, Officer or employee or agent at the time of such amendment.
(b) The Trustees may not amend this Declaration of Trust to eliminate the rights of Shareholders of any Class or Series as set forth in this Section 10(b) to vote on any amendment of this Declaration of Trust or the By-Laws or alter or amend the percentage of voting Shares required to approve any amendment or action which requires a specific Shareholder vote under this Declaration of Trust or the By-Laws unless an equivalent vote has authorized such an amendment of the Declaration of Trust or By-Laws. Any amendment (other than an amendment establishing the rights of another Class of Shares, even if the rights of such Class adversely effect the rights of any existing Class) which adversely affects the holders of one or more Classes or Series of Shares shall require a vote of the Shareholders holding a majority of the Shares of each Class or Series so adversely affected and entitled to vote thereon and no vote of Shareholders of any Class or Series not so adversely affected shall be required, except that any amendment of any provision of Article IX, Sections 4, 5, 6 or 7 shall require the vote of the Shareholders holding three-quarters of the Shares of each Class and Series entitled to vote thereon, regardless of the percentage of Trustees recommending such amendment.
Section 11. DERIVATIVE ACTIONS. In addition to the requirements set forth in
Section 3816 of the Delaware Act, a Shareholder may bring a derivative action on
behalf of the Trust only if the following conditions are met:
(a) Shareholders eligible to bring such derivative action under the Delaware Act who hold at least 10% of the Outstanding Shares of the Trust, or 10% of the Outstanding Shares of the Series or Class to which such action relates, shall join in the request for the Trustees to commence such action; and
(b) the Trustees must be afforded a reasonable amount of time to consider such shareholder request and to investigate the basis of such claim. The Trustees shall be entitled to retain counsel or other advisers in considering the merits of the request and shall require an undertaking by the Shareholders making such request to reimburse the Trust for the expense of any such advisers in the event that the Trustees determine not to bring such action.
Section 12. FISCAL YEAR. The fiscal year of the Trust shall end on a specified date as set forth in the By-laws. The Trustees may change the fiscal year of the Trust without Shareholder approval.
Section 13. SEVERABILITY. The provisions of this Declaration are severable. If the Trustees determine, with the advice of counsel, that any provision hereof conflicts with the 1940 Act, the regulated investment company provisions of the Internal Revenue Code or with other applicable laws and regulations, the conflicting provision shall be deemed never to have constituted a part of this Declaration; provided, however, that such determination shall not affect any of the remaining provisions of this Declaration or render invalid or improper any action taken or omitted prior to such determination. If any provision hereof shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision only in such jurisdiction and shall not affect any other provision of this Declaration.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the undersigned being all the Trustees of the Trust have executed this instrument as of the date first written above.
/s/ Daniel T. Geraci Daniel T. Geraci, As Trustee and not individually |
NUMBER SHARES
[box] [box]
COMMON SHARES CUSIP 72369h 10 6
SEE REVERSE FOR
CERTAIN DEFINITIONS
P I O N E E R H I G H I N C O M E T R U S T
A BUSINESS TRUST ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN RIDGEFIELD PARK, NY AND NEW YORK, NY
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FULLY PAID AND NONASSESSABLE COMMON SHARES OF BENEFICIAL OWNERSHIP OF
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Pioneer High Income Trust, transferable on the books of the Trust by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be subject to all of the provisions of the
S H A R E C E R T I F I C A T E
Declaration of Trust and By-Laws of the Trust, each as from time to time amended, to all of which the holder by acceptance hereof assents. This Certificate is not valid until countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Trust and the facsimile signatures of its duly authorized officers.
[seal] Dated:
COUNTERSIGNED AND REGISTERED:
MELLON INVESTOR SERVICES LLC
TRANSFER AGENT
AND REGISTRAR, /s/ Vincent Nave /s/ Daniel T. Geraci
BY Treasurer Executive Vice
AUTHORIZED SIGNATURE [SPECIMEN] President and
Trustee
[SPECIMEN]
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[BANKNOTE CORPORATION OF AMERICA]
P I O N E E R H I G H I N C O M E T R U S T
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM-as tenants in common UNIF GIFT MIN ACT-______ Custodian_______
(Cust) (Minor)
TEN ENT-as tenants by the under Uniform Gifts to Minors
entireties
Act . . . . . . . . . . . . .
JT TEN-as joint tenants with (State)
right of survivorship and
not as tenants in common
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Additional abbreviations may also be used not in the above list
For value received, _________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[box]___________________________________________________________________________
___________________________________________________________________Common Shares of Beneficial Ownership represented by the within certificate and do hereby irrevocably constitute and appoint
________________________________________________________________________Attorney to transfer the said Common Shares of Beneficial Ownership on the books of the within named Trust with full power of substitution in the premises.
Dated:______________________
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the Certificate, in
every particular, without alteration or
enlargement, or any change whatever.
Signature(s) Guaranteed:
By
THE SIGNATURE(S) SHOULD BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
PIONEER HIGH INCOME TRUST
AUTOMATIC DIVIDEND REINVESTMENT PLAN
TERMS AND CONDITION
Pursuant to the Automatic Dividend Reinvestment Plan (the "Plan") of Pioneer High Income Trust (the "Trust"), unless a holder (each, a "Shareholder") of the Trust's common shares of beneficial interest (the "Common Shares") otherwise elects, all dividends and capital gain distributions on such Shareholder's Common Shares will be automatically reinvested by Mellon Investor Services , as agent for Shareholders in administering the Plan (the "Plan Agent"), in additional Common Shares of the Trust. Shareholders who elect not to participate in the Plan will receive all dividends and other distributions payable in cash paid by check mailed directly to the Shareholder of record (or, if the Common Shares are held in street or other nominee name, then to such nominee) by Mellon Investor Services , as the Dividend Disbursing Agent. Shareholders may elect not to participate in the Plan and to receive all dividends and capital gain distributions in cash by contacting the Plan Agent. Enrollment, purchase or sales of shares and other transactions or services offered by the Plan can be directed to the Plan Agent through the following:
INTERNET
You can obtain information and perform certain transactions on your Pioneer High Income Trust account on-line via Investor ServiceDirect (R). To gain access, you will require a password which you may establish when you visit the website. If you have forgotten your password, call 1-877-978-7778 to have it reset. To access Investor ServiceDirect please visit the Mellon Investor Services website at WWW.MELLONINVESTOR.COM.
TELEPHONE
Telephone Shareholder Customer Service, including sale of shares toll-free within the United States and Canada:
1-800-288-9541
International Phone Inquiries:
1-201-329-8660
An automated voice response system is available 24 hours a day, 7 days a week. Customer service representatives are available from 9:00 a.m. to 7:00 p.m., Eastern Standard Time, Monday through Friday (except holidays).
IN WRITING
You may also write to the Plan Agent at the following address: Mellon Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938. Be sure to include your name, address, daytime phone number, social security or tax I.D. number and a reference to Pioneer High Income Trust on all correspondence. .
Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received by the Plan Agent prior to any dividend record date; otherwise such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution.
The Plan Agent will open an account for each Shareholder under the Plan in the same name in which such Shareholder's Common Shares are registered. Whenever the Trust declares an income dividend or a capital gain distribution (collectively referred to as "dividends") payable in cash, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in Common Shares. The Common Shares will be acquired by the Plan Agent for the participants' accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized Common Shares from the Trust ("newly issued Common Shares") or (ii) by purchase of outstanding Common Shares on the open market ("open-market purchases") on the New York Stock Exchange (the "NYSE"), the primary national securities exchange on which the common shares are traded (the "Exchange"), or elsewhere. If, on the payment date for any dividend or distribution the net asset value per Common Share is equal to or less than the market price per Common Share plus estimated brokerage trading fees (such condition being referred to herein as "market premium"), the Plan Agent will invest the dividend amount in newly issued Common Shares on behalf of the participants. The number of newly issued Common Shares to be credited to each participant's account will be determined by dividing the dollar amount of the dividend or distribution by the net asset value per Common Share on the date the Common Shares are issued, provided that the maximum discount from the then current market price per share on the date of issuance may not exceed 5%. If, on the payment date for any dividend or distribution, the net asset value per Common Share is greater than the market value or market premium (such condition being referred to herein as "market discount"), the Plan Agent will invest the dividend amount in Common Shares acquired on behalf of the participants in open-market purchases.
In the event of a market discount on the payment date for any dividend or distribution, the Plan Agent will have until the last business day before the next date on which the Common Shares trade on an "ex-dividend" basis or in no event more than 30 days after the record date for such dividend, whichever is sooner (the "last purchase date"), to invest the dividend amount in Common Shares acquired in open-market purchases. It is contemplated that the Trust will pay monthly income dividends. Therefore, the period during which open-market purchases can be made will exist only from the record date of each dividend through the date before the next "ex-dividend" date which typically will be approximately ten days. If, before the Plan Agent has completed its open- market purchases, the market price of a Common Share exceeds the net asset value per Common Share, the average per Common Share purchase price paid by the Plan Agent may exceed the net asset value of the Common Shares, resulting in the acquisition of fewer Common Shares than if the dividend had been paid in newly issued Common Shares on the dividend record date. Because of the foregoing difficulty with respect to open market purchases, if the Plan Agent is unable to invest the full dividend amount in open market purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Agent may cease making open-market purchases and may invest the uninvested portion of the dividend amount in newly issued Common Shares at the net asset value per Common Share at the close of business on the last purchase date.
The Plan Agent maintains all Shareholders' accounts in the Plan and furnishes written confirmation of all transactions in the accounts, including information needed by Shareholders for tax records. Common Shares in the account of each Plan participant will be held by the Plan Agent in non-certificated form in the name of the Plan participant.
In the case of Shareholders such as banks, brokers or nominees that hold Common Shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of Common Shares certified from time to time by the record Shareholder and held for the account of beneficial owners who participate in the Plan.
There will be no brokerage charges with respect to Common Shares issued directly by the Trust as a result of dividends or capital gains distributions payable either in Common Shares or in cash. However, each participant will pay a pro rata share of brokerage trading fees incurred with respect to the Plan Agent's open- market purchases in connection with the reinvestment of dividends.
VOTING
Each Shareholder proxy will include those Common Shares purchased or received pursuant to the Plan. The Plan Agent will forward all proxy solicitation materials to participants and vote proxies for Common Shares held pursuant to the Plan in accordance with the instructions of the participants.
TAXATION
The automatic reinvestment of dividends will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such dividends.
MANAGEMENT CONTRACT
THIS AGREEMENT dated as of this 1st day of April 2002 between Pioneer High Income Trust, a Delaware business trust (the "Trust"), and Pioneer Investment Management, Inc., a Delaware corporation (the "Manager").
WITNESSETH
WHEREAS, the Trust is registered as a closed-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and has filed with the Securities and Exchange Commission (the "Commission") a registration statement for the purpose of registering its shares for public offering under the Securities Act of 1933, as amended (the "1933 Act").
WHEREAS, the parties hereto deem it mutually advantageous that the Manager should be engaged, subject to the supervision of the Trust's Board of Trustees and officers, to manage the Trust.
NOW, THEREFORE, in consideration of the mutual covenants and benefits set forth herein, the Trust and the Manager do hereby agree as follows:
1. The Manager will regularly provide the Trust with investment research, advice and supervision and will furnish continuously an investment program for the Trust, consistent with the investment objectives and policies of the Trust. The Manager will determine from time to time what securities shall be purchased for the Trust, what securities shall be held or sold by the Trust and what portion of the Trust's assets shall be held uninvested as cash, subject always to the provisions of the Trust's Certificate of Trust, Agreement and Declaration of Trust, By-Laws and its registration statements under the 1940 Act and under the 1933 Act covering the Trust's shares, as filed with the Commission, and to the investment objectives, policies and restrictions of the Trust, as each of the same shall be from time to time in effect, and subject, further, to such policies and instructions as the Board of Trustees of the Trust may from time to time establish. To carry out such determinations, the Manager will exercise full discretion and act for the Trust in the same manner and with the same force and effect as the Trust itself might or could do with respect to purchases, sales or other transactions, as well as with respect to all other things necessary or incidental to the furtherance or conduct of such purchases, sales or other transactions.
2. The Manager will, to the extent reasonably required in the conduct of the business of the Trust and upon the Trust's request, furnish to the Trust research, statistical and advisory reports upon the industries, businesses, corporations or securities as to which such requests shall be made, whether or not the Trust shall at the time have any investment in such industries, businesses, corporations or securities. The Manager will use its best efforts in the preparation of such reports and will endeavor to consult the persons and sources believed by it to have information available with respect to such industries, businesses, corporations or securities.
3. The Manager will maintain all books and records with respect to the Trust's securities transactions required by subparagraphs (b)(5), (6), (9) and (10) and paragraph (f) of Rule 31a-1 under the 1940 Act (other than those records being maintained by the custodian or transfer agent appointed by the Trust) and preserve such records for the periods prescribed therefor by Rule 31a-2 under the 1940 Act. The Manager will also provide to the Board of Trustees such periodic and special reports as the Board may reasonably request.
4. Except as otherwise provided herein, the Manager, at its own expense, shall furnish to the Trust office space in the offices of the Manager, or in such other place as may be agreed upon from time to time, and all necessary office facilities, equipment and personnel for managing the Trust's affairs and investments, and shall arrange, if desired by the Trust, for members of the Manager's organization to serve as officers or agents of the Trust.
5. The Manager shall pay directly or reimburse the Trust for: (i) the compensation (if any) of the Trustees who are affiliated with, or "interested persons" (as defined in the 1940 Act) of, the Manager and all officers of the Trust as such; and (ii) all expenses not hereinafter specifically assumed by the Trust where such expenses are incurred by the Manager or by the Trust in connection with the management of the affairs of, and the investment and reinvestment of the assets of, the Trust.
6. The Trust shall assume and shall pay: (i) charges and expenses for fund
accounting, pricing and appraisal services and related overhead, including, to
the extent such services are performed by personnel of the Manager or its
affiliates, office space and facilities, and personnel compensation, training
and benefits; (ii) the charges and expenses of auditors; (iii) the charges and
expenses of any custodian, transfer agent, administrator, plan agent, dividend
disbursing agent and registrar appointed by the Trust; (iv) issue and transfer
taxes chargeable to the Trust in connection with securities transactions to
which the Trust is a party; (v) insurance premiums, interest charges, dues and
fees for membership in trade associations and all taxes and corporate fees
payable by the Trust to federal, state or other governmental agencies; (vi) fees
and expenses involved in registering and maintaining registrations of the Trust
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; (vii) 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; (viii) charges and
expenses of legal counsel to the Trust and the Trustees; (ix) compensation of
those Trustees of the Trust who are not affiliated with, or "interested persons"
of, the Manager or the Trust (other than as Trustees); (x) the cost of preparing
and printing share certificates; (xi) interest on borrowed money, if any; and
(xii) the fees and other expenses of listing the fund's shares on the New York
Stock Exchange or any other national stock exchange.
7. In addition to the expenses described in Section 6 above, the Trust shall pay all brokers' and underwriting commissions chargeable to the Trust in connection with securities transactions to which the Trust is a party.
8. The Trust shall pay to the Manager, as compensation for the Manager's services and expenses assumed hereunder, a fee at the annual rate equal to 0.60% of the Trust's average weekly managed assets. "Managed assets" means the total assets of the Trust (including any assets attributable to any leverage that may be outstanding) minus the sum of accrued liabilities (other than debt representing financial leverage).
9. The management fee payable hereunder shall be computed daily and paid monthly
in arrears. In the event of termination of this Agreement, the fee provided in
Section 8 shall be computed on the basis of the period ending on the last
business day on which this Agreement is in effect subject to a pro rata
adjustment based on the number of days elapsed in the current month as a
percentage of the total number of days in such month.
10. The Manager may from time to time agree not to impose all or a portion of its fee otherwise payable hereunder (in advance of the time such fee or a portion thereof would otherwise accrue) and/or undertake to pay or reimburse the Trust for all or a portion of its expenses not otherwise required to be borne or reimbursed by the Manager. Any such fee reduction or undertaking may be discontinued or modified by the Manager at any time.
11. It is understood that the Manager may employ one or more sub-investment advisers (each a "Subadviser") to provide investment advisory services to the Trust by entering into a written agreement with each such Subadviser; provided, that any such agreement first shall be approved by the vote of a majority of the Trustees, including a majority of the Trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust, the Manager or any such Subadviser, and otherwise approved in accordance with the requirements of the 1940 Act or an exemption therefrom. The authority given to the Manager in Sections 1 through 13 hereof may be delegated by it under any such agreement; provided, that any Subadviser shall be subject to the same restrictions and limitations on investments and brokerage discretion as the Manager. The Trust agrees that the Manager shall not be accountable to the Trust or the Trust's shareholders for any loss or other liability relating to specific investments directed by any Subadviser, even though the Manager retains the right to reverse any such investment because, in the event a Subadviser is retained, the Trust and the Manager will rely almost exclusively on the expertise of such Subadviser for the selection and monitoring of specific investments.
12. The Manager will not be liable for any error of judgment or mistake of law or for any loss sustained by reason of the adoption of any investment policy or the purchase, sale, or retention of any security on the recommendation of the Manager, whether or not such recommendation shall have been based upon its own investigation and research or upon investigation and research made by any other individual, firm or corporation, but nothing contained herein will be construed to protect the Manager against any liability to the Trust or its shareholders 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 this Agreement.
13. Nothing in this Agreement will in any way limit or restrict the Manager or any of its officers, directors, or employees from buying, selling or trading in any securities for its or their own accounts or other accounts. The Manager may act as an investment adviser to any other person, firm or corporation, and may perform management and any other services for any other person, association, corporation, firm or other entity pursuant to any contract or otherwise, and take any action or do any thing in connection therewith or related thereto; and no such performance of management or other services or taking of any such action or doing of any such thing shall be in any manner restricted or otherwise affected by any aspect of any relationship of the Manager to or with the Trust or deemed to violate or give rise to any duty or obligation of the Manager to the Trust except as otherwise imposed by law. The Trust recognizes that the Manager, in effecting transactions for its various accounts, may not always be able to take or liquidate investment positions in the same security at the same time and at the same price.
14. In connection with purchases or sales of securities for the account of the Trust, neither the Manager nor any of its directors, officers or employees will act as a principal or agent or receive any commission except as permitted by the 1940 Act. The Manager shall arrange for the placing of all orders for the purchase and sale of securities for the Trust's account with brokers or dealers selected by the Manager. In the selection of such brokers or dealers and the placing of such orders, the Manager is directed at all times to seek for the Trust the most favorable execution and net price available except as described herein. It is also understood that it is desirable for the Trust that the Manager have access to supplemental investment and market research and security and economic analyses provided by brokers who may execute brokerage transactions at a higher cost to the Trust than may result when allocating brokerage to other brokers on the basis of seeking the most favorable price and efficient execution. Therefore, the Manager is authorized to place orders for the purchase and sale of securities for the Trust with such brokers, subject to review by the Trust's Trustees from time to time with respect to the extent and continuation of this practice. It is understood that the services provided by such brokers may be useful to the Manager in connection with its or its affiliates' services to other clients. In addition, subject to the Manager's obligation to seek the most favorable execution and net price available, the Manager may consider the sale of the Trust's shares in selecting brokers and dealers.
15. On occasions when the Manager deems the purchase or sale of a security to be in the best interest of the Trust as well as other clients, the Manager may, to the extent permitted by applicable laws and regulations, aggregate the securities to be sold or purchased in order to obtain the best execution and lower brokerage commissions, if any. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Manager in the manner it considers to be the most equitable and consistent with its fiduciary obligations to the Trust and to such clients.
16. This Agreement shall become effective on the date hereof and shall remain in force until December 31, 2003 and from year to year thereafter, but only so long as its continuance is approved in accordance with the requirements of the 1940 Act or an exemption therefrom, subject to the right of the Trust and the Manager to terminate this contract as provided in Section 17 hereof.
17. Either party hereto may, without penalty, terminate this Agreement by vote of its Board of Trustees or Directors, as the case may be, or by vote of a "majority of the outstanding voting securities" (as defined in the 1940 Act) of the Trust or the Manager, as the case may be, and the giving of 60 days' written notice to the other party.
18. This Agreement shall automatically terminate in the event of its assignment. For purposes of this Agreement, the term "assignment" shall have the meaning given it by Section 2(a)(4) of the 1940 Act.
19. The Trust agrees that in the event that neither the Manager nor any of its affiliates acts as an investment adviser to the Trust, the name of the Trust will be changed to one that does not contain the name "Pioneer" or otherwise suggest an affiliation with the Manager.
20. The Manager is an independent contractor and not an employee of the Trust for any purpose. If any occasion should arise in which the Manager gives any advice to its clients concerning the shares of the Trust, the Manager will act solely as investment counsel for such clients and not in any way on behalf of the Trust.
21. This Agreement states the entire agreement of the parties hereto, and is intended to be the complete and exclusive statement of the terms hereof. It may not be added to or changed orally and may not be modified or rescinded except by a writing signed by the parties hereto and in accordance with the 1940 Act, when applicable.
22. This Agreement and all performance hereunder shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts.
23. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms or provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.
24. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers and their seal to be hereto affixed as of the day and year first above written.
ATTEST: PIONEER HIGH INCOME TRUST /S/ JOSEPH P. BARRI /S/ JOHN F. COGAN, JR. ------------------- ---------------------- Joseph P. Barri John F. Cogan, Jr. Secretary Chairman and President ATTEST: PIONEER INVESTMENT MANAGEMENT, INC. /S/ DOROTHY BOURASSA /S/ DANIEL T. GERACI --------------------- -------------------- Dorothy Bourassa Daniel T. Geraci Secretary President |
Pioneer High Income Trust
(a Delaware business trust)
[ ] Common Shares of Beneficial Interest
(No Par Value Per Share)
PURCHASE AGREEMENT
April 25, 2002
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10080
Ladies and Gentlemen:
Pioneer High Income Trust, a Delaware business trust (the "Trust"), and the Trust's investment adviser, Pioneer Investment Management, Inc., a Delaware corporation and a Member of the UniCredito Italiano Banking Group, Register of Banking Groups("Pioneer") ( the "Adviser"), confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other Underwriters named in Schedule A hereto (collectively, the "Underwriters", which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Merrill Lynch, UBS Warburg LLC and RBC Dain Rauscher Inc. are acting as representatives (in such capacity, the "Representatives"), with respect to the issue and sale by the Trust and the purchase by the Underwriters, acting severally and not jointly, of the respective number of common shares of beneficial interest, no par value per share, of the Trust ("Common Shares") set forth in said SCHEDULE A, and with respect to the grant by the Trust to the Underwriters, acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of [ ] additional Common Shares to cover over-allotments, if any. The aforesaid [ ] Common Shares (the "Initial Securities") to be purchased by the Underwriters and all or any part of the [ ] Common Shares subject to the option described in Section 2(b) hereof (the "Option Securities") are hereinafter called, collectively, the "Securities."
The Trust understands that the Underwriters propose to make a public offering of the Securities as soon as the Representatives deem advisable after this Agreement has been executed and delivered.
The Trust has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form N-2 (No. 333-75458 and No.
811-10603) covering the registration of the Securities under the Securities Act
of 1933, as amended (the "1933 Act"), including the related preliminary
prospectus or prospectuses, and a notification on Form N-8A of registration of
the Trust as an investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the rules and regulations of the Commission under
the 1933 Act and the 1940 Act (the "Rules and Regulations"). Promptly after
execution and delivery of this Agreement, the Trust will either (i) prepare and
file a prospectus in accordance with the provisions of Rule 430A ("Rule 430A")
of the Rules and Regulations and paragraph (c) or (h) of Rule 497 ("Rule 497")
of the Rules and Regulations or (ii) if the Trust has elected to rely upon Rule
434 ("Rule 434") of the Rules and Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 497. The
information included in any such prospectus or in any such Term Sheet, as the
case may be, that was omitted from such registration statement at the time it
became effective but that is deemed to be part of such registration statement at
the time it became effective, if applicable, (a) pursuant to paragraph (b) of
Rule 430A is referred to as "Rule 430A Information" or (b) pursuant to paragraph
(d) of Rule 434 is referred to as "Rule 434 Information." Each prospectus used
before such registration statement became effective, and any prospectus that
omitted, as applicable, the Rule 430A Information or the Rule 434 Information,
that was used after such effectiveness and prior to the execution and delivery
of this Agreement, including in each case any statement of additional
information incorporated therein by reference, is herein called a "preliminary
prospectus." Such registration statement, including the exhibits thereto and
schedules thereto at the time it became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the Rules and Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final prospectus in
the form first furnished to the Underwriters for use in connection with the
offering of the Securities, including the statement of additional information
incorporated therein by reference, is herein called the "Prospectus." If Rule
434 is relied on, the term "Prospectus" shall refer to the preliminary
prospectus dated March 28, 2002 together with the Term Sheet and all references
in this Agreement to the date of the Prospectus shall mean the date of the Term
Sheet. For purposes of this Agreement, all references to the Registration
Statement, any preliminary prospectus, the Prospectus or any Term Sheet or any
amendment or supplement to any of the foregoing shall be deemed to include the
copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" in the Registration Statement, any preliminary prospectus or the Prospectus (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is incorporated by reference in the Registration Statement, any preliminary prospectus or the Prospectus, as the case may be.
SECTION 1. Representations and Warranties.
(a) REPRESENTATIONS AND WARRANTIES BY THE TRUST AND THE ADVISER. The Trust and the Adviser jointly and severally represents and warrants to each Underwriter as of the date hereof, as of the Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if any) referred to in Section 2(b) hereof, and agree with each Underwriter, as follows:
(i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. Each of the Registration Statement and any Rule 462(b) Registration Statement has become effective under the 1933 Act and no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act, or order of suspension or revocation of registration pursuant to Section 8(e) of the 1940 Act, and no proceedings for any such purpose have been instituted or are pending or, to the knowledge of the Trust or the Adviser, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any Option Securities
are purchased, at the Date of Delivery), the Registration Statement,
the Rule 462(b) Registration Statement, the notification of Form N-8A
and any amendments and supplements thereto complied and will comply in
all material respects with the requirements of the 1933 Act, the 1940
Act and the Rules and Regulations and did not and will not contain an
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. Neither the Prospectus nor any amendments or
supplements thereto, at the time the Prospectus or any such amendment
or supplement was issued and at the Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery), included or will
include an untrue statement of a material fact or omitted or will omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. If Rule 434 is used, the Trust will comply with the
requirements of Rule 434 and the Prospectus shall not be "materially
different", as such term is used in Rule 434, from the prospectus
included in the Registration Statement at the time it became effective.
Each preliminary prospectus and the prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 497 under the 1933 Act, complied when so filed in all material respects with the Rules and Regulations and each preliminary prospectus and the Prospectus delivered to the Underwriters for use in connection with this offering was identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
If a Rule 462(b) Registration Statement is required in connection with the offering and sale of the Securities, the Trust has complied or will comply with the requirements of Rule 111 under the 1933 Act Regulations relating to the payment of filing fees thereof.
(ii) INDEPENDENT ACCOUNTANTS. The accountants who certified the statement of assets and liabilities included in the Registration Statement are independent public accountants as required by the 1933 Act and the Rules and Regulations.
(iii) FINANCIAL STATEMENTS. The statement of assets and liabilities included in the Registration Statement and the Prospectus, together with the related notes, presents fairly the financial position of the Trust at the date indicated; said statement has been prepared in conformity with generally accepted accounting principles ("GAAP").
(iv) EXPENSE SUMMARY. The information set forth in the Prospectus in the Fee Table has been prepared in accordance with the requirements of Form N-2 and to the extent estimated or projected, such estimates or projections are reasonably believed to be attainable and reasonably based.
(v) NO MATERIAL ADVERSE CHANGE. Since the respective dates as of which
information with respect to the Trust is given in the Registration
Statement and the Prospectus, except as otherwise stated therein and
except for changes in the net asset value of the Trust arising out of
normal investment operations, (A) there has been no material
adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Trust,
whether or not arising in the ordinary course of business (a
"Material Adverse Effect"), (B) there have been no transactions
entered into by the Trust, other than those in the ordinary course
of business, which are material with respect to the Trust, and
(C) there has been no dividend or distribution of any kind
declared, paid or made by the Trust on any class of its capital stock.
(vi) GOOD STANDING OF THE TRUST. The Trust has been organized and is validly existing as a business trust in good standing under the laws of the State of Delaware and has business trust power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and to enter into and perform its obligations under this Agreement; and the Trust is duly qualified as a foreign business trust to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect.
(vii) NO SUBSIDIARIES. The Trust has no subsidiaries.
(viii) INVESTMENT COMPANY STATUS. The Trust is registered with the Commission under the 1940 Act as a closed-end diversified management investment company, and no order of suspension or revocation of such registration has been issued or proceedings therefor initiated or threatened by the Commission.
(ix) OFFICERS AND TRUSTEES. No person is serving or acting as an officer, trustee or investment adviser of the Trust except in accordance with the provisions of the 1940 Act and the Rules and Regulations and the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and the rules and regulations of the Commission promulgated under the Advisers Act (the "Advisers Act Rules and Regulations"). Except as disclosed in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), no trustee of the Trust is an "interested person" (as defined in the 1940 Act) of the Trust or an "affiliated person" (as defined in the 1940 Act) of any Underwriter.
(x) CAPITALIZATION. The authorized, issued and outstanding shares of beneficial interest of the Trust is as set forth in the Prospectus as of the date thereof under the caption "Description of Shares." All issued and outstanding shares of beneficial interest of the Trust have been duly authorized and validly issued and are fully paid and non-assessable and have been offered and sold or exchanged by the Trust in compliance with all applicable laws (including, without limitation, federal and state securities laws); none of the outstanding shares of beneficial interest of the Trust was issued in violation of the preemptive or other similar rights of any securityholder of the Trust.
(xi) AUTHORIZATION AND DESCRIPTION OF SECURITIES. The Securities to be purchased by the Underwriters from the Trust have been duly authorized for issuance and sale to the Underwriters pursuant to this Agreement and, when issued and delivered by the Trust pursuant to this Agreement against payment of the consideration set forth herein, will be validly issued and fully paid and non-assessable. The Common Shares conform in all material respects to all statements relating thereto contained in the Prospectus and such description conforms in all material respects to the rights set forth in the instruments defining the same; except as described in the Registration Statement, no holder of the Securities will be subject to personal liability solely by reason of being such a holder; and the issuance of the Securities is not subject to the preemptive or other similar rights of any securityholder of the Trust.
