The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire Proxy Statement/Prospectus, including the form of
Agreement and Plan of Reorganization attached as EXHIBIT A-2, because it
contains details that are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco California Tax-Free Income Fund to Pioneer California Tax
Free Income Fund
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Business A series of Safeco Tax-Exempt Bond Trust, a A newly organized series of Pioneer Series
diversified open-end management investment Trust II, an open-end management investment
company organized as a Delaware statutory company registered under the Investment
trust. Company Act and organized as a Delaware
statutory trust.
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Net assets as of $82.4 million None. The Pioneer California Tax Free Income
June 30, 2004 Fund is newly organized and does not expect to
commence investment operations until the
Reorganization occurs.
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Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers (until August 2, 2004): Portfolio Managers:
Stephen C. Bauer (since 1983) Day-to-day management of the Fund's
President and Director, SAM portfolio will be the responsibility of a team of
fixed income portfolio managers led by
Mary Metastasio (since 2003) Kenneth J. Taubes.
Vice President, SAM
Mr. Taubes joined Pioneer as a senior vice
Currently Pioneer is investment adviser to president in September 1998 and has been an
Safeco California Tax-Free Income Fund. The investment professional since 1982.
Portfolio Managers of Pioneer California Tax
Fund, as indicated in the next column,
currently manage your Safeco Fund.
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Investment objective Each Fund seeks to provide as high a level of current interest income exempt from federal income
tax and California state personal income tax as is consistent with the relative stability of
capital.
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8
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Primary investments To achieve its investment objective, each Fund invests primarily in investment-grade municipal
bonds issued by the state of California or its political subdivisions and having average maturities
of 15 years or longer. Under normal circumstances, each Fund invests:
o At least 80% of its assets in securities the interest on which is exempt from federal income tax
and California personal income tax
o At least 65% of its assets in investment-grade municipal bonds with a maturity of more than
one year
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Pioneer California Tax Free Income Fund's
investments may have fixed or variable
principal payments and all types of interest
rate payment and reset terms, including
fixed and floating rates, inverse floating
rate, zero coupon, contingent, deferred and
payment in kind and auction rate features.
Pioneer California Tax Free Income Fund
may invest in tax-exempt securities of
issuers located outside the state of
California. The Fund will not invest in
securities the interest on which is a tax
preference item for purposes of the federal
alternative minimum tax.
Pioneer California Tax Free Income Fund
may invest in municipal securities of any
maturity, although under normal
circumstances it is anticipated that the Fund
will generally invest in longer-term
investments. Municipal securities with
longer maturities are generally more volatile
than other fixed income securities with
shorter maturities.
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Investment strategies When evaluating a bond to buy, SAM Pioneer considers both broad economic
considered among other things: factors and issuer specific factors in selecting
a portfolio designed to achieve the Fund's
o Yield investment objective. In assessing the
o Maturity appropriate maturity and rating weighting of
o Structural features such as an issuer's right the Fund's portfolio, Pioneer considers a
to buy the bond back at a stated price (a variety of factors that are expected to
"call") or the Fund's right to require the influence economic activity and interest rates.
issuer to buy the bond back at a stated price These factors include fundamental economic
(a "put") indicators, such as the rates of economic
o Credit quality (including the underlying rating growth and inflation, Federal Reserve
of insured bonds) monetary policy and the relative value of the
o The project the issuer is financing U.S. dollar compared to other currencies.
o The original offering price
o The amount of discount off or premium on Once Pioneer determines the preferable portfolio
the stated principal amount of the bond characteristics, Pioneer selects individual
represented by the price offered securities based upon the terms of the securities
o Whether the bond appears to offer the best (such as yields compared to U.S. Treasuries or
overall value when compared to other comparable issues), liquidity and rating and
available bonds issuer diversification.
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9
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Investment strategies
(continued) SAM historically favored long-term maturity Pioneer also employs due diligence and
bonds in essential services that offer a fundamental research, an evaluation of the
significant degree of protection against issuer issuer based on its financial statements and
repurchase rights prior to maturity and good operations, to assess an issuer's credit quality,
value relative to their peers. SAM may use the taking into account financial condition, future
rating services provided by Moody's, S&P, or capital needs and potential for change in
Fitch. Bond ratings indicate an issuer's financial rating. In making these portfolio decisions,
strength and ability to meet its debt obligations. Pioneer relies on the knowledge, experience
and judgment of its staff who have access to
Safeco California Tax-Free Income Fund sold a wide variety of research.
bonds when:
o They become fully valued
o More attractively valued bonds become
available;
o Cash is needed to meet shareholder
redemptions
Because it often takes years for attractive
relative valuations to be recognized by the
municipal securities market, turnover of the
Fund's portfolio can be low.
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Other investments Safeco California Tax-Free Income Fund will Pioneer California Tax Free Income Fund may
limit its investment in municipal obligations the invest up to 20% of its net assets in securities
interest on which is payable from the revenues of other investment companies, investment
of similar types of projects to less than 25% of grade commercial paper, U.S. government
each Funds' total assets. As a matter of securities, U.S. or foreign bank instruments and
operating policy, "similar types of projects" repurchase agreements.
may include sports, convention or trade show
facilities; airports or mass transportation; Pioneer California Tax Free Income Fund may
sewage or solid waste disposal facilities; or air invest up to 10% of its net assets in debt
and water pollution control projects. securities rated below investment grade or, if
unrated, of equivalent quality as determined by
Safeco California Tax-Free Income Fund may Pioneer. Debt securities rated below investment
invest in any of the following short-term, grade are commonly referred to as "junk
tax-exempt obligations: municipal notes of bonds" and are considered speculative. Below
issuers rated, at the time of the purchase, investment grade debt securities involve greater
within one of the three highest grades risk of loss, are subject to greater price
assigned by a nationally recognized statistical volatility and are less liquid, especially during
rating organization ("NRSRO"); unrated periods of economic uncertainty or change,
municipal notes offered by issuers having than higher quality debt securities.
outstanding municipal bonds rated within one
of the three highest grades assigned by an Pioneer California Tax Free Income Fund may
NRSRO; notes issued by or on behalf of invest up to 10% of its net assets in inverse
municipal issuers that are guaranteed by the floating rate obligations (a type of derivative
U.S. government; tax-exempt commercial paper instrument). Inverse floating rate obligations
assigned one of the two highest grades by an represent interests in tax-exempt bonds. The
NRSRO; certificates of deposit issued by banks interest rate on inverse floating rate
with assets of $1,000,000,000 or more; and obligations will generally decrease as short-
municipal obligations that have a maturity of term interest rates increase, and increase as
one year or less from the date of purchase. short-term rates decrease. Due to their
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10
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Other investments (continued) Safeco California Tax-Free Income Fund may leveraged structure, the sensitivity of the
invest in obligations of the U.S. government, market value of an inverse floating rate
its agencies or instrumentalities or in qualified obligation to changes in interest rates is
repurchase agreements, the net interest on generally greater than a comparable
which is taxable for federal income tax long-term bond issued by the same
purposes. municipality and with similar credit
quality, redemption and maturity
provisions. Inverse floating rate
obligations may be volatile and involve
leverage risk.
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Temporary defensive Safeco California Tax-Free Income Fund may Pioneer California Tax Free Income Fund may
strategies hold cash or as a temporary defensive invest all or part of its assets in
measure when market conditions so warrant. securities with remaining maturities of
less than one year, cash equivalents or may
hold cash.
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Diversification Each Fund is diversified for the purpose of the Investment Company Act, and each Fund is
subject to diversification requirements under the Internal Revenue Code of 1986, as amended
("the Code").
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Industry concentration Each Fund will not make investments that will result in the concentration (as that term may be
defined in the Investment Company Act, any rule or order thereunder, or SEC staff interpretation
thereof) of its investments in the securities of issuers primarily engaged in the same industry,
provided that this restriction does not limit each Fund from investing in obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
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Restricted and illiquid If immediately after and as a result of such Pioneer California Tax Free Income Fund
securities action the value of the following securities, in will not invest more than 10% of its net
the aggregate, would exceed 10% of Safeco assets in illiquid and other securities
California Tax-Free Income Fund's net assets, that are not readily marketable. Repurchase
the Fund will not (i) purchase securities for agreements maturing in more than seven days
which there is no readily available market, (ii) will be included for purposes of the
purchase time deposits maturing in more than foregoing limit. Securities subject to
seven days, (iii) purchase over-the-counter restrictions on resale under the 1933 Act,
(OTC) options or hold assets set aside to cover are considered illiquid unless they are
OTC options written by the Fund, (iv) enter into eligible for resale pursuant to Rule 144A
repurchase agreements maturing in more than or another exemption from the registration
seven days, or (v) invest in interests in real requirements of the 1933 Act and are
estate investment trusts which are not readily determined to be liquid by Pioneer.
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
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Borrowing Safeco California Tax-Free Income Fund may Pioneer California Tax Free Income Fund may
borrow money (i) from banks or (ii) by engaging not borrow money, except on a temporary
in reverse repurchase agreements. basis and to the extent permitted by
applicable law, as amended and interpreted
or modified from time to time by any
regulatory authority having jurisdiction.
Under current regulatory requirements, the
Fund may: (a) borrow from banks or through
reverse repurchase agreements in an amount
up to 33 1/3% of the fund's total assets
(including the amount borrowed); (b) borrow
up to an additional 5%
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11
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Borrowing (continued) of the fund's assets for temporary
purposes; (c) obtain such short-term
credits as are necessary for the clearance
of portfolio transactions; (d) purchase
securities on margin to the extent
permitted by applicable law; and (e) engage
in transactions in mortgage dollar rolls
that are accounted for as financings.
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Lending Safeco California Tax-Free Income Fund may Pioneer California Tax Free Income Fund may
lend securities to qualified institutional investors not make loans, except that the Fund may
with a value of up to 33% of the Fund's total (i) lend portfolio securities in accordance
assets. with the Fund's investment policies, (ii)
enter into repurchase agreements, (iii)
purchase all or a portion of an issue of
publicly distributed debt securities, bank
loan participation interests, bank
certificates of deposit, bankers'
acceptances, debentures or other
securities, whether or not the purchase is
made upon the original issuance of the
securities, (iv) participate in a credit
facility whereby the Fund may directly lend
to and borrow money from other affiliated
funds to the extent permitted under the
Investment Company Act or an exemption
therefrom, and (v) make loans in any other
manner consistent with applicable law, as
amended and interpreted or modified from
time to time by any regulatory authority
having jurisdiction.
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Derivative instruments Safeco California Tax-Free Income Fund may Pioneer California Tax Free Income Fund may
not purchase securities on margin. However, use futures and options on securities,
the Fund may (i) obtain short-term credits as indices and currencies, forward currency
necessary to clear its purchases and sales of exchange contracts and other derivatives.
securities, and (ii) make margin deposits in The Fund does not use derivatives as a
connection with its use of financial options and primary investment technique and generally
futures, forward and spot currency contracts, limits their use to hedging. However, the
swap transactions and other financial contracts Fund may use derivatives for a variety of
or derivative instruments. non-principal purposes, including:
o As a hedge against adverse changes in
stock market prices, interest rates or
currency exchange rates
o As a substitute for purchasing or selling
securities
o To increase the Fund's return as a non-
hedging strategy that may be considered
speculative
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Other investment policies and As described above, the Funds have substantially similar principal investment strategies and
restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and non-
fundamental investment restrictions, see the SAI.
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12
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Buying, Sellingand Exchange Shares
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Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer California
of Safeco California Tax-Free Income Fund are Tax Free Income Fund you receive in the
subject to a 4.50% front-end sales charge. Reorganization will not be subject to any
sales charge. Moreover, if you own shares
A contingent deferred sales charge of up to in your own name as of the closing of the
5.00% if you redeem Class B shares within six Reorganization (i.e., not in the name of a
years of purchase. broker or other intermediary) or own shares in
the name of an omnibus account provider as
A contingent deferred sales charge of up to of the closing of the Reorganization that
1.00% if you redeem Class C shares within agrees with the Pioneer Fund to distinguish
one year of purchase. beneficial holders in the same manner and
maintain your account, you may purchase
Purchases of Investor Class shares of the Fund Class A shares of Pioneer California Tax Free
are not subject to a sales load. Income Fund and Class A shares of any fund
in the Pioneer family of funds through such
The Fund assesses a mandatory redemption account in the future without paying any
fee of 2%, as a percentage of the amount sales charge.
redeemed or exchanged, on Class A and
Investor Class shares held less than 30 days. Except as described above, Class A shares of
Pioneer California Tax Free Income Fund are
subject to a front-end sales charge of up
to 4.50%.
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Management and other fees Safeco California Tax-Free Income Fund pays Pioneer California Tax Free Income Fund will
an advisory fee on a monthly basis at an pay Pioneer an advisory fee as follows: 0.50%
annual rate as follows: of the fund's average daily net assets on the
first $250 million, 0.45% on assets greater
$0-$250,000,000: 0.50 of 1% than $250 million to $750 million and 0.40%
$250,000,001-$750,000,000: 0.45 of 1% on assets greater than $750 million. The fee is
Over $750,000,00: 0.40 of 1% computed daily and paid monthly.
SAM serves as administrator and fund In addition, the Fund will reimburse Pioneer for
accounting agent for Safeco California Tax-Free certain fund accounting and legal expenses
Income Fund. The Fund pays SAM an incurred on behalf of the Fund and pays a
administrative services fee of 0.05% of the separate shareholder servicing/transfer agency
Fund's average daily net assets up to the first fee to Pioneer Investment Management
$200,000,000 and 0.01% of its net assets Shareholder Services, Inc. ("PIMSS"), an
thereafter, and an accounting fee of 0.04% affiliate of Pioneer.
of the Fund's average daily net assets up to
the first $200,000,000 and 0.01% of its net Pioneer has agreed until the second anniversary
assets thereafter. of the closing of the Reorganization to limit the
expenses (excluding extraordinary expenses) of
During its most recent fiscal year, Safeco the Investor Class to 0.63% of the average daily
California Tax-Free Income Fund paid aggregate net assets attributable to the Investor Class.
advisory and administration fees at an average
rate of 0.59% of average daily net assets. The Investor Class shares to be issued in the
Reorganization will convert to Class A shares
SAM had contractually agreed until April 30, after two years. Class A shares will have
2009, to pay certain fund operating expenses higher expenses per share than Investor Class
(but not all of the operating expenses of the shares due to the Rule 12b-1 Plan. In
Fund) that exceeded the rate of 0.40% per addition, although Pioneer has agreed to limit
annum of the Fund's average daily net assets.
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13
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Management and other fees This arrangement included all Fund operating the expenses attributable to Investor Class
(continued) expenses except management fees, Rule 12b-1 shares, Pioneer is not required to limit the
fees, brokerage commissions, interest, and expenses attributable to Class A shares.
extraordinary expenses.
In 2003, SAM began voluntarily reimbursing the
Fund to the extent that its total expenses
exceeded the rate of 0.86% per annum of the
Fund's average daily net assets for Class A
shares, 1.61% per annum for Class B and Class
C shares, and 0.63% per annum for Investor
Class shares.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Class A shares were 1.06%. After giving effect
to the voluntary expense reimbursement, the
operating expenses for Class A shares
were 0.86%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
B shares were 1.76%. After giving effect to
the voluntary expense reimbursement, the
operating expenses for Class B shares
were 1.61%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
C shares, after giving effect to the contractual
expense reimbursement, were 1.90%, and
without giving effect to the expense limitation
were 4.09%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class C shares were 1.61%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares were 0.75%. After giving
effect to the voluntary expense reimbursement,
the operating expenses for Investor Class
shares were 0.63%.