(xii) ABSENCE OF DEFAULTS AND CONFLICTS. The Trust is not in violation of its declaration of trust or by-laws, or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which it is a party or by which it may be bound, or to which any of the property or assets of the Trust is subject (collectively, "Agreements and Instruments") except for such violations or defaults that would not result in a Material Adverse Effect; and the execution, delivery and performance of this Agreement, the Management Agreement, the Administration Agreement the Custodian Agreement and the Transfer Agent and Service Agreement referred to in the Registration Statement (as used herein, the "Management Agreement," the Administration Agreement the "Custodian Agreement" and the "Transfer Agency Agreement," respectively) and the consummation of the transactions contemplated herein and in the Registration Statement (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described in the Prospectus under the caption "Use of Proceeds") and compliance by the Trust with its obligations hereunder have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Trust pursuant to, the Agreements and Instruments (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the declaration of trust or by-laws of the Trust or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Trust or any of its assets, properties or operations. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Trust.
(xiii) ABSENCE OF PROCEEDINGS. There is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Trust or the Adviser, threatened, against or affecting the Trust, which is required to be disclosed in the Registration Statement (other than as disclosed therein), or which might reasonably be expected to result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the properties or assets of the Trust or the consummation of the transactions contemplated in this Agreement or the performance by the Trust of its obligations hereunder. The aggregate of all pending legal or governmental proceedings to which the Trust is a party or of which any of its property or assets is the subject which are not described in the Registration Statement, including ordinary routine litigation incidental to the business, could not reasonably be expected to result in a Material Adverse Effect.
(xiv) ACCURACY OF EXHIBITS. There are no contracts or documents which are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits thereto by the 1933 Act, the 1940 Act or by the Rules and Regulations which have not been so described and filed as required.
(xv) POSSESSION OF INTELLECTUAL PROPERTY. The Adviser owns or possesses, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, "Intellectual Property") necessary to carry on the business now operated by the Trust, and the Adviser has not received any notice or is not otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Adviser therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect.
(xvi) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by the Trust of its obligations hereunder, in connection with the offering, issuance or sale of the Securities hereunder or the consummation of the transactions contemplated by this Agreement, except such as have been already obtained or as may be required under the 1933 Act, the 1940 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), or state securities laws.
(xvii) POSSESSION OF LICENSES AND PERMITS. The Trust possesses such permits, licenses, approvals, consents and other authorizations (collectively, "Governmental Licenses") issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to operate its properties and to conduct the business as contemplated in the Prospectus; the Trust is in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and the Trust has not received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect.
(xviii) ADVERTISEMENTS. Any advertising, sales literature or other promotional material (including "prospectus wrappers", "broker kits," "road show slides" and "road show scripts") authorized in writing by or prepared by the Trust or the Adviser used in connection with the public offering of the Securities (collectively, "sales material") does not contain an 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 under which they were made, not misleading. Moreover, all sales material complied and will comply in all material respects with the applicable requirements of the 1933 Act, the 1940 Act, the Rules and Regulations and the rules and interpretations of the National Association of Securities Dealers, Inc. ("NASD").
(xix) SUBCHAPTER M. The Trust intends to direct the investment of the proceeds of the offering described in the Registration Statement in such a manner as to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended ("Subchapter M of the Code" and the "Code," respectively), and intends to qualify as a regulated investment company under Subchapter M of the Code.
(xx) MATERIAL AGREEMENTS. This Agreement, the Management Agreement, the Administration Agreement, the Custodian Agreement and the Transfer Agency Agreement have each been duly authorized by all requisite action on the part of the Trust, executed and delivered by the Trust, as of the dates noted therein and each complies with all applicable provisions of the 1940 Act. Assuming due authorization, execution and delivery by the other parties thereto with respect to the Administration Agreement the Custodian Agreement and the Transfer Agency Agreement, each of the Management Agreement the Administration Agreement, the Custodian Agreement and the Transfer Agency Agreement constitutes a valid and binding agreement of the Trust, enforceable in accordance with its terms, except as affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.
(xxi) REGISTRATION RIGHTS. There are no persons with registration rights or other similar rights to have any securities registered pursuant to the Registration Statement or otherwise registered by the Trust under the 1933 Act.
(xxii) NYSE LISTING. The Securities have been duly authorized for listing, upon notice of issuance, on the New York Stock Exchange ("NYSE") and the Trust's registration statement on Form 8-A under the 1934 Act has become effective.
(b) REPRESENTATIONS AND WARRANTIES BY THE ADVISER. The Adviser represents and warrants to each Underwriter as of the date hereof, as of the Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if any) referred to in Section 2(b) hereof as follows:
(i) GOOD STANDING OF THE ADVISER. The Adviser has been duly organized and is validly existing and in good standing as a corporation under the laws of the State of Delaware with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and it is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required.
(ii) INVESTMENT ADVISER STATUS. The Adviser is duly registered with the Commission as an investment adviser under the Advisers Act, and is not prohibited by the Advisers Act or the 1940 Act, or the rules and regulations under such acts, from acting under the Management Agreement for the Trust as contemplated by the Prospectus.
(iii) DESCRIPTION OF ADVISER. The description of the Adviser in the Registration Statement and the Prospectus (and any amendment or supplement to either of them) complied and comply in all material respects with the provisions of the 1933 Act, the 1940 Act, the Advisers Act, the Rules and Regulations and the Advisers Act Rules and Regulations and is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
(iv) CAPITALIZATION. The Adviser has the financial resources available to it necessary for the performance of its services and obligations as contemplated in the Prospectus, this Agreement and the Management Agreement.
(v) AUTHORIZATION OF AGREEMENTS; ABSENCE OF DEFAULTS AND CONFLICTS.
This Agreement and the Management Agreement have each been duly authorized, executed and delivered by the Adviser, and the Management Agreement constitutes a valid and binding obligation of the Adviser, enforceable in accordance with its terms, except as affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law); and neither the execution and delivery of this Agreement or the Management Agreement nor the performance by the Adviser of its obligations hereunder or thereunder will conflict with, or result in a breach of any of the terms and provisions of, or constitute, with or without the giving of notice or lapse of time or both, a default under, any agreement or instrument to which the Adviser is a party or by which it is bound and which are material to the conduct of the Adviser's services under the Management Agreement, the certificate of incorporation, the by-laws or other organizational documents of the Adviser, or to the Adviser's knowledge, by any law, order, decree, rule or regulation applicable to it of any jurisdiction, court, federal or state regulatory body, administrative agency or other governmental body, stock exchange or securities association having jurisdiction over the Adviser or its respective properties or operations; and no consent, approval, authorization or order of any court or governmental authority or agency is required for the consummation by the Adviser of the transactions contemplated by this Agreement or the Management Agreement, except as have been obtained or may be required under the 1933 Act, the 1940 Act, the 1934 Act or state securities laws.
(vi) NO MATERIAL ADVERSE CHANGE. Since the respective dates as of which information with respect to the Adviser is given in the Registration Statement and the Prospectus, except as otherwise stated therein, there has not occurred any event which should reasonably be expected to have a material adverse effect on the ability of the Adviser to perform its obligations under this Agreement and the Management Agreement.
(vii) ABSENCE OF PROCEEDINGS. There is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Adviser, threatened against or affecting the Adviser or any "affiliated person" of the Adviser (as such term is defined in the 1940 Act) or any partners, directors, officers or employees of the foregoing, whether or not arising in the ordinary course of business, which should reasonably be expected to result in any material adverse change in the condition, financial or otherwise, or earnings, business affairs or business prospects of the Adviser, materially and adversely affect the properties or assets of the Adviser or materially impair or adversely affect the ability of the Adviser to function as an investment adviser or perform its obligations under the Management Agreement, or which is required to be disclosed in the Registration Statement and the Prospectus.
(viii) ABSENCE OF VIOLATION OR DEFAULT. The Adviser is not in violation of its certificate of incorporation, by-laws or other organizational documents or in default under any agreement, indenture or instrument, which violation or default should reasonably be expected to have a material adverse effect on the ability of the Adviser to perform its obligations under this Agreement and the Management Agreement.
(c) OFFICER'S CERTIFICATES. Any certificate signed by any officer of the Trust or the Adviser delivered to the Representatives or to counsel for the Underwriters shall be deemed a representation and warranty by the Trust or the Adviser, as the case may be, to each Underwriter as to the matters covered thereby
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) INITIAL SECURITIES. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Trust agrees to sell to each Underwriter, severally and not jointly, and each Underwriter, severally and not jointly, agrees to purchase from the Trust, at the price per share set forth in SCHEDULE B, the number of Initial Securities set forth in SCHEDULE A opposite the name of such Underwriter, plus any additional number of Initial Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof.
(b) OPTION SECURITIES. In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Trust hereby grants an option to the Underwriters, severally and not jointly, to purchase up to an additional [ ] Common Shares in the aggregate at the price per share set forth in SCHEDULE B, less an amount per share equal to any dividends or distributions declared by the Trust and payable on the Initial Securities but not payable on the Option Securities. The option hereby granted will expire 45 days after the date hereof and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments which may be made in connection with the offering and distribution of the Initial Securities upon notice by the Representatives to the Trust setting forth the number of Option Securities as to which the several Underwriters are then exercising the option and the time and date of payment and delivery for such Option Securities. Any such time and date of delivery (a "Date of Delivery") shall be determined by the Representatives, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time, as hereinafter defined. If the option is exercised as to all or any portion of the Option Securities, each of the Underwriters, acting severally and not jointly, will purchase that proportion of the total number of Option Securities then being purchased which the number of Initial Securities set forth in SCHEDULE A opposite the name of such Underwriter bears to the total number of Initial Securities, subject in each case to such adjustments as Merrill Lynch in its discretion shall make to eliminate any sales or purchases of a fractional number of Option Securities.
(c) PAYMENT. Payment of the purchase price for, and delivery of certificates
for, the Initial Securities shall be made at the offices of Clifford Chance
Rogers & Wells LLP, 200 Park Avenue, New York, New York 10166, or at such other
place as shall be agreed upon by the Representatives and the Trust, at 10:00
A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M.
(Eastern time) on any given day) business day after the date hereof (unless
postponed in accordance with the provisions of Section 10), or such other time
not later than ten business days after such date as shall be agreed upon by the
Representatives and the Trust (such time and date of payment and delivery being
herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are purchased by the Underwriters, payment of the purchase price for, and delivery of certificates for, such Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Representatives and the Trust, on each Date of Delivery as specified in the notice from the Representatives to the Trust.
Payment shall be made to the Trust by wire transfer of immediately available funds to a bank account designated by the Trust, against delivery to the Representatives for the respective accounts of the Underwriters of certificates for the Securities to be purchased by them. It is understood that each Underwriter has authorized the Representatives, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial Securities and the Option Securities, if any, which it has agreed to purchase. Merrill Lynch, individually and not as representative of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Initial Securities or the Option Securities, if any, to be purchased by any Underwriter whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such Underwriter from its obligations hereunder.
(d) DENOMINATIONS; REGISTRATION. Certificates for the Initial Securities and the Option Securities, if any, shall be in such denominations and registered in such names as the Representatives may request in writing at least one full business day before the Closing Time or the relevant Date of Delivery, as the case may be. The certificates for the Initial Securities and the Option Securities, if any, will be made available for examination and packaging by the Representatives in the City of New York not later than 10:00 A.M. (Eastern time) on the business day prior to the Closing Time or the relevant Date of Delivery, as the case may be.
(e) ADDITIONAL COMPENSATION TO UNDERWRITERS. The Adviser has also agreed to pay from its own assets an additional commission to certain Underwriters in connection with the offering of the Securities. The Representatives will be entitled to an additional commission equal to 0.10% per year of the Trust's average quarterly total managed assets multiplied by the percentage of the entire offering of the common shares such Representative sells in the offering of the Securities. Each of the other Underwriters will also be entitled to this additional commission if such Underwriter sells Securities with an aggregate offering price of more than $50,000,000 in this offering. This additional commission will be payable quarterly during the continuance of the Management Agreement or other advisory agreement between the Trust and the Adviser.
SECTION 3. Covenants.
(a) The Trust and the Adviser, jointly and severally, covenant with each Underwriter as follows:
(i) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION REQUESTS. The Trust, subject to Section 3(a)(ii), will comply with the requirements of Rule 430A or Rule 434, as applicable, and will notify the Representatives immediately, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective, or any supplement to the Prospectus or any amended Prospectus shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes. The Trust will promptly effect the filings necessary pursuant to Rule 497 and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 497 was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Trust will make reasonable efforts to prevent the issuance of any stop order, or order of suspension or revocation of registration pursuant to Section 8(e) of the 1940 Act, and, if any such stop order or order of suspension or revocation of registration is issued, to obtain the lifting thereof at the earliest possible moment.
(ii) FILING OF AMENDMENTS. The Trust will give the Representatives notice of its intention to file or prepare any amendment to the Registration Statement (including any filing under Rule 462(b)), any Term Sheet or any amendment, supplement or revision to either the prospectus included in the Registration Statement at the time it became effective or to the Prospectus, will furnish the Representatives with copies of any such documents a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such document to which the Representatives or counsel for the Underwriters shall object.
(iii) DELIVERY OF REGISTRATION STATEMENTS. The Trust has furnished or will deliver to the Representatives and counsel for the Underwriters, without charge, signed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein) and signed copies of all consents and certificates of experts, and will also deliver to the Representatives, without charge, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(iv) DELIVERY OF PROSPECTUSES. The Trust has delivered to each Underwriter, without charge, as many copies of each preliminary prospectus as such Underwriter reasonably requested, and the Trust hereby consents to the use of such copies for purposes permitted by the 1933 Act. The Trust will furnish to each Underwriter, without charge, during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(v) CONTINUED COMPLIANCE WITH SECURITIES LAWS. If at any time when a prospectus is required by the 1933 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Trust, to amend the Registration Statement or amend or supplement the Prospectus in order that the Prospectus will not include any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the opinion of such counsel, at any such time to amend the Registration Statement or amend or supplement the Prospectus in order to comply with the requirements of the 1933 Act or the Rules and Regulations, the Trust will promptly prepare and file with the Commission, subject to Section 3(a)(ii), such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectus comply with such requirements, and the Trust will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request.
(vi) BLUE SKY QUALIFICATIONS. The Trust will use its best efforts, in cooperation with the Underwriters, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions of the United States as the Representatives may designate and to maintain such qualifications in effect for a period of not less than one year from the later of the effective date of the Registration Statement and any Rule 462(b) Registration Statement; provided, however, that the Trust shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. In each jurisdiction in which the Securities have been so qualified, the Trust will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for a period of not less than one year from the effective date of the Registration Statement and any Rule 462(b) Registration Statement.
(vii) RULE 158. The Trust will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its securityholders as soon as practicable an earnings statement for the purposes of, and to provide the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act.
(viii) USE OF PROCEEDS. The Trust will use the net proceeds received by it from the sale of the Securities in the manner specified in the Prospectus under "Use of Proceeds".
(ix) LISTING. The Trust will use its reasonable efforts to effect the listing of the Securities on the NYSE, subject to notice of issuance, concurrently with the effectiveness of the Registration Statement.
(x) RESTRICTION ON SALE OF SECURITIES. During a period of 180 days from the date of the Prospectus, the Trust will not, without the prior written consent of Merrill Lynch, (A) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares or file any registration statement under the 1933 Act with respect to any of the foregoing or (B) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Shares, whether any such swap or transaction described in clause (A) or (B) above is to be settled by delivery of Common Shares or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (1) the Securities to be sold hereunder or (2) Common Shares issued pursuant to any dividend reinvestment plan.
(xi) REPORTING REQUIREMENTS. The Trust, during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will file all documents required to be filed with the Commission pursuant to the 1940 Act and the 1934 Act within the time periods required by the 1940 Act and the Rules and Regulations and the 1934 Act and the rules and regulations of the Commission thereunder, respectively.
(xii) SUBCHAPTER M. The Trust will comply with the requirements of Subchapter M of the Code to qualify as a regulated investment company under the Code.
(xiii) NO MANIPULATION OF MARKET FOR SECURITIES. The Trust will not (a) take, directly or indirectly, any action designed to cause or to result in, or that might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Trust to facilitate the sale or resale of the Securities, and (b) until the Closing Date, or the Date of Delivery, if any, (i) sell, bid for or purchase the Securities or pay any person any compensation for soliciting purchases of the Securities or (ii) pay or agree to pay to any person any compensation for soliciting another to purchase any other securities of the Trust.
(xiv) RULE 462(B) REGISTRATION STATEMENT. If the Trust elects to rely upon Rule 462(b), the Trust shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and the Trust shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or give irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the 1933 Act.
(b) The Adviser covenants with each Underwriter that for a period of 180 days from the date of the Prospectus, the Adviser will not, without your prior written consent which consent shall not be unreasonably withheld, enter into an agreement pursuant to which the Adviser acts as investment adviser to any other U.S. closed-end registered investment company having an investment objective, policies and restrictions substantially similar to those of the Trust.
SECTION 4. Payment of Expenses.
(a) EXPENSES. The Trust will pay all expenses incident to the performance of its obligations under this Agreement, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and of each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of this Agreement, any Agreement among Underwriters and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Securities, (iii) the preparation, issuance and delivery of the certificates for the Securities to the Underwriters, including any stock or other transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Securities to the Underwriters, (iv) the fees and disbursements of the Trust's counsel, accountants and other advisors (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(a)(vi) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing and delivery to the Underwriters of copies of each preliminary prospectus, Prospectus and any amendments or supplements thereto, (vii) the preparation, printing and delivery to the Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii) the fees and expenses of any transfer agent or registrar for the Securities, (ix) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by the NASD of the terms of the sale of the Securities, (x) the fees and expenses incurred in connection with the listing of the Securities on the NYSE and (xi) the printing of any sales material. Also, the Trust has agreed to pay the Underwriters $0.005 per share as partial reimbursement of expenses incurred in connection with the offering. Pioneer has agreed to pay organizational expenses and offering costs (other than sales load) of the Trust that exceed $0.03 per Common Share.
(b) TERMINATION OF AGREEMENT. If this Agreement is terminated by the Representatives in accordance with the provisions of Section 5 or Section 9(a)(i) hereof, the Trust and the Adviser, jointly and severally, agree that they shall reimburse the Underwriters for all of their out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations.
The obligations of the several Underwriters hereunder are subject to the accuracy of the representations and warranties of the Trust and the Adviser contained in Section 1 hereof or in certificates of any officer of the Trust or the Adviser delivered pursuant to the provisions hereof, to the performance by the Trust and the Adviser of their respective covenants and other obligations hereunder, and to the following further conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement, including any Rule 462(b) Registration Statement, shall have become effective and at Closing Time no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act, no notice or order pursuant to Section 8(e) of the 1940 Act shall have been issued, and no proceedings with respect to either shall have been initiated or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel to the Underwriters. A prospectus containing the Rule 430A Information shall have been filed with the Commission in accordance with Rule 497 (or a post-effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rule 430A) or, if the Trust has elected to rely upon Rule 434, a Term Sheet shall have been filed with the Commission in accordance with Rule 497.
(b) OPINION OF COUNSEL FOR TRUST AND THE ADVISER. At Closing Time, the Representatives shall have received the favorable opinion, dated as of Closing Time, of Hale & Dorr LLP, counsel for the Trust and the Adviser, in form and substance satisfactory to counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters to the effect set forth in EXHIBIT A hereto and to such further effect as counsel to the Underwriters may reasonably request.
(c) OPINION OF COUNSEL FOR UNDERWRITERS. At Closing Time, the Representatives
shall have received the favorable opinion, dated as of Closing Time, of Clifford
Chance Rogers & Wells LLP, counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters with respect
to the matters set forth in clauses (A) (i), (ii), (vi), (vii) (solely as to
preemptive or other similar rights arising by operation of law or under the
charter or by-laws of the Trust), (viii) through (x), inclusive, (xii), (xiv)
(solely as to the information in the Prospectus under "Description of Shares")
and the last paragraph of EXHIBIT A hereto. In giving such opinion such counsel
may rely, as to all matters governed by the laws of jurisdictions other than the
law of the State of New York and the federal law of the United States, upon the
opinions of counsel satisfactory to the Representatives. Such counsel may also
state that, insofar as such opinion involves factual matters, they have relied,
to the extent they deem proper, upon certificates of officers of the Trust and
certificates of public officials.
(d) OFFICERS' CERTIFICATES. At Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Trust, whether or not arising in the ordinary course of business (except, in the case of any Officer's Certificate delivered on any Date of Delivery in connection with any Option Securities, for any change in the net asset value of the Trust resulting from its investment operations), and the Representatives shall have received a certificate of a duly authorized officer of the Trust and of the chief financial or chief accounting officer of the Trust and of the President or a Vice President of the Adviser, dated as of Closing Time, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties in Sections 1(a) and (b) hereof are true and correct with the same force and effect as though expressly made at and as of Closing Time, (iii) each of the Trust and the Adviser, respectively, has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement, or order of suspension or revocation of registration pursuant to Section 8(e) of the 1940 Act, has been issued and no proceedings for any such purpose have been instituted or are pending or are contemplated by the Commission.
(e) ACCOUNTANT'S COMFORT LETTER. At the time of the execution of this Agreement, the Representatives shall have received from Ernst & Young LLP a letter dated such date, in form and substance satisfactory to the Representatives, together with signed or reproduced copies of such letter for each of the other Underwriters containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus.
(f) BRING-DOWN COMFORT LETTER. At Closing Time, the Representatives shall have received from Ernst & Young LLP a letter, dated as of Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (e) of this Section, except that the specified date referred to shall be a date not more than three business days prior to Closing Time.
(g) APPROVAL OF LISTING. At Closing Time, the Securities shall have been approved for listing on the NYSE, subject only to official notice of issuance.
(h) NO OBJECTION. The NASD has confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements.
(i) CONDITIONS TO PURCHASE OF OPTION SECURITIES. In the event that the Underwriters exercise their option provided in Section 2(b) hereof to purchase all or any portion of the Option Securities, the representations and warranties of the Trust contained herein and the statements in any certificates furnished by the Trust hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery, the Representatives shall have received:
(i) OFFICERS' CERTIFICATES. Certificates, dated such Date of Delivery, of a duly authorized officer of the Trust and of the chief financial or chief accounting officer of the Trust and of the President or a Vice President of the Adviser confirming that the information contained in the certificate delivered by each of them at the Closing Time pursuant to Section 5(d) hereof remains true and correct as of such Date of Delivery.
(ii) OPINIONS OF COUNSEL FOR THE TRUST AND THE ADVISER. The favorable opinion of Hale & Dorr LLP, counsel for the Trust and the Adviser, in form and substance satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(b) hereof.
(iii) OPINION OF COUNSEL FOR THE UNDERWRITERS. The favorable opinion of Clifford Chance Rogers & Wells LLP, counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(c) hereof.
(iv) BRING-DOWN COMFORT LETTER. A letter from Ernst & Young LLP, in form and substance satisfactory to the Representatives and dated such Date of Delivery, substantially in the same form and substance as the letter furnished to the Representatives pursuant to Section 5(f) hereof, except that the "specified date" in the letter furnished pursuant to this paragraph shall be a date not more than five days prior to such Date of Delivery.
(j) ADDITIONAL DOCUMENTS. At Closing Time and at each Date of Delivery, counsel for the Underwriters shall have been furnished with such documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Trust and the Adviser in connection with the organization and registration of the Trust under the 1940 Act and the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Representatives and counsel for the Underwriters.
(k) TERMINATION OF AGREEMENT. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of Option Securities, on a Date of Delivery which is after the Closing Time, the obligations of the several Underwriters to purchase the relevant Option Securities, may be terminated by the Representatives by notice to the Trust at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6, 7, 8 and 13 shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) INDEMNIFICATION OF UNDERWRITERS. The Trust and the Adviser, jointly and severally, agree to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, as follows:
(i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus or the Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission; provided that (subject to
Section 6(e) below) any such settlement is effected with the written
consent of the Trust; and
(iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Trust or the
Adviser by any Underwriter through Merrill Lynch expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) and
provided further that the Trust will not be liable to any Underwriter with
respect to any indemnification contained in this paragraph (a) to the extent
that the Trust shall sustain the burden of proving that any such loss,
liability, claim, damage or expense resulted from the fact that such
Underwriter, in contravention of a requirement of this Agreement or applicable
law, sold Securities to a person to whom such Underwriter failed to send or
give, at or prior to the Closing Time or the Date of Delivery, as the case may
be, a copy of the Prospectus, as then amended or supplemented if: (i) the Trust
has previously furnished copies thereof (sufficiently in advance of the Closing
Time or the Date of Delivery, as the case may be, to allow for distribution by
the Closing Time or the Date of Delivery, as the case may be) to the Underwriter
and the loss, liability, claim, damage or expense of such Underwriter resulted
from an untrue statement or omission of a material fact contained in or omitted
from the preliminary prospectus which was corrected in the Prospectus as, if
applicable, amended or supplemented prior to the Closing Time or the Date of
Delivery, as the case may be, and such Prospectus was required by law to be
delivered at or prior to the written confirmation of sale to such person and
(ii) the failure to give or send such Prospectus by the Closing Time or the Date
of Delivery, as the case may be, to such person would have constituted the sole
basis for the claim asserted by such person against the party or parties
asserting such loss, liability, claim, damage or expense as to which
indemnification is sought pursuant to this paragraph (a).
(b) INDEMNIFICATION OF TRUST, ADVISER, TRUSTEES, DIRECTORS AND OFFICERS. Each Underwriter severally agrees to indemnify and hold harmless the Trust and the Adviser, their respective trustees and directors, each of the Trust's officers who signed the Registration Statement, and each person, if any, who controls the Trust or the Adviser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Trust or the Adviser by such Underwriter through Merrill Lynch expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the Prospectus (or any amendment or supplement thereto).
(c) INDEMNIFICATION FOR MARKETING MATERIALS. In addition to the foregoing
indemnification, the Trust and the Adviser also, jointly and severally, agree to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, against any and all loss, liability, claim, damage
and expense described in the indemnity contained in Section 6(a), as limited by
the proviso set forth therein, with respect to any sales material.
(d) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party shall give
notice as promptly as reasonably practicable to each indemnifying party of any
action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement of such
action, the indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, to assume the defense thereof with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to the indemnified party of its election to assume the defense thereof,
the indemnifying party shall not be liable to the indemnified party for any
legal expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation. In any such action where the
indemnifying party does not assume the defense thereof, counsel to the
indemnified parties shall be selected by Merrill Lynch in the case of parties
indemnified pursuant to Section 6(a) above, and, in the case of parties
indemnified pursuant to Section 6(b) above, counsel to the indemnified parties
shall be selected by the Trust and the Adviser, and in both cases, an
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(e) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
SECTION 7. Contribution.
If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Trust and the Adviser on the one hand and the Underwriters on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Trust and the Adviser on the one hand and of the Underwriters on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Trust and the Adviser on the one hand and the Underwriters on the other hand in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Trust and the total underwriting discount received by the Underwriters (whether from the Trust or otherwise), in each case as set forth on the cover of the Prospectus, or, if Rule 434 is used, the corresponding location on the Term Sheet, bear to the aggregate initial public offering price of the Securities as set forth on such cover.
The relative fault of the Trust and the Adviser on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Trust or the Adviser or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
The Trust, the Adviser and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Underwriter, and each trustee of the Trust and each director of the Adviser, respectively, each officer of the Trust who signed the Registration Statement, and each person, if any, who controls the Trust or the Adviser, within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Trust and the Adviser, respectively. The Underwriters' respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial Securities set forth opposite their respective names in SCHEDULE A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Trust or the Adviser submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or controlling person, or by or on behalf of the Trust or the Adviser, and shall survive delivery of the Securities to the Underwriters.
SECTION 9. Termination of Agreement.
(a) TERMINATION; GENERAL. The Representatives may terminate this Agreement, by notice to the Trust, at any time at or prior to Closing Time (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Trust or the Adviser, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Representatives, impracticable or inadvisable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) if trading in the Common Shares of the Trust has been suspended or materially limited by the Commission or the NYSE, or if trading generally on the American Stock Exchange or the NYSE or in the Nasdaq National Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such system or by order of the Commission, the NASD or any other governmental authority, or a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States, or (iv) if a banking moratorium has been declared by either Federal or New York authorities.
(b) LIABILITIES. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 6, 7, 8 and 13 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the Underwriters.
If one or more of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the "Defaulted Securities"), the Representatives shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representatives shall not have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the number of Securities to be purchased on such date, each of the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number of Securities to be purchased on such date, this Agreement or, with respect to any Date of Delivery which occurs after the Closing Time, the obligation of the Underwriters to purchase and of the Trust to sell the Option Securities to be purchased and sold on such Date of Delivery shall terminate without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a termination of the obligation of the Underwriters to purchase and the Trust to sell the relevant Option Securities, as the case may be, either the Representatives or the Trust shall have the right to postpone Closing Time or the relevant Date of Delivery, as the case may be, for a period not exceeding seven days in order to effect any required changes in the Registration Statement or Prospectus or in any other documents or arrangements. As used herein, the term "Underwriter" includes any person substituted for an Underwriter under this Section 10.
SECTION 11. Notices.
All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to the Representatives, Merrill Lynch & Co., North Tower, World Financial Center, New York, New York 10080, attention of Equity Capital Markets; and notices to the Trust or the Adviser shall be directed, as appropriate, to the office of Pioneer Investment Management, Inc. at 60 State Street, Boston, Massachusetts 02109, Attention: General Counsel.
SECTION 12. Parties.
This Agreement shall each inure to the benefit of and be binding upon the Underwriters, the Trust, the Adviser and their respective partners and successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters, the Trust, the Adviser and their respective successors and the controlling persons and officers, trustees and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Underwriters, the Trust, the Adviser and their respective partners and successors, and said controlling persons and officers, trustees and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE. UNLESS OTHERWISE EXPLICITLY PROVIDED, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings.
The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
If the foregoing is in accordance with your understanding of our agreement, please sign and return to us a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Underwriters, the Trust and the Adviser in accordance with its terms.
Very truly yours,
Pioneer High Income Trust
By:
Name:
Title:
Pioneer Investment Management, Inc.
By:
Name:
Title:
CONFIRMED AND ACCEPTED, as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
UBS WARBURG LLC
RBC DAIN RAUSCHER INC.
By: Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in SCHEDULE A hereto.
SCHEDULE A
Number of
NAME OF UNDERWRITER Initial Securities
-------------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated...................... [ ]
-------------------------------------------------------------------------------------------------------------------
Total..................................................................... [ ]
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SCHEDULE B
Pioneer High Income Trust
[ ] Common Shares of Beneficial Interest
(No Par Value )
1. The initial public offering price per share for the Securities, determined as provided in said Section 2, shall be $15.00.
2. The purchase price per share for the Securities to be paid by the several Underwriters shall be $14.325, being an amount equal to the initial public offering price set forth above less $0.675 per share; provided that the purchase price per share for any Option Securities purchased upon the exercise of the over-allotment option described in Section 2(b) shall be reduced by an amount per share equal to any dividends or distributions declared by the Trust and payable on the Initial Securities but not payable on the Option Securities.
CUSTODIAN AGREEMENT
THIS AGREEMENT, dated as of July 1, 2001 between each of the open-end management investment companies listed on Appendix A hereto each a Fund (as amended from time to time) severally and not jointly, (each a FUND), and BROWN BROTHERS HARRIMAN & CO., a limited partnership formed under the laws of the State of New York (BBH&CO. or the CUSTODIAN). Each Fund is organized under either the laws of the State of Delaware or the Commonwealth of Massachusetts and registered with the Commission under the 1940 Act, as amended.
W I T N E S S E T H:
WHEREAS, the Fund wishes to employ BBH&Co. to act as custodian for the Fund and to provide related services, all as provided herein, and BBH&Co. is willing to accept such employment, subject to the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the Fund and BBH&Co. hereby agree, as follows:
1. APPOINTMENT OF CUSTODIAN. The Fund hereby appoints and employs BBH&Co. as the Fund's custodian for the term and subject to the conditions of this Agreement, including the related 17f-5 Delegation Schedule, and BBH&Co. hereby accepts such appointment. All Investments of the Fund delivered to the Custodian or its agents or Subcustodians shall be dealt with as provided in this Agreement. The duties of the Custodian with respect to the Fund's Investments shall be only as set forth expressly in this Agreement which duties are generally comprised of safekeeping and various administrative duties that will be performed in accordance with Instructions and as reasonably required to effect Instructions.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE FUND. The Fund hereby represents, warrants and covenants each of the following:
2.1 This Agreement has been, and at the time of delivery of each Instruction such Instruction will have been, duly authorized, executed and delivered by the Fund. This Agreement does not conflict with or constitute a default under the Fund's prospectus, Certificate of Trust and By-Laws, or any other agreement, judgment, order or decree to which the Fund is a party or by which it is bound.
2.2 The Fund shall safeguard and shall be responsible for the safekeeping of any testkeys, identification codes, passwords, other security devices or statements of account with which the Custodian provides it. In furtherance and not in limitation of the foregoing, in the event the Fund utilizes any on-line service offered by the Custodian, the Fund shall be fully responsible for the security of its connecting terminal, access thereto and the proper and authorized use thereof and the initiation and application of continuing effective safeguards in respect thereof. Additionally, unless otherwise agreed in connection with the provision of such (service) (software) if the Fund uses any on-line or similar communications service made available by the Custodian, the Fund shall be responsible for ensuring the security of its access to the service and for its use of the service, and shall only attempt to access the service and the Custodian's computer systems as directed by the Custodian. Unless otherwise agreed in connection with the provision of such (service) (software). If the Custodian provides any computer software to the Fund relating to the services described in this Agreement, the Fund will only use the software for the purposes for which the Custodian provided the software to the Fund, and will abide by the license agreement accompanying the software and any other security policies which the Custodian provides to the Fund.
3. REPRESENTATION AND WARRANTY OF BBH&CO. BBH&Co. hereby represents and warrants that this Agreement has been duly authorized, executed and delivered by BBH&Co. and does not and will not violate any Applicable Law or conflict with or constitute a default under BBH&Co.'s limited partnership agreement or any agreement, instrument, judgment, order or decree to which BBH&Co. is a party or by which it is bound.
4. INSTRUCTIONS. Unless otherwise explicitly indicated herein, the Custodian shall perform its duties pursuant to Instructions. As used herein, the term INSTRUCTION shall mean a directive initiated by the Fund, acting directly or through its board of trustees, officers or other Authorized Persons, which directive shall conform to the requirements of this Section 4.
4.1 AUTHORIZED PERSONS. For purposes hereof, an AUTHORIZED PERSON shall be a person or entity authorized to give Instructions for or on behalf of the Fund by written notices to the Custodian or otherwise in accordance with procedures delivered to and acknowledged by the Custodian. Such Authorized Persons may be identified by the Board of Trustees of the Fund by name, title or positions, may include officers of the Fund authorized by the Board of Trustees to name additional Authorized Persons and may include officers or employees of the Fund's investment adviser or its affiliates. The Custodian may treat any Authorized Person as having full authority of the Fund to issue Instructions hereunder unless the notice of authorization contains explicit limitations as to said authority. The Custodian may not
treat any Instruction from an Authorized Person directing the delivery of securities or payment to such Authorized Person to be valid for purposes of this Agreement. The Custodian shall be entitled to rely upon the authority of Authorized Persons until it receives appropriate written notice from the Fund to the contrary.
4.2 FORM OF INSTRUCTION. Each Instruction shall be transmitted by such
secured or authenticated electro-mechanical means as the Custodian shall make
available to the Fund from time to time unless the Fund shall elect to transmit
such Instruction in accordance with Subsections 4.2.1 through 4.2.3 of this
Section.
4.2.1 FUND DESIGNATED SECURED-TRANSMISSION METHOD.
Instructions may be transmitted through a secured or tested
electro-mechanical means identified by the Fund or by an Authorized
Person entitled to give Instruction and acknowledged and accepted by
the Custodian; it being understood that such acknowledgment shall
authorize the Custodian to receive and process such means of delivery
but shall not represent a judgment by the Custodian as to the
reasonableness or security of the method determined by the Authorized
Person.
4.2.2 WRITTEN INSTRUCTIONS. Instructions may be transmitted in a writing that bears the manual signature or initials of Authorized Persons.
4.2.3 OTHER FORMS OF INSTRUCTION. Instructions may also be transmitted by another means determined by the Fund or Authorized Persons and acknowledged and accepted by the Custodian (subject to the same limits as to acknowledgements as is contained in Subsection 4.2.1, above) including Instructions given orally or by SWIFT, telex or telefax (whether tested or untested).
When an Instruction is given by means established under Subsections 4.2.1 through 4.2.3, it shall be the responsibility of the Custodian to use reasonable care to adhere to any security or other procedures established in writing between the Custodian and the Authorized Person (and such other procedures as are customarily adhered to by custodians to protect client assets) with respect to such means of Instruction, but such Authorized Person shall be solely responsible for determining that the particular means chosen is reasonable under the circumstances. Telephonic or oral instructions shall be considered proper Instructions if the Custodian reasonably believes them to have been given by an Authorized Person. Telephonic or oral instructions shall be confirmed by methods established in accordance with Section 4.2.1. With respect to telefax instructions, the parties agree and acknowledge that receipt of legible instructions cannot be assured, that the Custodian cannot verify that authorized signatures on telefax instructions are original or properly affixed, and that the Custodian shall not be liable for losses or expenses incurred through actions taken in reliance on inaccurately stated, illegible or unauthorized telefax instructions; provided that if the Custodian receives Instructions that it determines to be illegible, the Custodian shall promptly seek confirmation of such Instructions from the Authorized Person sending such Instruction. The provisions of Section 4A of the Uniform Commercial Code shall apply to Funds Transfers performed in accordance with Instructions. The Funds Transfer Services Schedule to this Agreement shall comprise a designation of form of a means of delivering Instructions selected by the Custodian for purposes of this Section 4.2.
4.3 COMPLETENESS AND CONTENTS OF INSTRUCTIONS. The Authorized Person shall be responsible for assuring the adequacy and accuracy of Instructions. Particularly, upon any acquisition or disposition or other dealing in the Fund's Investments and upon any delivery and transfer of any Investment or monies, the person initiating such Instruction shall give the Custodian an Instruction with appropriate detail, including, without limitation:
4.3.1 The transaction date and the date and location of
settlement;
4.3.2 The specification of the type of transaction;
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4.3.3 A description of the Investments or monies in question, including, as appropriate, quantity, price per unit, amount of money to be received or delivered and currency information; and
4.3.4 The name of the broker or similar entity concerned with execution of the transaction.
If the Custodian shall determine that an Instruction is either unclear or incomplete, the Custodian shall give prompt notice of such determination to the Fund, and the Fund shall thereupon amend or otherwise reform such Instruction.
4.4 TIMELINESS OF INSTRUCTIONS. In giving an Instruction, the Fund shall take into consideration delays which may occur due to the involvement of a Subcustodian or agent, differences in time zones, and other factors particular to a given market, exchange or issuer. When the Custodian has established specific timing requirements or deadlines with respect to particular classes of Instructions and adequate notice thereof has been provided to the Fund, or when an Instruction is received by the Custodian at such a time that it could not reasonably be expected to have acted on such Instruction due to time zone differences or other factors beyond its reasonable control, the Custodian shall not be responsible for any increased risk or failure to timely complete any settlement to the extent that such risk arises out of such delay.
5. SAFEKEEPING OF FUND ASSETS. The Custodian shall hold Investments delivered to it or Subcustodians for the Fund in accordance with the provisions of this Section. The Custodian shall not be responsible for the safekeeping of Investments not delivered or that are not caused to be issued to it or its Subcustodians or pre-existing faults or defects in Investments that are delivered to the Custodian, or its Subcustodians. The Custodian is hereby authorized to hold with itself or a Subcustodian, and to record in one or more accounts, all Investments delivered to and accepted by the Custodian, any Subcustodian or their respective agents pursuant to an Instruction or in consequence of any corporate
action. The Custodian shall hold Investments for the account of the Fund and shall segregate Investments from assets belonging to the Custodian and shall cause its Subcustodians to segregate Investments from assets belonging to the Subcustodian in an account held for the Fund or in an account maintained by the Subcustodian generally for non-proprietary assets of the Custodian.
5.1 USE OF SECURITIES DEPOSITORIES. The Custodian may deposit and maintain Investments in any Securities Depository, either directly or through one or more Subcustodians appointed by the Custodian. Investments held in a Securities Depository shall be held (a) subject to the agreement, rules, statement of terms and conditions or other document or conditions effective between the Securities Depository and the Custodian or the Subcustodian, as the case may be, and (b) in an account for the Fund or in bulk segregation in an account maintained for the non-proprietary assets of the entity holding such Investments in the Securities Depository. If the rules and regulations of the Securities Depository prevent the Custodian, the Subcustodian or (any agent of either) from holding its clients' assets in such a separate account, the Custodian, the Subcustodian or other agent shall as appropriate segregate such Investments for benefit of the Fund or for benefit of clients of the Custodian generally on its own books.
5.2 CERTIFICATED ASSETS. Investments which are certificated may be held in registered or bearer form: (a) in the Custodian's vault; (b) in the vault of a Subcustodian or agent of the Custodian or a Subcustodian; or (c) in an account maintained by the Custodian, Subcustodian or agent at a Securities Depository; all in accordance with customary market practice in the jurisdiction in which any Investments are held provided that Securities are held in the name of the Fund or in an account of the Custodian containing only the assets of the Fund or only assets held as fiduciary or custodian for customers..
5.3 REGISTERED ASSETS. Investments which are registered may be registered in the name of the Custodian, a Subcustodian, or in the name of the Fund or a nominee for any of the foregoing, and may be held in any manner set forth in paragraph 5.2 above with or without any identification of fiduciary capacity in such registration.
5.4 BOOK ENTRY ASSETS. Investments which are represented by book-entry may be so held in an account maintained by the Book-entry Agent on behalf of the Custodian, a Subcustodian or another agent of the Custodian, or a Securities Depository.
5.5 REPLACEMENT OF LOST INVESTMENTS. In the event of a loss of Investments for which the Custodian is responsible under the terms of this Agreement, the Custodian shall replace such Investment, or in the event that such replacement cannot be effected, the Custodian shall pay to the Fund the fair market value of such Investment based on
the last available price as of the close of business in the relevant market on the date that a claim was first made to the Custodian with respect to such loss, or, if less, such other amount as shall be agreed by the parties as the date for settlement.
6. ADMINISTRATIVE DUTIES OF THE CUSTODIAN. The Custodian shall perform the following administrative duties with respect to Investments of the Fund.
6.1 PURCHASE OF INVESTMENTS. Pursuant to Instruction, Investments purchased for the account of the Fund shall be paid for (a) against delivery thereof to the Custodian or a Subcustodian, as the case may be, either directly or through a Clearing Corporation or a Securities Depository (in accordance with the rules of such Securities Depository or such Clearing Corporation), or (b) otherwise in accordance with an Instruction or Applicable Law. However, (i) in the case of repurchase agreements entered into by the Fund, the Custodian may release funds to a securities system or to a Subcustodian prior to the receipt of advice from the securities system or Subcustodian that the securities underlying such repurchase agreement have been transferred by book entry into the Account of the Custodian maintained with such securities system or Subcustodian, so long as such payment instructions to the securities system or Subcustodian include a requirement that delivery is only against payment for securities, (ii) in the case of foreign exchange contracts, options, time deposits, call account deposits, currency deposits, and other deposits, contracts or options, the Custodian may make payment therefor without receiving an instrument evidencing said deposit, contract or option so long as such payment instructions detail specific securities to be acquired, and (iii) in the case of securities for which payment for the security and receipt of the instrument evidencing the security are under generally accepted trade practice or the terms of the instrument representing the security expected to take place in different locations or through separate parties, the Custodian may make payment for such securities prior to delivery thereof in accordance with such generally accepted trade practice or the terms of the instrument representing such security.
6.2 SALE OF INVESTMENTS. Pursuant to Instruction, Investments sold for
the account of the Fund shall be delivered (a) against payment therefor in cash,
by certified check, bank cashiers check, bank credit or by bank wire transfer,
(b) by credit to the account of the Custodian or the applicable Subcustodian, as
the case may be, with a Clearing Corporation or a Securities Depository (in
accordance with the rules of such Securities Depository or such Clearing
Corporation), or (c) otherwise in accordance with an Instruction, Applicable Law
or the terms of the instrument representing such Investment; provided, however,
that (i) in the case of delivery of physical certificates or
instruments representing securities, the Custodian may make delivery to the broker buying the securities, against receipt therefor, for examination in accordance with "street delivery" custom, provided that the payment therefor is to be made to the Custodian (which payment may be made by a broker's check) or that such securities are to be returned to the Custodian, and (ii) in the case of securities referred to in the last sentence of Section 6.1, the Custodian may make settlement, including with respect to the form of payment, in accordance with generally accepted trade practice relating to such securities or the terms of the instrument representing said security.
6.3 DELIVERY AND RECEIPT IN CONNECTION WITH BORROWINGS OF THE FUND OR OTHER COLLATERAL AND MARGIN REQUIREMENTS. Pursuant to Instruction, the Custodian may deliver or receive Investments or cash of the Fund in connection with borrowings or loans by the Fund and other collateral and margin requirements.
6.4 FUTURES AND OPTIONS. If, pursuant to an Instruction, the Custodian
shall become a party to an agreement with the Fund and a futures commission
merchant regarding margin accounts (TRI-PARTY AGREEMENT), the Custodian shall
(a) receive and retain, to the extent the same are provided to the Custodian,
confirmations or other documents evidencing the purchase or sale by the Fund of
exchange-traded futures contracts and commodity options, (b) when required by
such Tri-Party Agreement, deposit and maintain in an account opened pursuant to
such Agreement (MARGIN ACCOUNT), segregated either physically or by book-entry
in a Securities Depository for the benefit of any futures commission merchant,
such Investments as the Fund shall have designated as initial, maintenance or
variation "margin" deposits or other collateral intended to secure the Fund's
performance of its obligations under the terms of any exchange-traded futures
contracts and commodity options; and (c) thereafter pay, release or transfer
Investments into or out of the margin account in accordance with the provisions
of such Agreement. Alternatively, the Custodian may deliver Investments, in
accordance with an Instruction, to a futures commission merchant for purposes of
margin requirements in accordance with Rule 17f-6. The Custodian shall in no
event be responsible for the acts and omissions of any futures commission
merchant to whom Investments are delivered pursuant to this Section; for the
sufficiency of Investments held in any Margin Account; or, for the performance
of any terms of any exchange-traded futures contracts and commodity options.
6.5 CONTRACTUAL OBLIGATIONS AND SIMILAR INVESTMENTS. From time to time, the Fund's Investments may include Investments that are not ownership interests as may be represented by certificate (whether registered or bearer), by entry in a Securities Depository or by book entry agent, registrar or similar agent for recording ownership interests in the relevant Investment. If the Fund shall at any time acquire such Investments, including without limitation deposit obligations, loan participations, repurchase agreements and derivative arrangements, the Custodian shall (a) receive and
retain, to the extent the same are provided to the Custodian, confirmations or other documents evidencing the arrangement; and (b) perform on the Fund's account in accordance with the terms of the applicable arrangement, but only to the extent directed to do so by Instruction. The Custodian shall have no responsibility for agreements running to the Fund as to which it is not a party other than to retain, to the extent the same are provided to the Custodian, documents or copies of documents evidencing the arrangement and, in accordance with Instruction, to include such arrangements in reports made to the Fund.
6.6 EXCHANGE OF SECURITIES. Unless otherwise directed by Instruction, the Custodian shall: after prior notice of such action to the Fund: (a) exchange securities held for the account of the Fund for other securities in connection with any reorganization, recapitalization, conversion, split-up, change of par value of shares or similar event: and (b) deposit any such securities in accordance with the terms of any reorganization or protective plan.
6.7 SURRENDER OF SECURITIES. Unless otherwise directed by Instruction, the Custodian may surrender securities after prior notice of such action to the Fund: (a) in temporary form for definitive securities; (b) for transfer into the name of an entity allowable under Section 5.3; and (c) for a different number of certificates or instruments representing the same number of shares or the same principal amount of indebtedness.
6.8 RIGHTS, WARRANTS, ETC. Pursuant to Instruction, the Custodian shall
(a) deliver warrants, puts, calls, rights or similar securities to the issuer or
trustee thereof, or to any agent of such issuer or trustee, for purposes of
exercising such rights or selling such securities, and (b) deposit securities in
response to any invitation for the tender thereof.
6.9 MANDATORY CORPORATE ACTIONS. Unless otherwise directed by Instruction, the Custodian shall after prior notice of such action to the Fund: (a) comply with the terms of all mandatory or compulsory exchanges, calls, tenders, redemptions or similar rights of securities ownership affecting securities held on the Fund's account and promptly notify the Fund of such action; and (b) collect all stock dividends, rights and other items of like nature with respect to such securities.
6.10 INCOME COLLECTION. Unless otherwise directed by Instruction, the
Custodian shall collect any amount due and payable to the Fund with respect to
Investments and promptly credit the amount collected to a Principal or Agency
Account; provided, however, that the Custodian shall not be responsible for:
(a) the collection of amounts due and payable with respect to Investments that
are in default; or (b) the collection of cash or share entitlements with
respect to Investments that are not registered in the name of the Custodian or
its Subcustodians. The Custodian is hereby authorized to endorse and deliver
any instrument required to be so endorsed and delivered to effect collection
of any amount due and payable to the Fund with respect to Investments.
6.11 OWNERSHIP CERTIFICATES AND DISCLOSURE OF THE FUND'S INTEREST. The Custodian is hereby authorized to execute on behalf of the Fund ownership certificates, affidavits or other disclosure required under Applicable Law or established market practice in connection with the receipt of income, capital gains or other payments by the Fund with respect to Investments, or in connection with the sale, purchase or ownership of Investments.
With respect to securities issued in the United States of America, the Custodian [ ] may [ ] may not release the identity of the Fund to an issuer which requests such information pursuant to the Shareholder Communications Act of 1985 for the specific purpose of direct communications between such issuer and the Fund. IF NO BOX IS CHECKED, THE CUSTODIAN SHALL RELEASE SUCH INFORMATION UNTIL IT RECEIVES CONTRARY INSTRUCTIONS FROM THE FUND. With respect to securities issued outside of the United States of America, information shall be released in accordance with law or custom of the particular country in which such security is located.
6.12 PROXY MATERIALS. The Custodian shall deliver, or cause to be delivered, to the Fund proxy forms, notices of meeting, and any other notices or announcements affecting or relating to Investments received by the Custodian or any nominee. Unless authorized to do so by Instructions or proxy, neither the Custodian nor any Subcustodian shall vote any securities held for the Fund pursuant to this Agreement.
6.13. TAXES. The Custodian shall, where applicable, assist the Fund in the reclamation of taxes withheld on dividends and interest payments received by the Fund. In the performance of its duties with respect to tax withholding and reclamation, the Custodian shall be entitled to rely on the advice of counsel and upon information and advice regarding the Fund's tax status that is received from or on behalf of the Fund without duty of separate inquiry.
6.14. USE OF SEGREGATED ACCOUNTS. Upon receipt of Instructions, the
Custodian shall establish and maintain on its books a segregated account or
accounts on behalf of the Fund into which account or accounts may be transferred
cash and/or securities of the Fund (i) in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. (or any futures commission merchant registered under
the Commodity Exchange Act) relating to compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract market), or any
similar organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund, (ii) for purposes of segregating cash
or securities in connection with options purchased, sold or written by the Fund
or commodity futures contracts or options thereon purchased or sold by the Fund,
(iii) for the purposes of compliance by the Fund with the procedures required by
Investment Company Act and (iv) as mutually agreed from time to time between the
Fund and the Custodian.
6.15 OTHER DEALINGS. The Custodian shall otherwise act as directed by Instruction, including without
limitation effecting the free payments of moneys or the free delivery of securities, provided that such Instruction shall indicate the purpose of such payment or delivery and that the Custodian shall record the party to whom such payment or delivery is made.
The Custodian shall attend to all nondiscretionary details in connection with the sale, exchange, substitution, transfer or purchase or other administration of Investments, except as otherwise directed by an Instruction.
In fulfilling the duties set forth in Sections 6.6 through 6.10 above, the Custodian shall promptly provide to the Fund all information pertaining to a corporate action which the Custodian actually receives; provided that the Custodian shall not be responsible for the completeness or accuracy of any information it receives. Any advance credit of cash or shares expected to be received as a result of any corporate action shall be subject to actual collection and may, when the Custodian deems collection unlikely, be reversed by the Custodian.
The Custodian may at any time or times in its discretion appoint (and may at any time remove) agents (other than Subcustodians) to carry out some or all of the administrative provisions of this Agreement (AGENTS), provided, however, that the appointment of such agent shall not relieve the Custodian of its administrative obligations under this Agreement.
7. CASH ACCOUNTS, DEPOSITS AND MONEY MOVEMENTS. Subject to the terms and conditions set forth in this Section 7, the Fund hereby authorizes the Custodian to open and maintain, with itself or with Subcustodians, cash accounts in United States Dollars, in such other currencies as are the currencies of the countries in which the Fund maintains Investments or in such other currencies as the Fund shall from time to time request by Instruction.
7.1 TYPES OF CASH ACCOUNTS. Cash accounts opened on the books of the Custodian (PRINCIPAL ACCOUNTS) shall be opened in the name of the Fund. Such accounts collectively shall be a deposit obligation of the Custodian and shall be subject to the terms of this Section 7 and the general liability provisions contained in Section 9. Cash accounts opened on the books of a Subcustodian may be opened in the name of the Fund or the Custodian or in the name of the Custodian for its customers generally (AGENCY ACCOUNTS). Such deposits shall be obligations of the Subcustodian and shall be treated as an Investment of the Fund. Accordingly, the responsibility of the Custodian with respect to cash accounts shall be the same as and no greater than other Investments. Accordingly, the Custodian shall not be liable for
their repayment in the event such Subcustodian, by reason of its bankruptcy, insolvency or otherwise, fails to make repayment.
7.2 PAYMENTS AND CREDITS WITH RESPECT TO THE CASH ACCOUNTS. The Custodian shall make payments from or deposits to any of said accounts in the course of carrying out its administrative duties, including but not limited to income collection with respect to the Fund's Investments, and otherwise in accordance with Instructions. The Custodian and its Subcustodians shall be required to credit amounts to the cash accounts only when moneys are actually received in cleared funds in accordance with banking practice in the country and currency of deposit. Any credit made to any Principal or Agency Account before actual receipt of cleared funds shall be provisional and may be reversed by the Custodian in the event such payment is not actually collected. Unless otherwise specifically agreed in writing by the Custodian or any Subcustodian, all deposits shall be payable only at the branch of the Custodian or Subcustodian where the deposit is made or carried.
7.3 CURRENCY AND RELATED RISKS. The Fund bears risks of holding or
transacting in any currency. The Custodian shall not be liable for any loss or
damage arising from the applicability of any law or regulation now or hereafter
in effect, or from the occurrence of any event, which may delay or affect the
transferability, convertibility or availability of any currency in the country
(a) in which such Principal or Agency Accounts are maintained or (b) in which
such currency is issued, and in no event shall the Custodian be obligated to
make payment of a deposit denominated in a currency during the period during
which its transferability, convertibility or availability has been affected by
any such law, regulation or event. Without limiting the generality of the
foregoing, neither the Custodian nor any Subcustodian shall be required to repay
any deposit made at a foreign branch of either the Custodian or Subcustodian if
such branch cannot repay the deposit due to a cause for which the Custodian
would not be responsible in accordance with the terms of Section 9 of this
Agreement unless the Custodian or such Subcustodian expressly agrees in writing
to repay the deposit under such circumstances. All currency transactions in any
account opened pursuant to this Agreement are subject to exchange control
regulations of the United States and of the country where such currency is the
lawful currency or where the account is maintained. Any taxes, costs, charges or
fees imposed on the convertibility of a currency held by the Fund shall be for
the account of the Fund.
7.4 FOREIGN EXCHANGE TRANSACTIONS. The Custodian shall, subject to the terms of this Section, settle foreign exchange transactions (including contracts, futures, options and options on futures) on behalf and for the account of the Fund with such currency brokers or banking institutions, including Subcustodians, as the Fund may direct pursuant to Instructions. The Custodian may act as principal in any foreign exchange transaction with the Fund in accordance with
Section 7.4.2 of this Agreement. The obligations of the Custodian in respect of all foreign exchange transactions (whether or not the Custodian shall act as principal in such transaction) shall be contingent on the free, unencumbered transferability of the currency transacted on the actual settlement date of the transaction.
7.4.1 THIRD PARTY FOREIGN EXCHANGE TRANSACTIONS. The Custodian shall process foreign exchange transactions (including without limitation contracts, futures, options, and options on futures), where any third party acts as principal counterparty to the Fund on the same basis it performs duties as agent for the Fund with respect to any other of the Fund's Investments. Accordingly the Custodian shall only be responsible for delivering or receiving currency on behalf of the Fund in respect of such contracts pursuant to Instructions. The Custodian shall not be responsible for the failure of any counterparty (including any Subcustodian) in such agency transaction to perform its obligations thereunder. The Custodian (a) shall transmit cash and Instructions to and from the currency broker or banking institution with which a foreign exchange contract or option has been executed pursuant hereto, (b) may make free outgoing payments of cash in the form of U.S. Dollars or foreign currency without receiving confirmation of a foreign exchange contract or option or confirmation that the countervalue currency completing the foreign exchange contract has been delivered or received or that the option has been delivered or received, and (c) shall hold all confirmations, certificates and other documents and agreements received by the Custodian and evidencing or relating to such foreign exchange transactions in safekeeping. Subject to the Custodian's Standard of Care under this Agreement, the Fund accepts full responsibility for its use of third-party foreign exchange dealers and for execution of said foreign exchange contracts and options and understands that the Fund shall be responsible for any and all costs and interest charges which may be incurred by the Fund or the Custodian as a result of the failure or delay of third parties to deliver foreign exchange.
7.4.2 FOREIGN EXCHANGE WITH THE CUSTODIAN AS PRINCIPAL. The Custodian may undertake foreign exchange transactions with the Fund as principal as the Custodian and the Fund may agree from time to time. In such event, the foreign exchange transaction will be performed in accordance with the particular agreement of the parties, or in the event a principal foreign exchange transaction is initiated by Instruction in the absence of specific agreement, such transaction will be performed in accordance with the usual commercial terms of the Custodian.
7.5 DELAYS. If no event of Force Majeure shall have occurred and be continuing and in the event that a delay shall have been caused by the negligence or willful misconduct of the Custodian in carrying out an Instruction to credit or transfer cash, the Custodian, without limiting the Custodian's obligations under Section 9. shall be liable to the Fund: (a) with respect to Principal Accounts, for interest to be calculated at the rate customarily paid on such deposit and currency by the Custodian on overnight deposits at the time the delay occurs for the period from the day when the transfer should have been effected until the day it is in fact effected; and, (b) with respect to Agency Accounts, for interest to be calculated at the rate customarily paid on such deposit and currency by the Subcustodian on overnight deposits at the time the delay occurs for the period from the day when the transfer should have been effected until the day it is in fact effected. The Custodian shall not be liable for delays in carrying out such Instructions to transfer cash which are not due to the Custodian's own negligence or willful misconduct.
7.6 ADVANCES. If, for any reason in the conduct of its safekeeping duties pursuant to Section 5 hereof or its administration of the Fund's assets pursuant to Section 6 hereof, the Custodian or any Subcustodian advances monies to facilitate settlement or otherwise for the benefit of the Fund (whether or not any Principal or Agency Account shall be overdrawn either during, or at the end of, any Business Day), (collectively, an "Advance"), then in such event any Investment at any time held for the account of the Fund by the Custodian or a Subcustodian shall be security for such Advance and if the Fund shall fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of the Fund's Investments to the extent necessary to obtain reimbursement.
Neither the Custodian nor any Subcustodian shall be obligated to advance monies to the Fund, and in the event that such Advance occurs, any transaction giving rise to an Advance shall be for the account and risk of the Fund and shall not be deemed to be a transaction undertaken by the Custodian for its own account and risk. If such Advance shall have been made by a Subcustodian or any other person, the Custodian may assign any rights granted or arising to the Custodian hereunder to such Subcustodian or other person. The Custodian may assign any rights it has hereunder to a Subcustodian or third party.