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Distribution and service Investor Class shares of the Pioneer Fund are not subject to a Rule 12b-1 fee. Pioneer Investor
(12b-1) fee Class shares will convert into Class A shares after two years. Class A shares of each Fund are
subject to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
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14
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Safeco California Tax-Free Income Fund Pioneer California Tax Free Income Fund
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Buying shares You may buy shares of Safeco California You may buy shares from any investment firm
Tax-Free Income Fund directly through Safeco that has a sales agreement with PFD, Pioneer
Securities, the Fund's principal underwriter or California Tax Free Income Fund's distributor.
through brokers, registered investment Existing shareholders of Safeco California
advisers, banks and other financial institutions Tax-Free Income Fund who own shares in their
that have entered into selling agreements with own name as of the closing of the
the Fund's principal underwriter, as described Reorganization (i.e., not in the name of a
in the Fund's prospectus. broker or other intermediary) or own shares in
the name of an omnibus account provider as of
Certain account transactions may be done the closing of the Reorganization that agrees
by telephone. with the Pioneer Fund to distinguish beneficial
holders in the same manner and who maintain
their accounts may buy shares of any fund in
the Pioneer family of funds through such
accounts in the future without paying sales
charges.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
California Tax Free Income Fund by telephone
or online.
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Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer
acquire through dividend reinvestment or other California Tax Free Income Fund without
fund distributions. incurring any fee on the exchange with the
more than 62 other Pioneer Funds. Your
Certain account transactions may be done by exchange would be for Class A shares, which
telephone. would be subject to a Rule 12b-1 fee. An
exchange generally is treated as a sale and a
new purchase of shares for federal income
tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer California Tax
Free Income Fund for shares of other Pioneer
Funds by telephone or online.
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Selling shares Investor Class shares will be sold at net asset value per share next calculated after the Fund
receives your request in good order.
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You may sell your shares by contacting Safeco Normally, your investment firm will send your
California Tax-Free Income Fund directly in request to sell shares to PIMSS. You can also
writing or by contacting a financial intermediary sell your shares by contacting the Fund directly
as described in the Fund's prospectus. if your account is registered in your name.
If the account is established in the shareholder's
own name, shareholders may also redeem
shares of Pioneer California Tax Free Income
Fund by telephone or online.
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15
Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks. You
could lose money on your investment or not make as much as if you invested
elsewhere if:
o Interest rates go up, causing the value of the Fund's investments to
decline
o The issuer of a security owned by the Fund defaults on its obligation
to pay principal and/or interest or has its credit rating downgraded
o New federal or state legislation adversely affects the tax-exempt
status of securities held by either Fund or the financial ability of
municipalities to repay these obligations
o The issuer of a security owned by either Fund may not be able to make
timely payments because of a general economic downturn or increased
governmental costs
o Because the Funds concentrate their investments in a single state,
there may be more fluctuation in the value of its securities than is
the case for mutual funds whose portfolios are more geographically
diverse.
o Because both Funds invest primarily in securities issued by California
and its municipalities, they are more vulnerable to unfavorable
developments in California than are funds that invest in municipal
securities of many states. Unfavorable developments in any economic
sector may adversely affect the overall California municipal market
o The investment adviser's judgment about the credit quality,
attractiveness or relative value of a particular security proves to be
incorrect
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
Investing in mutual fund shares is not the same as making a bank deposit.
Your investment is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. You could lose money by investing
in either Fund.
Past Performance
Set forth below is performance information for Safeco California Tax-Free
Income Fund. The bar charts show how Safeco California Tax-Free Income Fund's
total return (not including any deduction for sales charges) has varied from
year to year for each full calendar year. The tables show average annual total
return (before and after taxes) for Safeco California Tax-Free Income Fund over
time for each class of shares (including deductions for sales charges, if
applicable) compared with a broad-based securities market index. The bar chart
gives an indication of the risks of investing in Safeco California Tax-Free
Income Fund, including the fact that you could incur a loss and experience
volatility of returns year to year. Past performance before and after taxes
does not indicate future results. Because Pioneer California Tax Free Income
Fund is a newly organized mutual fund, it has no past performance.
Safeco California Tax-Free Income Fund -- Investor Class
Calendar Year Total Returns*
* During the period shown in the bar chart, Safeco California Tax-Free Income
Fund's highest quarterly return was 10.59% for the quarter ended March 31,
1995, and the lowest quarterly return was -6.16% for the quarter ended March
31, 1994.
16
Safeco California Tax-Free Income Fund
Average Annual Total Returns as of December 31, 2003
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1 Year 5 Years 10 Years
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Safeco California Tax-Free Income Fund, Class A shares
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Return Before Taxes 0.05% 3.84% 5.25%
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Return After Taxes on Distributions(1) -0.01% 3.74% 5.07%
----------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 1.51% 3.85% 5.07%
----------------------------------------------------------------------------------------------------
Safeco California Tax-Free Income Fund, Class B shares
----------------------------------------------------------------------------------------------------
Return Before Taxes -1.04% 3.68% 5.26%
----------------------------------------------------------------------------------------------------
Safeco California Tax-Free Income Fund, Class C shares
----------------------------------------------------------------------------------------------------
Return Before Taxes 2.97% 4.02% 5.16%
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Safeco California Tax-Free Income Fund, Investor Class shares
----------------------------------------------------------------------------------------------------
Return Before Taxes 4.97% 5.10% 5.96%
----------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 4.91% 5.00% 5.78%
----------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 4.87% 4.99% 5.74%
----------------------------------------------------------------------------------------------------
Lehman Brothers Long Municipal Bond Index(2)
(reflects no deduction for fees, taxes or expenses) 6.13% 5.95% 6.40%
----------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown.
(2) The Lehman Brothers Long Municipal Bond Index, an unmanaged index of bonds
with a minimum credit rating of BAA3, issued as part of a deal of at least
$50 million, having an amount of at least $5 million and maturing in 22 or
more years, is for reference only, is not limited to California issuers and
does not mirror the Fund's investments.
The most recent portfolio manager's discussion of the Safeco Fund's
performance is attached as Exhibit D.
The Funds' Fees and Expenses
Shareholders of both Funds pay various fees and expenses, either directly
or indirectly. The tables below show the fees and expenses that you would pay
if you were to buy and hold shares of each Fund. The expenses in the tables
appearing below are based on (i) for Safeco California Tax-Free Income Fund,
the expenses of Safeco California Tax-Free Income Fund for the period ended
December 31, 2003 and (ii) for Pioneer California Tax Free Income Fund,
estimated expenses of Pioneer California Tax Free Income Fund. Future expenses
for all share classes may be greater or less.
Pro Forma
Safeco Pioneer
Safeco Safeco Safeco California California
California California California Tax-Free Tax Free
Tax-Free Tax-Free Tax-Free Income Fund Income Fund
Income Fund Income Fund Income Fund Investor Investor
Shareholder transaction fees Class A Class B Class C Class Class(9)
(paid directly from your investment) ------------- ------------- ------------- ------------- ------------
Maximum sales charge (load) when you buy shares
as a percentage of offering price ........................ 4.50%(6) None None None None(1)
Maximum deferred sales charge (load) as a percentage
of purchase price or the amount you receive when you sell
shares, whichever is less ................................ None 5.00%(7) 1.00%(8) None None
Redemption fees for shares held less than 30 days ......... 2.00% None None 2.00% N/A
Wire redemption fee ....................................... $ 204 $ 204 $ 204 $ 204 $ 10
Annual low balance fee .................................... $ 125 $ 125 $ 125 $ 125 N/A
17
Pro Forma
Safeco Pioneer
Safeco Safeco Safeco California California
California California California Tax-Free Tax Free
Tax-Free Tax-Free Tax-Free Income Fund Income Fund
Income Fund Income Fund Income Fund Investor Investor
Shareholder transaction fees Class A Class B Class C Class Class(9)
(paid directly from your investment) ------------- ------------- ------------- ------------- ------------
Annual fund operating expenses (deducted from
fund assets) (as a % of average net assets)
Management fee .................................. 0.50% 0.50% 0.50% 0.50% 0.50%
Distribution and service (12b-1) fee ............ 0.25% 1.00% 1.00% None None
Other expenses .................................. 0.31% 0.26% 2.59% 0.25% 0.26%
Total fund operating expenses ................... 1.06% 1.76% 4.09% 0.75% 0.76%
Expense reimbursement / reduction ............... None(2) None(2) 2.19%(2) None(2) 0.13%(3)
Net fund operating expenses ..................... 1.06% 1.76% 1.90% 0.75% 0.63%
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer California Tax Free Income Fund through the Reorganization. In
addition, shareholders of your Safeco Fund who own shares in their own name
as of the closing of the Reorganization (i.e., not in the name of a broker
or other intermediary) or own shares in the name of an omnibus account
provider that agrees with the Pioneer Fund to distinguish beneficial
holders in the same manner and who maintain their accounts may purchase
Class A shares of Pioneer California Tax Free Income Fund or of any fund in
the Pioneer family of funds through such account in the future without
paying this sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
California Tax-Free Income Fund for certain fund operating expenses (but
not all of the operating expenses of the Fund) that exceeded the rate of
0.40% per annum of the Fund's average daily net assets. This arrangement
included all fund operating expenses except management fees, Rule 12b-1
fees, brokerage commissions, interest, and extraordinary expenses. In 2003,
SAM began voluntarily reimbursing the Fund to the extent that its total
expenses exceeded the rate of 0.86% per annum of the Fund's average daily
net assets for Class A shares, 1.61% per annum for Class B and Class C
shares, and 0.63% per annum for Investor Class shares. The above table
reflects "contractual" expense reimbursements from SAM, if any, but does
not reflect "voluntary" expense reimbursements by SAM.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer California
Tax Free Income Fund to 0.63% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once each year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after six years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares.
The hypothetical example below helps you compare the cost of investing in each
Fund. It assumes that: (a) you invest $10,000 in each Fund for the time periods
shown, (b) you reinvest all dividends and distributions, (c) your investment
has a 5% return each year, (d) each Fund's gross operating expenses remain the
same, (e) the expense limitations are in effect for five years for Safeco
California Tax-Free Income Fund and two years for Pioneer California Tax Free
Income Fund and (f) and the Investor Class shares of Pioneer California
Tax-Free Income Fund convert to Class A shares after two years. The examples
are for comparison purposes only and are not a representation of either Fund's
actual expenses or returns, either past or future.
18
Example
Safeco California Tax-Free Income Fund
Class A shares
Year 1 ...................... $ 553
Year 3 ...................... $ 772
Year 5 ...................... $1,008
Year 10 ..................... $1,686
Class B shares With redemption Without redemption
Year 1 ...................... $ 679 $ 179
Year 3 ...................... $ 854 $ 554
Year 5 ...................... $1,154 $ 954
Year 10 ..................... $1,719 $1,719
Class C shares With redemption Without redemption
Year 1 ...................... $ 293 $ 193
Year 3 ...................... $ 597 $ 597
Year 5 ...................... $1,026 $1,026
Year 10 ..................... $2,306 $2,306
Investor Class shares
Year 1 ...................... $ 77
Year 3 ...................... $ 240
Year 5 ...................... $ 417
Year 10 ..................... $ 930
Pro Forma Pioneer California Tax Free Income Fund
Investor Class shares
Year 1 ...................... $ 64
Year 3 ...................... $ 265
Year 5 ...................... $ 547
Year 10 ..................... $1,350
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco California Tax-Free Income Fund. The Trustees considered
the following matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Fund until August 2, 2004, was
acquired by Symetra. Symetra informed the Trustees that it did not intend to
continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the resources of Pioneer. At June 30, 2004, Pioneer managed over
62 investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutional and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market
fund that will be available to your Safeco Fund's shareholders through
exchanges. In addition, Pioneer offers shareholders additional options for
their accounts, including the ability to transact and exchange shares over the
telephone or online and the ability to access account values and transaction
history in all of the shareholder's direct accounts in the Pioneer Funds over
the telephone or online.
Third, Pioneer's commitment until the second anniversary of the
Reorganization to limit the expenses (excluding extraordinary expenses) of the
Investor Class of Pioneer California Tax Free Income Fund to 0.63% of average
daily net assets. This expense ratio is lower than both the gross expenses and
expenses net of expense reimbursement of the Class A shares and lower than the
net expenses of Investor Class shares of your Safeco Fund. Although you will
experience higher expenses once the Investor Class shares convert to Class A
shares after two years, your expenses will remain the same until the second
anniversary of the Reorganization.
Fourth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account
19
in the future or may exchange those shares for Class A shares of another
Pioneer Fund or purchase Class A share of another Pioneer Fund without paying
any sales charge.
Fifth, the Investor Class shares of Pioneer California Tax Free Income
Fund received in the Reorganization will provide Safeco California Tax-Free
Income Fund shareholders with exposure to substantially the same investment
product as they currently have.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco
Funds and the Pioneer Funds associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses
of any proxy solicitation firm retained in connection with the Reorganizations;
(3) the legal fees and expenses incurred by the Safeco Funds in connection with
the Reorganizations; and (4) the Trustees' fees and out of pocket expenses
incurred as a result of the Reorganizations.
The Trustees also considered that Pioneer and Symetra will benefit from
the Reorganization. See "Will Pioneer and Symetra Benefit from the
Reorganizations."
The Board of Trustees of Pioneer California Tax Free Income Fund also
considered that the Reorganization presents an excellent opportunity for the
Pioneer California Tax Free Income Fund to acquire investment assets without
the obligation to pay commissions or other transaction costs that a fund
normally incurs when purchasing securities. This opportunity provides an
economic benefit to Pioneer California Tax Free Income Fund.
CAPITALIZATION
The following table sets forth the capitalization of each Fund, as of
September 30, 2004, and the pro forma capitalization of the combined Fund as of
September 30, 2004.
Pro Forma
Safeco Pioneer Pioneer
California California California
Tax-Free Tax Free Tax Free
Income Fund Income Fund Income Fund
September 30, 2004 September 30, 2004 September 30, 2004
-------------------- -------------------- -------------------
Total Net Assets (in thousands) $99,315 N/A $99,315
Class A shares ................ $ 1,159 N/A N/A
Class B shares ................ $ 495 N/A N/A
Class C shares ................ $ 101 N/A N/A
Investor Class shares ......... $97,561 N/A $99,315
Net Asset Value Per Share
Class A shares ................ $ 12.72 N/A N/A
Class B shares ................ $ 12.69 N/A N/A
Class C shares ................ $ 12.69 N/A N/A
Investor Class shares ......... $ 12.71 N/A $ 12.71
Shares Outstanding
Class A shares ................ 91,125 N/A N/A
Class B shares ................ 38,970 N/A N/A
Class C shares ................ 7,980 N/A N/A
Investor Class shares ......... 7,677,020 N/A 7,813,926
It is impossible to predict how many shares of Pioneer California Tax Free
Income Fund will actually be received and distributed by your Safeco Fund on
the Reorganization date. The table should not be relied upon to determine the
amount of Pioneer California Tax-Free Income Fund's shares that will actually
be received and distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund.