7.7 INTEGRATED ACCOUNT. For purposes hereof, deposits maintained in all Principal Accounts (whether or not denominated in Dollars) of each series of the Fund shall collectively constitute a single and indivisible current account with respect to the series' obligations to the Custodian, or its assignee, and balances in such Principal Accounts shall be available for satisfaction of the series' obligations under this Section 7.
8. SUBCUSTODIANS AND SECURITIES DEPOSITORIES. Subject to the provisions hereinafter set forth in this Section 8, the Fund hereby authorizes the Custodian to utilize Securities Depositories to act on behalf of the Fund and to appoint from time to time and to utilize Subcustodians. With respect to securities and funds held by a Subcustodian, either directly or indirectly (including by a Securities Depository or Clearing Corporation), notwithstanding any provisions of this Agreement to the contrary, payment for securities purchased and delivery of securities sold may be made prior to receipt of securities or payment, respectively, and securities or payment may be received in a form, in accordance with
(a) governmental regulations, (b) rules of Securities Depositories and clearing agencies, (c) generally accepted trade practice in the applicable local market, (d) the terms and characteristics of the particular Investment, or (e) the terms of Instructions.
8.1 DOMESTIC SUBCUSTODIANS AND SECURITIES DEPOSITORIES. The Custodian may deposit and/or maintain, either directly or through one or more agents appointed by the Custodian, Investments of the Fund in any Securities Depository in the United States, including The Depository Trust Company, provided such Depository meets applicable requirements of the Federal Reserve Bank or of the Securities and Exchange Commission. The Custodian may, at any time and from time to time, appoint any bank as defined in Section 2(a)(5) of the 1940 Act meeting the requirements of a custodian under Section 17(f) of the 1940 Act and the rules and regulations thereunder, to act on behalf of the Fund as a Subcustodian for purposes of holding Investments of the Fund in the United States.
8.2 FOREIGN SUBCUSTODIANS AND SECURITIES DEPOSITORIES. Unless instructed otherwise by the Fund, the Custodian may deposit and/or maintain non-U.S. Investments of the Fund in any non-U.S. Securities Depository provided such Securities Depository meets the requirements of an "eligible securities depository" under Rule 17f-7 promulgated under the 1940 Act, or any successor rule or regulation ("Rule 17f-7") or which by order of the Securities and Exchange Commission is exempted therefrom. Prior to the time that securities are placed with such depository, but subject to the provisions of Section 8.2.4 below, the Custodian shall have prepared an assessment of the custody risks associated with maintaining assets with the Securities Depository and shall have established a system to monitor such risks on a continuing basis in accordance with Subsection 8.2.3 of this Section and Rule 17f-7. Additionally, the Custodian may, at any time and from time to time, appoint (a) any bank, trust company or other entity meeting the requirements of an "eligible foreign custodian" under Rule 17f-5 or which by order of the Securities and Exchange Commission is exempted therefrom, or (b) any bank as defined in Section 2(a)(5) of the 1940 Act meeting the requirements of a custodian under Section 17(f) of the 1940 Act and the rules and regulations thereunder, to act on behalf of the Fund as a Subcustodian for purposes of holding Investments of the Fund outside the United States. Such appointment of foreign Subcustodians shall be subject to approval of the Fund or the Foreign Custody Manager in accordance with Subsections 8.2.1 and 8.2.2 hereof, and use of non-U.S. Securities Depositories shall be subject to the terms of Subsections 8.2.3 and 8.2.4 hereof. An Instruction to open an account in a given country shall comprise authorization of the Custodian to hold assets in such country in accordance with the terms of this Agreement. The Custodian shall not be required to make independent inquiry as to the authorization of the Fund to invest in such country.
8.2.1 BOARD APPROVAL OF FOREIGN SUBCUSTODIANS. Unless and except to the extent that the Board has delegated to and the Custodian has accepted delegation of review of certain matters concerning the appointment of Subcustodians pursuant to Subsection 8.2.2, the Custodian shall, prior to the appointment of any Subcustodian for purposes of holding Investments of the Fund outside the United States, obtain written confirmation of the approval of the Board of Trustees of the Fund with respect to (a) the identity of a Subcustodian, and (b) the Subcustodian agreement which shall govern such appointment, such approval to be signed by an Authorized Person.
8.2.2 DELEGATION OF BOARD REVIEW OF SUBCUSTODIANS. From time to time, the Custodian may agree to perform certain reviews of Subcustodians and of Subcustodian Contracts as delegate of the Fund's Board. In such event, the Custodian's duties and obligations with respect to this delegated review will be performed in accordance with the terms of the attached 17f-5 Delegation Schedule to this Agreement.
8.2.3 MONITORING AND RISK ASSESSMENT OF SECURITIES DEPOSITORIES. Prior to the placement of any assets of the Fund with a non-U.S. Securities Depository, the Custodian: (a) shall provide to the Fund or its authorized representative an assessment of the custody risks associated with maintaining assets within such Securities Depository; and (b) shall have established a system to monitor the custody risks associated with maintaining assets with such Securities Depository on a continuing basis and to promptly notify the Fund or its Investment Adviser of any material changes in such risk. In performing its duties under this subsection, the Custodian shall use reasonable care and may rely on such reasonable sources of information. It is acknowledged that information procured through some sources may not be independently verifiable by the Custodian and that direct access to Securities Depositories is limited under most circumstances. Accordingly, the Custodian shall not be responsible for errors or omissions in its duties hereunder provided that it has performed its monitoring and assessment duties with reasonable care, prudence and diligence. The risk assessment shall be provided to the Fund or its Investment Adviser by such means as the Custodian shall reasonably establish. Advices of material change in such assessment may be provided by the Custodian in the manner established as customary between the Fund and the Custodian for transmission of material market information.
8.3 RESPONSIBILITY FOR SUBCUSTODIANS. The Custodian shall be liable to the Fund for any loss or damage to the Fund caused by or resulting from the acts or omissions of any Subcustodian to the extent that under the terms set forth in the subcustodian agreement between the Custodian and the Subcustodian, the Subcustodian has failed to perform in accordance with the standard of conduct imposed under such subcustodian agreement as determined in accordance with the law which is adjudicated to govern such agreement and in accordance with any determination of any court as to the duties of said Subcustodian pursuant to said agreement. The Custodian shall also be liable to the Fund for its own negligence in connection with the delivery of any securities or funds held by it to any Subcustodian.
8.4 NEW COUNTRIES. The Fund shall be responsible for informing the Custodian sufficiently in advance of a
proposed investment which is to be held in a country in which no Subcustodian is authorized to act in order that the Custodian shall, if it deems appropriate to do so, have sufficient time to establish a subcustodial arrangement in accordance herewith. In the event, however, the Custodian is unable to establish such arrangements prior to the time such investment is to be acquired, the Custodian is authorized to designate at its discretion a local safekeeping agent, and the use of such local safekeeping agent shall be at the sole risk of the Fund, and accordingly the Custodian shall be responsible to the Fund for the actions of such agent if and only to the extent the Custodian shall have recovered from such agent for any damages caused the Fund by such agent. The Custodian shall provide the Fund prompt notice if it receives Instruction with respect to a security to be settled in a country for which a Subcustodian has not been appointed or if the Custodian has appointed such an agent and at the request of the Fund, the Custodian agrees to remove any security held on behalf of the Fund by such an agent to a Subcustodian. Under such circumstances, the Custodian shall collect income and respond to corporate developments on a best efforts basis.
9. RESPONSIBILITY OF THE CUSTODIAN. In performing its duties and obligations hereunder, the Custodian shall use reasonable care, prudence and diligence in carrying out the provisions of this Agreement, provided that the Custodian shall not be required to take any action that would be in contravention of Applicable Law. Subject to the specific provisions of this Section, the Custodian shall be liable for any direct damage or expense incurred by the Fund in consequence of the Custodian's negligence, bad faith or willful misconduct. In no event shall the Custodian be liable hereunder for any special or punitive damages or for losses attributable to the diminution in the enterprise value of the Fund or damage to reputation arising out of, pursuant to or in connection with this Agreement even if the Custodian has been advised of the possibility of such damages. It is agreed that the Custodian shall have no duty to assess the risks inherent in the Fund's Investments or to provide investment advice with respect to such Investments and that the Fund as principal shall bear any risks attendant to particular Investments such as failure of counterparty or issuer.
9.1 LIMITATIONS OF PERFORMANCE. The Custodian shall not be responsible under this Agreement for any failure to perform its duties, and shall not be liable hereunder for any loss or damage in association with such failure to perform, for or in consequence of the following causes:
9.1.1 FORCE MAJEURE. FORCE MAJEURE shall mean any
circumstance or event which is beyond the reasonable control
of the Custodian, a Subcustodian or any agent of the Custodian
or a Subcustodian and which adversely affects the performance
by the Custodian of its obligations hereunder, by the
Subcustodian of its obligations under its Subcustody Agreement
or by any other agent of the Custodian or the Subcustodian,
including any event caused by, arising out of or involving (a)
an act of God, (b) accident, fire, water damage or explosion,
(c) any computer, system or other equipment failure or
malfunction caused by any computer virus or the malfunction or
failure of any communications medium, (d) any interruption of
the power supply or other utility service, (e) any strike or
other work stoppage, whether partial or total, (f) any delay
or disruption resulting from or reflecting the occurrence of
any Sovereign Risk, (g) any disruption of, or suspension of
trading in, the securities, commodities or foreign exchange
markets, whether or not resulting from or reflecting the
occurrence of any Sovereign Risk, (h) any encumbrance on the
transferability of a currency or a currency position on the
actual settlement date of a foreign exchange transaction,
whether or not resulting from or reflecting the occurrence of
any Sovereign Risk, or (i) any other cause similarly beyond
the reasonable control of the Custodian.
9.1.2 COUNTRY RISK. COUNTRY RISK shall mean, with respect to the acquisition, ownership, settlement or custody of Investments in a jurisdiction, all risks relating to, or arising in consequence of, systemic and markets factors affecting the acquisition, payment for or ownership of Investments including (a) the prevalence of crime and corruption, (b) the inaccuracy or unreliability of business and financial information, (c) the instability or volatility of banking and financial systems, or the absence or inadequacy of an infrastructure to support such systems, (d) custody and settlement infrastructure of the market in which such Investments are transacted and held, (e) the acts, omissions and operation of any Securities Depository, (f) the risk of the bankruptcy or insolvency of banking agents, counterparties to cash and securities transactions, registrars or transfer agents, and (g) the existence of market conditions which prevent the orderly execution or settlement of transactions or which affect the value of assets.
9.1.3 SOVEREIGN RISK. SOVEREIGN RISK shall mean, in respect of any jurisdiction, including the United States of America, where Investments are acquired or held hereunder or under a Subcustody Agreement, (a) any act of war, terrorism, riot, insurrection or civil commotion, (b) the imposition of any investment, repatriation or exchange control restrictions by any Governmental Authority, (c) the confiscation, expropriation or nationalization of any Investments by any Governmental Authority, whether de facto or de jure, (iv) any devaluation or revaluation of the currency, (d) the imposition of taxes, levies or other charges affecting Investments, (vi) any change in the Applicable Law, or (e) any other economic or political risk incurred or experienced beyond the Custodian's control.
9.2. LIMITATIONS ON LIABILITY. The Custodian shall not be liable for any loss, claim, damage or other liability arising from the following causes:
9.2.1 FAILURE OF THIRD PARTIES. The failure of any third party including: (a) any issuer of Investments or book-entry or other agent of an issuer; (b) any counterparty with respect to any Investment, including any issuer of exchange-traded or other futures, option, derivative or commodities contract; (c) failure of an Investment Adviser, Foreign Custody Manager (if not the Custodian) or other agent of the Fund; or (d) failure of other third parties similarly beyond the control or choice of the Custodian.
9.2.2 INFORMATION SOURCES. The Custodian may rely upon information received from issuers of Investments or agents of such issuers, information received from Subcustodians and from other commercially reasonable sources such as commercial data bases and the like, but shall not be responsible for specific inaccuracies in such information, provided that the Custodian has, complied with its standard of care under this Agreement and relied upon such information in good faith, or for the failure of any commercially reasonable information provider.
9.2.3 RELIANCE ON INSTRUCTION. Action by the Custodian or the Subcustodian in accordance with an Instruction, even when such action conflicts with, or is contrary to any provision of, the Fund's Declaration of Trust, Certificate of Trust By-laws, Applicable Law, or actions by the trustees, directors or shareholders of the Fund.
9.2.4 RESTRICTED SECURITIES. The limitations inherent in the rights, transferability or similar investment characteristics of a given Investment of the Fund.
10. INDEMNIFICATION. The Fund hereby indemnifies the Custodian and each Subcustodian, and their respective agents, nominees and the partners, employees, officers and directors, and agrees to hold each of them harmless from and against all claims and liabilities, including counsel fees and taxes, incurred or assessed against any of them in connection with the performance of this Agreement and any Instruction, except such as may arise from its or any of its agent's breach of the relevant standard of care set forth in this Agreement. If a Subcustodian or any other person indemnified under the preceding sentence gives written notice of a claim to the Custodian, the Custodian shall promptly give written notice to the Fund.
11. REPORTS AND RECORDS. The Custodian shall:
11.1 create and maintain records relating to the performance of its obligations under this Agreement and as required by the 1940 Act and rules and regulations thereunder and under applicable federal and state laws. All such records shall be the property of the Fund and, in the event of the termination of this Agreement, shall be delivered to the successor custodian;
11.2 make available to the Fund, its auditors, counsel, agents and employees, during regular business hours of the Custodian, upon reasonable request , all records maintained by the Custodian pursuant to paragraph 11.1 above, subject, however, to all reasonable security requirements of the Custodian then applicable to the records of its custody customers generally; and
11.3 make available to the Fund all Electronic Reports; it being understood that the Custodian shall not be liable hereunder for the inaccuracy or incompleteness thereof or for errors in any information included therein.
12. MISCELLANEOUS.
12.1 PROXIES, ETC. The Fund will promptly execute and deliver, upon request, such proxies, powers of attorney or other instruments as may be reasonable and necessary or desirable for the Custodian to provide, or to cause
any Subcustodian to provide, in its performance of custody services.
12.2 ENTIRE AGREEMENT. Except as specifically provided herein, this Agreement constitutes the entire agreement between each Fund listed from an Appendix A hereto, as amended from time to time, severally and not jointly, and the Custodian with respect to the subject matter hereof. Accordingly, this Agreement supersedes any custody agreement or other oral or written agreements heretofore in effect between the Fund and the Custodian with respect to the custody of the Fund's Investments. Appendix A may be amended by Pioneer Investment Management, Inc. from time to time to add any additional Funds with the consent of the Custodian
12.3 WAIVER AND AMENDMENT. No provision of this Agreement may be waived, amended or modified, and no addendum or appendix to this Agreement shall be or become effective, or be waived, amended or modified, except by an instrument in writing executed by the party against which enforcement of such waiver, amendment or modification is sought; provided, however, that an Instruction shall, whether or not such Instruction shall constitute a waiver, amendment or modification for purposes hereof, be deemed to have been accepted by the Custodian when it commences actions pursuant thereto or in accordance therewith.
12.4 GOVERNING LAW AND JURISDICTION. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND BE GOVERNED BY THE LAWS OF, THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW OF SUCH STATE. THE PARTIES HERETO IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS AND THE FEDERAL COURTS LOCATED IN THE COMMONWEALTH OF MASSACHUSETTS.
12.5 NOTICES. Notices and other writings contemplated by this
Agreement, other than Instructions, shall be delivered (a) by hand, (b) by first
class registered or certified mail, postage prepaid, return receipt requested,
(c) by a nationally recognized overnight courier, or (d) by facsimile
transmission, provided that any notice or other writing sent by facsimile
transmission shall also be mailed, postage prepaid, to the party to whom such
notice is addressed. All such notices shall be addressed, as follows:
If to the Fund:
c/o Pioneer Investment Management, Inc.
60 State Street
Boston, MA 02109
Attention: General Counsel
Telephone: (617) 422-4980
Facsimile: (617) 422-4223
and
[Fund Name]
60 State Street
Boston, MA 02109
Attention: Vin____________ Treasurer
Telephone: (781)
Facsimile: (781)
If to the Custodian:
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Attn: Manager, Securities Department
Telephone: (617) 772-1818
Facsimile: (617) 772-2263,
|
or such other address as the Fund or the Custodian may have designated in writing to the other.
12.6 HEADINGS. Paragraph headings included herein are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof.
12.7 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. This Agreement shall become effective when one or more counterparts have been signed and delivered by the Fund and the Custodian.
12.8 CONFIDENTIALITY. The parties hereto agree that each shall treat confidentially the terms and conditions of this Agreement and all information provided by each party to the other regarding its business and operations. All confidential information provided by a party hereto shall be used by any other party hereto solely for the purpose of rendering or obtaining services pursuant to this Agreement and, except as may be required in carrying out this Agreement, shall not be disclosed to any third party without the prior consent of such providing party. The foregoing shall not be applicable to any information that is publicly available when provided or thereafter becomes publicly available other than through a breach of this Agreement, or that is required to be disclosed by or to any bank examiner of the Custodian or any Subcustodian, any Regulatory Authority, any auditor of the parties hereto, or by judicial or administrative process or otherwise by Applicable Law.
12.9 COUNSEL. In fulfilling its duties hereunder, the Custodian shall be entitled to receive and act upon the
advice of (i) counsel regularly retained by the Custodian in respect of such matters, (ii) counsel for the Fund or (iii) such counsel as the Fund and the Custodian may agree upon, with respect to all matters, and the Custodian shall be without liability for any action reasonably taken or omitted pursuant to such advice.
12.10 CONFLICT. Nothing contained in this Agreement shall prevent the
Custodian and its associates from (i) dealing as a principal or an intermediary
in the sale, purchase or loan of the Fund's Investments to, or from the
Custodian or its associates; (ii) acting as a custodian, a subcustodian, a
trustee, an agent, securities dealer, an investment manager or in any other
capacity for any other client whose interests may be adverse to the interests of
the Fund; or (iii) buying, holding, lending, and dealing in any way in any
assets for the benefit of its own account, or for the account of any other
client whose interests may be adverse to the Fund notwithstanding that the same
or similar assets may be held or dealt in by, or for the account of the Fund by
the Custodian. The Fund hereby voluntarily consents to, and waives any potential
conflict of interest between the Custodian and/or its associates and the Fund,
and agrees that:
(a) the Custodian's and/or its associates' engagement in
any such transaction shall not disqualify the Custodian
from continuing to perform as the custodian of the Fund
under this Agreement;
(b) the Custodian and/or its associates shall not be under any
duty to disclose any information in connection with any such
transaction to the Fund;
(c) the Custodian and/or its associates shall not be liable to account to the Fund for any profits or benefits made or derived by or in connection with any such transaction; and
(d) the Fund shall use all reasonable efforts to disclose this provision, among other provisions in this Agreement, to its shareholders.
13. DEFINITIONS. The following defined terms will have the respective meanings set forth below.
13.1 ADVANCE shall mean any extension of credit by or through the Custodian or by or through any Subcustodian and shall include amounts paid to third parties for account of the Fund or in discharge of any expense, tax or other item payable by the Fund.
13.2 AGENCY ACCOUNT(S) shall mean any deposit account opened on the
books of a Subcustodian or other banking institution in accordance with Section
7.1.
13.3 AGENT(S) shall have the meaning set forth in the last sentence of
Section 6.
13.4 APPLICABLE LAW shall mean with respect to each jurisdiction, all
(a) laws, statutes, treaties, regulations, guidelines (or their equivalents);
(b) orders, interpretations licenses and permits; and (c) judgments, decrees,
injunctions
writs, orders and similar actions by a court of competent jurisdiction; compliance with which is required or customarily observed in such jurisdiction.
13.5 AUTHORIZED PERSON(S) shall mean any person or entity authorized to give Instructions on behalf of the Fund in accordance with Section 4.1.
13.6 BOOK-ENTRY AGENT(S) shall mean an entity acting as agent for the issuer of Investments for purposes of recording ownership or similar entitlement to Investments, including without limitation a transfer agent or registrar.
13.7 CLEARING CORPORATION shall mean any entity or system established for purposes of providing securities settlement and movement and associated functions for a given market.
13.8 DELEGATION AGREEMENT shall mean any separate agreement entered into between the Custodian and the Fund or its authorized representative with respect to certain matters concerning the appointment and administration of Subcustodians delegated to the Custodian pursuant to Rule 17f-5. 13.9 FOREIGN CUSTODY MANAGER shall mean the Fund's foreign custody manager appointed pursuant to Rule 17f-5 of the 1940 Act.
13.10 FOREIGN FINANCIAL REGULATORY AUTHORITY shall have the meaning given by Section 2(a)(50) of the 1940 Act.
13.11 FUNDS TRANSFER SERVICES SCHEDULE shall mean any separate schedule entered into between the Custodian and the Fund or its authorized representative with respect to certain matters concerning the processing of payment orders from Principal Accounts of the Fund.
13.12 GLOBAL CUSTODY NETWORK LISTING shall mean the Countries and Subcustodians approved for Investments in non-U.S. Markets.
13.13 INSTRUCTION(S) shall have the meaning assigned in Section 4.
13.14 INVESTMENT ADVISER shall mean any person or entity who is an Authorized Person to give Instructions with respect to the investment and reinvestment of the Fund's Investments.
13.15 INVESTMENT(S) shall mean any investment asset of the Fund, including without limitation securities, bonds, notes, and debentures as well as receivables, derivatives, contractual rights or entitlements and other intangible assets.
13.16 MARGIN ACCOUNT shall have the meaning set forth in Section 6.4 hereof.
13.17 PRINCIPAL ACCOUNT(S) shall mean deposit accounts of the Fund carried on the books of BBH&Co. as principal in accordance with Section 7.
13.18 SAFEKEEPING ACCOUNT shall mean an account established on the books of the Custodian or any Subcustodian for purposes of segregating the interests of the Fund (or clients of the Custodian or Subcustodian) from the assets of the Custodian or any Subcustodian.
13.19 SECURITIES DEPOSITORY shall mean a central or book entry system or agency established under Applicable Law for purposes of recording the ownership and/or entitlement to investment securities for a given market that, if a foreign Securities Depository, meets the definitional requirements of Rule 17f-7 under the 1940 Act.
13.20 SUBCUSTODIAN(S) shall mean each foreign bank appointed by the Custodian pursuant to Section 8, but shall not include Securities Depositories.
13.21 TRI-PARTY AGREEMENT shall have the meaning set forth in
Section 6.4 hereof.
13.22 1940 ACT shall mean the Investment Company Act of 1940, as amended..
14. COMPENSATION. The Fund agrees to pay to the Custodian (a) a fee in an
amount set forth in the fee letter between the Fund and the Custodian in
effect on the date hereof or as amended from time to time, and (b) all
out-of-pocket expenses incurred by the Custodian in connection with this
Agreement, including the fees and expenses of all Subcustodians, and payable
from time to time. Amounts payable by the Fund under and pursuant to this
Section 14 shall be payable by wire transfer to the Custodian at BBH&Co. in New
York, New York.
15. TERMINATION. This Agreement may be terminated by either party in accordance with the provisions of this Section. The provisions of this Agreement and any other rights or obligations incurred or accrued by any party hereto prior to termination of this Agreement shall survive any termination of this Agreement.
15.1 NOTICE AND EFFECT. This Agreement may be terminated by either party by written notice effective no sooner than seventy-five (75) consecutive calendar days following the date that notice to such effect shall be delivered to other party at its address set forth in paragraph 12.5 hereof.
15.2 SUCCESSOR CUSTODIAN. In the event of the appointment of a successor custodian, it is agreed that the Investments of the Fund held by the Custodian or any Subcustodian shall be delivered to the successor custodian in
accordance with reasonable Instructions. The Custodian agrees to cooperate with the Fund in the execution of documents and performance of other actions necessary or desirable in order to facilitate the succession of the new custodian. If no successor custodian shall be appointed, the Custodian shall in like manner transfer the Fund's Investments in accordance with Instructions.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed as of the date first above written.
BROWN BROTHERS HARRIMAN & CO. EACH FUND LISTED ON APPENDIX A HERETO,
SEVERALLY AND NOT JOINTLY
By: /s/ Stokley P. Towles By: /s/ David D. Tripple
Name: Stokley P. Towles Name: David D. Tripple
Title: Partner Title: Executive Vice President of
each Fund
Date: August 20, 2001 Date:
|
FUNDS TRANSFER SERVICES SCHEDULE TO CUSTODIAN AGREEMENT
1. EXECUTION OF PAYMENT ORDERS. Brown Brothers Harriman & Co. (the Custodian) is hereby instructed by Pioneer Investment Management, Inc. (the Company) to execute each payment order, whether denominated in United States dollars or other applicable currencies, received by the Custodian in the Company's name as sender and authorized and confirmed by an Authorized Person as defined in a Custodian Agreement dated as of July 1, 2001 by and between the Custodian and the Company, as amended or restated from time thereafter (the Agreement), provided that the Company has sufficient available funds on deposit in a Principal Account as defined in the Agreement and provided that the order (i) is received by the Custodian in the manner specified in this Funds Transfer Services Schedule or any amendment hereafter; (ii) complies with any written instructions and restrictions of the Company as set forth in this Funds Transfer Services Schedule or any amendment hereafter; (iii) is authorized by the Company or is verified by the Custodian in compliance with a security procedure set forth in Paragraph 2 below for verifying the authenticity of a funds transfer communication sent to the Custodian in the name of the Company or for the detection of errors set forth in any such communication; and (iv) contains sufficient data to enable the Custodian to process such transfer.
2. SECURITY PROCEDURE. The Company hereby elects to use the procedure selected below as its security procedure (the Security Procedure). The Security Procedure will be used by the Custodian to verify the authenticity of a payment order or a communication amending or canceling a payment order. The Custodian will act on instructions received provided the instruction is authenticated by the Security Procedure. The Company agrees and acknowledges in connection with (i) the size, type and frequency of payment orders normally issued or expected to be issued by the Company to the Custodian, (ii) all of the security procedures offered to the Company by the Custodian, and (iii) the usual security procedures used by customers and receiving banks similarly situated, that authentication through the Security Procedure shall be deemed commercially reasonable for the authentication of all payment orders submitted to the Custodian. The Company hereby elects (PLEASE CHOOSE ONE) the following Security Procedure as described below:
[ ] BIDS AND BIDS WORLDVIEW PAYMENT PRODUCTS. BIDS and BIDS Worldview
Payment Products, are on-line payment order authorization facilities with built-in authentication procedures. The Custodian and the Company shall each be responsible for maintaining the confidentiality of passwords or other codes to be used by them in connection with BIDS. The Custodian will act on instructions received through BIDS without duty of further confirmation unless the Company notifies the Custodian that its password is not secure.
[X] SWIFT. Primary Method the Custodian and the Company shall comply with SWIFT's authentication procedures. The Custodian will act on instructions received via SWIFT provided the instruction is authenticated by the SWIFT system.
[ ] TESTED TELEX. The Custodian will accept payment orders sent by tested telex, provided the test key matches the algorithmic key the Custodian and Company have agreed to use.
[ ] COMPUTER TRANSMISSION. The Custodian is able to accept transmissions sent from the Company's computer facilities to the Custodian's computer facilities provided such transmissions are encrypted and digitally certified or are otherwise authenticated in a reasonable manner based on available technology. Such procedures shall be established in an operating protocol between the Custodian and the Company.
[X] TELEFAX INSTRUCTIONS. Back-Up Method A payment order transmitted to the Custodian by telefax transmission shall transmitted by the Company to a telephone number specified from time to time by the Custodian for such purposes. If it detects no discrepancies, the Custodian will then either:
1. If the telefax requests a repetitive payment order, the Custodian may call the Company at its last known telephone number, request to speak to the Company or Authorized Person, and confirm the authorization and the details of the payment order (a "Callback"); or
2. If the telefax requests a non-repetitive order, the Custodian will perform a Callback.
All faxes must be accompanied by a fax cover sheet which indicates the sender's name, company name, telephone number, fax number, number of pages, and number of transactions or instructions attached.
[ ] TELEPHONIC. Alternative Back-Up Method A telephonic payment order shall be called into the Custodian at the telephone number designated from time to time by the Custodian for that purpose. The caller shall identify herself/himself as an Authorized Person. The Custodian shall obtain the payment order data from the caller. The Custodian shall then:
1. If a telephonic repetitive payment order, the Custodian may perform a Callback; or
2. If a telephonic non-repetitive payment order, the Custodian will perform a Callback.
In the event the Company chooses a procedure which is not a Security Procedure as described above, the Company agrees to be bound by any payment order (whether or not authorized) issued in its name and accepted by the Custodian in compliance with the procedure selected by the Company.
3. REJECTION OF PAYMENT ORDERS. The Custodian shall give the Company timely notice of the Custodian's rejection of a payment order. Such notice may be given in writing or orally by telephone, each of which is hereby deemed commercially reasonable. In the event the Custodian fails to execute a properly executable payment order and fails to give the Company notice of the Custodian's non-execution, the Custodian shall be liable only for the Company's actual damages and only to the extent that such damages are recoverable under UCC 4A (as defined in Paragraph 7 below). Notwithstanding anything in this Funds Transfer Services Schedule and the Agreement to the contrary, the Custodian shall in no event be liable for any consequential or special damages under this Funds Transfer Services Schedule, whether or not such damages relate to services covered by UCC 4A, even if the Custodian has been advised of the possibility of such damages. Whenever compensation in the form of interest is payable by the Custodian to the Company pursuant to this Funds Transfer Services Schedule, such compensation will be payable at the rate specified in UCC 4A.
4. CANCELLATION OF PAYMENT ORDERS. The Company may cancel a payment order but the Custodian shall have no liability for the Custodian's failure to act on a cancellation instruction unless the Custodian has received such cancellation instruction at a time and in a manner affording the Custodian reasonable opportunity to act prior to the Custodian's execution of the order. Any cancellation shall be sent and confirmed in the manner set forth in Paragraph 2 above.
5. RESPONSIBILITY FOR THE DETECTION OF ERRORS AND UNAUTHORIZED PAYMENT ORDERS.
Except as may be provided, the Custodian is not responsible for detecting any
Company error contained in any payment order sent by the Company to the
Custodian. In the event that the Company's payment order to the Custodian either
(i) identifies the beneficiary by both a name and an identifying or bank account
number and the name and number identify different persons or entities, or (ii)
identifies any bank by both a name and an identifying number and the number
identifies a person or entity different from the bank identified by name,
execution of the payment order, payment to the beneficiary, cancellation of the
payment order or actions taken by any bank in respect of such payment order may
be made solely on the basis of the number. The Custodian shall not be liable for
interest on the amount of any payment order that was not authorized or was
erroneously executed unless the Company so notifies the Custodian within thirty
(30) business days following the Company's receipt of notice that such payment
order had been processed. If a payment order in the name of the Company and
accepted by the Custodian was not authorized by the Company, the liability of
the parties will be governed by the applicable provisions of UCC 4A.