Similarly, the Board of Trustees of Pioneer California Tax Free Income Fund,
including its Independent Trustees, approved the Reorganization. They also
determined that the Reorganization is in the best interests of Pioneer
California Tax Free Income Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
20
Safeco High-Yield Bond Fund and
Pioneer High Yield Fund
PROPOSAL 1(b)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire Proxy Statement/Prospectus, including the form of
Agreement and Plan of Reorganization attached as EXHIBIT A-1, because it
contains details that are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have a higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco High-Yield Bond Fund to Pioneer High Yield Fund
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Safeco High-Yield Bond Fund Pioneer High Yield Fund
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Business A series of Safeco Taxable Bond Trust, a A diversified open-end management
diversified open-end management investment investment company registered under the
company organized as a Delaware statutory Investment Company Act and organized as a
trust. Delaware statutory trust.
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Net assets as of $38 million $7,665 million
June 30, 2004
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Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers: Portfolio Managers:
Greg Card (since 2001 and until August 2, Margaret D. Patel (since inception)
2004) Joined Pioneer in 1999
Assistant Vice President, SAM Investment professional for over 25 years
Joined SAM in 2001
Beverly Denny (since July 2003)
Assistant Vice President, SAM
Associated with SAM since 1991
Currently Pioneer is acting as investment
adviser to Safeco High-Yield Bond Fund. The
Portfolio Manager of Pioneer High Yield Fund,
as indicated in the next column, currently
manages your Safeco Fund.
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Investment objective Safeco High-Yield Bond Fund seeks to provide Pioneer High Yield Fund seeks to maximize
a high level of current interest income through total return through a combination of income
the purchase of high-yield debt securities. and capital appreciation.
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21
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Safeco High-Yield Bond Fund Pioneer High Yield Fund
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Primary investments Under normal market conditions, Safeco Under normal market conditions, the Fund
High-Yield Bond Fund invests at least 80% of invests at least 80% of net assets (plus any
net assets (plus any borrowings for investment borrowings for investment purposes) in below
purposes) in high-yield debt securities. investment grade (high yield) debt securities
and preferred stocks.
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Investment strategies Safeco High-Yield Bond Fund uses a "value" Pioneer High Yield Fund uses a "value" style
style of management and seeks to invest in an of management and seeks securities selling at
issuer that is a good value relative to its peers. reasonable prices or substantial discounts to
SAM historically evaluated an issuer's their underlying values and then holds these
creditworthiness, liquidity and prospects for securities for their incremental yields or until
growing earnings and cash flow. the market values reflect their intrinsic values.
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Other investments Safeco High-Yield Bond Fund may invest up to Pioneer High Yield Fund's investments may
20% of its assets in unrated securities. In have fixed or variable principal payments and
addition, the Fund may invest up to 5% of its all types of interest rate and dividend payment
total assets in securities which are in default. and reset terms, including fixed rate, adjustable
rate, zero coupon, contingent, deferred,
Safeco High-Yield Bond Fund may invest in payment in kind and auction rate features. The
restricted securities that are exempt from Fund invests in securities with a broad range of
registration requirements and eligible for resale maturities.
to qualified institutional investors under Rule
144A or Section 4(2). Pioneer High Yield Fund may invest in
mortgage-backed and asset-backed securities.
Safeco High-Yield Bond Fund may invest in To the extent the Fund invests significantly in
Yankee sector debt securities. Yankee debt asset-backed and mortgage-related securities,
securities are securities issued in the U.S. its exposure to prepayment and extension
by foreign issuers. These bonds involve risks may be greater than if it invested in
investment risks that are different from those other fixed income securities.
of domestic issuers.
Pioneer High Yield Fund may invest in
Safeco High-Yield Bond Fund may invest in mortgage derivatives and structured securities.
securities that are direct obligations of the U.S. Mortgage derivatives can become illiquid and
Treasury and supported by the full faith and hard to value in declining markets.
credit of the U.S. government. The Fund may
invest in other U.S. Government Securities, Consistent with its objective, Pioneer High
including (a) securities supported by the full Yield Fund may invest in equity securities
faith and credit of the U.S. government but that issued by both U.S. and non-U.S. issuers,
are not direct obligations of the U.S. Treasury, including common stocks, depositary receipts,
(b) securities that are not supported by the full warrants, rights and other equity interests
faith and credit of the U.S. government but are when Pioneer believes they offer the potential
supported by the issuer's ability to borrow from for capital appreciation or to diversity the
the U.S. Treasury, and (c) securities supported Fund's portfolio.
solely by the creditworthiness of the issuer.
Pioneer High Yield Fund may invest in
Safeco High-Yield Bond Fund may invest up to securities of Canadian issuers to the same
20% of assets in foreign securities. extent as U.S. issuers. The Fund may invest
up to 15% of its total assets in securities of
non-U.S. and non-Canadian issuers, including
debt and equity securities of corporate issuers
and debt securities of government issuers in
developed and emerging markets.
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22
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Safeco High-Yield Bond Fund Pioneer High Yield Fund
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Temporary defensive Safeco High-Yield Bond Fund may hold cash Pioneer High Yield Fund may invest all or part
strategies or invest in high-quality, short-term securities of its assets in securities with remaining
issued by an agency or instrumentality of the maturities of less than one year, cash
U.S. government, high-quality commercial paper, equivalents or may hold cash.
certificates of deposit, shares of no-load, open-
end money market funds, or repurchase
agreements.
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Diversification Each Fund is diversified for the purpose of the Investment Company Act, and each Fund is
subject to diversification requirements under the Code.
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Industry concentration Each Fund may not invest more than 25% of its assets in any one industry.
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Restricted and illiquid If immediately after and as a result of such Pioneer High Yield Fund may not invest more
securities action the value of the following securities, in than 15% of its net assets in securities which
the aggregate, would exceed 15% of Safeco are illiquid and other securities which are not
High-Yield Bond Fund's net assets, the Fund readily marketable. Repurchase agreements
will not (i) purchase securities for which there maturing in more than seven days will be
is no readily available market, (ii) purchase included for purposes of the foregoing limit.
time deposits maturing in more than seven Securities subject to restrictions on resale
days, (iii) purchase over-the-counter (OTC) under the 1933 Act are considered illiquid
options or hold assets set aside to cover OTC unless they are eligible for resale pursuant to
options written by the Fund, (iv) enter into Rule 144A or another exemption from the
repurchase agreements maturing in more than registration requirements of the 1933 Act and
seven days, or (v) invest in interests in real are determined to be liquid by Pioneer.
estate investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
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Borrowing Safeco High-Yield Bond Fund may borrow Pioneer High Yield Fund may not borrow
money (i) from banks or (ii) by engaging in money, except the Fund may: (a) borrow from
reverse repurchase agreements. banks or through reverse repurchase
agreements in an amount up to 33 1/3% of the
Fund's total assets (including the amount
borrowed); (b) to the extent permitted by
applicable law, borrow up to an additional 5%
of the Fund's assets for temporary purposes;
(c) obtain such short-term credits as are
necessary for the clearance of portfolio
transactions; (d) purchase securities on
margin to the extent permitted by applicable
law; and (e) engage in transactions in
mortgage dollar rolls that are accounted for
as financings.
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Lending Safeco High-Yield Bond Fund may lend Pioneer High Yield Fund may lend portfolio
securities to qualified institutional investors with securities with a value that may not exceed
a value of up to 33% of the Fund's total assets. 33 1/3% of the value of its assets.
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23
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Safeco High-Yield Bond Fund Pioneer High Yield Fund
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Derivative instruments Safeco High-Yield Bond Fund may not Pioneer High Yield Fund may use futures and
purchase securities on margin. However, the options on securities, indices and
Fund may (i) obtain short-term credits as currencies, forward currency exchange
necessary to clear its purchases and sales of contracts and other derivatives. The Fund
securities, and (ii) make margin deposits in does not use derivatives as a primary
connection with its use of financial options and investment technique and generally limits
futures, forward and spot currency contracts, their use to hedging. However, the Fund may
swap transactions and other financial contracts use derivatives for a variety of
or derivative instruments. non-principal purposes, including:
o As a hedge against adverse changes in
stock market prices, interest rates or
currency exchange rates
o As a substitute for purchasing or
selling securities
o To increase the Fund's return as a
non- hedging strategy that may be
considered speculative
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Other investment policies and As described above, the Funds have substantially similar principal investment strategies and
restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and non-
fundamental investment restrictions, see the SAI.
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Buying, Selling and Exchanging Shares
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Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer High
of Safeco High-Yield Bond Fund are subject to Yield Fund you receive in the
a 4.50% front-end sales charge. Reorganization will not be subject to any
sales charge. Moreover, if you own shares
Contingent deferred sales charge of up to 5% in your own name as of the closing of the
if you redeem Class B shares within six years Reorganization (i.e., not in the name of a
of purchase. broker or other intermediary) or own shares
in the name of an omnibus account provider
Contingent deferred sales charge of 1% if you as of the closing of the Reorganization
redeem Class C shares within one year of that agrees with the Pioneer Fund to
purchase. distinguish beneficial holders in the same
manner and maintain your account, you may
Purchases of Investor Class shares of Fund are purchase Class A shares of Pioneer High
not subject to a sales load. Yield Fund and Class A shares of any fund
in the Pioneer family of funds through such
Safeco High-Yield Bond Fund assesses a account in the future without paying any
mandatory redemption fee of 2%, as a sales charge.
percentage of the amount redeemed or
exchanged, on Class A and Investor Class Except as described above, Class A shares
shares held less than 30 days. of Pioneer High Yield Fund are subject to a
front-end sales charge of up to 4.50%.
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24
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Safeco High-Yield Bond Fund Pioneer High Yield Fund
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Management and other fees Safeco High-Yield Bond Fund pays an advisory Pioneer High Yield Fund pays Pioneer a
fee on a monthly basis at an annual rate as management fee equal to:
follows:
0.70% of average daily net assets up to
$0-$250,000,000: 0.65 of 1% $500 million;
$250,000,001-$750,000,000: 0.55 of 1% 0.65% of the next $500 million;
Over $750,000,000: 0.50 of 1% 0.60% of the next $4 billion;
0.55% of the next $1 billion;
SAM serves as administrator and fund 0.50% of the next $1 billion;
accounting agent for Safeco High-Yield Bond 0.45% of the next $1 billion;
Fund. The Fund pays SAM an administrative 0.40% of the next $1 billion;
services fee of 0.05% of the Fund's average 0.35% of the next $1 billion; and
daily net assets up to the first $200,000,000 0.30% on assets over $10 billion.
and 0.01% of its net assets thereafter, and an
accounting fee of 0.04% of the Fund's average During its most recent fiscal year, Pioneer
daily net assets up to the first $200,000,000 High Yield Fund paid an advisory fee at
and 0.01% of its net assets thereafter. an average rate of 0.61% of average daily
net assets.
During its most recent fiscal year, Safeco
High-Yield Bond Fund paid aggregate advisory In addition, Pioneer High Yield Fund
and administration fees at an average rate of reimburses Pioneer for certain fund
0.74% of average daily net assets. accounting and legal expenses incurred on
SAM had contractually agreed until April 30, behalf of the Fund and pays a separate
2009, to pay certain fund operating expenses shareholder servicing/transfer agency fee to
PIMSS, an affiliate of Pioneer.
(but not all of the operating expenses of the
Fund) that exceeded the rate of 0.40% per Through October 31, 2005, Pioneer may
annum of the Fund's average daily net assets. recover expenses that it incurred under a prior
This arrangement included all Fund operating expense limitation (within three years of being
expenses except management fees, Rule 12b-1 incurred) from the Fund if the expense ratio of
fees, brokerage commissions, interest, and the Class A shares is less than 1.00%. Each
extraordinary expenses. class will reimburse Pioneer no more than
the amount by which that class' expenses
In 2003, SAM began voluntarily reimbursing the were reduced.
Fund to the extent that its total expenses
exceeded the rate of 1.15% per annum of the For the fiscal year ended October 31, 2003,
Fund's average daily net assets for Class A Pioneer High Yield Fund's total annual
shares, 1.90% per annum for Class B and Class operating expenses for Class A shares were
C shares, and 0.90% per annum for Investor 1.06% of average daily net assets. The Fund
Class shares. currently does not have an expense limitation
for its Class A shares
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
A shares, after giving effect to the contractual
expense limitation were 1.30%, and without
giving effect to the expense limitation, were
1.41%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class A shares were 1.15%.
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25
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Safeco High-Yield Bond Fund Pioneer High Yield Fund
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Management and other fees For the fiscal year ended December 31, 2003, Pioneer has agreed until the second
(continued) the Fund's annual operating expenses for Class anniversary of the closing of the
B shares, after giving effect to the contractual Reorganization to limit the expenses
expense limitation were 2.05%, and without (excluding extraordinary expenses) of the
giving effect to the expense limitation, were Investor Class to 0.90% of the average
2.88%. After giving effect to the voluntary daily net assets attributable to the
expense reimbursement, the operating Investor Class. The Investor Class shares
expenses for Class A shares were 1.90%. to be issued in the Reorganization will
convert to Class A shares after two years.
For the fiscal year ended December 31, 2003, Class A shares will have higher expenses
the Fund's annual operating expenses for Class per share than Investor Class shares due to
C shares, after giving effect to the contractual the Rule 12b-1 Plan. In addition, although
expense limitation were 2.05%, and without Pioneer has agreed to limit the expenses
giving effect to the expense limitation, were attributable to Investor Class shares,
2.45%. After giving effect to the voluntary Pioneer is not required to limit the
expense reimbursement, the operating expenses attributable to Class A shares.
expenses for Class A shares were 1.90%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares, after giving effect to the
contractual expense limitation were 1.05%, and
without giving effect to the expense limitation,
were 1.27%. After giving effect to the voluntary
expense reimbursement, the operating expenses
for Investor Class shares were 0.90%.
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Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject to
a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
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Buying shares You may buy shares of Safeco High-Yield Bond You may buy shares from any investment firm
Fund directly through Safeco Securities, the that has a sales agreement with PFD,
Fund's principal underwriter or through Pioneer High Yield Fund's distributor.
brokers, registered investment advisers, banks Existing shareholders of Safeco High-Yield
and other financial institutions that have Bond Fund who own shares in their own name
entered into selling agreements with the Fund's as of the closing of the Reorganization
principal underwriter, as described in the (i.e., not in the name of a broker or other
Fund's prospectus. intermediary) or own shares in the name of
an omnibus account provider as of the
Certain account transactions may be done closing of the Reorganization that agrees
by telephone. with the Pioneer Fund to distinguish
beneficial holders in the same manner and
who maintain their accounts may buy shares
of any fund in the Pioneer family of funds
through such accounts in the future without
paying sales charges.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
High Yield Fund by telephone or online.
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26
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Safeco High-Yield Bond Fund Pioneer High Yield Fund
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Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer High
acquire through dividend reinvestment or other Yield Fund without incurring any fee on the
fund distributions or for Class A shares that exchange with the more than 62 other Pioneer
you have exchanged for Class A shares of Funds. Your exchange would be for Class A
another fund. shares, which would be subject to Rule 12b-1
fees. An exchange generally is treated as a sale
Certain account transactions may be done and a new purchase of shares for federal
by telephone. income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer High Yield
Fund for shares of other Pioneer Funds by
telephone or online.
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Selling shares Each class of shares is sold at the net asset value per share next calculated after the Fund
receives your request in good order.