6. LAWS AND REGULATIONS. The rights and obligations of the Custodian and the Company with respect to any payment order executed pursuant to this Funds Transfer Services Schedule will be governed by any applicable laws, regulations, circulars and funds transfer system rules, the laws and regulations of the United States of America and of other relevant countries including exchange control regulations and limitations on dealings or other sanctions, and including without limitation those sanctions imposed under the law of the United States of America by the Office of Foreign Assets Control. Any taxes, fines, costs, charges or fees imposed by relevant authorities on such transactions shall be for the account of the Company.
7. MISCELLANEOUS. All accounts opened by the Company or its authorized agents at the Custodian subsequent to the date hereof shall be governed by this Funds Transfer Schedule. All terms used in this Funds Transfer Services Schedule shall have the meaning set forth in Article 4A of the Uniform Commercial Code as currently in effect in the State of New York (UCC 4A) unless otherwise set forth herein. The terms and conditions of this Funds Transfer Services Schedule are in addition to, and do not modify or otherwise affect, the terms and conditions of the Agreement and any other agreement or arrangement between the parties hereto.
8. INDEMNIFICATION. The Custodian does not recommend the sending of instructions by telefax or telephonic means as provided in Paragraph 2. BY ELECTING TO SEND INSTRUCTIONS BY TELEFAX OR TELEPHONIC MEANS, THE COMPANY AGREES TO INDEMNIFY THE CUSTODIAN AND ITS PARTNERS, OFFICERS AND EMPLOYEES FOR ALL LOSSES THEREFROM.
OPTIONAL: The Custodian will perform a Callback if instructions are sent by telefax or telephonic means as provided in Paragraph 2. THE COMPANY MAY, AT ITS OWN RISK AND BY HEREBY AGREEING TO INDEMNIFY THE CUSTODIAN AND ITS PARTNERS, OFFICERS AND EMPLOYEES FOR ALL LOSSES THEREFROM OTHER THAN LOSSES RESULTING FROM THE CUSTODIANS OWN NEGLIGENCE OR WILLFUL DEFAULT, ELECT TO WAIVE A CALLBACK BY THE CUSTODIAN BY INITIALLING HERE:____
Pioneer Investment Management, Inc. is a member of the UniCredit Italian Banking Group, register of banking groups.
Accepted and agreed:
BROWN BROTHERS HARRIMAN & CO. EACH OF THE FUNDS LISTED ON
APPENDIX A HERETO, AS AMENDED FROM
TIME TO TIME
By: /s/ Stokley P. Towles By: /s/ David D. Tripple
Name: Stokley P. Towles Name: David D. Tripple
Title: Partner Title: Executive Vice President
|
Date: August 20, 2001 Date:
17F-5 DELEGATION SCHEDULE
By its execution of this Delegation Schedule dated as of July 1, 2001. Each Fund listed on Appendix A hereto, as amended from time to time, severally and not jointly, each of which is a management investment company registered with the Securities and Exchange Commission (the "Commission") under the Investment Company Act of 1940, as amended, (the "1940 Act"), acting through its Board of Trustees or its duly appointed representative (each a "Fund"), hereby appoints BROWN BROTHERS HARRIMAN & CO., a New York limited partnership with an office in Boston, Massachusetts (the "Delegate") as its delegate to perform certain functions with respect to the custody of Fund's Assets outside the United States.
1. MAINTENANCE OF FUND'S ASSETS ABROAD. The Fund, acting through its Board of Trustees or its duly authorized representative, hereby instructs Delegate pursuant to the terms of the Custodian Agreement dated as of the date hereof executed by and between the Fund and the Delegate (the "Custodian Agreement") to place and maintain the Fund's Assets in countries outside the United States in accordance with Instructions received from the Fund's Investment Adviser. Such instruction shall represent a Proper Instruction under the terms of the Custodian Agreement. The Fund acknowledges that: (a) the Delegate shall perform services hereunder only with respect to the countries where it accepts delegation as Foreign Custody Manager as indicated on your Global Custody Network Listing; (b) depending on conditions in the particular country, advance notice may be required before the Delegate shall be able to perform its duties hereunder in or with respect to such country (such advance notice to be reasonable in light of the specific facts and circumstances attendant to performance of duties in such country); and (c) nothing in this Delegation Schedule shall require the Delegate to provide delegated or custodial services in any country, and there may from time to time be countries as to which the Delegate determines it will not provide delegation services.
2. DELEGATION. Pursuant to the provisions of Rule 17f-5 under the 1940 Act as amended, the Board hereby delegates to the Delegate, and the Delegate hereby accepts such delegation and agrees to
perform, only those duties set forth in this Delegation Schedule concerning the safekeeping of the Fund's Assets in each of the countries as to which it acts as the Board's delegate. The Fund appoints the Delegate as the Fund's "Foreign Custody Manager" as such term is used in Rule 17f-5 under the 1940 Act. The Delegate is hereby authorized to take such actions on behalf of or in the name of the Fund as are reasonably required to discharge its duties under this Delegation Schedule, including, without limitation, to cause the Fund's Assets to be placed with a particular Eligible Foreign Custodian in accordance herewith.
3. SELECTION OF ELIGIBLE FOREIGN CUSTODIAN AND CONTRACT ADMINISTRATION. The Delegate shall perform the following duties with respect to the selection of Eligible Foreign Custodians and administration of certain contracts governing the Fund's foreign custodial arrangements:
(a) SELECTION OF ELIGIBLE FOREIGN CUSTODIAN. The Delegate shall place and maintain the Fund's Assets with an Eligible Foreign Custodian; PROVIDED that the Delegate shall have determined that the Fund's Assets will be subject to reasonable care based on the standards applicable to custodians in the relevant market after considering all factors relevant to the safekeeping of such assets including without limitation:
(i) The Eligible Foreign Custodian's practices, procedures, and
internal controls, including, but not limited to, the physical
protections available for certificated securities (if applicable), the
controls and procedures for dealing with any Securities Depository, the
method of keeping custodial records, and the security and data
protection practices;
(ii) Whether the Eligible Foreign Custodian has the requisite
financial strength to provide reasonable care for the Fund's Assets;
(iii) The Eligible Foreign Custodian's general reputation and
standing; and
(iv) Whether the Fund will have jurisdiction over and be able to
enforce judgments against the Eligible Foreign Custodian, such as by
virtue of the existence of any offices of such Eligible Foreign
Custodian in the United States or such Eligible Foreign Custodian's
appointment of an agent for service of process in the United States or
consent to jurisdiction in the United States.
(b) CONTRACT ADMINISTRATION. The Delegate shall cause that the foreign custody arrangements with an Eligible Foreign Custodian shall be governed by a written contract that the Delegate
has determined will provide reasonable care for Fund assets based on the standards specified in paragraph (c)(1) of Rule 17f-5 under the 1940 Act . Each such contract shall, except as set forth in the last paragraph of this subsection (b), include provisions that provide:
(i) For indemnification or insurance arrangements (or any
combination of the foregoing) that will adequately protect the Fund
against the risk of loss of assets held in accordance with such
contract;
(ii) That the Fund's Assets will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of the
Eligible Foreign Custodian or its creditors except a claim of payment
for their safe custody or administration or, in the case of cash
deposits, liens or rights in favor of creditors of such Custodian
arising under bankruptcy, insolvency or similar laws;
(iii) That beneficial ownership of the Fund's Assets will be
freely transferable without the payment of money or value other than
for safe custody or administration;
(iv) That adequate records will be maintained identifying the
Fund's Assets as belonging to the Fund or as being held by a third
party for the benefit of the Fund;
(v) That the Fund's independent public accountants will be given
access to those records described in (iv) above or confirmation of the
contents of such records; and
(vi) That the Delegate will receive sufficient and timely
periodic reports with respect to the safekeeping of the Fund's Assets,
including, but not limited to, notification of any transfer to or from
the Fund's account or a third party account containing the Fund's
Assets.
Such contract may contain, in lieu of any or all of the provisions specified in this Section 3 (b), such other provisions that the Delegate determines will provide, in their entirety, the same or a greater level of care and protection for the Fund's Assets as the specified provisions, in their entirety.
(c) LIMITATION TO DELEGATED SELECTION. Notwithstanding anything in this Delegation Schedule to the contrary, the duties under this Section 3 shall apply only to Eligible Foreign Custodians selected by the Delegate and shall not apply to Securities Depositories or to any Eligible Foreign Custodian that the Delegate is directed to use pursuant to Section 7.
4. MONITORING. The Delegate shall establish a system to monitor at reasonable
intervals (but at least annually) the appropriateness of maintaining the Fund's Assets with each Eligible Foreign Custodian that has been selected by the Delegate pursuant to Section 3 of this Delegation Schedule. The Delegate shall monitor the continuing appropriateness of placement of the Fund's Assets in accordance with the criteria established under Section 3(a) of this Delegation Schedule. The Delegate shall monitor the continuing appropriateness of the contract governing the Fund's arrangements in accordance with the criteria established under Section 3(b) of this Delegation Schedule.
5. REPORTING. At least annually and more frequently as mutually agreed between the parties, the Delegate shall provide to the Board written reports specifying placement of the Fund's Assets with each Eligible Foreign Custodian selected by the Delegate pursuant to Section 3 of this Delegation Schedule and shall promptly report as to any material changes to such foreign custody arrangements. Delegate will prepare such a report with respect to any Eligible Foreign Custodian that the Delegate has been instructed to use pursuant to Section 7 only to the extent specifically agreed with respect to the particular situation.
6. WITHDRAWAL OF FUND'S ASSETS. If the Delegate determines that an arrangement
with a specific Eligible Foreign Custodian selected by the Delegate under
Section 3 of this Delegation Schedule no longer meets the requirements of said
Section, Delegate shall withdraw the Fund's Assets from the non-complying
arrangement as soon as reasonably practicable; PROVIDED, however, that if in the
reasonable judgment of the Delegate, such withdrawal would require liquidation
of any of the Fund's Assets or would materially impair the liquidity, value or
other investment characteristics of the Fund's Assets, it shall be the duty of
the Delegate to provide information regarding the particular circumstances and
to act only in accordance with Proper Instructions with respect to such
liquidation or other withdrawal.
7. DIRECTION AS TO ELIGIBLE FOREIGN CUSTODIAN. Notwithstanding this Delegation Schedule, the Fund, acting through its Board, its Investment Adviser or its other authorized representative, may direct the Delegate to place and maintain the Fund's Assets with a particular Eligible Foreign Custodian, including without limitation with respect to investment in countries as to which the Custodian will not provide delegation services. In such event, the Delegate shall be entitled to rely on any such instruction as a Proper Instruction under the terms of the Custodian Agreement and shall have no duties under this Delegation Schedule with respect to such arrangement save those that it may undertake specifically in writing with respect to each particular instance.
8. STANDARD OF CARE. In carrying out its duties under this Delegation Schedule, the Delegate agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for safekeeping the Fund's Assets would exercise.
9. REPRESENTATIONS.The Delegate hereby represents and warrants that it is a U.S. Bank and that this Delegation Schedule has been duly authorized, executed and delivered by the Delegate and is a legal, valid and binding agreement of the Delegate.
The Fund hereby represents and warrants that its Board of Trustees has determined that it is reasonable to rely on the Delegate to perform the delegated responsibilities provided for herein and that this Delegation Schedule has been duly authorized, executed and delivered by the Fund and is a legal, valid and binding agreement of the Fund.
10. EFFECTIVENESS; TERMINATION. This Delegation Schedule shall be effective as of the date on which this Delegation Schedule shall have been accepted by the Delegate, as indicated by the date set forth below the Delegate's signature. This Delegation Schedule may be terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Such termination shall be effective on the 30th day following the date on which the non-terminating party shall receive the foregoing notice. The foregoing to the contrary notwithstanding, this Delegation Schedule shall be deemed to have been terminated concurrently with the termination of the Custodian Agreement.
11. NOTICES.Notices and other communications under this Delegation Schedule are to be made in accordance with the arrangements designated for such purpose under the Custodian Agreement unless otherwise indicated in a writing referencing this Delegation Schedule and executed by both parties.
12. DEFINITIONS. Capitalized terms in this Delegation Schedule have the following meanings:
a. ELIGIBLE FOREIGN CUSTODIAN - shall have the meaning set forth in Rule 17f-5(a)(1) and shall also include a U.S. Bank.
b. FUND'S ASSETS - shall mean any of the Fund's investments (including foreign currencies) for which the primary market is outside the United States, and such cash and cash equivalents as are reasonably necessary to effect the Fund's transactions in such investments.
c. PROPER INSTRUCTIONS - shall have the meaning set forth in the Custodian Agreement.
d. SECURITIES DEPOSITORY - shall have the meaning set forth in Rule 17f-7.
e. SOVEREIGN RISK - shall have the meaning set forth in
Section [6.3] of the Custodian Agreement.
f . U.S. BANK - shall mean a bank which qualifies to serve as a custodian of assets of investment companies under Section 17(f) of the Act.
13. GOVERNING LAW AND JURISDICTION. This Delegation Schedule shall be construed in accordance with the laws of the Commonwealth of Massachusetts. The parties hereby submit to the exclusive jurisdiction of the Federal courts sitting in the Commonwealth of Massachusetts or of the state courts of such Commonwealth.
14. FEES. Delegate shall perform its functions under this Delegation Schedule for the compensation determined under the Custodian Agreement.
15. INTEGRATION. This Delegation Schedule sets forth all of the Delegate's duties with respect to the selection and monitoring of Eligible Foreign Custodians, the administration of contracts with Eligible Foreign Custodians, the withdrawal of assets from Eligible Foreign Custodians and the issuance of reports in connection with such duties. The terms of the Custodian Agreement shall apply generally as to matters not expressly covered in this Delegation Schedule, including dealings with the Eligible Foreign Custodians in the course of discharge of the Delegate's obligations under the Custodian Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed as of the date first above written.
BROWN BROTHERS HARRIMAN & CO. EACH FUND LISTED ON APPENDIX A By: /s/ Stokley P. Towles By: /s/ David D. Tripple Name: Stokley P. Towles Name: David D. Tripple Title: Partner Title: Executive Vice President |
APPENDIX A
TO
CUSTODIAN AGREEMENT
BETWEEN
BROWN BROTHERS HARRIMAN & CO.
AND
EACH OF THE OPEN-END MANAGEMENT INVESTMENT COMPANIES
LISTED ON APPENDIX "A" THERETO
Dated as of July 1, 2001
The following is a list of Funds for which the Custodian shall serve under a Custodian Agreement dated as of July 1, 2001.
PIONEER AMERICA INCOME TRUST
PIONEER BALANCED FUND
PIONEER BOND FUND
PIONEER CASH RESERVES FUND
PIONEER EMERGING MARKETS FUND
PIONEER EQUITY-INCOME FUND
PIONEER EUROPE FUND
PIONEER EUROPE SELECT FUND
PIONEER FUND
PIONEER GLOBAL FINANCIALS FUND
PIONEER GLOBAL HEALTH CARE FUND
PIONEER GLOBAL TELECOMS FUND
PIONEER GROWTH SHARES
PIONEER HIGH YIELD FUND
PIONEER VALUE FUND
PIONEER INDEPENDENCE FUND
PIONEER INDO-ASIA FUND
PIONEER INTEREST SHARES
PIONEER INTERNATIONAL VALUE FUND
PIONEER LARGE-CAP VALUE FUND
PIONEER LIMITED MATURITY BOND FUND
PIONEER MICRO-CAP FUND
PIONEER MID-CAP FUND
PIONEER MID-CAP VALUE FUND
PIONEER REAL ESTATE SHARES
PIONEER SCIENCE & TECHNOLOGY FUND
PIONEER SMALL COMPANY FUND
PIONEER STRATEGIC INCOME FUND
PIONEER TAX-FREE INCOME FUND
PIONEER TAX-MANAGED FUND
PIONEER AMERICA INCOME VCT PORTFOLIO
PIONEER BALANCED VCT PORTFOLIO
PIONEER EMERGING MARKETS VCT PORTFOLIO
PIONEER EQUITY-INCOME VCT PORTFOLIO
PIONEER EUROPE SELECT VCT PORTFOLIO
PIONEER EUROPE VCT PORTFOLIO
PIONEER FUND VCT PORTFOLIO
PIONEER GLOBAL FINANCIALS VCT PORTFOLIO
PIONEER GLOBAL HEALTH CARE VCT PORTFOLIO
PIONEER GLOBAL TELECOMS VCT PORTFOLIO
PIONEER GROWTH SHARES VCT PORTFOLIO
PIONEER HIGH YIELD VCT PORTFOLIO
PIONEER INTERNATIONAL VALUE VCT PORTFOLIO
PIONEER MID-CAP VALUE VCT PORTFOLIO
PIONEER MONEY MARKET VCT PORTFOLIO
PIONEER REAL ESTATE GROWTH VCT PORTFOLIO
PIONEER SCIENCE & TECHNOLOGY VCT PORTFOLIO
PIONEER SMALL COMPANY VCT PORTFOLIO
PIONEER STRATEGIC INCOME VCT PORTFOLIO
PIONEER SWISS FRANC BOND VCT PORTFOLIO
PIONEER INTERNATIONAL EQUITY FUND
IN WITNESS WHEREOF, each of the parties hereto has caused this Appendix to be executed in its name and on behalf of each such open-end management investment company.
Each of the open-end management BROWN BROTHERS HARRIMAN & CO. investment companies listed on this Appendix "A" By: /s/ David D. Trippel By: /s/ D.A. Donahue Name: David D. Tripple Name: D.A. Donahue Title: Executive Vice President Title: Partner |
APPENDIX A
TO
CUSTODIAN AGREEMENT
BETWEEN
BROWN BROTHERS HARRIMAN & CO.
AND
EACH OF THE OPEN-END MANAGEMENT INVESTMENT COMPANIES
LISTED ON APPENDIX "A" THERETO
Dated as of August 21, 2001
The following is a list of Funds for which the Custodian shall serve under a Custodian Agreement dated as of July 1, 2001.
PIONEER AMERICA INCOME TRUST
PIONEER BALANCED FUND
PIONEER BOND FUND
PIONEER CASH RESERVES FUND
PIONEER EMERGING MARKETS FUND
PIONEER EQUITY-INCOME FUND
PIONEER EUROPE FUND
PIONEER EUROPE SELECT FUND
PIONEER FUND
PIONEER GLOBAL FINANCIALS FUND
PIONEER GLOBAL HEALTH CARE FUND
PIONEER GLOBAL TELECOMS FUND
PIONEER GROWTH SHARES
PIONEER HIGH YIELD FUND
PIONEER VALUE FUND
PIONEER INDEPENDENCE FUND
PIONEER INDO-ASIA FUND
PIONEER INTEREST SHARES
PIONEER INTERNATIONAL VALUE FUND
PIONEER LARGE-CAP VALUE FUND
PIONEER LIMITED MATURITY BOND FUND
PIONEER MICRO-CAP FUND
PIONEER MID-CAP FUND
PIONEER MID-CAP VALUE FUND
PIONEER REAL ESTATE SHARES
PIONEER SCIENCE & TECHNOLOGY FUND
PIONEER SMALL COMPANY FUND
PIONEER STRATEGIC INCOME FUND
PIONEER TAX-FREE INCOME FUND
PIONEER TAX-MANAGED FUND
PIONEER AMERICA INCOME VCT PORTFOLIO
PIONEER BALANCED VCT PORTFOLIO
PIONEER EMERGING MARKETS VCT PORTFOLIO
PIONEER EQUITY-INCOME VCT PORTFOLIO
PIONEER EUROPE SELECT VCT PORTFOLIO
PIONEER EUROPE VCT PORTFOLIO
PIONEER FUND VCT PORTFOLIO
PIONEER GLOBAL FINANCIALS VCT PORTFOLIO
PIONEER GLOBAL HEALTH CARE VCT PORTFOLIO
PIONEER GLOBAL TELECOMS VCT PORTFOLIO
PIONEER GROWTH SHARES VCT PORTFOLIO
PIONEER HIGH YIELD VCT PORTFOLIO
PIONEER INTERNATIONAL VALUE VCT PORTFOLIO
PIONEER MID-CAP VALUE VCT PORTFOLIO
PIONEER MONEY MARKET VCT PORTFOLIO
PIONEER REAL ESTATE GROWTH VCT PORTFOLIO
PIONEER SCIENCE & TECHNOLOGY VCT PORTFOLIO
PIONEER SMALL COMPANY VCT PORTFOLIO
PIONEER STRATEGIC INCOME VCT PORTFOLIO
PIONEER SWISS FRANC BOND VCT PORTFOLIO
PIONEER INTERNATIONAL EQUITY FUND
PIONEER LONG/SHORT FUND
PIONEER GLOBAL HIGH YIELD FUND
PIONEER GLOBAL VALUE FUND
IN WITNESS WHEREOF, each of the parties hereto has caused this Appendix to be executed in its name and on behalf of each such open-end management investment company.
Each of the open-end management BROWN BROTHERS HARRIMAN & CO. investment companies listed on this Appendix "A" By: /s/ David D. Tripple By: /s/ D.A. Donahue Name: David D. Tripple Name: D.A. Donahue Title: Executive Vice President Title: Partner |
APPENDIX A
TO
CUSTODIAN AGREEMENT
BETWEEN
BROWN BROTHERS HARRIMAN & CO.
AND
EACH OF THE OPEN-END MANAGEMENT INVESTMENT COMPANIES
LISTED ON APPENDIX "A" THERETO
Dated as of November 13, 2001
The following is a list of Funds for which the Custodian shall serve under the
Custodian Agreement dated as of July 1, 2001 (the "Agreement"):
PIONEER AMERICA INCOME TRUST
PIONEER BALANCED FUND
PIONEER BOND FUND
PIONEER CASH RESERVES FUND
PIONEER EMERGING MARKETS FUND
PIONEER EQUITY INCOME FUND
PIONEER EUROPE FUND
PIONEER EUROPE SELECT FUND
PIONEER FUND
PIONEER GLOBAL FINANCIALS FUND
PIONEER GLOBAL HEALTH CARE FUND
PIONEER GLOBAL HIGH YIELD FUND
PIONEER GLOBAL TELECOMS FUND
PIONEER GLOBAL VALUE FUND
PIONEER GROWTH SHARES
PIONEER HIGH YIELD FUND
PIONEER INDEPENDENCE FUND
PIONEER INDO-ASIA FUND
PIONEER INTEREST SHARES
PIONEER INTERNATIONAL EQUITY FUND
PIONEER INTERNATIONAL VALUE FUND
PIONEER LARGE CAP VALUE FUND
PIONEER LIMITED MATURITY BOND FUND
PIONEER LONG/SHORT FUND
PIONEER MID CAP GROWTH FUND
PIONEER MID CAP VALUE FUND
PIONEER REAL ESTATE SHARES
PIONEER SCIENCE & TECHNOLOGY FUND
PIONEER SMALL CAP VALUE FUND
PIONEER SMALL COMPANY FUND
PIONEER STRATEGIC INCOME FUND
PIONEER TAX FREE INCOME FUND
PIONEER TAX MANAGED FUND
PIONEER VALUE FUND
PIONEER WORLD EQUITY FUND
PIONEER AMERICA INCOME VCT PORTFOLIO
PIONEER BALANCED VCT PORTFOLIO
PIONEER EMERGING MARKETS VCT PORTFOLIO
PIONEER EQUITY INCOME VCT PORTFOLIO
PIONEER EUROPE SELECT VCT PORTFOLIO
PIONEER EUROPE VCT PORTFOLIO
PIONEER FUND VCT PORTFOLIO
PIONEER GLOBAL FINANCIALS VCT PORTFOLIO
PIONEER GLOBAL HEALTH CARE VCT PORTFOLIO
PIONEER GLOBAL TELECOMS VCT PORTFOLIO
PIONEER GROWTH SHARES VCT PORTFOLIO
PIONEER HIGH YIELD VCT PORTFOLIO
PIONEER INTERNATIONAL VALUE VCT PORTFOLIO
PIONEER MID CAP VALUE VCT PORTFOLIO
PIONEER MONEY MARKET VCT PORTFOLIO
PIONEER REAL ESTATE GROWTH VCT PORTFOLIO
PIONEER SCIENCE & TECHNOLOGY VCT PORTFOLIO
PIONEER SMALL CAP VALUE VCT PORTFOLIO
PIONEER SMALL COMPANY VCT PORTFOLIO
PIONEER STRATEGIC INCOME VCT PORTFOLIO
PIONEER SWISS FRANC BOND VCT PORTFOLIO
IN WITNESS WHEREOF, each of the parties hereto has caused this Appendix to be executed in its name and on behalf of each such open-end management investment company.
Each of the open-end management BROWN BROTHERS HARRIMAN & CO. investment companies listed on this Appendix "A" By: /s/ Dorothy E. Bourassa By: /s/ Stokley P. Towles Name: Dorothy E. Bourassa Name: Stokley P. Towles Title: Assistant [Secretary] Title: Partner |
APPENDIX A
TO
CUSTODIAN AGREEMENT
BETWEEN
BROWN BROTHERS HARRIMAN & CO.
AND
EACH OF THE OPEN-END MANAGEMENT INVESTMENT COMPANIES
LISTED ON APPENDIX "A" THERETO
Dated as of December 14, 2001
The following is a list of Funds for which the Custodian shall serve under the Custodian Agreement dated as of July 1, 2001 (the "Agreement"):
PIONEER AMERICA INCOME TRUST
PIONEER BALANCED FUND
PIONEER BOND FUND
PIONEER CASH RESERVES FUND
PIONEER EMERGING MARKETS FUND
PIONEER EQUITY INCOME FUND
PIONEER EUROPE FUND
PIONEER EUROPE SELECT FUND
PIONEER FUND
PIONEER GLOBAL CONSUMERS FUND
PIONEER GLOBAL ENERGY & UTILITIES FUND
PIONEER GLOBAL FINANCIALS FUND
PIONEER GLOBAL HEALTH CARE FUND
PIONEER GLOBAL HIGH YIELD FUND
PIONEER GLOBAL INDUSTRIALS FUND
PIONEER GLOBAL TELECOMS FUND
PIONEER GLOBAL VALUE FUND
PIONEER GROWTH SHARES
PIONEER HIGH YIELD FUND
PIONEER INDEPENDENCE FUND
PIONEER INTEREST SHARES
PIONEER INTERNATIONAL EQUITY FUND
PIONEER INTERNATIONAL VALUE FUND
PIONEER LARGE CAP VALUE FUND
PIONEER LONG/SHORT FUND
PIONEER MID CAP GROWTH FUND
PIONEER MID CAP VALUE FUND
PIONEER REAL ESTATE SHARES
PIONEER SCIENCE & TECHNOLOGY FUND
PIONEER SMALL CAP VALUE FUND
PIONEER SMALL COMPANY FUND
PIONEER STRATEGIC INCOME FUND
PIONEER TAX FREE INCOME FUND
PIONEER TAX MANAGED FUND
PIONEER VALUE FUND
PIONEER AMERICA INCOME VCT PORTFOLIO
PIONEER BALANCED VCT PORTFOLIO
PIONEER EMERGING MARKETS VCT PORTFOLIO
PIONEER EQUITY INCOME VCT PORTFOLIO
PIONEER EUROPE SELECT VCT PORTFOLIO
PIONEER EUROPE VCT PORTFOLIO
PIONEER FUND VCT PORTFOLIO
PIONEER GLOBAL CONSUMERS VCT PORTFOLIO
PIONEER GLOBAL ENERGY & UTILITIES VCT PORTFOLIO
PIONEER GLOBAL FINANCIALS VCT PORTFOLIO
PIONEER GLOBAL HEALTH CARE VCT PORTFOLIO
PIONEER GLOBAL INDUSTRIALS VCT PORTFOLIO
PIONEER GLOBAL TELECOMS VCT PORTFOLIO
PIONEER GROWTH SHARES VCT PORTFOLIO
PIONEER HIGH YIELD VCT PORTFOLIO
PIONEER INTERNATIONAL VALUE VCT PORTFOLIO
PIONEER MID CAP VALUE VCT PORTFOLIO
PIONEER MONEY MARKET VCT PORTFOLIO
PIONEER REAL ESTATE GROWTH VCT PORTFOLIO
PIONEER SCIENCE & TECHNOLOGY VCT PORTFOLIO
PIONEER SMALL CAP VALUE VCT PORTFOLIO
PIONEER SMALL COMPANY VCT PORTFOLIO
PIONEER STRATEGIC INCOME VCT PORTFOLIO
PIONEER SWISS FRANC BOND VCT PORTFOLIO
IN WITNESS WHEREOF, each of the parties hereto has caused this Appendix to be executed in its name and on behalf of each such open-end management investment company.
Each of the open-end management BROWN BROTHERS HARRIMAN & CO. investment companies listed on this Appendix "A" By: /s/ Dorothy E. Bourassa By: /s/ Stokley P. Towles Name: Dorothy E. Bourassa Name: Stokley P. Towles Title: Assistant Secretary Title: Partner |
APPENDIX A
TO
CUSTODIAN AGREEMENT
BETWEEN
BROWN BROTHERS HARRIMAN & CO.
AND
EACH OF THE OPEN-END MANAGEMENT INVESTMENT COMPANIES
LISTED ON APPENDIX "A" THERETO
Dated as of March 12, 2002
The following is a list of Funds for which the Custodian shall serve under the Custodian Agreement dated as of July 1, 2001 (the "Agreement"):
PIONEER AGGRESSIVE GROWTH FUND
PIONEER AMERICA INCOME TRUST
PIONEER BALANCED FUND
PIONEER BOND FUND
PIONEER CASH RESERVES FUND
PIONEER EMERGING GROWTH FUND
PIONEER EMERGING MARKETS FUND
PIONEER EQUITY INCOME FUND
PIONEER EUROPE FUND
PIONEER EUROPE SELECT FUND
PIONEER FUND
PIONEER GLOBAL CONSUMERS FUND
PIONEER GLOBAL ENERGY & UTILITIES FUND
PIONEER GLOBAL FINANCIALS FUND
PIONEER GLOBAL HEALTH CARE FUND
PIONEER GLOBAL HIGH YIELD FUND
PIONEER GLOBAL INDUSTRIALS FUND
PIONEER GLOBAL TECHNOLOGY FUND
PIONEER GLOBAL TELECOMS FUND
PIONEER GLOBAL VALUE FUND
PIONEER GROWTH SHARES
PIONEER HIGH INCOME TRUST
PIONEER HIGH YIELD FUND
PIONEER INDEPENDENCE FUND
PIONEER INDO-ASIA FUND
PIONEER INTEREST SHARES
PIONEER INTERNATIONAL EQUITY FUND
PIONEER INTERNATIONAL VALUE FUND
PIONEER LARGE CAP GROWTH FUND
PIONEER LARGE CAP VALUE FUND
PIONEER LONG/SHORT FUND
PIONEER MID CAP GROWTH FUND
PIONEER MID CAP VALUE FUND
PIONEER REAL ESTATE SHARES
PIONEER SCIENCE & TECHNOLOGY FUND
PIONEER SMALL CAP GROWTH FUND
PIONEER SMALL COMPANY FUND
PIONEER SMALL CAP VALUE FUND
PIONEER STRATEGIC INCOME FUND
PIONEER TAX FREE INCOME FUND
PIONEER TAX MANAGED FUND (To be renamed PIONEER CORE EQUITY FUND)
PIONEER VALUE FUND
PIONEER AMERICA INCOME VCT PORTFOLIO
PIONEER BALANCED VCT PORTFOLIO
PIONEER EMERGING MARKETS VCT PORTFOLIO
PIONEER EQUITY INCOME VCT PORTFOLIO
PIONEER FUND VCT PORTFOLIO
PIONEER GLOBAL CONSUMERS VCT PORTFOLIO
PIONEER GLOBAL ENERGY & UTILITIES VCT PORTFOLIO
PIONEER GLOBAL FINANCIALS VCT PORTFOLIO
PIONEER GLOBAL HEALTH CARE VCT PORTFOLIO
PIONEER GLOBAL INDUSTRIALS VCT PORTFOLIO
PIONEER GLOBAL TELECOMS VCT PORTFOLIO
PIONEER GROWTH SHARES VCT PORTFOLIO
PIONEER GLOBAL VALUE VCT PORTFOLIO
PIONEER HIGH YIELD VCT PORTFOLIO
PIONEER INTERNATIONAL VALUE VCT PORTFOLIO
PIONEER MID CAP VALUE VCT PORTFOLIO
PIONEER MONEY MARKET VCT PORTFOLIO
PIONEER REAL ESTATE GROWTH VCT PORTFOLIO (To be renamed
PIONER REAL ESTATE SHARES VCT PORTFOLIO)
PIONEER SCIENCE & TECHNOLOGY VCT PORTFOLIO
PIONEER SMALL CAP VALUE VCT PORTFOLIO
PIONEER SMALL COMPANY VCT PORTFOLIO
PIONEER STRATEGIC INCOME VCT PORTFOLIO
PIONEER SWISS FRANC BOND VCT PORTFOLIO
IN WITNESS WHEREOF, each of the parties hereto has caused this Appendix to be executed in its name and on behalf of each such open-end management investment company.
Each of the open-end management BROWN BROTHERS HARRIMAN & CO. investment companies listed on this Appendix "A" By: /s/ Dorothy Bourassa By: /s/ Stokley P. Towles Name: Dorothy E. Bourassa Name: Stokley P. Towles Title: Assistant Secretary Title: Partner |
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT dated this 1st day of April, 2002 between the Pioneer High Income Trust (the "Fund") and Pioneer Investment Management, Inc., a Delaware corporation (the "Manager").
W I T N E S S E T H
WHEREAS, the Fund is registered as a closed-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and has filed with the Securities and Exchange Commission (the "Commission") a registration statement (the "Registration Statement") for the purpose of registering its shares for public offering under the Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, the parties hereto are parties to a Management Contract dated the date hereof (the "Management Contract");
WHEREAS, the Management Contract provides that the Manager will bear all of the Fund's expenses other than those provided in Section 2(c) and 2(d) of the Management Contract;
WHEREAS, Section 2(c)(i) provides that the Fund shall pay charges and expenses for Fund accounting, pricing and appraisal services and related overhead, including, to the extent that such services were performed by personnel of the Manager or its affiliates, office space and facilities, and personnel compensation, training and benefits;
WHEREAS, Section 2(c)(vi) and (vii) provide that the Fund shall pay (i) fees and expenses involved in registering and maintaining registrations of the Fund and/or its shares with the Commission, state or blue sky securities agencies and foreign countries, including the preparation of prospectuses and statements of additional information for filing with the Commission and (ii) 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;
WHEREAS, the Manager intends to appoint a sub-administrator to perform some of its obligations under this Agreement and the parties do not intend that the Fund compensate the Manager for the services of the sub-administrator separately from the compensation under the Management Contract; and
WHEREAS, certain of these activities, as set forth on Exhibit 1 hereto, can be performed by members of the Manager's legal, accounting and administrative staff working at the direction and under the supervision of the Board of Trustees and Fund counsel.
NOW THEREFORE, in consideration of the mutual covenants and benefits set forth herein, the Fund and the Manager do hereby agree as follows:
1. The Fund authorizes the Manager to perform fund accounting services on behalf of the Fund, subject to the supervision and direction of the Board of Trustees. Such services, determined as of the date of this Agreement, are set forth on Exhibit 1 hereto. These services (the "Bookkeeping Services") may be revised from time to time on mutual agreement of the parties.
2. The Fund authorizes the Manager to assist with the performance of the legal services listed on Exhibit 1 hereto (the "Legal Services"). The Legal Services shall at all times be subject to the supervision and direction of the Board of Trustees and Fund counsel.
3. The Trustees recognize that the Bookkeeping Services and the Legal Services can be performed efficiently by the Manager. The Fund is entering into this Agreement to achieve the operating and expense benefits of such efficiency. In authorizing such activities on behalf of the Fund, the Fund expressly does not delegate to the Manager or its personnel the authority to render legal advice to, or legal judgments on behalf of, the Fund. Between meetings of the Trustees, Fund counsel is authorized to determine the services that may appropriately be provided by the Manager pursuant to this Agreement.
4. In consideration of its services under this Agreement, the Manager shall be entitled to be reimbursed for the allocable portion of the direct costs of the Bookkeeping Services and the Legal Expenses (collectively, the "Services"); provided, however, if the Manager elects to retain a sub-administrator to perform any Bookkeeping Services, the Manager shall not be entitled to reimbursement of any fees paid to the sub-administrator for such services and shall only be entitled, as to Bookkeeping Services, for its direct costs incurred in connection with (i) any Bookkeeping Services actually performed by the Manager and (ii) its supervision of the services rendered by the sub-administrator. Such allocation shall be based upon the proportion of personnel time devoted to the Services authorized to be performed on behalf of the Fund to the total time worked by such personnel, in each case as estimated in good faith by the Manager and reviewed and approved annually by the Board of Trustees. Subject to the proviso above, direct costs shall include any out-of-pocket expenses of the Manager incurred in connection with the Services, the salaries and benefits of personnel of the Manager who are engaged in the Services pursuant to this Agreement and, with respect to the Services, a reasonable allocation of overhead (to the extent permitted under the Management Contract) associated with the performance of the Bookkeeping Services. The Manager shall estimate such direct costs and overhead (as appropriate) in good faith and the Fund shall be entitled to such supporting information as the Trustees shall reasonably request from time to time. Reimbursements paid hereunder to the Fund shall be subject to annual approval of the Board of Trustees.
5. Neither the Manager nor any sub-administrator shall be liable to the Fund for any action taken or omitted to be taken by it in connection with the performance of any of the Manager's duties or obligations under this Agreement, and the Fund shall indemnify the Manager and any sub-administrator and hold them harmless from and against all damages, liabilities, costs and expenses (including reasonable attorneys' fees and amounts reasonably paid in settlement) incurred by the Manager or any sub-administrator in or by reason of any pending, threatened or contemplated action, suit, investigation or other proceeding (including an action or suit by or in the right of the Fund or its security holders) arising out of or otherwise based upon any action actually or allegedly taken or omitted to be taken by the Manager or any sub-administrator in connection with the performance of any of the Manager's duties or obligations under this Agreement; provided, however, that nothing contained herein shall protect or be deemed to protect the Manager or any sub-administrator against or entitle or be deemed to entitle the Manager or any sub-administrator to indemnification in respect of any liability to the Fund or its security holders to which the Manager or any sub-administrator would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of the Manager's duties, or by reason of its reckless disregard of the Manager's duties and obligations under this Agreement. Such expenses shall be paid by the Fund in advance of the final disposition of such matter upon invoice by the Manager or any sub-administrator and receipt by the Fund of an undertaking from the Manager or any sub-administrator to repay such amounts if it shall ultimately be established that the Manager or any sub-administrator is not entitled to payment of such expenses hereunder.
6. Either party hereto may, without penalty, terminate this Agreement by the giving of 60 days' written notice to the other party.
7. The Manager is an independent contractor and not an employee of the Fund for any purpose. If any occasion should arise in which the Manager gives any advice to its clients concerning the shares of the Fund, the Manager will act solely as investment counsel for such clients and not in any way on behalf of the Fund or any series thereof.
8. This Agreement states the entire agreement of the parties hereto with respect to the subject matter of this Agreement and it is intended to be the complete and exclusive statement of the terms hereof. It may not be added to or changed orally, and may not be modified or rescinded except by a writing signed by the parties hereto and in accordance with the 1940 Act, when applicable.
9. This Agreement and all performance hereunder shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.
10. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms or provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.
11. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by this duly authorized officers and their seal to be hereto affixed as of the day and year first above written.
Attest: PIONEER HIGH INCOME TRUST /S/ DOROTHY BOURASSA /S/ JOHN F. COGAN, JR. Dorothy Bourassa John F. Cogan, Jr. Assistant Secretary President Attest: PIONEER INVESTMENT MANAGEMENT, INC. /S/ DOROTHY BOURASSA /S/ DANIEL GERACI Dorothy Bourassa Daniel Geraci Secretary President |
EXHIBIT 1
FUND ACCOUNTING, ADMINISTRATION AND CUSTODY SERVICES (FAACS)
FAACS Administration:
o Provide direction, supervision and administrative support to all FAACS teams
o Prepare or review and submit all tax reports for Fund
Fund Accounting:
o Maintain all accounting records for Fund
o Calculate and report daily net asset values per share and yields
o Recommend income and capital gains distribution rates
o Prepare Fund's financial statements and assist in fund audits
Global Custody and Settlements Division:
o Enter portfolio trades into Fund Accounting records
o Support corporate actions analyses
Pricing and Corporate Actions:
o Ensure accuracy and timeliness of prices supplied by external sources
to provide daily valuations of all security positions held by Fund
o Validate and communicate corporate/class action information to
Fund Accounting
o Present periodic valuation report to Board of Trustees
FAACS Systems:
o Provide systems support to users of fund accounting and portfolio
pricing software, and manage relationships with applicable software and
hardware vendors
o Develop and maintain custom applications and systems interfaces for FAACS
teams
Shareholder Reporting and Audit Liaison:
o Review and complete Fund's financial statements
o Manage the Fund Audit process to ensure timely completion of shareholder
reports
o Prepare reports related to contract renewals and soft dollar payments
for Board of Trustees' review
o Provide financial information to Legal Department for prospectus updates and
other regulatory filings o Prepare regulatory reports such as N-SAR, Form S
and EDGAR filings
Fund's Controller:
o Manage Fund expense payment cycles (e.g., timeliness and accuracy of payments,
allocation of costs among portfolios)
o Coordinate and standardize Fund expense accruals and forecasting
o Provide expense reporting to Fund Accounting, FAACS management and auditors
o Provide daily reconciliation of receivable, payable and share accounts between
Fund records and entities listed above
o Communicate Fund prices and yields
LEGAL SERVICES
Filings under Investment Company Act of 1940 and Securities Act of 1933
o SEC electronic filing (EDGAR) Responsibilities
o Prepare Fund registration Statements and related filings for filing on EDGAR
and complete filings
o Maintain and develop enhancements to Pioneer's EDGAR systems and procedures,
including contingency planning
o Maintain EDGAR related databases and document archives
o Liaison with third party EDGAR agents when necessary
o Prepare proxy statements and related materials for filing on EDGAR and
complete filings
Blue Sky Administration (State Registration)
o Principal liaison with Blue Sky vendor (Bluesky MLS, Inc.)
o Coordinate SEC filing schedule and Fund documentation with Blue Sky vendor
o Monitor status of state filings with Blue Sky vendor
o Transfer Agent coordination
o Review vendor statements and invoices
o Conduct vendor due diligence, as appropriate
o Hiring oversight
o In-person meetings
Proxy Statements
o Assist Hale and Dorr LLP in the preparation of proxy statements
o Coordinate internal review of proxy statements and related documents
o Review proxy related materials prepared by the distribution company to ensure
compliance with regulatory requirements
o Review the transfer agent's proxy solicitation efforts to ensure compliance
with regulatory requirements
o Act as liaison between Hale and Dorr LLP and transfer agency staff with
respect to the proxy solicitation process
NYSE Compliance
o Preparation of initial and additional listing applications
o Preparation of annual certifications
o Liaison between the Fund and NYSE
Preferred Share Compliance
o Co-ordination with rating agencies and provision of reports and certifications
o Co-ordination with auction agent
Miscellaneous Services
o Monitor the preparation of shareholder reports by the distribution company
o Prepare and file (via EDGAR) Section 16 filings (re: closed-end funds)
o Maintain Officer and Trustee securities holdings (fund and non-fund related)
o Assist in the preparation of fund Form N-SARs
o Code of Ethics administration (as it relates to Disinterested Trustees)
Regulatory Oversight
o Monitor proposed changes in applicable regulation and inform appropriate
Pioneer personnel of the proposals and impact on Fund
o Act as liaison with Hale and Dorr LLP in the implementation of changes
ADMINISTRATION AGREEMENT
This ADMINISTRATION AGREEMENT, made as of the 24th day of April 2002 between PIONEER INVESTMENT MANAGEMENT, INC., a Delaware corporation ("PIM"), and PRINCETON ADMINISTRATORS, L.P., a Delaware limited partnership (the "Administrator").
WITNESSETH:
WHEREAS, PIM has agreed to provide or arrange the provision of certain administrative services to Pioneer High Income Trust (the "Trust"), a Delaware business trust and a diversified closed-end management investment company registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"); and
WHEREAS, PIM wishes to retain the Administrator to perform the administrative services contemplated by this Agreement to the Trust;
NOW, THEREFORE, the parties hereto agree as follows:
1. DUTIES OF THE ADMINISTRATOR. PIM hereby retains the Administrator to act as administrator of the Trust, subject to the supervision and directions of PIM and the Board of Trustees of the Trust as herein set forth. Subject to the supervision and direction of PIM, the Administrator shall perform or arrange for the performance of the following administrative and clerical services:
(a) Calculate or arrange for the calculation and publication of
the Trust's net asset value in accordance with the Trust's
policy as adopted from time to time by the Board of Trustees;
(b) Maintain, or arrange for the maintenance of, certain books and
records of the Trust, as mutually agreed upon between the
parties hereto, that are required under the Investment Company
Act;
(c) Provide the Trust with administrative offices and data
processing facilities as well as the services of persons
competent to perform such administrative and clerical
functions as are necessary to provide effective operation of
the Trust;
(d) Maintain the Trust's expense budget and monitor expense
accruals;
(e) Arrange for payment of the Trusts' expenses, as PIM directs,
which may include calculation of various contractual expenses
of the Trust's service providers, and the review and approval
of invoices for the Trust's account and submission to a Trust
officer for authorization of payment in a manner to be agreed
upon;
(f) Oversee and review calculations of fees paid to the
Administrator, PIM, the transfer agent and the custodian;
(g) Compute the Trust's yield, total return, expense ratios and
portfolio turnover rate as well as various Trust statistical
data as reasonably requested;
(h) Prepare, for review and approval by officers of the Trust,
financial information for the Trust's semi-annual and annual
reports, proxy statements and other communications with
shareholders required or otherwise to be sent to Trust
shareholders, and arrange for the printing and dissemination
of such reports and communications to shareholders;
(i) Prepare reports relating to the business and affairs of the
Trust as may be mutually agreed upon and not otherwise
appropriately prepared by PIM or the Trust's custodian,
counsel or auditors;
(j) Prepare, or arrange for preparation for review, approval and
execution by officers of the Trust, the Trust's federal, state
and local income tax returns, and any other required tax
returns, as may be mutually agreed upon;
(k) Calculate the Trust's annual net investment income (including
net realized short-term capital gain) and net realized
long-term capital gain to determine the Trust's minimum annual
distributions to shareholders and the tax and accounting
treatment of such distributions on a per share basis, to be
reviewed by the Trust's independent public accountants;
(l) Prepare for review by an officer of the Trust the Trust's
periodic financial reports required to be filed with the
Securities and Exchange Commission (the "SEC") on Form N-SAR
and Form N-2 and such other reports, forms or filings, as may
be mutually agreed upon;
(m) Prepare such financial information and reports as may be
required by any stock exchange or exchanges on which the
Trust's shares are listed, and such other information and
reports required by such stock exchanges as may be mutually
agreed upon;
(n) Prepare such financial information and reports as may be
required by any banks from which the Trust borrows funds;
(o) Prepare reports related to the Trust's preferred stock, if
any, as required by rating agencies;
(p) Assist in the preparation and filing of Forms 3, 4 and 5
pursuant to Section 16 of the Securities Exchange Act of 1934
and Section 30(f) of the Investment Company Act for the
officers and trustees of the Trust, such filings to be based
on information provided by those persons and PIM;
(q) Coordinate the performance of administrative and professional
services rendered to the Trust by others, including its
custodian, registrar, transfer agent, dividend disbursing
agent and dividend reinvestment plan agent, as well as
accounting, auditing and such other services as may from time
to time be mutually agreed;
(r) Consult as necessary with the Trust's officers, independent
accountants, legal counsel, custodian, accounting agent and
transfer and dividend disbursing agent in establishing the
accounting policies of the Trust;
(s) Review implementation of any stock purchase or dividend
reinvestment programs authorized by the Board of rustees;
(t) Provide such assistance to the PIM, the custodian and the
Trust's counsel and auditors as generally may reasonably be
required to properly carry on the business and operations of
the Trust; and
(u) Respond to, or refer to PIM, the Trust's officers or transfer
agent, shareholder inquiries relating to the Trust.
PIM agrees to deliver and to use its reasonable commercial efforts to cause
the custodian to deliver, on a timely basis, such information to the
Administrator as may be necessary or appropriate for the Administrator's
performance of its duties and responsibilities hereunder, including but not
limited to, daily records of transactions, valuation of investments in
United States dollars (which may be based on information provided by a
pricing service) and expenses borne by the Trust, the Trust management
letter to stockholders and such other information necessary for the
Administrator to prepare the above referenced reports and filings, and the
Administrator shall be entitled to rely on the accuracy and completeness of
such information in performing its duties hereunder.
All services are to be furnished through the medium of any officer or
employee of the Administrator as the Administrator deems appropriate in
order to fulfill its obligations hereunder.
Each party shall bear all its own expenses incurred in connection with this
Agreement. Printing and dissemination expenses, such as those for reports
to shareholders and proxy statements, shall be expenses of the Trust.
2. COMPENSATION OF THE ADMINISTRATOR. PIM will pay the Administrator a fee
on the first business day of each calendar month for the previous month
equal to the greater of (i) $120,000 per annum ($10,000 per month), or (ii)
at an annual rate equal to 0.10% of the Trust's Managed Assets (as
hereinafter defined). For the purposes of determining fees payable to the
Administrator, the value of the Trust's assets shall be computed at the
times and in the manner specified in the Trust's registration statement on
Form N-2, as amended from time to time (the "Registration Statement").
Compensation by PIM to the Administrator shall commence on the date of the
first receipt by the Trust of the proceeds of the sale of its shares to the
underwriters as described in the Registration Statement, and the fee for
the period from the date the Trust shall receive the proceeds of the sale
of its shares to the underwriters as aforesaid to the end of the month
during which such proceeds are so received, shall be pro-rated according to
the proportion that such period bears to the full monthly period. Upon
termination of this Agreement before the end of a month, the fee for such
part of that month shall be pro-rated according to the proportion that such
periods bear to the full monthly period and shall be payable within seven
days after the date of termination of this Agreement. "Managed Assets"
means the average weekly value of the Trust's total assets minus the sum
of the Trust's liabilities, which liabilities exclude debt relating to
leverage, short-term debt and the aggregate liquidation preference of any
outstanding preferred stock.
3. LIMITATION OF LIABILITY OF THE ADMINISTRATOR, INDEMNIFICATION
(a) The Administrator may, with respect to questions of law, apply for and
obtain the advice and opinion of legal counsel, and with respect to the
application of generally accepted accounting principles or Federal Tax
accounting principles, apply for and obtain the advice and opinion of
accounting experts, at the reasonable expense of the Trust or PIM. The
Administrator shall obtain prior permission of the Trust or PIM before
obtaining the advise and opinion of legal or accounting experts at the
expense of the Trust or PIM, and shall not use any counsel or accounting
experts to which the Trust or PIM shall reasonably object. The
Administrator shall be fully protected with respect to any action taken or
omitted by it in good faith in conformity with this paragraph.
(b) The Administrator shall not be liable to the Trust or PIM for any action
taken or omitted to be taken by the Administrator in connection with the
performance of any of its duties or obligations under this Agreement, and
PIM shall indemnify the Administrator and hold it harmless from and against
all damages, liabilities, costs and expenses (including reasonable
attorneys' fees and amounts reasonably paid in settlement) incurred by the
Administrator in or by reason of any pending, threatened or contemplated
action, suit, investigation or other proceeding (including an action or
suit by or in the right of the Trust or its security holders) arising out
of or otherwise based upon any action actually or allegedly taken or
omitted to be taken by the Administrator in connection with the performance
of any of its duties or obligations under this Agreement; provided,
however, that nothing contained herein shall protect or be deemed to
protect the Administrator against or entitle or be deemed to entitle the
Administrator to indemnification in respect of any liability to PIM, the
Trust or its security holders to which the Administrator would otherwise be
subject 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 duties and obligations under this Agreement. Such expenses shall be
paid by PIM in advance of the final disposition of such matter upon invoice
by the Administrator and receipt by PIM of an undertaking from the
Administrator to repay such amounts if it shall ultimately be established
that the Administrator is not entitled to payment of such expenses
hereunder.
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(c) As used in this Paragraph 3, the term "Administrator" shall include any affiliates of the Administrator performing services for the Trust contemplated hereby, and trustees, officers, agents and employees of the Administrator or such affiliates.
4. ACTIVITIES OF THE ADMINISTRATOR.
The services of the Administrator hereunder are not exclusive and nothing in this Agreement shall limit or restrict the right of the Administrator to engage in any other business or to render services of any kind to any other corporation, firm, individual or association. The Administrator shall be deemed to be an independent contractor, unless otherwise expressly provided or authorized by this Agreement.
5. DURATION AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective as of the date on which the Trust's Registration Statement on Form N-2 shall be declared effective by the SEC and shall thereafter continue in effect unless terminated as herein provided. This Agreement may be terminated by either party hereto (without penalty) at any time upon not less than 60 days prior written notice to the other party hereto.
6. AMENDMENTS OF THIS AGREEMENT.
This Agreement may be amended by the parties hereto only if such amendment is specifically approved by the Board of Trustees of the Trust and such amendment is set forth in a written instrument executed by each of the parties hereto.
7. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts without reference to choice of law principles thereof and in accordance with the Investment Company Act. In the case of any conflict, the Investment Company Act shall control.
8. COUNTERPARTS.
This Agreement may be executed by the parties hereto in counterparts, and if executed in more than one counterpart, the separate instruments shall constitute one agreement.
9. NOTICES. Any notice or other communication required to be given in writing pursuant to this Agreement shall be deemed duly given if delivered or mailed by registered mail, postage prepaid, (1) to the Administrator at P.O. Box 9095, Princeton, New Jersey 08543-9095, Attention: Donald C. Burke, (2) to PIM at 60 State Street, Boston, Massachusetts 02109 Attention: General Counsel.
10. ENTIRE AGREEMENT. This Agreement sets forth the agreement and understanding of the parties hereto solely with respect to the matters covered hereby and the relationship between PIM and Princeton Administrators L.P. as Administrator. Nothing in this Agreement shall govern, restrict or limit in any respect any other business dealings between the parties hereto unless otherwise expressly provided herein.
11. NO ASSIGNMENT. This Agreement shall not be assigned by either party without the prior written consent of the other, except that either party may assign the agreement to another party if such assignment is to a party controlling, controlled by or under common control with the assigning party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
PIONEER INVESTMENT MANAGEMENT, INC.
By _________________________________________________
Title: _______________________________________________
PRINCETON ADMINISTRATORS, L.P.
By _________________________________________________
Title: _______________________________________________
INVESTMENT COMPANY SERVICE AGREEMENT
PIONEER HIGH INCOME TRUST
April 25, 2002
Pioneer High Income Trust, a Delaware business trust with its principal place of business at 60 State Street, Boston, Massachusetts 02109 ("Customer"), and Pioneer Investment Management Shareholder Services, Inc., a Massachusetts corporation, and a Member of the UniCredito Banking Group, Register of Banking Groups, with its principal place of business at 60 State Street, Boston, Massachusetts 02109 ("PIMSS"), hereby agree as follows:
1. SERVICES TO BE PROVIDED BY PIMSS. During the term of this Agreement, PIMSS will provide to the common shares of beneficial interest of Customer(the "Account"), with the services described in EXHIBIT A that is attached hereto and incorporated herein by reference. It is understood that PIMSS may subcontract any of such services to one or more firms designated by PIMSS, provided that PIMSS (i) shall be solely responsible for all compensation payable to any such firm and (ii) shall be liable to Customer for the acts or omissions of any such firm to the same extent as PIMSS would be liable to Customer with respect to any such act or omission hereunder. Customer acknowledges that PIMSS intends to retain Mellon Investor Services LLC to act as its agent in providing the services set forth in Exhibit A hereto, provided that PIMSS shall be entitled, without Customer's prior consent to terminate Mellon Investor Services LLC and to appoint another subcontractor with respect to the services to be provided hereunder.
2. EFFECTIVE DATE. This Agreement shall become effective on the date hereof (the "Effective Date") and shall continue in effect until it is terminated in accordance with Section 11 below.
3. DELIVERY OF DOCUMENTATION, MATERIALS AND DATA. Customer shall, from time to time, while this Agreement is in effect deliver all such documentation, materials and data as may be necessary or desirable to enable PIMSS to perform its services hereunder.
4. REPORTS AND MAINTENANCE OF RECORDS BY PIMSS. PIMSS will furnish to Customer and to properly authorized auditors, examiners, distributors, dealers, underwriters, salesmen, insurance companies, investors, and others designated by Customer in writing, such books, any and all records and reports at such times as are prescribed for each service in the Exhibits attached hereto. Customer agrees to examine or to ask any other authorized recipient to examine each such report or copy promptly and will report or cause to be reported any errors or discrepancies therein of which Customer then has any knowledge. PIMSS may at its option at any time, and shall forthwith upon Customer's demand, turn over to Customer and cease to retain in PIMSS' files, any and all records and documents created and maintained by PIMSS pursuant to this Agreement which are no longer needed by PIMSS in the performance of its services or for its protection.
If not so turned over to Customer, such documents and reports will be retained by PIMSS for six years from the year of creation, during the first two of which the same shall be in readily accessible form. At the end of six years, such records and documents will be turned over to Customer by PIMSS unless Customer authorizes their destruction.
5. PIMSS' DUTY OF CARE AND INDEMNIFICATION.
(a) LIMITATION OF LIABILITY. (i) In the absence of gross negligence or intentional misconduct on its part, PIMSS shall not be liable for any action taken, suffered, or omitted by it (or any of its agents) or for any error of judgment made by it (or any of its agents) in the performance of its duties under this Agreement. In no event will PIMSS be liable for special, indirect, incidental or consequential losses or damages of any kind whatsoever (including but not limited to lost profits), even if PIMSS has been advised of the possibility of such damages. Any liability of PIMSS will be limited in the aggregate to an amount equal to the fee paid by Customer during the preceding twelve (12) month period.
(ii) In the event any question or dispute arises with respect to PIMSS' duties hereunder, PIMSS shall not be required to act or be held liable or responsible for its failure or refusal to act until the question or dispute has been (i) judicially settled (and, if appropriate, PIMSS may file a suit in interpleader or for a declaratory judgment for such purpose) by final judgment rendered by a court of competent jurisdiction that is binding on all parties interested in the matter and is no longer subject to review or appeal, or (ii) settled by a written document in form and substance satisfactory to PIMSS and Customer and executed by Customer. In addition, PIMSS may require for such purpose, but shall not be obligated to require, the execution of such written settlement by parties that may have an interest in the settlement.
(b) INDEMNIFICATION. Customer shall indemnify PIMSS and its agents for, and hold it harmless against, any loss, liability, claim or expense ("Loss") arising out of or in connection with its duties under this Agreement or this appointment, including the costs and expenses of defending itself against any Loss or enforcing this Agreement, except to the extent that such Loss shall have been determined by a court of competent jurisdiction to be a result of the gross negligence or intentional misconduct of PIMSS or its agents.
(c) FORCE MAJEURE. Neither PIMSS nor its agents shall be liable for any failures, delays or losses, arising directly or indirectly out of conditions beyond its reasonable control, including, but not limited to, acts of government, exchange or market ruling, suspension of trading, work stoppages or labor disputes, civil disobedience, riots, rebellions, electrical or mechanical failure, computer hardware or software failure, communications facilities failures including telephone failure, war, fires, earthquakes, storms, floods, acts of God or similar occurrences.
6. CONFIDENTIALITY. PIMSS will keep confidential all records and information provided by Customer or by the shareholders of the Account to PIMSS, except to the extent disclosures are required by this Agreement, are required by the Customer's Prospectus and Statement of Additional Information, or are required by a valid subpoena or warrant issued by a court of competent jurisdiction or by a state or federal agency or governmental authority.