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You may sell your shares by contacting Safeco Normally, your investment firm will send your
High-Yield Bond Fund directly in writing or by request to sell shares to PIMSS. You can also
contacting a financial intermediary as described sell your shares by contacting the Fund
in the Fund's prospectus. directly if your account is registered in
your name.
If the account is established in the
shareholder's own name, shareholders may
also redeem shares of Pioneer High Yield
Fund by telephone or online.
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Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks. You
could lose money on your investment in either Fund or not make as much as if
you invested elsewhere if:
o Interest rates go up, causing the value of debt securities in the
Fund's portfolio to decline
o The issuer of a security owned by a Fund defaults on its obligation to
pay principal and/or interest or has its credit rating downgraded
o During periods of declining interest rates, the issuer of a security
may exercise its option to prepay principal earlier than scheduled,
forcing the Fund to reinvest in lower yielding securities. This is
known as call or prepayment risk
o During periods of rising interest rates, the average life of certain
types of securities may be extended because of slower than expected
principal payments. This may lock in a below market interest rate,
increase the security's duration (the estimated period until the
security is paid in full) and reduce the value of the security. This
is known as extension risk
o The investment adviser's judgment about the attractiveness, relative
value or potential appreciation of a particular sector, security or
investment strategy proves to be incorrect
o A downturn in equity markets causes the price of convertible
securities to drop even when the prices of below investment grade
bonds otherwise would not go down
Investment in high yield securities involves substantial risk of loss.
High yield securities are considered 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, an
investment in either Fund is subject to the following specific risks:
o Increased price sensitivity to changing interest rates and
deteriorating economic environment
27
o Greater risk of loss due to default or declining credit quality
o Adverse company-specific events are more likely to render the issuer
unable to make interest and/or principal payments
o A negative perception of the high yield market develops, depressing
the price and liquidity of high yield securities. This negative
perception could last for a significant period of time
In addition, each Fund holds a material percentage of the outstanding debt
securities of certain high yield issuers, which practice may adversely impact
the liquidity and market value of those investments. Investments in the Funds
are not bank deposits and are not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. You could lose money by
investing in either Fund.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return (before and after taxes) for each Fund over
time for each class of shares (including deductions for sales charges) compared
with a broad-based securities market index. The bar charts give an indication
of the risks of investing in each Fund, including the fact that you could incur
a loss and experience volatility of returns year to year. Past performance
before and after taxes does not indicate future results.
Safeco High-Yield Bond Fund -- Investor Class
Calendar Year Total Returns*
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 10.53% for the quarter ended June 30, 2003, and the
lowest quarterly return was -12.38% for the quarter ended June 30, 2002.
28
Pioneer High Yield Fund -- Class A shares
Calendar Year Total Returns*
[TABULAR REPRESENTATION OF BAR CHART]
'99 27.06
'00 12.70
'01 16.74
'02 -2.70
'03 32.13
* During the period shown in the bar chart, since the Fund's inception on
February 12, 1998, Pioneer High Yield Fund's highest quarterly return was
11.10% for the quarter ended December 31, 1999, and the lowest quarterly
return was -8.97% for the quarter ended September 30, 2002.
Safeco High-Yield Bond Fund
Average Annual Total Returns for the Period Ended December 31, 2003
-------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
-------------------------------------------------------------------------------------------------------
Safeco High-Yield Bond Fund, Class A shares
-------------------------------------------------------------------------------------------------------
Return Before Taxes 24.55% -0.45% 3.65%
-------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 20.85% -3.67% 0.20%
-------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 15.68% -2.35% 0.95%
-------------------------------------------------------------------------------------------------------
Safeco High-Yield Bond Fund, Class B shares
-------------------------------------------------------------------------------------------------------
Return Before Taxes 24.21% -0.58% 3.66%
-------------------------------------------------------------------------------------------------------
Safeco High-Yield Bond Fund, Class C shares
-------------------------------------------------------------------------------------------------------
Return Before Taxes 28.35% -0.27% 3.59%
-------------------------------------------------------------------------------------------------------
Safeco High-Yield Bond Fund, Investor Class shares
-------------------------------------------------------------------------------------------------------
Return Before Taxes 30.50% 0.67% 4.28%
-------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 26.51% -2.68% 0.75%
-------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 19.53% -1.49% 1.44%
-------------------------------------------------------------------------------------------------------
Merrill Lynch High-Yield Master II Index(2)
(reflects no deduction for fees, expenses or taxes) 28.15% 5.02% 7.05%
-------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The Merrill Lynch High-Yield Master II Index, an unmanaged index of
outstanding debt of domestic market issuers rated below investment grade,
but not in default, is for reference only and does not mirror the Fund's
investments.
29
Pioneer High Yield Fund -- Class A shares
Average Annual Total Returns for the Period Ended October 31, 2003
-----------------------------------------------------------------------------------------------------------
Since
1 Year 5 Years Inception(1)
-----------------------------------------------------------------------------------------------------------
Pioneer High Yield Fund, Class A shares
-----------------------------------------------------------------------------------------------------------
Return Before Taxes 26.15% 15.49% 11.71%
-----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(2) 23.09% 11.39% 7.99%
-----------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(2) 16.78% 10.72% 7.63%
-----------------------------------------------------------------------------------------------------------
Merrill Lynch High-Yield Master II Index(3)
(reflects no deduction for fees, expenses or taxes) 28.15% 5.02% 4.45%
-----------------------------------------------------------------------------------------------------------
Merrill Lynch Index of Convertible Bonds(4)
(speculative quality)
(reflects no deduction for fees, expenses or taxes) 35.99% 7.11% 7.17%
-----------------------------------------------------------------------------------------------------------
(1) The Fund commenced operations on February 12, 1998.
(2) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(3) The Merrill Lynch High-Yield Master II Index, an unmanaged index of
outstanding debt of domestic market issuers rated below investment grade,
but not in default, is for reference only and does not mirror the Fund's
investments.
(4) The Merrill Lynch Index of Convertible Bonds (Speculative Quality), a
market capitalization weighted index including mandatory and non-mandatory
domestic corporate convertible securities, is for reference only and does
not mirror the Fund's investments.
Pioneer High Yield Fund's Investor Class shares will not be outstanding
prior to the closing of the Reorganization and consequently have no performance
history. However, the performance record of the Investor Class would be
modestly higher than the performance of Class A shares due to the lower
expenses applicable to the Investor Class.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
The Funds' Fees and Expenses
Shareholders of both Funds pay various fees and expenses, either directly
or indirectly. The tables below show the fees and expenses that you would pay
if you were to buy and hold shares of each Fund. The expenses in the tables
appearing below are based on (i) for Safeco High-Yield Bond Fund, the expenses
of Safeco High-Yield Bond Fund for the year ended December 31, 2003 and (ii)
for Pioneer High Yield Fund, the expenses of Pioneer High Yield Fund for the
year ended October 31, 2003. Future expenses for all share classes may be
greater or less.
Pro Forma
Pioneer
Safeco Safeco Safeco Safeco High Yield
High-Yield High-Yield High-Yield High-Yield Fund
Bond Fund Bond Fund Bond Fund Bond Fund Investor
Shareholder transaction fees (paid directly from Class A Class B Class C Investor Class Class(9)
your investment) ------------ ------------ ------------ ---------------- -----------
Maximum sales charge (load) when you buy shares
as a percentage of offering price ........................ 4.50%(6) None None None None(1)
Maximum deferred sales charge (load) as a percentage
of purchase price or the amount you receive when you sell
shares, whichever is less ................................ None 5.00%(7) 1.00%(8) None None
Redemption fees for shares held less than 30 days ......... 2.00% None None 2.00% N/A
Wire redemption fee ....................................... $ 204 $ 204 $ 204 $ 204 $ 10
Annual low balance fee .................................... $ 125 $ 125 $ 125 $ 125 N/A
30
Pro Forma
Pioneer
Safeco Safeco Safeco Safeco High Yield
High-Yield High-Yield High-Yield High-Yield Fund
Bond Fund Bond Fund Bond Fund Bond Fund Investor
Shareholder transaction fees (paid directly from Class A Class B Class C Investor Class Class(9)
your investment) ------------ ------------ ------------ ---------------- -----------
Annual fund operating expenses (deducted from
fund assets) (as a % of average net assets)
Management fee ................................... 0.65% 0.65% 0.65% 0.65% 0.58%
Distribution and service (12b-1) fee ............. 0.25% 1.00% 1.00% None None
Other expenses ................................... 0.51% 1.23% 0.80% 0.62% 0.38%
Total fund operating expenses .................... 1.41% 2.88% 2.45% 1.27% 0.96%
Expense reimbursement/reduction .................. 0.11%(2) 0.83%(2) 0.40%(2) 0.22%(2) 0.06%(3)
Net fund operating expenses ...................... 1.30% 2.05% 2.05% 1.05% 0.90%
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer High Yield Fund through the Reorganization. In addition,
shareholders of your Safeco Fund who own shares in their own name as of the
closing of the Reorganization (i.e., not in the name of a broker or other
intermediary) or own shares in the name of an omnibus account provider that
agrees with the Pioneer Fund to distinguish beneficial holders in the same
manner and who maintain their accounts may purchase Class A shares of
Pioneer High Yield Fund or of any fund in the Pioneer family of funds
through such account in the future without paying this sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
High-Yield Bond Fund for certain fund operating expenses (but not all of
the operating expenses of the Fund) that exceeded the rate of 0.40% per
annum of the Fund's average daily net assets. This arrangement included all
fund operating expenses except management fees, Rule 12b-1 fees, brokerage
commissions, interest, and extraordinary expenses. In 2003, SAM began
voluntarily reimbursing the Fund to the extent that its total expenses
exceeded the rate of 1.15% per annum of the Fund's average daily net assets
for Class A shares, 1.90% per annum for Class B and Class C shares, and
0.90% per annum for Investor Class shares. The above table reflects
"contractual" expense reimbursements from SAM, if any, but does not reflect
"voluntary" expense reimbursements by SAM.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer High Yield
Fund to 0.90% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once each year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after six years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares. Class A shares do not currently have an
expense limitation and may be subject to higher total operating expenses.
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for five years for
Safeco High-Yield Bond Fund and two years for Pioneer High Yield Fund and (f)
and the Investor Class shares of Pioneer High Yield Fund convert to Class A
shares after two years. The examples are for comparison purposes only and are
not a representation of either Fund's actual expenses or returns, either past
or future.
Example
Safeco High-Yield Bond Fund
Class A shares
Year 1 .................. $ 576
Year 3 .................. $ 844
Year 5 .................. $1,131
Year 10 ................. $2,014
Class B shares With redemption Without redemption
Year 1 .................. $ 708 $ 208
Year 3 .................. $ 943 $ 643
Year 5 .................. $1,303 $1,103
Year 10 ................. $2,155 $2,155
31
Class C shares With redemption Without redemption
Year 1 ...................... $ 308 $ 208
Year 3 ...................... $ 643 $ 643
Year 5 ...................... $1,103 $1,103
Year 10 ..................... $2,613 $2,613
Investor Class shares
Year 1 ...................... $ 107
Year 3 ...................... $ 334
Year 5 ...................... $ 579
Year 10 ..................... $1,425
Pro Forma Pioneer High Yield Fund
Investor Class shares
Year 1 ...................... $ 92
Year 3 ...................... $ 300
Year 5 ...................... $ 539
Year 10 ..................... $1,225
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco High-Yield Bond Fund. The Trustees considered the following
matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Safeco Fund until August 2,
2004, was acquired by Symetra. Symetra informed the Trustees that it did not
intend to continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the investment performance of Pioneer High Yield Fund, which has
one of the best performance records of any mutual fund specializing in high
yield securities. For the one and five year periods ended June 30, 2004, Class
A shares of Pioneer High Yield Fund had an average annual return of 11.63% and
14.31% compared to an average annual return of the Class A shares and Investor
Class shares of 6.42% and 11.67% (one year) and -0.42% and 0.74% (five years),
respectively, during the same periods. In addition, the Trustees considered the
track record of Pioneer in managing equity and fixed income mutual funds.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutional and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market
fund that will be available to your Safeco Fund's shareholders through
exchanges. In addition, Pioneer offers shareholders additional options for
their accounts, including the ability to transact and exchange shares over the
telephone or online and the ability to access account values and transaction
history in all of the shareholder's direct accounts in the Pioneer Funds over
the telephone or online.
Fourth, Pioneer High Yield Fund's lower operating expenses and Pioneer's
commitment until the second anniversary of the Reorganization to limit the
expenses (excluding extraordinary expenses) of the Investor Class of Pioneer
High Yield Fund to 0.90% of average daily net assets. The estimated expenses of
the Investor Class shares of Pioneer High Yield Fund are below both the gross
expenses and expenses net of contractual expense reimbursement of each class of
shares of your Safeco Fund. Although you will experience higher expenses once
the Investor Class shares convert to Class A shares after two years, Pioneer
High Yield Fund's Class A expense ratio for the most recent fiscal year was
1.06% of average daily net assets, which was below the net expenses of the
Class A shares of your Safeco Fund and only one basis point above the net
expenses of the Investor Class of your Safeco Fund.
Fifth, the substantially larger size of Pioneer High Yield Fund offers
greater opportunity for diversification of the investment portfolio, which
should help to reduce risks.
Sixth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
32
Seventh, the Investor Class shares of Pioneer High Yield Fund received in
the Reorganization will provide Safeco High-Yield Bond Fund shareholders with
exposure to substantially the same investment product as they currently have.
Pioneer and Symetra will pay all of out of pocket expenses of the Safeco
Funds and the Pioneer Funds associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses
of any proxy solicitation firm retained in connection with the Reorganizations;
(3) the legal fees and expenses incurred by the Safeco Funds in connection with
the Reorganizations; and (4) the Trustees' fees and out of pocket expenses
incurred as a result of the Reorganizations.
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Will Pioneer and Symetra Benefit from the
Reorganizations."
The Board of Trustees of Pioneer High Yield Fund also considered that the
Reorganization presents an excellent opportunity for the Pioneer High Yield
Fund to acquire investment assets without the obligation to pay commissions or
other transaction costs that a fund normally incurs when purchasing securities.
This opportunity provides an economic benefit to Pioneer High Yield Fund and
its shareholders.
CAPITALIZATION
The following table sets forth the capitalization of each Fund as of
September 30, 2004, and the pro forma capitalization of the combined Fund as of
September 30, 2004.
Safeco Pro Forma
High-Yield Pioneer Pioneer
Bond Fund High Yield Fund High Yield Fund
September 30, 2004 September 30, 2004 September 30, 2004
-------------------- -------------------- -------------------
Total Net Assets (in thousands) $ 39,683 $7,811,801 $7,851,484
Class A shares ................ $ 1,857 $3,469,718 $3,469,718
Class B shares ................ $ 465 $1,780,040 $1,780,040
Class C shares ................ $ 261 $2,411,841 $2,411,841
Investor Class shares ......... $ 37,101 N/A $ 39,683
Class Y shares ................ N/A $ 143,957 $ 143,957
Class R shares ................ N/A $ 6,245 $ 6,245
Net Asset Value Per Share
Class A shares ................ $ 5.78 $ 11.72 $ 11.72
Class B shares ................ $ 5.78 $ 11.77 $ 11.77
Class C shares ................ $ 5.79 $ 11.88 $ 11.88
Investor Class shares ......... $ 5.78 N/A $ 11.72
Class Y shares ................ N/A $ 11.69 $ 11.69
Class R shares ................ N/A $ 12.87 $ 12.87
Shares Outstanding
Class A shares ................ 321,002 295,917,476 295,917,476
Class B shares ................ 480,411 151,211,694 151,211,694
Class C shares ................ 45,023 203,097,222 203,097,222
Investor Class shares ......... 6,417,136 N/A 3,385,922
Class Y shares ................ N/A 12,311,037 12,311,037
Class R shares ................ N/A 485,113 485,113
It is impossible to predict how many shares of Pioneer High Yield Fund
will actually be received and distributed by your Safeco Fund on the
Reorganization date. The table should not be relied upon to determine the
amount of Pioneer High Yield Fund's shares that will actually be received and
distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund.