7. CUSTOMER INSPECTION. Upon reasonable notice, in writing signed by Customer, PIMSS shall make available, during regular business hours, all records and other data created and maintained pursuant to this Agreement for reasonable audit and inspection by Customer or Customer's agents, including reasonable visitation by Customer or Customer's agents, including inspecting PIMSS' operation facilities. PIMSS shall not be liable for injury to or responsible in any way for the safety of any individual visiting PIMSS' facilities under the authority of this section. Customer will keep confidential and will cause to keep confidential all confidential information obtained by its employees or agents or any other individual representing Customer while on PIMSS' premises. Confidential information shall include (1) any information of whatever nature regarding PIMSS' operations, security procedures, and data processing capabilities, (2) financial information regarding PIMSS, its affiliates, or subsidiaries, and (3) any information of whatever kind or description regarding any customer of PIMSS, its affiliates or subsidiaries.
8. RELIANCE BY PIMSS ON INSTRUCTIONS AND ADVICE; INDEMNITY. PIMSS and its agents shall be entitled to seek advice of Customer's legal counsel with respect to PIMSS' responsibilities and duties hereunder and shall in no event be liable to Customer for any action taken pursuant to such advice, except to the extent that Customer's legal counsel determines in its sole discretion that the rendering of advice to PIMSS would result in a conflict of interest.
Whenever PIMSS is authorized to take action hereunder pursuant to proper instructions from Customer, PIMSS shall be entitled to rely upon any certificate, letter or other instrument or telephone call or Internet transaction reasonably believed by PIMSS to be genuine and to have been properly made or signed by an officer or other authorized agent of Customer, and shall be entitled to receive as conclusive proof of any fact or matter required to be ascertained by it hereunder a certificate signed by an officer of Customer or any other person authorized by Customer's Board of Trustees.
Customer agrees to indemnify and hold PIMSS, its employees, agents and nominees harmless from any and all claims, demands, actions and suits, whether groundless or otherwise, and from and against any and all judgments, liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising out of or in any way relating to PIMSS' action or non-action upon information, instructions or requests given or made to PIMSS by Customer with respect to the Account.
Notwithstanding the above, whenever Customer may be asked to indemnify or hold PIMSS harmless, Customer shall be advised of all pertinent facts arising from the situation in question. Additionally, PIMSS will use reasonable care to identify and notify Customer promptly concerning any situation, which presents, actually or potentially, a claim for indemnification against Customer. Customer shall have the option to defend PIMSS against any claim for which PIMSS is entitled to indemnification from Customer under the terms hereof, and in the event Customer so elects, it will notify PIMSS and, thereupon, Customer shall take over complete defense of the claim and PIMSS shall sustain no further legal or other expenses in such a situation for which indemnification shall be sought or entitled. PIMSS may in no event confess any claim or make any compromise in any case in which Customer will be asked to indemnify PIMSS except with Customer's prior written consent.
9. MAINTENANCE OF DEPOSIT ACCOUNTS. PIMSS shall maintain on behalf of Customer such deposit accounts as are necessary or desirable from time to time to enable PIMSS to carry out the provisions of this Agreement.
10. COMPENSATION AND REIMBURSEMENT TO PIMSS. For the services rendered by PIMSS under this Agreement, Customer agrees to pay to PIMSS the fees and expenses set forth on Exhibit B.
11. TERMINATION. Either PIMSS or Customer may at any time terminate this Agreement by giving 90 days' prior written notice to the other.
After the date of termination, for so long as PIMSS in fact continues to perform any one or more of the services contemplated by this Agreement or the Exhibits, the provisions of this Agreement, including without limitation the provisions of Section 8 dealing with indemnification, shall where applicable continue in full force and effect.
12. REPRESENTATIONS AND WARRANTIES; REQUIRED DOCUMENTS.
12.1 REPRESENTATIONS AND WARRANTIES OF PIMSS.
PIMSS represents and warrants to the Customer that:
(a) It is a corporation duly organized and existing and in good standing under the laws of The Commonwealth of Massachusetts.
(b) It is duly qualified to carry on its business in The Commonwealth of Massachusetts and the State of Nebraska.
(c) All requisite corporate proceedings have been taken to authorize it to enter into this Agreement.
(d) It is empowered under all applicable laws and by its Articles of Organization and By Laws to enter into and perform this Agreement.
12.2 REPRESENTATIONS AND WARRANTIES OF CUSTOMER.
Customer represents and warrants to PIMSS and any of its agents (including Mellon Investor Services LLC, which is specifically entitled to rely upon such representations) that:
(a)the shares of the Trust issued and outstanding on the date hereof have been duly authorized, validly issued and are fully paid and are non-assessable; and any shares to be issued hereunder, when issued, shall have been duly authorized, validly issued and fully paid and will be non-assessable; (b) the shares (other than shares issued to Pioneer Investment Management, Inc. in connection with the initial capitalization of the Customer) issued and outstanding on the date hereof have been duly registered under the Securities Act of 1933, as amended, and such registration has become effective, or such shares are exempt from such registration; and have been duly registered under the Securities Exchange Act of 1934, as amended, or are exempt from such registration; (c) any shares to be issued hereunder, when issued shall have been duly registered under the Securities Act of 1933, as amended, and such registration shall have become effective or shall be exempt from such registration; and shall have been duly registered under the Securities Exchange Act of 1934, as amended, or shall be exempt from such registration; (d) Customer has paid or caused to be paid all taxes, if any, that were payable upon or in respect of the original issuance of the shares issued and outstanding on the date hereof; (e) the execution and delivery of this Agreement, and the issuance and any subsequent transfer of the shares hereunder, do not and will not conflict with, violate, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, the Declaration of Trust or the By-Laws of Customer, any law or regulation, any order or decree of any court or public authority having jurisdiction, or any mortgage, indenture, contract, agreement or undertaking to which Customer is a party or by which it is bound; (f) the execution and delivery of this Agreement does not and will not conflict with, violate, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, the Declaration of Trust or the By-Laws of Customer, any law or regulation, any order or decree of any court or public authority having jurisdiction, or any mortgage, indenture, contract, agreement or undertaking to which Customer is a party or by which it is bound; and this Agreement is enforceable against Customer in accordance with its terms, except as may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting the enforcement of creditors' rights generally; and (h) Customer agrees to provide the such documentation and notifications as PIMSS shall reasonably request.
12.3 CUSTOMER DOCUMENT DELIVERY.
Customer shall promptly furnish to PIMSS the following:
(a) A copy of Customer's Agreement and Declaration of Trust and By-Laws and all amendments related thereto.
(b) A certified copy of the resolution of the Customer's Board of Trustees authorizing the appointment of PIMSS and the execution and delivery of this Agreement.
(c) A copy of Customer's Registration Statement and all amendments thereto.
13. LIABILITIES OF THE CUSTOMER NOT OBIGATONS OF TRUSTEES OR SHAREHOLDERS. The parties to this Agreement acknowledge and agree that all liabilities arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, including without limitation, liabilities arising in connection with any agreement of Customer or its Trustees set forth herein to indemnify any party to this Agreement or any other person, shall be satisfied solely out of the assets of the Account and that no Trustee, officer or holder of shares of beneficial interest of Customer shall be personally liable for any of the foregoing liabilities. Customer's Agreement and Declaration of Trust describes in detail the respective responsibilities and limitations on liability of the Trustees, officers, and holders of shares of beneficial interest of Customer.
14. MISCELLANEOUS. In connection with the operation of this Agreement, PIMSS and Customer may agree from time to time on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions are to be signed by both parties and annexed hereto, but no such provision shall contravene any applicable federal and state law or regulation, and no such provision shall be deemed to be an amendment of this Agreement.
This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether written or oral.
If any provision or provisions of this Agreement shall be held invalid, unlawful or unenforceable, the validity, legality, and enforceability of the remaining provisions of the Agreement shall not in any way be affected or impaired.
This Agreement shall be construed in accordance with the laws of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, Customer and PIMSS have caused this Agreement to be executed in their respective names by their respective officers thereunto duly authorized as of the date first written above.
PIONEER INVESTMENT MANAGMENT
SHAREHOLDER SERVICES, INC.
By: /s/ Peggy Schooley
Peggy Schooley
Chief Executive Officer and President
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PIONEER HIGH INCOME TRUST
By: /s/ Vincent Nave
Vincent Nave
Treasurer
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EXHIBIT A - TO INVESTMENT COMPANY SERVICE AGREEMENT
SERVICES TO BE PROVIDED
Certain of the following services (marked with an asterisk below) may be provided by a sub-administrator to Customer.
ACCOUNT MAINTENANCE FUNCTIONS
o Opening new accounts
o Posting debits and credits
o Maintaining certificate history
o Placing and releasing stop transfer notations
o Consolidating accounts
o Coding accounts requiring special handling (e.g. "bad address," "do not mail,"
"VIP," etc.)
o Processing address changes
o Responding to shareholder correspondence
o Providing a toll-free phone number for shareholder inquiries
o Obtaining and posting Taxpayer Identification Number certifications pursuant
to IDTCA regulations
o Maintaining inactive accounts for the purpose of research and tax reporting
o Closing (purging) inactive accounts that meet selective criteria
o Providing Customer's shareholders with on-line access to shareholder records
o Training on all aspects of the stock transfer system
SECURITY ISSUANCE FUNCTIONS
o Qualifying under the rules of the NYSE and NASDAQ/AMEX to act in the dual
capacity as transfer agent and registrar
o Maintaining mail and window facilities for the receipt of transfer requests
o Maintaining and securing unissued certificate inventory and supporting
documents
o Examining issuance or transfer requests to ensure that proper authority is
being exercised
o Verifying (to the extent possible) that surrendered certificates are genuine
and have not been altered
o Verifying that original issuances are properly authorized and have necessary
regulatory approval
o In connection with requests for transfer, verifying that shares issued equal
the amount surrendered
o Place and remove stop orders on shares
o Verifying that no stop orders are held against shares submitted for transfer
o Issuing and registering new securities
o Recording canceled and issued securities
o Canceling surrendered certificates
o Delivering completed transfers
o Processing restricted and legal transfers upon presentment of appropriate
supporting documentation
o Preparing daily transfer or management summary journals
o Replacing lost, destroyed or stolen certificates provided that PIMSS or its
agent is in receipt of (a) evidence acceptable to it of the loss, theft or
destruction, and (b) a surety bond acceptable to PIMSS or its agent sufficient
to indemnify and hold it and Customer harmless (charge imposed on shareholder)
PROXY AND ANNUAL MEETING FUNCTIONS*
o Assisting in annual meeting planning
o Processing and mailing proxy material and Annual Report
o Tabulating physical proxies (both scanner and manual) returned by
shareholders
o Identifying shareholders who will attend the Annual Meeting
o Providing Inspector(s) of Election for the Annual Meeting
o Supporting efforts of any proxy solicitor
o Preparing certified list of record date holders
o Preparing report of final vote
o Providing remote access to proxy tabulation system
o Maintaining an automated link with (i) DTC to redistribute record date
Cede & Co. share positions to participants and (ii) ADP to receive
transmissions of broker votes
o Processing omnibus proxies for respondent banks
CASH DIVIDEND DISBURSEMENT FUNCTIONS
o Up to four quarterly dividends per fiscal year
o Preparing and mailing checks
o Reconciling checks
o Preparing payment register in list form
o Withholding and filing taxes for non-resident aliens and others
o Filing federal tax information returns o Processing "B" and "C" notices
received from the IRS
o Mailing required statements (Form 1099-DIV or Form 1042) to registered
holders
o Maintaining stop payment files and issuing replacement checks
o Maintaining separate dividend addresses
o Receiving, verifying and posting funds to cover entire dividend distribution
on mailing date of checks
DIVIDEND REINVESTMENT SERVICES
o Opening and maintaining participant accounts
o Processing reinvestment and optional cash payments
o Preparing participant statements of account, after each transaction, showing
activity for current period o Processing liquidations and terminations
according to plan specifications
o Providing periodic investment reports to Customer
o Preparing Form 1099-B to report sale proceeds
ESCHEATMENT SERVICES
o Taking all necessary steps to establish compliance with the unclaimed
property requirements of all jurisdictions that may have a claim on
escheatable property held by [PIMSS] [Customer]
o Identifying specific records and property subject to reporting based upon
current state statutes, rules, and regulations
o Executing state mandated due diligence mailings for lost property owners as
required, organizing records into acceptable formats for reporting, and
remitting property due each state when and as required
o Obtaining penalty and interest release agreements and indemnification from
future claim agreements (on property remitted) from the states that offer
such agreements
o Identifying all property that has become escheatable since the last filing
date
o Reviewing the applicable state regulations to determine if there have
been any changes in reporting procedures
o Reporting and remitting to each state when and as required
o Executing a mailing to all accounts with uncashed checks or RPO certificates
as required by state laws
o Executing SEC mandated lost shareholder database searches
OTHER SERVICES (OPTIONAL SERVICES - SUBJECT TO ADDITIONAL FEES)*:
o ACH, Direct Deposit Services
o Bank/Broker Distributions
o Cash Dividends
o Confidential Proxy Voting
o Corporate Stock Buy-Backs
o Custodial Services
o Direct Purchase & Dividend Reinvestment Services
o Direct Registration System/Profile Services
o Dividends - special dividends (allowance of twelve yearly)
o Solicitation, processing and maintenance of consents for electronic
distribution of materials
o Electronic distribution of material
o Electronic Proxy Voting (e.g. telephone, internet, intranet)
o Employee Stock Option Plan administration
o Employee Stock Purchase Plan Administration
o Escrow Services
o Exchanges or Tender Offers
o Foreign Tax Re-claim
o Solicitation, processing and maintenance of consents for delivery of materials
to households
o Logistics services including document transportation, fulfillment, printing
and media placement
o Mailing Quarterly or Periodic Reports
o Maintaining Mail Lists
o Odd-Lot Programs
o Proxy Solicitation
o Secondary Offerings or Closings
o Special Meetings
o Standby Rights Agency
o Stock Splits and Stock Dividends
o StockWatch (beneficial owner identification)
o Subscription Agent Services
o Survey Tabulation
o Warrant Agency
EXHIBIT B
SERVICE FEES
MONTHLY ADMINISTRATIVE FEE $2,000
The above fee will be charged for all services listed in Exhibit B and will be
subject to the following allowances:
Number of active accounts maintained 1000
Number of mailings per year (including one enclosure) 4
Number of reports or analyses 5
Number of lists or labels 5
Number of Inspectors of Election 1
Number of respondent bank omnibus proxies 10
Number of certificates issued and book-entry credits 250
Number of book-entry debits 500
Number of monthly shareholder calls handled via CSR 15
Number of monthly shareholder calls handled via IVR 30
Number of monthly Investor ServiceDirect transactions 100
Number of correspondence items per month 10
Number of due diligence mailings to "lost" shareholders 250
To the extent the above allowances are exceeded or activities occur, the
following unit fees will apply:
For each active account maintained (per year) $5.25
For each inactive account maintained 40% of active account fee
For each option or restricted item processed $25.00
For each legal item processed $50.00
Mailings See Attached
Lists / Labels / Analyses See Attached
For each additional Inspector of Election $1,500.00
For each respondent bank omnibus proxy $100.00
For each DWAC delivery $25.00
For each certificate issued or cancelled $2.00
For each book-entry credit or debit posted $1.50
For each shareholder telephone call via CSR $5.25
For each shareholder telephone call via IVR $1.50
For each correspondence responding to a shareholder $15.00
For each Investor ServiceDirect transaction $1.50
For each stop maintained on a lost certificate (per month) $0.05
For each stop removed from a lost certificate $0.05
For each stop placed on or removed from a restricted security $50.00
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FOR THE PURPOSES OF THIS AGREEMENT THE FOLLOWING DEFINITIONS APPLY:
1. Investor Service Direct (ISD) transactions will include any
shareholder transaction initiated through ISD including, but not
limited to, the following:
o Purchasing or selling shares
o Duplicate 1099 requests
o Updating or changing consent to electronic delivery
o Forms or document requests
o Taxpayer certification
o Certificate issuance
o Update dividend reinvestment selection
o Duplicate book entry statement
o PIN change
2. Active and Inactive accounts will be defined as follows:
o Active accounts are defined as accounts with a share
balance greater than zero or outstanding cash balances or
taxable income that has not yet been reported to the
Internal Revenue Service.
o Inactive accounts are defined as accounts with a share
balance equal to zero and no outstanding cash balances and
no taxable income to be reported to the Internal Revenue
Service.
DIVIDEND REINVESTMENT PLAN - SCHEDULE OF FEES
----------------------------------------------- -------------------------- --------------------------- ------------------------
FEE ITEM AMOUNT PAID BY
----------------------------------------------- -------------------------- --------------------------- ------------------------
Plan establishment fee $5,000.00 Customer
Annual program administration fee $10,000.00 Customer
Fulfillment processing - mail $1.25 Per request Customer
-internet $5.00 Per request Customer
Reinvestment of Monthly dividend
Per dividend $1.60 / 5% of div to per participant Customer
max of $3.50
Reinvestment trading fee $0.03 Per share Participant
Purchase of shares with additional investment
By check $5.00 Per transaction Participant *
By individual debit of bank account $3.50 Per transaction Participant *
By automatic debit of bank account $2.00 Per transaction Participant *
Trading fee $.03 Per share Participant *
Employee file purchases $1.60 Per account Customer*
For each payroll site $100.00 Per file per cycle Customer
Sale of shares - full or fractional $15.00 Per transaction Participant
Trading fee $.12 Per share Participant
Safekeeping No charge
Duplicate statement - prior year $20.00 Per request Participant
Insufficient funds or rejected automatic debit $35.00 per check or debit Participant
Other services including but not limited to: Per Stock Transfer Agency Contract Customer
Certificate Issuance
Transfer of shares
Out of pocket expenses including but not As incurred Customer
limited to:
800 number
Forms/brochures
Postage
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LISTS / LABELS / ANALYSES
FEE SCHEDULE
LISTS
PER NAME LISTED $0.05
LABELS
Per label printed $0.05
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ANALYSES
Per name passed on data base $0.02
Per name listed in report $0.05
(Minimum charge for each of the above services will be $500.)
MAILING SERVICES
FEE SCHEDULE
ADDRESSING
Addressing mailing medium (per name) $0.05
AFFIXING
Affixing labels (per label) $0.04
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INSERTING
Inserting Enclosures (Machine)
1st Enclosure (per piece) $0.05
2nd Enclosure (per piece) $0.04
Each Enclosure thereafter (per piece) $0.03
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Inserting Enclosures (Manual)
Charge will be determined based on analysis of work to be performed.
(Minimum charge for any mailing will be $500.)
EXPENSES AND OTHER CHARGES
FEES AND OUT OF POCKET EXPENSES: The cost of stationery and supplies, including but not limited to transfer sheets, dividend checks, envelopes, and paper stock, together with any disbursement for telephone, postage, mail insurance, travel for annual meeting, link-up charges for ADP and tape charges from DTC are billed in addition to the above fees. All charges and fees, out of pocket costs, expenses and disbursements of PIMSS or its agents are due and payable by Customer upon receipt of an invoice from PIMSS.
With respect to any shareholder mailing processed by PIMSS or its agents, Customer shall, at least one business day prior to mail date, provide immediately available funds sufficient to cover all postage due on such mailing. For any dividend mailing, Customer shall, at least one business day prior to the mail date, also provide immediately available funds sufficient to pay the aggregate amount of dividends to be paid.
If Customer participates in the Direct Registration System, PIMSS or its agent will provide a "sell" feature for liquidation of book-entry shares held on behalf of a shareholder. Upon receipt of a sell request by the registered shareholder, Mellon Bank, N.A. will process the request and remit the proceeds to the shareholder in the form of a check (less the appropriate fees). The charge for each such sale is $15.00 plus $0.12 per share or, if applicable, the fees quoted in the Customer's stock purchase and / or dividend reinvestment plan.
OFFERING ADMINISTRATION FEE: A minimum fee of $5,000 will be imposed for activities associated with initial public offerings (IPO's), secondary offerings and / or closings. The fee covers the coordination of efforts necessary between PIMSS, its agents, the Customer's underwriters, the banknote company and DTC in order to effect the closing. This fee will cover the issuance of up to 200 certificates and /or book-entry credits. Certificates and / or book-entry credits over this amount will be billed at $2.00 each. This fee is in addition to any fees PIMSS or its agents may charge for coordination of selling shareholders, custody services and / or escrow services.
LEGAL, TECHNOLOGICAL EXPENSES: Certain expenses may be incurred in resolving legal matters that arise in the course of performing services hereunder. This may result in a separate charge to cover PIMSS' agent's expenses (including the cost of external or internal counsel) in resolving such matters. Customer agrees to reimburse PIMSS' agents for such expenses provided that any legal expenses charged to the Customer relate directly and solely to Customer legal matters and shall be reasonable.
In the event any federal regulation and/or state or local laws are enacted which require PIMSS or its agents to make any technological improvements and/or modifications to its current system, Customer shall compensate PIMSS, on a pro rata basis proportionate to the Customer's registered shareholder base, for reasonable costs associated with making such required technological improvements and/or modifications; provided that PIMSS use its best efforts to seek Customer's approval at least 120 days' in advance of any such, such approval not to be unreasonably withheld.
RECORD STORAGE: Monthly fee of $2.50 per box, with a minimum charge of $50.00.
LOST SHAREHOLDER SERVICES: A fee of $3.00 will be charged for each lost account searched per database searched. A fee of $2.50 will be charged per account for each state mandated due diligence mailing.
OTHER SERVICES: Fees for any services provided to Customer by or on behalf of PIMSS hereunder that are not set forth in EXHIBIT A hereto or in this EXHIBIT B will be based on PIMSS' or its agent's standard fees at the time such services are provided or, if no standard fees have been established, an appraisal of the work to be performed.
Rev. 10/2001
SERVICE AGREEMENT
FOR
SUB-TRANSFER AGENT SERVICES
TO
PIONEER HIGH INCOME TRUST
THIS SUB-TRANSFER AGENT AGREEMENT (this "Agreement") between Pioneer Investment Management Shareholder Services, Inc., a Massachusetts corporation and Member of the UniCredito Italiano Banking Group, Register of Banking Groups ("Client"), and Mellon Investor Services LLC, a New Jersey limited liability company ("Mellon"), is dated as of April 24, 2002.
1. APPOINTMENT. Client is the transfer agent for Pioneer High Income Trust, a Delaware business trust (the "Trust"). Client appoints Mellon as sub-transfer agent, registrar and dividend disbursing agent for the Trust and Mellon accepts such appointment in accordance with the following terms and conditions for all authorized Trust shares of each class of stock listed in EXHIBIT A hereto (the "Shares").
2. TERM OF AGREEMENT.
(a) This Agreement shall commence on the date hereof and shall continue for a term of three years (the "Initial Term"). Unless either party gives written notice of termination of this Agreement at least 60 days prior to the end of the Initial Term, this Agreement shall automatically renew for an additional, successive one-year terms. Notwithstanding the preceding sentences, this Agreement will automatically terminate without penalty if the Trust terminates the transfer agency agreement between the Trust and Client.
(b) Prior to termination of this Agreement, Client must provide Mellon with written instructions as to the disposition of records, as well as any additional documentation reasonably requested by Mellon. Except as otherwise expressly provided in this Agreement, the respective rights and duties of Client and Mellon under this Agreement shall cease upon termination of the appointment, provided that, if necessary in order to accommodate orderly conversion of shareholder records to a new sub-transfer agent, the parties obligations under this Agreement shall continue until such conversion is completed.
3. DUTIES OF MELLON. Mellon will provide the services listed in EXHIBIT B hereto, in the performance of its duties as transfer agent, registrar, and dividend disbursing agent.
4. REPRESENTATIONS AND WARRANTIES OF CLIENT. (a)Client has obtained the following represents, warrants and covenants from the Trust as to which Mellon is specifically authorized to rely:
(i) the Shares issued and outstanding on the date hereof have been duly authorized, validly issued and are fully paid and are non-assessable; and any Shares to be issued hereunder, when issued, shall have been duly authorized, validly issued and fully paid and will be non-assessable;
(ii) the Shares issued and outstanding on the date hereof (other than shares issued to Pioneer Investment Management, Inc. in connection with the initial capitalization of the Trust) have been duly registered under the Securities Act of 1933, as amended, and such registration has become effective, or are exempt from such registration; and have been duly registered under the Securities Exchange Act of 1934, as amended, or are exempt from such registration;
(iii) any Shares to be issued hereunder, when issued shall have been duly registered under the Securities Act of 1933, as amended, and such registration shall have become effective or shall be exempt from such registration; and shall have been duly registered under the Securities Exchange Act of 1934, as amended, or shall be exempt from such registration;
(iv) the Trust has paid or caused to be paid all taxes, if any, that were payable upon or in respect of the original issuance of the Shares issued and outstanding on the date hereof; and
(v) the execution and delivery of this Agreement, and the issuance and any subsequent transfer of the Shares hereunder, do not and will not conflict with, violate, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, the charter or the by-laws of the Trust, any law or regulation, any order or decree of any court or public authority having jurisdiction, or any mortgage, indenture, contract, agreement or undertaking to which the Trust is a party or by which it is bound.
(b)Client represents, warrants and covenants to Mellon that:
(i) the execution and delivery of this Agreement does not and will not conflict with, violate, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, the charter or the by-laws of Client, any law or regulation, any order or decree of any court or public authority having jurisdiction, or any mortgage, indenture, contract, agreement or undertaking to which Client is a party or by which it is bound; and this Agreement is enforceable against Client in accordance with its terms, except as may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting the enforcement of creditors' rights generally; and
(ii) Client agrees to provide the documentation and notifications listed in EXHIBIT C hereto. Client further agrees to deliver an opinion of counsel as provided in Exhibit C, Section 7(a) and (b) upon any future original issuance of Shares for which Mellon will act as sub-transfer agent hereunder.
5. COMPENSATION AND EXPENSES. Client shall compensate Mellon for its services hereunder in accordance with the fee schedules listed in EXHIBIT D hereto. After the Initial Term, such fees may be adjusted annually, on or about each anniversary date of this Agreement, by the annual percentage of change in the latest Consumer Price Index of All Urban Consumers (CPI-U) United States City Average, as published by the U.S. Department of Labor, Bureau of Labor Statistics plus one half percent (0.5%). In accordance with EXHIBIT D hereto, Client shall reimburse Mellon for all reasonable expenses, disbursements or advances incurred by it in accordance herewith. All amounts owed to Mellon hereunder are due upon receipt of the invoice. Delinquent payments are subject to a late payment charge of one and one half percent (1.5%) per month commencing sixty (60) days from the invoice date. Client agrees to reimburse Mellon for any attorney's fees and any other costs associated with collecting delinquent payments.
6. SCOPE OF AGENCY.
(a) Mellon shall act solely as agent for Client under this Agreement and owes no duties hereunder to any other person. Mellon undertakes to perform the duties and only the duties that are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against Mellon.
(b) Mellon may rely upon, and shall be protected in acting or refraining from acting in reliance upon, (i) any Client communication authorized by this Agreement, (ii) any communication from any predecessor Transfer Agent or co-Transfer Agent or from any Registrar (other than Mellon), predecessor Registrar or co-Registrar, and (iii) any other written instruction, notice, request, direction, consent, report, certificate, or other instrument, paper, document or electronic transmission believed by Mellon to be genuine and to have been signed or given by the proper party or parties. In addition, Mellon is authorized to refuse to make any transfer it deems improper.
(c) Mellon may consult with counsel (including internal counsel) whose advice shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon provided Mellon informs Client in advance of its intention to do so.
(d) Any instructions given by Client to Mellon orally shall be confirmed in writing by Client as soon as practicable. Mellon shall not be liable or responsible and shall be fully authorized and protected for acting, or failing to act, in accordance with any oral instructions which do not conform with the written confirmation received in accordance with this Section 6(d).
(e) Mellon may perform any of its duties hereunder either directly or by or through agents or attorneys. Mellon shall be liable for any misconduct or negligence on the part of any agent or attorney appointed by Mellon hereunder.
(f) Mellon shall not be obligated to take any legal action hereunder; if, however, Mellon determines to take any legal action hereunder, and, where the taking of such legal action might in Mellon's judgment subject or expose Mellon to any expense or liability, Mellon shall not act unless it shall have been furnished with an indemnity mutually agreed upon by Mellon and Client.
7. INDEMNIFICATION. Client shall indemnify Mellon for, and hold it harmless
against, any loss, liability, claim or expense ("Loss") arising out of or in
connection with its duties under this Agreement or this appointment, including
the costs and expenses of defending itself against any Loss or enforcing this
Agreement, except to the extent that such Loss shall have been determined by a
court of competent jurisdiction to be a result of Mellon's gross negligence or
intentional misconduct.
8. LIMITATION OF LIABILITY.
(a) In the absence of gross negligence or intentional misconduct on its part, Mellon shall not be liable for any action taken, suffered, or omitted by it or for any error of judgment made by it in the performance of its duties under this Agreement. In no event will Mellon be liable for special, indirect, incidental or consequential loss or damages of any kind whatsoever (including but not limited to lost profits), even if Mellon has been advised of the possibility of such damages. Any liability of Mellon will be limited in the aggregate to an amount equal to twelve (12) times the flat monthly fee to be paid by Client as set forth in EXHIBIT D hereto.
(b) In the event any question or dispute arises with respect to Mellon's duties hereunder, Mellon shall not be required to act or be held liable or responsible for its failure or refusal to act until the question or dispute has been (i) judicially settled (and, if appropriate, Mellon may file a suit in interpleader or for a declaratory judgment for such purpose) by final judgment rendered by a court of competent jurisdiction that is binding on all parties interested in the matter and is no longer subject to review or appeal, or (ii) settled by a written document in form and substance satisfactory to Mellon and Client and executed by Client. In addition, Mellon may require for such purpose, but shall not be obligated to require, the execution of such written settlement by parties that may have an interest in the settlement.
9. FORCE MAJEURE. Mellon shall not be liable for any failures, delays or losses, arising directly or indirectly out of conditions beyond its reasonable control, including, but not limited to, acts of government, exchange or market ruling, suspension of trading, work stoppages or labor disputes, civil disobedience, riots, rebellions, electrical or mechanical failure, computer hardware or software failure, communications facilities failures including telephone failure, war, fires, earthquakes, storms, floods, acts of God or similar occurrences.