Similarly, the Board of Trustees of Pioneer High Yield Fund, including its
Independent Trustees, approved the Reorganization. They also determined that
the Reorganization is in the best interests of Pioneer High Yield Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
33
Safeco Intermediate-Term Bond Fund and
Pioneer Bond Fund
PROPOSAL 1(c)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire Proxy Statement/Prospectus, including the form of
Agreement and Plan of Reorganization attached as EXHIBIT A-1, because it
contains details that are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have a higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Intermediate-Term Bond Fund to Pioneer Bond Fund
------------------------------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund Pioneer Bond Fund
------------------------------------------------------------------------------------------------------------------------------------
Business A series of Safeco Managed Bond Trust, a A diversified open-end management
diversified open-end management investment investment company registered under the
company organized as a Delaware statutory Investment Company Act and organized as a
trust. Delaware statutory trust.
------------------------------------------------------------------------------------------------------------------------------------
Net assets as of $10 million $259 million
June 30, 2004
------------------------------------------------------------------------------------------------------------------------------------
Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers (since 2004 and until Portfolio Managers:
August 2, 2004): Day-to-day management of the Fund's
Greg Card portfolio is the responsibility of a team of
Assistant Vice President, SAM fixed income portfolio managers led by
Joined SAM in 2001 Kenneth J. Taubes.
Tim Hokari Mr. Taubes joined Pioneer as a senior vice
Assistant Vice President, SAM president in September 1998 and has been an
Joined SAM in 2000 investment professional since 1982.
Lesley Fox
Assistant Vice President, SAM
Joined SAM in 2000
Nancy McFadden
Fixed Income Analyst, SAM
Joined SAM in 2001
Currently Pioneer is acting as investment adviser
to Safeco Intermediate-Term Bond Fund. The
Portfolio Managers of the Pioneer Bond Fund, as
indicated in the next column, are currently
managing your Safeco Fund.
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34
------------------------------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund Pioneer Bond Fund
------------------------------------------------------------------------------------------------------------------------------------
Investment objective Safeco Intermediate-Term Bond Fund seeks a Pioneer Bond Fund seeks current income by
high level of current income as is consistent investing primarily in an investment-grade
with the preservation of capital. portfolio, consistent with capital preservation
and prudent investment risk.
------------------------------------------------------------------------------------------------------------------------------------
Primary investments Under normal circumstances, Safeco Under normal market conditions, Pioneer
Intermediate-Term Bond Fund invests at least Bond Fund invests at least 80% of total
80% of net assets (plus any borrowings for assets in:
investment purposes) in bonds, including but
not limited to corporate, government and o Debt securities issued or guaranteed by the
mortgage bonds, most of which will be U.S. government or its agencies and
investment-grade quality, whether rated instrumentalities
or unrated. o Debt securities, including convertible debt,
of corporate and other issuers rated at least
The dollar weighted average maturity of Safeco investment grade at the time of investment,
Intermediate-Term Bond Fund generally ranges and comparably rated commercial paper
between three and ten years. o Cash and cash equivalents, certificates of
deposit, repurchase agreements maturing in
one week or less and bankers' acceptances
------------------------------------------------------------------------------------------------------------------------------------
Investment strategies In managing the portfolio and selecting Pioneer considers both broad economic and
securities, SAM historically considered: issuer specific factors in selecting a portfolio
designed to achieve the fund's investment
o The price of the security relative to its rating objective. In assessing the appropriate
and market sector maturity, rating and sector weighting of the
o Structural features, such as an issuer's right fund's portfolio, Pioneer considers a variety of
to buy the bond back at a stated price or the factors that are expected to influence
Fund's right to require the issuer to buy the economic activity and interest rates. These
bond back at a stated price factors include fundamental economic
o The effect the security might have on indicators, such as the rates of economic
existing diversification of Fund assets and growth and inflation, Federal Reserve
allocation among various market sectors monetary policy and the relative value of the
o The effect the security might have on the U.S. dollar compared to other currencies.
yield and sensitivity to interest rate changes Once Pioneer determines the preferable
of the Fund's overall portfolio portfolio characteristics, it selects individual
securities based upon the terms of the
Safeco Intermediate-Term Bond Fund may securities (such as yields compared to U.S.
engage in short-term trading to achieve Treasuries or comparable issuers), liquidity
its objective. and rating, sector and issuer diversification.
------------------------------------------------------------------------------------------------------------------------------------
Other investments Safeco Intermediate-Term Bond Fund may Pioneer Bond Fund may invest up to 20% of its
invest up to 20% of its assets in high yield total assets in debt securities rated below
debt securities rated below investment grade investment grade or, if unrated, of equivalent
("junk" or "high-risk" bonds) and may invest in quality as determined by Pioneer.
Yankee sector bonds and Eurodollar bonds.
Up to 15% of its total assets in equity and
Safeco Intermediate-Term Bond Fund may also debt securities of non-U.S. corporate issuers
invest in mortgage-backed or asset-backed and in debt securities of non-U.S. government
securities. issuers.
Safeco Intermediate-Term Bond Fund may invest Pioneer Bond Fund will not invest more than
up to 20% of assets in foreign securities. 5% of its total assets in the securities of
emerging markets issuers.
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35
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Safeco Intermediate-Term Bond Fund Pioneer Bond Fund
------------------------------------------------------------------------------------------------------------------------------------
Other investments (continued) Pioneer Bond Fund may invest a substantial
portion of its assets in mortgage-related
securities, which represent interests in
pools of mortgage loans assembled for sale
to investors by various U.S. governmental
agencies, government-related organizations
and private issuers. These investments may
include mortgage-related derivative
securities such as collateralized mortgage
obligations.
Pioneer Bond Fund may invest in securities
of Canadian issuers to the same extent as
securities of U.S. issuers.
------------------------------------------------------------------------------------------------------------------------------------
Temporary defensive Safeco Intermediate-Term Bond Fund may hold Pioneer Bond Fund may invest all or part of
strategies cash or invest in high-quality, short-term its assets in securities with remaining
securities issued by an agency or instrumentality maturities of less than one year, cash
of the U.S. government, high-quality commercial equivalents or may hold cash.
paper, certificates of deposit, shares of no-load,
open-end money market funds, or repurchase
agreements.
------------------------------------------------------------------------------------------------------------------------------------
Diversification Each Fund is diversified for the purpose of the Investment Company Act, and each Fund is
subject to diversification requirements under the Code.
------------------------------------------------------------------------------------------------------------------------------------
Industry concentration Each Fund may not invest more than 25% of its assets in any one industry.
------------------------------------------------------------------------------------------------------------------------------------
Restricted and illiquid If immediately after and as a result of such Pioneer Bond Fund may not invest more than
securities action the value of the following securities, in 15% of its net assets in securities which
the aggregate, would exceed 15% of Safeco are illiquid and other securities which are
Intermediate-Term Bond Fund's net assets, the not readily marketable. Repurchase
Fund will not (i) purchase securities for which agreements maturing in more than seven days
there is no readily available market, (ii) will be included for purposes of the
purchase time deposits maturing in more than foregoing limit. Securities subject to
seven days, (iii) purchase over-the-counter restrictions on resale under the 1933 Act
(OTC) options or hold assets set aside to cover are considered illiquid unless they are
OTC options written by the Fund, (iv) enter into eligible for resale pursuant to Rule 144A
repurchase agreements maturing in more than or another exemption from the registration
seven days, or (v) invest in interests in real requirements of the 1933 Act and are
estate investment trusts which are not readily determined to be liquid by Pioneer.
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
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Borrowing Safeco Intermediate-Term Bond Fund may Pioneer Bond Fund may not borrow money,
borrow money (i) from banks or (ii) by except the Fund may: (a) borrow from banks
engaging in reverse repurchase agreements. or through reverse repurchase agreements in
an amount up to 33 1/3% of the Fund's total
assets (including the amount borrowed); (b)
to the extent permitted by applicable law,
borrow up to an additional 5% of the Fund's
assets for temporary purposes; (c) obtain
such short-term credits as are necessary
for the clearance of portfolio
transactions;
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36
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Safeco Intermediate-Term Bond Fund Pioneer Bond Fund
------------------------------------------------------------------------------------------------------------------------------------
Borrowing (continued) (d) purchase securities on margin to the
Lending Safeco Intermediate-Term Bond Fund may lend extent permitted by applicable law; and (e)
securities to qualified institutional investors engage in transactions in mortgage dollar
with a value of up to 33% of the Fund's total rolls that are accounted for as financings.
assets.
------------------------------------------------------------------------------------------------------------------------------------
Derivative instruments Safeco Intermediate-Term Bond Fund may not Pioneer Bond Fund may lend portfolio
purchase securities on margin. However, the securities with a value that may not exceed
Fund may (i) obtain short-term credits as 33 1/3% of the value of its total assets.
necessary to clear its purchases and sales of
securities, and (ii) make margin deposits in
connection with its use of financial options and
futures, forward and spot currency contracts,
swap transactions and other financial contracts
or derivative instruments.
------------------------------------------------------------------------------------------------------------------------------------
Other investment policies and As described above, the Funds have substantially Pioneer Bond Fund may use futures and
similar principal investment strategies and options on securities, indices and
restrictions policies. Certain of the non-principal investment currencies, forward currency exchange
policies and restrictions are different. For a contracts and other derivatives. The Fund
more complete discussion of each Fund's other does not use derivatives as a primary
investment policies and fundamental and non- investment technique and generally limits
fundamental investment restrictions, see the SAI. their use to hedging. However, the Fund may
use derivatives for a variety of
non-principal purposes, including:
o As a hedge against adverse changes in
stock market prices, interest rates or
currency exchange rates
o As a substitute for purchasing or
selling securities
o To increase the Fund's return as a
non-hedging strategy that may be
considered speculative
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Buying, Selling and Exchanging Shares
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Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer Bond
of Safeco Intermediate-Term Bond Fund are Fund you receive in the Reorganization will
subject to a 3.50% front-end sales charge. not be subject to any sales charge.
Contingent deferred sales charge of up to 4% Moreover, if you own shares in your own
if you redeem Class B shares within five years name as of the closing of the
of purchase. Reorganization (i.e., not in the name of a
Contingent deferred sales charge of 1% if you broker or other intermediary) or own shares
redeem Class C shares within one year of in the name of an omnibus account provider
purchase. as of the closing of the Reorganization
Purchases of Investor Class shares of the Fund that agrees with the Pioneer Fund to
are not subject to a sales load. distinguish beneficial holders in the same
The Fund assesses a mandatory redemption manner and maintain your account, you may
fee of 2%, as a percentage of the amount purchase Class A shares of Pioneer Bond
redeemed or exchanged, on Class A and Fund and Class A shares of any fund in the
Investor Class shares held less than 30 days Pioneer family of funds through such
account in the future without paying any
sales charge. Except as described above,
Class A shares of Pioneer Bond Fund are
subject to a front-end sales charge of up
to 4.50%.
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37
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Safeco Intermediate-Term Bond Fund Pioneer Bond Fund
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Management and other fees Safeco Intermediate-Term Bond Fund pays an
advisory fee on a monthly basis at an annual Pioneer Bond Fund pays Pioneer a management
rate as follows: fee equal to 0.50% of the Fund's average
daily net assets.
$0-750,000,000: 0.50 of 1%
$750,000,001-$1,250,000,000: 0.45 of 1% During its most recent fiscal year, Pioneer
Over $1,250,000,000: 0.40 of 1% Bond Fund paid an advisory fee at an
average rate of 0.50% of average daily net
SAM serves as administrator and fund assets.
accounting agent for Safeco Intermediate-
Term Bond Fund. The Fund pays SAM an In addition, the Fund reimburses Pioneer
administrative services fee of 0.05% of the for certain fund accounting and legal
Fund's average daily net assets up to the first expenses incurred on behalf of the Fund and
$200,000,000 and 0.01% of its net assets pays a separate shareholder
thereafter, and an accounting fee of 0.04% of servicing/transfer agency fee to PIMSS, an
the Fund's average daily net assets up to the affiliate of Pioneer.
first $200,000,000 and 0.01% of its net assets
thereafter. For the fiscal year ended June 30, 2004,
the Fund's total annual operating expenses
During its most recent fiscal year, Safeco for Class A shares were 1.14% of average
Intermediate-Term Bond Fund paid aggregate daily net asset. The Fund does not
advisory and administration fees at an average currently have an expense limitation for
rate of 0.59% of average daily net assets. its Class A shares.
SAM had contractually agreed until April 30, Pioneer has agreed until the second
2009, to pay certain fund operating expenses anniversary of the closing of the
(but not all of the operating expenses of the Reorganization to limit the expenses
Fund) that exceeded the rate of 0.40% per (excluding extraordinary expenses) of the
annum of the Fund's average daily net assets. Investor Class to 0.74% of the average
This arrangement included all Fund operating daily net assets attributable to the
expenses except management fees, Rule 12b-1 Investor Class.
fees, brokerage commissions, interest, and
extraordinary expenses. The Investor Class shares to be issued in
the Reorganization will convert to Class A
In 2003, SAM began voluntarily reimbursing the shares after two years. Class A shares will
Fund to the extent that its total expenses have higher expenses per share than
exceeded the rate of 0.99% per annum of the Investor Class shares due to the Rule 12b-1
Fund's average daily net assets for Class A Plan. In addition, although Pioneer has
shares, 1.74% per annum for Class B and Class agreed to limit the expenses attributable
C shares, and 0.74% per annum for Investor to Investor Class shares, Pioneer is not
Class shares. required to limit the expenses attributable
to Class A shares.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
A shares, after giving effect to the contractual
expense limitation were 1.15%, and without
giving effect to the expense limitation, were
2.05%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class A shares were 0.99%.
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38
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Safeco Intermediate-Term Bond Fund Pioneer Bond Fund
------------------------------------------------------------------------------------------------------------------------------------
Management and other fees For the fiscal year ended December 31, 2003,
(continued) the Fund's annual operating expenses for Class
B shares, after giving effect to the contractual
expense limitation were 1.90%, and without
giving effect to the expense limitation, were
2.78%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class B shares were 1.74%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
C shares, after giving effect to the contractual
expense limitation were 1.90%, and without
giving effect to the expense limitation, were
42.54%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class C shares were 1.74%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares, after giving effect to the
contractual expense limitation were 0.90%, and
without giving effect to the expense limitation,
were 1.53% per share. After giving effect to
the voluntary expense reimbursement, the
operating expenses for Investor Class shares
were 0.74%.