10. MARKET DATA. Client acknowledges that Mellon may provide real-time or delayed quotations and other market information and messages ("Market Data"), which Market Data is provided to Mellon by certain national securities exchanges and associations who assert a proprietary interest in Market Data disseminated by them but do not guarantee the timeliness, sequence, accuracy or completeness thereof. Client agrees and acknowledges that Mellon shall not be liable in any way for any loss or damage arising from or occasioned by any inaccuracy, error, delay in, omission of, or interruption in any Market Data or the transmission thereof.
11. NOTICES. All notices, demands and other communications given pursuant to the terms and provisions hereof shall be in writing, shall be deemed effective on the date of receipt, and may be sent by facsimile, overnight delivery services, or by certified or registered mail, return receipt requested to:
If to Client: with an additional copy to:
Pioneer Investment Management Pioneer Investment Management USA Inc.
Shareholder Services, Inc. 60 State Street
One Cabot Road Boston, MA 02109
Medford, MA 02155 Attn: General Counsel
Attn: Peggy Schooley Tel: 617-422-4980
Tel: 781- Fax: 617-422-4223
Fax: 781-
If to Mellon: with an additional copy to:
Mellon Investor Services LLC Mellon Investor Services LLC
[Regional Office Address] Overpeck Centre
Attn: Relationship Manager 85 Challenger Road
Tel: Ridgefield Park, NJ 07660
Fax: Attn: Legal Department
Tel: 201-373-7155
Fax: 201-373-7166
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12. SUBMISSION TO JURISDICTION; FOREIGN LAW.
(a) Client hereby irrevocably submits to the non-exclusive jurisdiction of any the Commonwealth of Massachusetts court sitting in Boston or the United States District Court for the -[______] District of Massachusetts and any appellate court from any thereof in any action or proceeding arising out of or relating to this Agreement, and Client hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Commonwealth of Massachusetts court or in such United States Federal court. The Client hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding or a defense based on the grounds of jurisdiction with respect thereto. The Client agrees that, to the fullest extent permitted by applicable laws, a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Mellon is not required hereunder to comply with the laws or regulations of any country other than the United States of America or any political subdivision thereof. Mellon may, with Client's prior approval, such approval not to be unreasonably withheld, consult with foreign counsel, at Client's expense, to resolve any foreign law issues that may arise as a result of Client or the Trust being subject to the laws or regulations of any foreign jurisdiction.
13. MISCELLANEOUS.
(a) AMENDMENTS. This Agreement may not be amended or modified in any manner except by a written agreement signed by both Client and Mellon. Client and Mellon agree to enter into discussions to amend the Fee Schedule (EXHIBIT D) if the number of shareholders increases or decreases by more than 7% in any 12 month period or the nature of services provided materially changes.
(b) GOVERNING LAW. This Agreement shall be governed by, construed and interpreted in accordance with the laws of the Commonwealth of Massachusetts , without regard to principles of conflicts of law.
(c) SURVIVAL OF TERMS. Sections 5, 7 and 8 hereof shall survive termination of this Agreement.
(d) ASSIGNMENT. This Agreement may not be assigned, or otherwise transferred, in whole or in part, by either party without the prior written consent of the other party, which the other party will not unreasonably withhold, condition or delay. Any attempted assignment in violation of the foregoing will be void.
(e) HEADINGS. The headings contained in this Agreement are for the purposes of convenience only and are not intended to define or limit the contents of this Agreement.
(f) SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement is found to violate a law, it will be severed from the rest of the Agreement and ignored.
(g) COUNTERPARTS. This Agreement may be executed manually in any number of counterparts, each of which such counterparts, when so executed and delivered, shall be deemed an original, and all such counterparts when taken together shall constitute one and the same original instrument.
(h) ENTIRE AGREEMENT. This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof and merges all prior written or oral communications, understandings, and agreements with respect to the subject matter of this Agreement. The parties acknowledge that the Exhibits hereto are an integral part of this Agreement.
(i) BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give any person or entity other than Mellon and Client any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of Mellon and Client.
[The remainder of this page has been intentionally left blank. Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their duly authorized officers as of the day and year above written.
PIONEER INVESTMENT MANAGEMENT SHAREHOLDER SERVICES, INC.
By:
Name:
Title:
MELLON INVESTOR SERVICES LLC
By:
Name:
Title:
Exhibit A
STOCK SUBJECT TO THE AGREEMENT
Number of Authorized
Number of Authorized Shares Reserved for
Shares Issued and Future Issuance Under
Outstanding (including Existing Agreements
Class of Stock Number of Authorized Treasury Shares)
Shares
Common
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Exhibit B
SERVICES TO BE PROVIDED
Certain of the following services (marked with an asterisk below) may be provided by a sub-administrator to the Trust.
ACCOUNT MAINTENANCE FUNCTIONS
o Opening new accounts
o Posting debits and credits
o Maintaining certificate history
o Placing and releasing stop transfer notations
o Consolidating accounts
o Coding accounts requiring special handling (e.g. "bad address," "do not mail,"
"VIP," etc.)
o Processing address changes
o Responding to shareholder correspondence
o Providing a toll-free phone number for shareholder inquiries
o Obtaining and posting Taxpayer Identification Number certifications pursuant
to IDTCA regulations
o Maintaining inactive accounts for the purpose of research and tax reporting
o Closing (purging) inactive accounts that meet selective criteria
o Providing Client and Trust's shareholders with on-line access to shareholder
records
o Training on all aspects of Mellon's stock transfer system
SECURITY ISSUANCE FUNCTIONS
o Qualifying under the rules of the NYSE and NASDAQ/AMEX to act in the dual
capacity as sub-transfer agent and registrar
o Maintaining mail and window facilities for the receipt of transfer requests
o Maintaining and securing unissued certificate inventory and supporting
documents
o Examining issuance or transfer requests to ensure that proper authority is
being exercised
o Verifying (to the extent possible) that surrendered certificates are genuine
and have not been altered
o Verifying that original issuances are properly authorized and have necessary
regulatory approval
o In connection with requests for transfer, verifying that Shares issued equal
the amount surrendered
o Place and remove stop orders on Shares
o Verifying that no stop orders are held against Shares submitted for transfer
o Issuing and registering new securities
o Recording canceled and issued securities
o Canceling surrendered certificates
o Delivering completed transfers
o Processing restricted and legal transfers upon presentment of appropriate
supporting documentation
o Preparing daily transfer or management summary journals
o Replacing lost, destroyed or stolen certificates provided that Mellon is in
receipt of (a) evidence acceptable to it of the loss, theft or destruction,
and (b) a surety bond acceptable to Mellon sufficient to indemnify and hold it
and Client harmless (charge imposed on shareholder)
PROXY AND ANNUAL MEETING FUNCTIONS*
o Assisting in annual meeting planning
o Processing and mailing proxy material and Annual Report
o Tabulating physical proxies (both scanner and manual) returned by shareholders
o Identifying shareholders who will attend the Annual Meeting
o Providing Inspector(s) of Election for the Annual Meeting
o Supporting efforts of any proxy solicitor
o Preparing certified list of record date holders
o Preparing report of final vote
o Providing remote access to proxy tabulation system
o Maintaining an automated link with (i) DTC to redistribute record date Cede &
Co. share positions to
participants and (ii) ADP to receive transmissions of broker votes
o Processing omnibus proxies for respondent banks
CASH DIVIDEND DISBURSEMENT FUNCTIONS
o Up to four quarterly dividends per fiscal year
o Preparing and mailing checks
o Reconciling checks
o Preparing payment register in list form
o Withholding and filing taxes for non-resident aliens and others o Filing
federal tax information returns
o Processing "B" and "C" notices received from the IRS o Mailing required
statements (Form 1099DIV or Form 1042) to registered holders
o Maintaining stop payment files and issuing replacement checks
o Maintaining separate dividend addresses
o Receiving, verifying and posting funds to cover entire dividend distribution
on mailing date of checks
DIVIDEND REINVESTMENT SERVICES
o Opening and maintaining participant accounts
o Processing reinvestment and optional cash payments
o Preparing participant statements of account, after each transaction, showing
activity for current period o Processing liquidations and terminations
according to plan specifications
o Providing periodic investment reports to Client
o Preparing Form 1099B to report sale proceeds
ESCHEATMENT SERVICES
o Taking all necessary steps to establish compliance with the unclaimed
property requirements of all jurisdictions that may have a claim on
escheatable property held by your organization
o Identifying specific records and property subject to reporting based upon
current state statutes, rules, and regulations
o Executing state mandated due diligence mailings for lost property owners as
required, organizing records into acceptable formats for reporting, and
remitting property due each state when and as required
o Obtaining penalty and interest release agreements and indemnification from
future claim agreements (on property remitted) from the states that offer
such agreements
o Identifying all property that has become escheatable since the last filing
date
o Reviewing the applicable state regulations to determine if there have
been any changes in reporting procedures
o Reporting and remitting to each state when and as required
o Executing a mailing to all accounts with uncashed checks or RPO certificates
as required by state laws o Executing SEC mandated lost shareholder database
searches
OTHER SERVICES (OPTIONAL SERVICES - SUBJECT TO ADDITIONAL FEES)*:
o ACH, Direct Deposit Services
o Bank/Broker Distributions
o Cash Dividends
o Confidential Proxy Voting
o Corporate Stock Buy-Backs
o Custodial Services
o Direct Purchase & Dividend Reinvestment Services
o Direct Registration System/Profile Services
o Dividends - special dividends (allowance of twelve yearly)
o Solicitation, processing and maintenance of consents for electronic
distribution of materials
o Electronic distribution of material
o Electronic Proxy Voting (e.g. telephone, internet, intranet)
o Employee Stock Option Plan administration
o Employee Stock Purchase Plan Administration
o Escrow Services
o Exchanges or Tender Offers
o Foreign Tax Re-claim
o Solicitation, processing and maintenance of consents for delivery of materials
to households
o Logistics services including document transportation, fulfillment, printing
and media placement
o Mailing Quarterly or Periodic Reports
o Maintaining Mail Lists
o Odd-Lot Programs
o Proxy Solicitation
o Secondary Offerings or Closings
o Special Meetings
o Standby Rights Agency
o Stock Splits and Stock Dividends
o StockWatch (beneficial owner identification)
o Subscription Agent Services
o Survey Tabulation
o Warrant Agency
Exhibit C
DOCUMENTS AND NOTIFICATIONS TO BE DELIVERED TO MELLON
UPON EXECUTION OF THIS AGREEMENT
Client shall provide Mellon with the following:
1. An adequate supply of Share certificates.
2. A copy of the resolutions adopted by the Board of Trustees of the Trust appointing Client as Transfer Agent and authorizing the appointment of Mellon as Sub-Transfer Agent and/or Registrar and Dividend Disbursing Agent, as the case may be, duly certified by the Secretary or Assistant Secretary of The Trust under the corporate seal.
3. A copy of the Declaration or Trust of the Trust, and all amendments thereto, certified by the Secretary of State of the state of incorporation.
4. A copy of the By-laws of the Trust s amended to date, duly certified by the Secretary of the Trust under the corporate seal.
5. A certificate of the Secretary or an Assistant Secretary of the Trust, under its corporate seal, stating that:
a) this Agreement has been executed and delivered pursuant to the authority of the Trust's Board of Trustees;
b) the attached specimen Share certificate(s) are in substantially the form submitted to and approved by the Trust's Board of Trustees for current use and the attached specimen Share certificates for each Class of Stock with issued and outstanding Shares are in the form previously submitted to and approved by the Trust's Board of Trustees for past use;
c) the attached list of existing agreements pursuant to which Shares have been reserved for future issuance specifying the number of reserved Shares subject to each such existing agreement and the substantive provisions thereof, is true and complete, or no Shares have been reserved for future issuance.
d) each shareholder list provided is true and complete (such certification may state that it is based upon the certification of the predecessor Transfer Agent or predecessor Registrar that prepared the list) or no Shares are outstanding;
e) the name of each stock exchange upon which any of the Shares are listed and the number and identity of the Shares so listed;
f) the name and address of each co-Transfer Agent, Registrar (other than Mellon) or co-Registrar for any of the Shares and the extent of its appointment, or there are no co-Transfer Agents, Registrars (other than Mellon) or co-Registrars for any of the Shares; and
g) the officer(s) of Client, who executed this Agreement as well as any certificates or papers delivered to Mellon pursuant to this Agreement, were validly elected to, and the incumbents of, the offices they purported to hold at the time of such execution and delivery, and that their signatures on all documentation are genuine; and upon which is subscribed a certificate of an officer of Client, other than the officer executing the certificate of the Secretary, stating that the person who executed the certificate of the Secretary was validly elected to, and is the Secretary or an Assistant Secretary of Client and that his signature on the certificate is genuine.
6. A shareholder list, preferably in machine readable format, certified as true and complete by the person preparing the list, for the issued and outstanding Shares, setting forth as to each holder, his/her name and address, tax identification number certified by the shareholder pursuant to requirements of the Internal Revenue Code and applicable regulations, the number of Shares held, the Share certificate numbers and the existence of any stop orders or other transfer restrictions.
7. Opinion of counsel for The Trust, addressed to Mellon, to the effect that:
a) the Shares issued and outstanding on the date hereof have been duly authorized, validly issued and are fully paid and are non-assessable;
b) the Shares issued and outstanding on the date hereof have been duly registered under the Securities Act of 1933, as amended, and such registration has become effective, or are exempt from such registration; and have been duly registered under the Securities Exchange Act of 1934, as amended, or are exempt from such registration;
c) The Trust has paid or caused to be paid all taxes, if any, which were payable upon or in respect of the original issuance of the Shares issued and outstanding on the date hereof; and
d) the execution and delivery of this Agreement and the issuance of the Shares do not and will not conflict with, violate, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, the charter or the by-laws of The Trust, any law or regulation, any order or decree of any court or public authority having jurisdiction, or any mortgage, indenture, contract, agreement or undertaking to which The Trust is a party.
8. A completed Internal Revenue Service Form 2678.
NOTIFICATION OF CHANGES
Client shall promptly notify Mellon of the following:
1. Any change in the name of the Trust, amendment of its declaration of trust or its by-laws;
2. Any change in the title of a Class of Stock from that set forth in the first column of Exhibit A;
3. Any change in the Number of Authorized Shares from that set forth in the second column of Exhibit A;
4. Any change in existing agreements or any entry into new agreements changing the Number of Authorized Shares Reserved for Future Issuance Under Existing Agreements from that listed in the fourth column of Exhibit A hereto;
5. Any change in the number of outstanding Shares subject to stop orders or other transfer limitations;
6. The listing or delisting of any Shares on any stock exchange;
7. The appointment after the date hereof of any co-Sub-Transfer Agent, Registrar (other than Mellon) or any co-Registrar for any of the Shares;
8. The merger of the Trust into, or the consolidation of the Trust with, or the sale or other transfer of the assets of Trust substantially as an entirety to, another person; or the merger or consolidation of another person into or with the Trust; and
9. Any other change in the affairs of Trust of which Mellon must have knowledge to perform properly its duties under this Agreement.
Exhibit D
FEE SCHEDULE
INITIAL TERM OF AGREEMENT: THREE (3) YEARS
---------------
FEES NOT SUBJECT TO INCREASE: THREE (3) YEARS
---------------
(DURING INITIAL TERM ONLY)
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SERVICE FEES
MONTHLY ADMINISTRATIVE FEE $2,000
The above fee will be charged for all services listed in Exhibit B and will be
subject to the following allowances:
Number of active accounts maintained 1000
Number of mailings per year (including one enclosure) 4
Number of reports or analyses 5
Number of lists or labels 5
Number of Inspectors of Election 1
Number of respondent bank omnibus proxies 10
Number of certificates issued and book-entry credits 250
Number of book-entry debits 500
Number of monthly shareholder calls handled via CSR 15
Number of monthly shareholder calls handled via IVR 30
Number of monthly Investor ServiceDirect transactions 100
Number of correspondence items per month 10
Number of due diligence mailings to "lost" shareholders 250
To the extent the above allowances are exceeded or activities occur, the
following unit fees will apply:
For each active account maintained (per year) $5.25
For each inactive account maintained 40% of active account fee
For each option or restricted item processed $25.00
For each legal item processed $50.00
Mailings See Attached
Lists / Labels / Analyses See Attached
For each additional Inspector of Election $1,500.00
For each respondent bank omnibus proxy $100.00
For each DWAC delivery $25.00
For each certificate issued or cancelled $2.00
For each book-entry credit or debit posted $1.50
For each shareholder telephone call via CSR $5.25
For each shareholder telephone call via IVR $1.50
For each correspondence responding to a shareholder $15.00
For each Investor ServiceDirect transaction $1.50
For each stop maintained on a lost certificate (per month) $0.05
For each stop removed from a lost certificate $0.05
For each stop placed on or removed from a restricted security $50.00
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FOR THE PURPOSES OF THIS AGREEMENT THE FOLLOWING DEFINITIONS APPLY:
1. Investor ServiceDirect (ISD) transactions will include any shareholder
transaction initiated through ISD including, but not limited to, the
following:
o Purchasing or selling shares
o Duplicate 1099 requests
o Updating or changing consent to electronic delivery
o Forms or document requests
o Taxpayer certification
o Certificate issuance
o Update dividend reinvestment selection
o Duplicate book entry statement
o PIN change
2. Active and Inactive accounts will be defined as follows:
o Active accounts are defined as accounts with a share
balance greater than zero or outstanding cash balances or
taxable income that has not yet been reported to the
Internal Revenue Service.
o Inactive accounts are defined as accounts with a share
balance equal to zero and no outstanding cash balances and
no taxable income to be reported to the Internal Revenue
Service.
DIVIDEND REINVESTMENT PLAN - SCHEDULE OF FEES
----------------------------------------------- -------------------------- --------------------------- ------------------------
FEE ITEM AMOUNT PAID BY
----------------------------------------------- -------------------------- --------------------------- ------------------------
Plan establishment fee $5,000.00 Client
Annual program administration fee $10,000.00 Client
Fulfillment processing - mail $1.25 Per request Client
-internet $5.00 Per request Client
Reinvestment of Monthly dividend
Per dividend $1.60 / 5% of div to per participant Client
max of $3.50
Reinvestment trading fee $0.03 Per share Participant
Purchase of shares with additional investment
By check $5.00 Per transaction Participant *
By individual debit of bank account $3.50 Per transaction Participant *
By automatic debit of bank account $2.00 Per transaction Participant *
Trading fee $.03 Per share Participant *
Employee file purchases $1.60 Per account Client*
For each payroll site $100.00 Per file per cycle Client
Sale of shares - full or fractional $15.00 Per transaction Participant
Trading fee $.12 Per share Participant
Safekeeping No charge
Duplicate statement - prior year $20.00 Per request Participant
Insufficient funds or rejected automatic debit $35.00 per check or debit Participant
Other services including but not limited to: Per Stock Transfer Agency Contract Client
Certificate Issuance
Transfer of shares
Out of pocket expenses including but not As incurred Client
limited to:
800 number
Forms/brochures
Postage
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LISTS / LABELS / ANALYSES
FEE SCHEDULE
LISTS
Per name listed $0.05
LABELS
Per label printed $0.05
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ANALYSES
Per name passed on data base $0.02
Per name listed in report $0.05
(Minimum charge for each of the above services will be $500.)
MAILING SERVICES
FEE SCHEDULE
ADDRESSING
Addressing mailing medium (per name) $0.05
AFFIXING
Affixing labels (per label) $0.04
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INSERTING
Inserting Enclosures (Machine)
1st Enclosure (per piece) $0.05
2nd Enclosure (per piece) $0.04
Each Enclosure thereafter (per piece) $0.03
|
Inserting Enclosures (Manual)
Charge will be determined based on analysis of work to be performed.
(Minimum charge for any mailing will be $500.)
EXPENSES AND OTHER CHARGES
FEES AND OUT OF POCKET EXPENSES: The cost of stationery and supplies, including but not limited to transfer sheets, dividend checks, envelopes, and paper stock, together with any disbursement for telephone, postage, mail insurance, travel for annual meeting, link-up charges for ADP and tape charges from DTC are billed in addition to the above fees. All charges and fees, out of pocket costs, expenses and disbursements of Mellon are due and payable by Client upon receipt of an invoice from Mellon.
With respect to any shareholder mailing processed by Mellon, client shall, at least one business day prior to mail date, provide immediately available funds sufficient to cover all postage due on such mailing. For any dividend mailing, client shall, at least one business day prior to the mail date, also provide immediately available funds sufficient to pay the aggregate amount of dividends to be paid.
If Client participates in the Direct Registration System, Mellon will provide a "sell" feature for liquidation of book-entry shares held on behalf of a shareholder. Upon receipt of a sell request by the registered shareholder, Mellon Bank, N.A. will process the request and remit the proceeds to the shareholder in the form of a check (less the appropriate fees). The charge for each such sale is $15.00 plus $0.12 per share or, if applicable, the fees quoted in the Client's stock purchase and / or dividend reinvestment plan.
OFFERING ADMINISTRATION FEE: A minimum fee of $5,000 will be imposed for activities associated with initial public offerings (IPO's), secondary offerings and / or closings. The fee covers the coordination of efforts necessary between Mellon, the Client's underwriters, the banknote company and DTC in order to effect the closing. This fee will cover the issuance of up to 200 certificates and /or book-entry credits. Certificates and / or book-entry credits over this amount will be billed at $2.00 each. This fee is in addition to any fees Mellon may charge for coordination of selling shareholders, custody services and / or escrow services.
CONVERSION: There may be a charge for converting the Client's files to Mellon's system. Mellon will review the conversion requirements to determine if extraordinary efforts will be required to complete the conversion, such as account history conversion or file format conversion. Any charge will be discussed with the Client prior to work commencing. In addition, if an out-of-proof condition exists at the time of conversion, and such condition is not resolved within 90 days of such conversion, Client agrees to provide Mellon with funds or shares sufficient to resolve the out-of-proof condition promptly after the 90th day.
DECONVERSION FEE: In the event Client requests that Mellon provide records to a successor agent, in connection with the expiration or termination of this Agreement, Client shall pay Mellon a fee for deconversion services (e.g., providing shareholder lists and files, producing and shipping records, answering successor agent inquiries). This fee will be based on Mellon's then-current deconversion fee schedule. Mellon may withhold the Client's records, reports and unused certificate stock from a successor agent pending the Client's payment in full of all fees and expenses owed to Mellon under this Agreement.
LEGAL, TECHNOLOGICAL EXPENSES: Certain expenses may be incurred in resolving legal matters that arise in the course of performing services hereunder. This may result in a separate charge to cover Mellon's expenses (including the cost of external or internal counsel) in resolving such matters. Client agrees to reimburse Mellon for such expenses provided that any legal expenses charged to the Client relate directly and solely to Client legal matters and shall be reasonable.
In the event any Federal regulation and/or state or local laws are enacted which require Mellon to make any technological improvements and/or modifications to its current system, Client shall compensate Mellon, on a pro rata basis proportionate to the Client's registered shareholder base, for reasonable costs associated with making such required technological improvements and/or modifications; provided that Mellon use its best efforts to seek Client's approval at least 120 days' in advance of any such, such approval not to be unreasonably withheld.
RECORD STORAGE: Monthly fee of $2.50 per box, with a minimum charge of $50.00.
LOST SHAREHOLDER SERVICES: A fee of $3.00 will be charged for each lost account searched per database searched. A fee of $2.50 will be charged per account for each state mandated due diligence mailing.
OTHER SERVICES: Fees for any services provided to Client by or on behalf of Mellon hereunder that are not set forth in EXHIBIT B hereto or in this EXHIBIT D will be based on Mellon's standard fees at the time such services are provided or, if no standard fees have been established, an appraisal of the work to be performed.
WWW.HALEDORR.COM
60 STATE STREET O BOSTON, MA 02109
617-526-6000 O FAX 617-526-5000
April 24, 2002
Pioneer High Income Trust
60 State Street
Boston, Massachusetts 02109
Ladies and Gentlemen:
Pioneer High Income Trust (the "Trust") was established as a Delaware business trust under an Agreement and Declaration of Trust dated January 30, 2002 (the "Declaration of Trust"). The beneficial interests thereunder are represented by transferable shares of beneficial interest, no par value.
The Trustees have the powers set forth in the Declaration of Trust, subject to the terms, provisions and conditions therein provided. Pursuant to Article V, Section 2 of the Declaration of Trust, the number of shares of beneficial interest authorized to be issued under the Declaration of Trust is unlimited and the Trustees are authorized to divide the shares into one or more series of shares and one or more classes thereof as they deem necessary or desirable. Pursuant to Article V, Section 3 of the Declaration of Trust, the Trustees are empowered in their discretion to issue shares of any series for such amount and type of consideration, including cash or securities, and on such terms as the Trustees may authorize, all without action or approval of the shareholders. As of the date of this opinion, the Trustees have divided the shares of the Trust into one class of shares.
We have examined the Declaration of Trust and By-Laws, each as amended from time to time, of the Trust, and such other documents as we have deemed necessary or appropriate for the purposes of this opinion, including, but not limited to, originals, or copies certified or otherwise identified to our satisfaction, of such documents, Trust records and other instruments. In our examination of the above documents, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as certified of photostatic copies.
Any reference to "our knowledge", to any matter "known to us", "coming to our attention" or "of which we are aware" or any variation of any of the foregoing shall mean the conscious awareness of the attorneys in this firm who have rendered substantive attention to the preparation of the Trust's Registration Statement on Form N-2 or any amendments thereto, of the existence or absence of any facts which would contradict the opinions set forth below. We have not undertaken any independent investigation to determine the existence or absence of such facts, and no inference as to our knowledge of the existence or absence of such facts should be drawn from the fact of our representation of the Trust. Without limiting the foregoing, we have not examined any dockets or
Pioneer High Income Trust
April 24, 2002
records of any court, administrative tribunal or other similar entity, or any electronic or computer databases, in connection with our opinions expressed below.
Our opinions below are qualified to the extent that they may be subject to or affected by (i) applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the rights and remedies of creditors generally, (ii) statutory or decisional law concerning recourse by creditors to security in the absence of notice or hearing and (iii) duties and standards imposed on creditors and parties to contracts, including, without limitation, requirements of good faith, reasonableness and fair dealing. Further, we do not express any opinion as to (i) the availability of the remedy of specific performance or any other equitable remedy upon breach of any provision of any agreement whether applied by a court of law or equity, (ii) the successful assertion of any equitable defense, or (iii) the right of any party to enforce the indemnification or contribution provisions of any agreement.
In rendering the opinion below, insofar as it relates to the good standing and valid existence of the Trust, we have relied solely on a certificate of the Secretary of State of the State of Delaware, dated as of a recent date, and such opinion is limited accordingly and is rendered as of the date of such certificate.
This opinion is limited to the Delaware Business Trust Act, and we express no opinion with respect to the laws of any other jurisdiction or to any other laws of the State of Delaware. Further, we express no opinion as to compliance with any state or federal securities laws, including the securities laws of the State of Delaware.
Our opinion below, as it relates to the non-assessability of the shares of the Trust, is qualified to the extent that any shareholder is, was or may become a named Trustee of the Trust. It is also qualified to the extent that, pursuant to Section 2 of Article VIII of the Declaration of Trust, the Trustees have the power to cause shareholders, or shareholders of a particular series, to pay certain custodian, transfer, servicing or similar agent charges by setting off the same against declared but unpaid dividends or by reducing share ownership (or by both means).
Subject to the foregoing, we are of the opinion that the Trust is a duly organized and validly existing business trust in good standing under the laws of the State of Delaware and that the shares of beneficial interest of the Trust, when issued in accordance with the terms, conditions, requirements and procedures set forth in the Declaration of Trust, the Trust's Registration Statement on Form N-2 and the Underwriting Agreement between the Trust and Merrill Lynch Pierce Fenner & Smith, Incorporated, as representatives of the underwriters named therein, will constitute legally and validly issued, fully paid and non-assessable shares of beneficial interest in the Trust, subject to compliance with the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and the applicable state laws regulating the sale of securities.
We are opining only as to the specific legal issues expressly set forth herein, and no opinion should be inferred as to any other matters. We are opining on the date hereof as to the law in effect on the date hereof, and we disclaim any obligation to advise you of any change in any of these sources of law or subsequent legal or factual developments that might affect any matters or opinions set forth herein.
Pioneer High Income Trust
April 24, 2002
This opinion is furnished to you solely for your use and may not be quoted to or relied upon by any other person or entity or used for any other purpose, without our prior written consent.
We consent to your filing this opinion with the Securities and Exchange Commission (the "Commission") as an exhibit to any amendments to the Trust's registration statement with the Commission. Except as provided in this paragraph, this opinion may not be relied upon by, or filed with, any other parties or for any other purpose.
Very truly yours,
/s/ Hale and Dorr LLP Hale and Dorr LLP |
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the use of our report dated April 23, 2002, in Pre-Effective Amendment Number 2 to the Registration Statement (Form N-2 No. 333-83402 and 811-21043) of Pioneer High Income Trust.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
April 24, 2002
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SHARE PURCHASE AGREEMENT
This Agreement is made as of the 18th day of March, 2002 between Pioneer Investment Management, Inc., a Delaware corporation ("PIM"), and Pioneer High Income Trust, a Delaware business trust (the "Fund").
WHEREAS, the Fund proposes to issue and sell common shares of beneficial interest (the "Shares") to the public pursuant to a registration statement on Form N-2 (the "Registration Statement") filed with the Securities and Exchange Commission;
WHEREAS the Fund wishes to sell to PIM, and PIM wishes to purchase from the Fund, $100,003 of shares of beneficial interest of the Fund (6,981 shares at a purchase price of $14.325 per share (collectively, the "Shares")); and
WHEREAS, PIM is purchasing the Shares for the purpose of providing the initial capitalization of the Fund as required by the Investment Company Act of 1940;
NOW, THEREFORE, the parties hereto agree as follows:
1. Simultaneously with the execution of this Agreement, PIM is delivering to the Fund a check in the amount of $100,003 in full payment for the Shares.
2. PIM agrees that it is purchasing the Shares for investment and has no present intention of redeeming or reselling the Shares.
3. PIM further agrees that it may not withdraw the Shares from the Fund for the first two years and at a rate, which at any time during the Fund's next three years of operations, exceeds in the aggregate $2,777.86 per month.
Executed as of the date first set forth above.
PIONEER INVESTMENT MANAGEMENT, INC.
/S/ DANIEL T. GERACI_________ By: Daniel T. Geraci Its: President |
PIONEER HIGH INCOME TRUST
/S/ DANIEL T. GERACI_________ By: Daniel T. Geraci Its: Executive Vice-President |