------------------------------------------------------------------------------------------------------------------------------------
Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject to
a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
------------------------------------------------------------------------------------------------------------------------------------
Buying shares You may buy shares of Safeco Intermediate- You may buy shares from any investment firm
Term Bond Fund directly through Safeco that has a sales agreement with PFD,
Securities, the Fund's principal underwriter, or Pioneer Bond Fund's distributor. Existing
through brokers, registered investment shareholders of Safeco Intermediate-Term
advisers, banks and other financial institutions Bond Fund who own shares in their own name
that have entered into selling agreements with as of the closing of the Reorganization
the Fund's principal underwriter, as described (i.e., not in the name of a broker or other
in the Fund's prospectus. intermediary) or own shares in the name of
an omnibus account provider as of the
Certain account transactions may be done closing of the Reorganization that agrees
by telephone. with the Pioneer Fund to distinguish
beneficial holders in the same manner and
who maintain their accounts may buy shares
of any fund in the Pioneer family of funds
through such accounts in the future without
paying sales charges.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
Bond Fund by telephone or online.
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39
------------------------------------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund Pioneer Bond Fund
------------------------------------------------------------------------------------------------------------------------------------
Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Bond
acquire through dividend reinvestment or other Fund without incurring any fee on the
fund distributions or for Class A shares that exchange with the more than 62 other Pioneer
you have exchanged for Class A shares of Funds. Your exchange would be for Class A
another fund. shares, which would be subject to Rule 12b-1
fees. An exchange generally is treated as a
Certain account transactions may be done sale and a new purchase of shares for federal
by telephone. income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer Bond Fund
for shares of other Pioneer Funds by
telephone or online.
------------------------------------------------------------------------------------------------------------------------------------
Selling shares Each class of shares will be sold at net asset value per share next calculated after the Fund
receives your request in good order.
------------------------------------------------------------------------------------------------------------------------------------
You may sell your shares by contacting Safeco Normally, your investment firm will send your
Intermediate-Term Bond Fund directly in writing request to sell shares to PIMSS. You can also
or by contacting a financial intermediary as sell your shares by contacting the Fund
described in the Fund's prospectus. directly if your account is registered in
your name.
If the account is established in the
shareholder's own name, shareholders may
also redeem shares of Pioneer Bond Fund by
telephone or online.
------------------------------------------------------------------------------------------------------------------------------------
Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks. The
market value of fixed income securities tends to be more volatile the longer
the maturity of such security. Since Pioneer Bond Fund may invest in securities
of longer maturity than your Safeco Fund, an investment in Pioneer Bond Fund
may have correspondingly greater risk. You could lose money on your investment
in either Fund or not make as much as if you invested elsewhere if:
o Interest rates go up, causing the value of debt securities in the
Fund's portfolio to decline.
o The issuer of a security owned by a Fund defaults on its obligation to
pay principal and/or interest or has its credit rating downgraded.
o During periods of declining interest rates, the issuer of a security
may exercise its option to prepay principal earlier than scheduled,
forcing the Fund to reinvest in lower yielding securities. This is
known as call or prepayment risk.
o During periods of rising interest rates, the average life of certain
types of securities may be extended because of slower than expected
principal payments. This may lock in a below market interest rate,
increase the security's duration (the estimated period until the
security is paid in full) and reduce the value of the security. This
is known as extension risk.
o The investment adviser's judgment about the attractiveness, relative
value or potential appreciation of a particular sector, security or
investment strategy proves to be incorrect.
o A downturn in equity markets causes the price of convertible
securities to drop even when the prices of below investment grade
bonds otherwise would not go down.
o To the extent that the Fund invests significantly in high yield
securities, its exposure to the credit risks associated with such
securities may be greater, its income and net asset value may be more
volatile, and it may be more difficult to achieve preservation of
principal.
Government sponsored entities such as the Federal Home Loan Mortgage
Corporation (Freddie Mac), the Federal National Mortgage Association (FNMA) and
the Federal Home Loan Banks (FHLB), although chartered or sponsored by
Congress, are not funded by
40
congressional appropriations and the debt and mortgage-backed securities issued
by them are neither guaranteed nor issued by the U.S. government. To the extent
the Funds invest significantly in mortgage-backed securities, its exposure to
prepayment and extension risks may be greater than if it invested in other
fixed income securities.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return (before and after taxes) for each Fund over
time for each class of shares (including deductions for sales charges) compared
with a broad-based securities market index. The bar charts give an indication
of the risks of investing in each Fund, including the fact that you could incur
a loss and experience volatility of returns year to year. Past performance
before and after taxes does not indicate future results.
Safeco Intermediate-Term Bond Fund -- Investor Class
Calendar Year Total Returns*
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return since the Fund's inception on February 28, 1994 was 5.74%
for the quarter ended June 30, 1995, and the lowest quarterly return was
-3.27% for the quarter ended March 31, 1996.
41
Pioneer Bond Fund -- Class A shares
Calendar Year Total Returns*
* During the period shown in the bar chart, Pioneer Bond Fund's highest
quarterly return was 6.11% for the quarter ended June 30, 1995, and the
lowest quarterly return was -3.03% for the quarter ended March 31, 1994.
Safeco Intermediate-Term Bond Fund
Average Annual Total Returns as of December 31, 2003
---------------------------------------------------------------------------------------------------------
Since
1 Year 5 Years Inception(1)
---------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund, Class A shares
---------------------------------------------------------------------------------------------------------
Return Before Taxes -0.31% 3.96% 4.95%
---------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(2) -1.67% 2.01% 2.81%
---------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(2) -0.21% 2.14% 2.87%
---------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund, Class B shares
---------------------------------------------------------------------------------------------------------
Return Before Taxes -1.33% 3.77% 4.80%
---------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund, Class C shares
---------------------------------------------------------------------------------------------------------
Return Before Taxes 1.47% 3.90% 4.69%
---------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Bond Fund, Investor Class shares
---------------------------------------------------------------------------------------------------------
Return Before Taxes 3.56% 5.01% 5.58%
---------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(2) 2.05% 2.94% 3.34%
---------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and
Sale of Fund Shares(2) 2.30% 2.97% 3.35%
---------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index(3)
(reflects no deduction for fees, expenses or taxes) 4.10% 6.62% 7.11%
---------------------------------------------------------------------------------------------------------
(1) The Fund commenced operations on February 28, 1994.
(2) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(3) The Lehman Brothers Aggregate Bond Index, an unmanaged index of securities
from the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed
Securities Index, and Asset Backed Securities Index, is for reference only
and does not mirror the Fund's investments.
42
Pioneer Bond Fund -- Class A shares
Average Annual Total Returns as of December 31, 2003
---------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
---------------------------------------------------------------------------------------------------------
Pioneer Bond Fund, Class A shares
---------------------------------------------------------------------------------------------------------
Return Before Taxes 6.76% 43.54% 3.50%
---------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 5.71% 3.54% 3.53%
---------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 2.51% 2.71% 3.11%
---------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index(2)
(reflects no deduction for fees, expenses or taxes) 4.10% 6.62% 6.95%
---------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The Lehman Brothers Aggregate Bond Index, an unmanaged index of securities
from the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed
Securities Index, and Asset Backed Securities Index, is for reference only
and does not mirror the Fund's investments.
Pioneer Bond Fund's Investor Class shares will not be outstanding prior to
the closing of the Reorganization and consequently have no performance history.
However, the performance record of the Investor Class would be modestly higher
than the performance of Class A, B and C shares due to the lower expenses
applicable to the Investor Class.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
The Funds' Fees and Expenses
Shareholders of both Funds pay various fees and expenses, either directly
or indirectly. The tables below show the fees and expenses that you would pay
if you were to buy and hold shares of each Fund. The expenses in the tables
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer Bond
Fund, the expenses of Pioneer Bond Fund for the period ended June 30, 2004.
Future expenses for all share classes may be greater or less.
Safeco
Intermediate- Pro Forma
Safeco Safeco Safeco Term Bond Pioneer
Intermediate- Intermediate- Intermediate- Fund Bond Fund
Term Bond Fund Term Bond Fund Term Bond Fund Investor Investor
Shareholder transaction fees Class A Class B Class C Class Class(9)
(paid directly from your investment) --------------- --------------- --------------- ------------- ----------
Maximum sales charge (load) when you buy shares
as a percentage of offering price ........................ 3.50%(6) None None None None(1)
Maximum deferred sales charge (load) as a percentage
of purchase price or the amount you receive when you sell
shares, whichever is less ................................ None 4.00%(7) 1.00%8 None None
Redemption fees for shares held less than 30 days ......... 2.00% None None 2.00% N/A
Wire redemption fee ....................................... $ 204 $ 204 $ 204 $ 204 $ 10
Annual low balance fee .................................... $ 125 $ 125 $ 125 $ 125 N/A
Annual fund operating expenses (deducted from
fund assets) (as a % of average net assets)
Management fee ............................................ 0.50% 0.50% 0.50% 0.50% 0.50%
Distribution and service (12b-1) fee ...................... 0.25% 1.00% 1.00% None None
Other expenses ............................................ 1.30% 1.28% 41.04% 1.03% 0.45%
Total fund operating expenses ............................. 2.05% 2.78% 42.54% 1.53% 0.95%
Expense reimbursement/reduction ........................... 0.90%2 0.88%(2) 40.64%(2) 0.63%(2) 0.21%(3)
Net fund operating expenses ............................... 1.15% 1.90% 1.90% 0.90% 0.74%
43
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer Bond Fund through the Reorganization. In addition, shareholders of
your Safeco Fund who own shares in their own name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) or
own shares in the name of an omnibus account provider that agrees with the
Pioneer Fund to distinguish beneficial holders in the same manner and who
maintain their accounts may purchase Class A shares of Pioneer Bond Fund or
of any fund in the Pioneer family of funds through such account in the
future without paying this sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
Intermediate-Term Bond Fund for certain Fund operating expenses (but not
all of the operating expenses of the Fund) that exceeded the rate of 0.40%
per annum of the Fund's average daily net assets. This arrangement included
all fund operating expenses except management fees, Rule 12b-1 fees,
brokerage commissions, interest, and extraordinary expenses. In 2003, SAM
began voluntarily reimbursing the Fund to the extent that its total
expenses exceeded the rate of 0.99% per annum of the Fund's average daily
net assets for Class A shares, 1.74% per annum for Class B and Class C
shares, and 0.74% per annum for Investor Class shares. The above table
reflects "contractual" expense reimbursements from SAM, if any, but does
not reflect "voluntary" expense reimbursements by SAM.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer Bond Fund
to 0.74% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once in year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after five years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares.
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect five years for
Safeco Intermediate-Term Bond Fund and two years for Pioneer Bond Fund and (f)
and the Investor Class shares of Pioneer Bond Fund convert to Class A shares
after two years. The examples are for comparison purposes only and are not a
representation of either Fund's actual expenses or returns, either past or
future.
Example
Safeco Intermediate-Term Bond Fund
Class A shares
Year 1 .............. $ 463
Year 3 .............. $ 703
Year 5 .............. $ 961
Year 10 ............. $2,247
Class B shares With Redemption Without Redemption
Year 1 .............. $ 593 $193
Year 3 .............. $ 797 $ 597
Year 5 .............. $1,126 $1,026
Year 10 ............. $2,389 $2,389
Class C shares With Redemption Without Redemption
Year 1 .............. $ 293 $ 193
Year 3 .............. $ 597 $ 597
Year 5 .............. $1,026 $1,026
Year 10 ............. $2,709 $2,709
Investor Class shares
Year 1 .............. $ 92
Year 3 .............. $ 287
Year 5 .............. $ 498
Year 10 ............. $1,518
44
Pro Forma Pioneer Bond Fund
Investor Class shares
Year 1 .................... $ 76
Year 3 .................... $ 281
Year 5 .................... $ 548
Year 10 ................... $1,312
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Intermediate-Term Bond Fund. The Trustees considered the
following matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Safeco Fund until August 2,
2004, was acquired by Symetra. Symetra informed the Trustees that it did not
intend to continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the investment performance of Pioneer Bond Fund, which has
outperformed your Safeco Fund over the most recent one, five and ten year
periods. For the one, five and ten year periods ended June 30, 2004, Class A
shares of Pioneer Bond Fund had an average annual return of 2.98%, 6.70% and
6.72%, respectively, compared to an average annual return of the Class A shares
and Investor Class shares of 3.66% and 0.02% (one year), 4.86% and 5.86% (five
years) and 5.24% and 5.88% (ten years), respectively, during the same periods.
In addition, the Trustees considered the track record of Pioneer in managing
equity and fixed income mutual funds.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutional and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market
fund that will be available to your Safeco Fund's shareholders through
exchanges. In addition, Pioneer offers shareholders additional options for
their accounts, including the ability to transact and exchange shares over the
telephone or online and the ability to access account values and transaction
history in all of the shareholder's direct accounts in the Pioneer Funds over
the telephone or online.
Fourth, Pioneer Bond Fund's lower gross expenses and Pioneer's commitment
until the second anniversary of the Reorganization to limit the expenses
(excluding extraordinary expenses) of the Investor Class of Pioneer Bond Fund
to 0.74 % of average daily net assets. The gross expense ratio of Pioneer Bond
Fund's Class A shares is lower than the gross expense ratio of each class of
shares of your Safeco Fund. In addition, the net expense ratio of the Investor
Class of Pioneer Bond Fund is lower than the net expenses of the Class A, Class
B and Class C shares of your Safeco Fund and the same as the net expenses of
the Investor Class. Although you will experience higher expenses once the
Investor Class shares convert to Class A shares after two years, your expenses
will remain the same until the second anniversary of the Reorganization.
Fifth, the substantially larger size of Pioneer Bond Fund offers greater
opportunity for diversification of the investment portfolio, which should help
to reduce risks.
Sixth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Seventh, the Trustees also considered the differences in the investment
policies of the two Funds, particularly Pioneer Bond Fund's ability to invest
in securities with longer maturities than your Safeco Fund. While this may
result in Pioneer Bond Fund having greater volatility of net asset value than
your Safeco Fund, the Trustees believe that the factors in favor of the
Reorganization mitigate this risk.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco
Funds and the Pioneer Funds associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses
of any proxy solicitation firm retained in connection with the Reorganizations;
(3) the legal fees and expenses incurred by the Safeco Funds in connection with
the Reorganizations; and (4) the Trustees' fees and out of pocket expenses
incurred as a result of the Reorganizations.
45
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Will Pioneer and Symetra Benefit from the
Reorganizations."
The Board of Trustees of Pioneer Bond Fund also considered that the
Reorganization presents an excellent opportunity for the Pioneer Bond Fund to
acquire investment assets without the obligation to pay commissions or other
transaction costs that a fund normally incurs when purchasing securities. This
opportunity provides an economic benefit to Pioneer Bond Fund and its
shareholders.
CAPITALIZATION
The following table sets forth the capitalization of each Fund as of
September 30, 2004, and the pro forma capitalization of the combined Fund as of
September 30, 2004.
Safeco Pro Forma
Intermediate-Term Pioneer Pioneer
Bond Fund Bond Fund Bond Fund
September 30, 2004 September 30, 2004 September 30, 2004
-------------------- -------------------- -------------------
Total Net Assets (in thousands) $ 9,598 $265,836 $275,434
Class A shares ................ $ 1,608 $163,765 $163,765
Class B shares ................ $ 604 $ 56,548 $ 56,548
Class C shares ................ $ 99 $ 28,246 $ 28,245
Investor Class shares ......... $ 7,286 N/A $ 9,598
Class Y shares ................ N/A $ 16,894 $ 16,894
Class R shares ................ N/A $ 383 $ 383
Net Asset Value Per Share
Class A shares ................ $ 8.51 $ 9.36 $ 9.36
Class B shares ................ $ 8.51 $ 9.32 $ 9.32
Class C shares ................ $ 8.51 $ 9.30 $ 9.30
Investor Class shares ......... $ 8.52 N/A $ 9.36
Class Y shares ................ N/A $ 9.30 $ 9.30
Class R shares ................ N/A $ 9.30 $ 9.37
Shares Outstanding
Class A shares ................ 188,948 17,479,859 17,479,859
Class B shares ................ 70,949 6,061,254 6,061,254
Class C shares ................ 11,688 3,036,946 3,036,946
Investor Class shares ......... 854,733 N/A 1,025,427
Class Y shares ................ N/A 16,894,081 16,894,081
Class R shares ................ N/A 383,073 383,073
It is impossible to predict how many shares of Pioneer Bond Fund will
actually be received and distributed by your Safeco Fund on the Reorganization
date. The table should not be relied upon to determine the amount of Pioneer
Bond Fund's shares that will actually be received and distributed.
Board's Evaluation and Recommendation
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund.
Similarly, the Board of Trustees of Pioneer Bond Fund, including its
Independent Trustees, approved the Reorganization. They also determined that
the Reorganization is in the best interests of Pioneer Bond Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
46
Safeco Intermediate-Term Municipal Bond Fund and
Pioneer Tax Free Income Fund
PROPOSAL 1(d)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire Proxy Statement/Prospectus, including the Agreement and
Plan of Reorganization attached as EXHIBIT A-1, because it contains details
that are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Intermediate-Term Municipal Bond Fund to Pioneer Tax Free
Income Fund
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Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
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Business A series of Safeco Tax-Exempt Bond Trust, a A diversified open-end management
diversified open-end management investment investment company registered under the
company organized as a Delaware statutory Investment Company Act and organized as a
trust. Delaware statutory trust.
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Net assets as of $16.4 million $332 million
June 30, 2004
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Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers (until August 2, 2004): Portfolio Managers:
Mary Metastasio (since 1996) Day-to-day management of the Fund's
Vice President, SAM portfolio is the responsibility of a team of
fixed income portfolio managers led by
Stephen C. Bauer (since 2003) Kenneth J. Taubes.
President and Director, SAM
Associated with SAM since 1971 Mr. Taubes joined Pioneer as a senior vice
president in September 1998 and has been
Currently Pioneer is acting as investment an investment professional since 1982.
adviser to Safeco Intermediate-Term Municipal
Bond Fund. The Portfolio Managers of the
Pioneer Tax Free Income Fund, as indicated in
the next column, currently manages your
Safeco Fund.
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Investment objective Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund seeks as high a
seeks to provide a high level of current interest level of current income exempt from federal
income exempt from federal income tax as is income taxes as possible consistent with the
consistent with prudent investment risk. preservation of capital.
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47
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Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
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Primary investments Under normal circumstances, Safeco Normally, Pioneer Tax Free Income Fund
Intermediate-Term Municipal Bond Fund invests invests at least 80% of its total assets in
at least 80% of its net assets (plus any investment grade securities that provide
borrowings for investment purposes) in income that is exempt from regular federal
investment grade municipal bonds with income tax and may not be subject to the
maturities of more than one year and the alternative minimum tax. These investments
interest on which is exempt from federal include bonds, notes and other debt
income tax. instruments issued by or on behalf of states,
counties, municipalities, territories and
Safeco Intermediate-Term Municipal Bond Fund possessions of the United States and the
will not invest in securities the income interest District of Columbia and their authorities,
on which is a tax preference item for purposes political subdivisions, agencies or
of the federal alternative minimum tax. instrumentalities.
Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund may invest in
will maintain an average dollar-weighted securities the income interest on which is a
maturity of between three and ten years. tax preference item for purposes of the federal
alternative minimum tax.
Pioneer Tax Free Income Fund may invest in
securities of any maturity.
Pioneer Tax Free Income Fund may invest
25% or more of its assets in issuers in any
one or more states or securities the payments
on which are derived from gas, electric,
telephone, sewer and water segments of the
municipal bond market. The Fund may also
invest up to 20% of its assets in industrial
development bonds.
Pioneer Tax Free Income Fund's investments
may have fixed or variable principal payments
and all types of interest rate payment and reset
terms, including fixed and floating rates,
inverse floating rate, zero coupon, contingent,
deferred and payment in kind and auction
rate features.
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Investment strategies In managing the portfolio and selecting Pioneer considers both broad economic factors
securities, SAM historically considered, among and issuer-specific factors in selecting a
other things: portfolio designed to achieve Pioneer Tax Free
Income Fund's investment objective. In
o Yield assessing the appropriate maturity and rating
o Maturity weighting of the Fund's portfolio, Pioneer
o Structural features such as an issuer's right considers a variety of factors that are expected
to buy the bond back at a stated price or to influence economic activity and interest
the Fund's right to buy the bond back at a rates. These factors include fundamental
stated price economic indicators such as the rates of
o Credit quality (including the underlying rating economic growth and inflation, Federal Reserve
of insured bonds) monetary policy and the other currencies. Once
o The purpose the issuer is financing;
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48
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Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
------------------------------------------------------------------------------------------------------------------------------------
Investment strategies o The original offering price Pioneer determines the preferable portfolio
(continued) o Any state or local tax exemption characteristics, Pioneer selects individual
o The amount of discount off or premium on securities based upon the terms of the
the stated principal amount of the bond securities (such as yields compared to U.S.
represented by the price offered Treasuries or comparable issues), liquidity and
rating and issuer diversification.
After evaluating a bond, SAM compared the
bond to other available bonds, which may have
had different features, and would buy the bond
if it appeared to offer the best relative value.
relative value of the U.S. dollar compared to
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Other investments Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund may invest up to
may invest up to 20% of its assets in unrated 20% of its assets in industrial development bonds.
municipal bonds, as long as the adviser
determines they are of comparable quality to Pioneer Tax Free Income Fund may invest up to
investment-grade securities. Unrated securities 20% of its net assets in securities of other
are not necessarily lower in quality than rated investment companies, investment grade
securities but may not be as attractive to as commercial paper, U.S. government securities,
many investors as rated securities. U.S. or foreign bank instruments and repurchase
agreements.
Safeco Intermediate-Term Municipal Bond Fund
will invest no more than 33% of its total assets Pioneer Tax Free Income Fund may invest up to
in municipal bonds rated in the fourth highest 10% of its net assets in debt securities rated
grade (or in comparable unrated bonds subject below investment grade or, if unrated, of
to the 20% limit). Such bonds are of medium equivalent quality as determined by Pioneer.
grade, have speculative characteristics, and are Debt securities rated below investment grade
more likely to have a weakened capacity to are commonly referred to as "junk bonds" and
make principal and interest payments under are considered speculative. Below investment
changing economic conditions or upon grade debt securities involve greater risk of
deterioration in the financial condition of the loss, are subject to greater price volatility and
issuer. are less liquid, especially during periods of
economic uncertainty or change, than higher
Safeco Intermediate-Term Municipal Bond Fund quality debt securities.
will not hold more than 5% of its net assets
in below investment-grade securities or, if Pioneer Tax Free Income Fund may invest up to
unrated, in securities that cease to be 10% of its net assets in inverse floating rate
comparable to a rated investment-grade security obligations (a type of derivative instrument).
(such below investment-grade securities are Inverse floating rate obligations represent
commonly referred to as "high yield" or "junk" interests in tax-exempt bonds.
bonds).
The interest rate on inverse floating rate
Safeco Intermediate-Term Municipal Bond obligations will generally decrease as short-
Fund may invest up to 20% of assets in term interest rates increase, and increase as
foreign securities. short-term rates decrease. Inverse floating
rate obligations may be volatile and involve
leverage risk.
Pioneer Tax Free Income Fund's investments
may have fixed or variable principal payments
and all types of interest rate payment and
reset terms, including fixed and floating rates,
inverse floating rate, zero coupon, contingent,
deferred and payment in kind and auction
rate features.
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49
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Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
------------------------------------------------------------------------------------------------------------------------------------
Temporary defensive Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund may invest
strategies may hold cash or invest in high-quality, short- all or part of its assets in securities with
term securities issued by an agency or remaining maturities of less than one year,
instrumentality of the U.S. government, high- cash equivalents or may hold cash.
quality commercial paper, certificates of
deposit, shares of no-load, open-end money
market funds, or repurchase agreements.
------------------------------------------------------------------------------------------------------------------------------------
Diversification Each Fund is diversified for the purpose of the Investment Company Act, and each Fund is
subject to diversification requirements under the Code.
------------------------------------------------------------------------------------------------------------------------------------
Industry concentration Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund may invest
may not invest more than 25% of its assets in 25% or more of its assets in issuers in any
any one industry. one or more states or securities the payments
on which are derived from gas, electric,
telephone, sewer and water segments of the
municipal bond market.
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Restricted and If immediately after and as a result of such Pioneer Tax Free Income Fund will not invest
illiquid securities action the value of the following securities, in more than 10% of its net assets in illiquid
the aggregate, would exceed 15% of Safeco and other securities that are not readily
Intermediate-Term Municipal Bond Fund's net marketable. Repurchase agreements maturing
assets, the Fund will not (i) purchase securities in more than seven days will be included for
for which there is no readily available market, purposes of the foregoing limit. Securities
(ii) purchase time deposits maturing in more subject to restrictions on resale under the
than seven days, (iii) purchase over-the-counter 1933 Act are considered illiquid unless they
(OTC) options or hold assets set aside to cover are eligible for resale pursuant to Rule 144A
OTC options written by the Fund, (iv) enter into or another exemption from the registration
repurchase agreements maturing in more than requirements of the 1933 Act and are
seven days, or (v) invest in interests in real determined to be liquid by Pioneer.
estate investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
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Borrowing Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund may not
may borrow money (i) from banks or (ii) by borrow money, except from a bank for
engaging in reverse repurchase agreements. temporary or emergency purposes and not
for investment purposes, and then only in an
amount not exceeding 5% of the value of the
Fund's total assets at the time of borrowing.
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Lending Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund may not
may lend securities to qualified institutional make loans, except through the purchase of
investors with a value of up to 33% of the securities, including repurchase agreements, in
Fund's total assets. accordance with its investment objective,
policies and limitations.
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50
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Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
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Derivative instruments Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund may use
may not purchase securities on margin. futures and options on securities, indices
However, the Fund may (i) obtain short-term and currencies, forward currency exchange
credits as necessary to clear its purchases and contracts and other derivatives. The Fund
sales of securities, and (ii) make margin does not use derivatives as a primary
deposits in connection with its use of financial investment technique and generally limits
options and futures, forward and spot currency their use to hedging. However, the Fund may
contracts, swap transactions and other use derivatives for a variety of
financial contracts or derivative instruments. non-principal purposes, including:
o As a hedge against adverse changes in
stock market prices, interest rates or
currency exchange rates
o As a substitute for purchasing or
selling securities
o To increase the Fund's return as a
non- hedging strategy that may be
considered speculative
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Other investment policies and As described above, the Funds have substantially similar principal investment strategies and
restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and non-
fundamental investment restrictions, see the SAI.
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Buying, Selling and Exchanging Shares
------------------------------------------------------------------------------------------------------------------------------------
Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer Tax
of the Fund are subject to a 3.50% front-end Free Income Fund you receive in the
sales charge. Reorganization will not be subject to any
sales charge. Moreover, if you own shares
Contingent deferred sales charge of up to 4% in your own name as of the closing of the
if you redeem Class B shares within five years Reorganization (i.e., not in the name of a
of purchase. broker or other intermediary) or own shares
in the name of an omnibus account provider
Contingent deferred sales charge of 1% if you as of the closing of the Reorganization
redeem Class C shares within one year of that agrees with the Pioneer Fund to
purchase. distinguish beneficial holders in the same
manner and maintain your account, you may
Purchases of Investor Class shares of the Fund purchase Class A shares of Pioneer Tax Free
are not subject to a sales load. Income Fund and Class A shares of any fund
in the Pioneer family of funds through such
The Fund assesses a mandatory redemption account in the future without paying any
fee of 2%, as a percentage of the amount sales charge.
redeemed or exchanged, on Class A and
Investor Class shares held less than 30 days. Except as described above, Class A shares
of Pioneer Tax Free Income Fund are subject
to a front-end sales charge of up to 4.50%.
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51
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Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
------------------------------------------------------------------------------------------------------------------------------------
Management and other fees Safeco Intermediate-Term Municipal Bond Fund Pioneer Tax Free Income Fund pays Pioneer a
pays an advisory fee on a monthly basis at an management fee equal to:
annual rate as follows:
0.50% of average daily net assets up to
$0-$250,000,000: 0.50 of 1% $250 million;
$250,000,001-$750,000,000: 0.45 of 1% 0.48% of the next $50 million; and
Over $750,000,000: 0.40 of 1% 0.45% on assets over $300 million.
SAM serves as administrator and fund During its most recent fiscal year, Pioneer
accounting agent for the Fund. The Fund pays Tax Free Income Fund paid an advisory fee
SAM an administrative services fee of 0.05% at an average rate of 0.49% of average
of the Fund's average daily net assets up to the daily net assets.
first $200,000,000 and 0.01% of its net assets
thereafter, and an accounting fee of 0.04% of In addition, the Fund reimburses Pioneer
the Fund's average daily net assets up to the for certain fund accounting and legal
first $200,000,000 and 0.01% of its net expenses incurred on behalf of the Fund and
assets thereafter. pays a separate shareholder
servicing/transfer agency fee to PIMSS, an
During its most recent fiscal year, Safeco affiliate of Pioneer.
Intermediate-Term Municipal Bond Fund paid
aggregate advisory and administration fees at For the fiscal year ended December 31,
an average rate of 0.59% of average daily 2003, the Fund's total annual operating
net assets. expenses for Class A shares were 0.93% of
average daily net assets. The Fund
SAM had contractually agreed until April 30, currently does not have an expense
2009, to pay certain Fund operating expenses limitation for its Class A shares.
(but not all of the operating expenses of the
Fund) that exceeded the rate of 0.40% per Pioneer has agreed until the second
annum of the Fund's average daily net assets. anniversary of the closing of the
This arrangement included all Fund operating Reorganization to limit the expenses
expenses except management fees, Rule 12b-1 (excluding extraordinary expenses) of the
fees, brokerage commissions, interest, and Investor Class to 0.70% of the average
extraordinary expenses. daily net assets attributable to the
Investor Class.
In 2003, SAM began voluntarily reimbursing the
Fund to the extent that its total expenses The Investor Class shares to be issued in
exceeded the rate of 0.85% per annum of the the Reorganization will convert to Class A
Fund's average daily net assets for Class A shares after two years. Class A shares will
shares, 1.60% per annum for Class B and Class have higher expenses per share than
C shares, and 0.70% per annum for Investor Investor Class shares due to the Rule 12b-1
Class shares. Plan. In addition, although Pioneer has
agreed to limit the expenses attributable
For the fiscal year ended December 31, 2003, to Investor Class shares, Pioneer is not
the Fund's annual operating expenses for Class required to limit the expenses attributable
A shares, after giving effect to the contractual to Class A shares.
expense limitation were 1.15%, and without
giving effect to the expense limitation, were
7.70%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class A shares were 0.85%.
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52
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Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
------------------------------------------------------------------------------------------------------------------------------------
Management and other fees For the fiscal year ended December 31, 2003,
(continued) the Fund's annual operating expenses for Class
B shares, after giving effect to the contractual
expense limitation were 1.90%, and without
giving effect to the expense limitation, were
16.43%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class B shares were 1.60%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
C shares, after giving effect to the contractual
expense limitation were 1.90%, and without
giving effect to the expense limitation, were
20.82%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class C shares were 1.60%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares, after giving effect to the
contractual expense limitation were 0.90%, and
without giving effect to the expense limitation,
were 1.04%. After giving effect to the voluntary
expense reimbursement, the operating expenses
for Investor Class shares were 0.70%.
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Distribution and service Each class of shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject to
a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
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Buying shares You may buy shares of Safeco Intermediate- You may buy shares from any investment firm
Term Municipal Bond Fund directly through that has a sales agreement with PFD,
Safeco Securities, the Fund's principal Pioneer Tax Free Income Fund's distributor.
underwriter or through brokers, registered Existing shareholders of Safeco
investment advisers, banks and other financial Intermediate-Term Municipal Bond Fund who
institutions that have entered into selling own shares in their own name as of the
agreements with the Fund's principal closing of the Reorganization (i.e., not in
underwriter, as described in the Fund's the name of a broker or other intermediary)
prospectus. or own shares in the name of an omnibus
account provider as of the closing of the
Certain account transactions may be done Reorganization that agrees with the Pioneer
by telephone. Fund to distinguish beneficial holders in
the same manner and who maintain their
accounts may buy shares of any fund in the
Pioneer family of funds through such
accounts in the future without paying sales
charges.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
Tax Free Income Fund by telephone or
online.
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53
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Safeco Intermediate-Term
Municipal Bond Fund Pioneer Tax Free Income Fund
------------------------------------------------------------------------------------------------------------------------------------
Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Tax Free
acquire through dividend reinvestment or other Income Fund without incurring any fee on the
Fund distributions or for Class A shares that exchange with the more than 62 other Pioneer
you have exchanged for Class A shares of Funds. Your exchange would be for Class A
another fund. shares, which would be subject to Rule 12b-1
fees. An exchange generally is treated as a
Certain account transactions may be done sale and a new purchase of shares for federal
by telephone. income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer Tax Free
Income Fund for shares of other Pioneer
Funds by telephone or online.
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Selling shares Each class of shares will be sold at net asset value per share next calculated after the Fund
receives your request in good order.
------------------------------------------------------------------------------------------------------------------------------------
You may sell your shares by contacting Safeco Normally, your investment firm will send
Intermediate-Term Municipal Bond Fund your request to sell shares to PIMSS. You
directly in writing or by contacting a financial can also sell your shares by contacting the
intermediary as described in the Fund's Fund directly if your account is registered in
prospectus. your name.
If the account is established in the shareholder's
own name, shareholders may also redeem
shares of Pioneer Tax Free Income Fund by
telephone or online.
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Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks. The
market value of a fixed income security tends to be more volatile the longer
the maturity of such security. Since Pioneer Tax Free Income Fund can invest in
securities of longer maturity than your Safeco Fund, an investment in Pioneer
Tax Free Income Fund may have correspondingly greater risks. You could lose
money on your investment in either Fund or not make as much as if you invested
elsewhere if:
o Interest rates go up, causing the value of debt securities in the
Fund's portfolio to decline
o The issuer of a security owned by the Fund defaults on its obligation
to pay principal and/or interest or has its credit rating downgraded
o New federal or state legislation adversely affects the tax-exempt
status of securities held by the Fund or the financial ability of
municipalities to repay these obligations
o The issuer of a security owned by the Fund may not be able to make
timely payments because of a general economic downturn or increased
governmental costs
o To the extent the Fund concentrates its investments in a single state
or securities the payments on which are dependent upon a single
industry, the Fund will be more susceptible to risks associated with
that state or industry
o The Fund's investment adviser is incorrect in its expectation of
changes in interest rates or the credit quality of an issuer
Although distributions of interest income from the Funds' tax-exempt
securities are generally exempt from regular federal income tax, distributions
from other sources, including capital gain distributions and any gains on the
sale of your shares, are not. You should consult a tax adviser about whether an
alternative minimum tax applies to you and about state and local taxes on Fund
distributions.
54
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return (before and after taxes) for each Fund over
time for each class of shares (including deductions for sales charges) compared
with a broad-based securities market index. The bar charts give an indication
of the risks of investing in each Fund, including the fact that you could incur
a loss and experience volatility of returns year to year. Past performance
before and after taxes does not indicate future results.
Safeco Intermediate-Term Municipal Bond Fund -- Investor Class
Calendar year total returns*
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 6.25% for the quarter ended March 31, 1995, and the
lowest quarterly return was -4.47% for the quarter ended March 31, 1994.
Pioneer Tax Free Income Fund -- Class A shares
Calendar Year Total Returns*
* During the period shown in the bar chart, Pioneer Tax Free Income Fund's
highest quarterly return was 7.11% for the quarter ended March 31, 1995, and
the lowest quarterly return was -5.87% for the quarter ended March 31, 1994.
55
Safeco Intermediate-Term Municipal Bond Fund
Average Annual Total Returns as of December 31, 2003
------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Municipal Bond Fund, Class A shares
------------------------------------------------------------------------------------------------------
Return Before Taxes 0.94% 4.12% 4.57%
------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 0.85% 4.01% 4.51%
------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and
Sale of Fund Shares(1) 1.95% 4.05% 4.49%
------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Municipal Bond Fund, Class B shares
------------------------------------------------------------------------------------------------------
Return Before Taxes -0.11% 4.56% 4.87%
------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Municipal Bond Fund, Class C shares
------------------------------------------------------------------------------------------------------
Return Before Taxes 2.89% 4.73% 4.87%
------------------------------------------------------------------------------------------------------
Safeco Intermediate-Term Municipal Bond Fund, Investor Class shares
------------------------------------------------------------------------------------------------------
Return Before Taxes 4.78% 4.91% 4.96%
------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 4.69% 4.79% 4.90%
------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and
Sale of Fund Shares(1) 4.56% 4.75% 4.84%
------------------------------------------------------------------------------------------------------
Lehman Brothers 7-Year Municipal Bond Index(2)
(reflects no deduction for fees, expenses or taxes) 5.45% 5.92% 5.86%
------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown.
(2) The Lehman Brothers 7-Year Municipal Bond Index, an unmanaged index of
bonds rated BAA3 or above, issued as part of a deal of at least $50
million, having an amount of at least $5 million and maturing in six or
more years, is for reference only and does not mirror the Fund's
investments.
Pioneer Tax Free Income Fund -- Class A shares
Average Annual Total Returns as of December 31, 2003
1 Year 5 Years 10 Years
------------------------------------------------------------------------------------------------------
Pioneer Tax Free Income Fund, Class A shares
------------------------------------------------------------------------------------------------------
Return Before Taxes 1.01% 3.77% 4.66%
------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) 1.02% 3.66% 4.43%
------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and
Sale of Fund Shares(1) 2.30% 3.83% 4.55%
------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index(2)
(reflects no deduction for fees, expenses or taxes) 5.31% 5.83% 6.03%
------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The Lehman Brothers Aggregate Bond Index, an unmanaged measure of
approximately 15,000 municipal bonds with a minimum credit rating of BBB,
and that were a part of at least a $50 million issuance made within the
past fives years and have a maturity of at least two years, is for
reference only and does not mirror the Fund's investments.
Pioneer Tax Free Income Fund's Investor Class shares will not be
outstanding prior to the closing of the Reorganization and consequently have no
performance history. However, the performance record of the Investor Class
would be modestly higher than the performance of Class A shares due to the
lower expenses applicable to the Investor Class shares.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
56
The Funds' Fees and Expenses
Shareholders of both Funds pay various fees and expenses, either directly
or indirectly. The tables below show the fees and expenses that you would pay
if you were to buy and hold shares of each Fund. The expenses in the tables
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer Tax
Free Income Fund, the expenses of Pioneer Tax Free Income Fund for the period
ended December 31, 2003. Future expenses for all share classes may be greater
or less.
Safeco Safeco Safeco Safeco Pro Forma
Intermediate- Intermediate- Intermediate- Intermediate- Pioneer Tax
Term Muni Term Muni Term Muni Term Muni Free Income
Bond Fund Bond Fund Bond Fund Bond Fund Fund Investor
Shareholder transaction fees Class A Class B Class C Investor Class Class(9)
(paid directly from your investment) ------------- --------------- -------------- -------------- --------------
Maximum sales charge (load) when you buy shares as a
percentage of offering price ............................ 3.50%(6) None None None None(1)
Maximum deferred sales charge (load) as a percentage of
purchase price or the amount you receive when you sell
shares, whichever is less ............................... None 4.00%(7) 1.00%(8) None None
Redemption fees for shares held less than 30 days ........ 2.00% None None 2.00% N/A
Wire redemption fee ...................................... $ 204 $ 204 $ 204 $ 204 $ 10
Annual low balance fee ................................... $ 125 $ 125 $ 125 $ 125 N/A
Annual fund operating expenses (deducted from fund assets)
(as a % of average net assets)
Management fee ........................................... 0.50% 0.50% 0.50% 0.50% 0.49%
Distribution and service (12b-1) fee ..................... 0.25% 1.00% 1.00% None None
Other expenses ........................................... 6.95% 14.93% 19.32% 0.54% 0.20%
Total fund operating expenses ............................ 7.70% 16.43% 20.82% 1.04% 0.69%
Expense reimbursement/reduction .......................... 6.55%(2) 14.53%(2) 18.92%(2) 0.14%(2) None(3)
Net fund operating expenses .............................. 1.15% 1.90% 1.90% 0.90% 0.69%
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer Tax Free Income Fund through the Reorganization. In addition,
shareholders of your Safeco Fund who own shares in their own name as of the
closing of the Reorganization (i.e., not in the name of a broker or other
intermediary) or own shares in the name of an omnibus account provider that
agrees with the Pioneer Fund to distinguish beneficial holders in the same
manner and who maintain their accounts may purchase Class A shares of
Pioneer Tax Free Income Fund or of any fund in the Pioneer family of funds
through such account in the future without paying this sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
Intermediate-Term Municipal Bond Fund for certain operating expenses (but
not all of the operating expenses of the Fund) that exceeded the rate of
0.40% per annum of the Fund's average daily net assets. This arrangement
included all Fund operating expenses except management fees, Rule 12b-1
fees, brokerage commissions, interest, and extraordinary expenses. In 2003,
SAM began voluntarily reimbursing the Fund to the extent that its total
expenses exceeded the rate of 0.85% per annum of the Fund's average daily
net assets for Class A shares, 1.60% per annum for Class B and Class C
shares, and 0.70% per annum for Investor Class shares. The above table
reflects "contractual" expense reimbursements from SAM, if any, but does
not reflect "voluntary" expense reimbursements by SAM.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer Tax Free
Income Fund to 0.70% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once in year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after five years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares. Class A shares do not currently have an
expense limitation and may be subject to higher total operating expenses.
57
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for five years for
Safeco Intermediate-Term Municipal Bond Fund and two years for Pioneer Tax Free
Income Fund and (f) and the Investor Class shares of Pioneer Tax Free Income
Fund convert to Class A shares after two years. The examples are for comparison
purposes only and are not a representation of either Fund's actual expenses or
returns, either past or future.
Example
Safeco Intermediate-Term Municipal Bond Fund
Class A shares
Year 1 .............. $ 463
Year 3 .............. $ 703
Year 5 .............. $ 961
Year 10 ............. $1,804
Class B shares With redemption Without redemption
Year 1 .............. $ 593 $ 193
Year 3 .............. $ 797 $ 597
Year 5 .............. $1,126 $1,026
Year 10 ............. $1,971 $1,971
Class C shares With redemption Without redemption
Year 1 .............. $ 293 $ 193
Year 3 .............. $ 597 $ 597
Year 5 .............. $1,026 $1,026
Year 10 ............. $2,477 $2,477
Investor Class shares
Year 1 .............. $ 92
Year 3 .............. $ 287
Year 5 .............. $ 498
Year 10 ............. $1,200
Pro Forma Pioneer Tax Free Income Fund
Investor Class shares
Year 1 .............. $ 71
Year 3 .............. $ 246
Year 5 .............. $ 460
Year 10 ............. $1,079
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Intermediate-Term Municipal Bond Fund. The Trustees
considered the following matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Fund until August 2, 2004, was
acquired by Symetra. Symetra informed the Trustees that it did not intend to
continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the historical investment performance of Pioneer Tax Free Income
Safeco Fund and your Safeco Fund are comparable. For the one, five and ten year
periods ended June 30, 2004, Class A shares of Pioneer Tax Free Income Fund had
an average annual return of 1.55%, 4.84% and 5.53%, respectively, compared to
an average annual return of the Class A shares and Investor Class shares of
-3.82% and -0.27% (one year), 4.13% and 4.94% (five years) and 4.84% and 5.25%
(ten years), respectively, during the same periods. In addition, the Trustees
considered the track record of Pioneer in managing equity and fixed income
mutual funds.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutional and other
clients. As of June 30, 2004,
58
assets under management of UniCredito Italiano S.p.A. were approximately $151
billion worldwide. Shareholders of your Safeco Fund would become part of a
significantly larger family of funds that offers a more diverse array of
investment options and enhanced shareholder account options. The Pioneer family
of mutual funds offers over 62 funds, including domestic and international
equity and fixed income funds and a money market fund that will be available to
your Safeco Fund's shareholders through exchanges. In addition, Pioneer offers
shareholders additional options for their accounts, including the ability to
transact and exchange shares over the telephone or online and the ability to
access account values and transaction history in all of the shareholder's
direct accounts in the Pioneer Funds over the telephone or online.
Fourth, Pioneer Tax Free Income Fund's lower operating expenses and
Pioneer's commitment until the second anniversary of the Reorganization to
limit the expenses (excluding extraordinary expenses) of the Investor Class of
Pioneer Tax Free Income Fund to 0.70% of average daily net assets. The
estimated expenses of the Investor Class shares of Pioneer Tax Free Income Fund
are below both the gross expenses and expenses net of expense reimbursement of
each class of shares of your Safeco Fund. Although you will experience higher
expenses once the Investor Class shares convert to Class A shares after two
years, your expenses will remain the same until the second anniversary of the
Reorganization.
Fifth, the substantially larger size of Pioneer Tax Free Income Fund
offers greater opportunity for diversification of the investment portfolio,
which should help to reduce risks.
Sixth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Seventh, the Trustees also considered the differences in the investment
policies of the two Funds, particularly Pioneer Tax Free Income Fund's ability
to invest in securities with longer maturities than your Safeco Fund. While
this may result in Pioneer Tax Free Income Fund having greater volatility of
net asset value than your Safeco Fund, the Trustees believe that the factors in
favor of the Reorganization mitigate this risk.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco
Funds and the Pioneer Funds associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses
of any proxy solicitation firm retained in connection with the Reorganizations;
(3) the legal fees and expenses incurred by the Safeco Funds in connection with
the Reorganizations; and (4) the Trustees' fees and out of pocket expenses
incurred as a result of the Reorganizations.
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Will Pioneer and Symetra Benefit from the
Reorganizations."
The Board of Trustees of Pioneer Tax Free Income Fund also considered that
the Reorganization presents an excellent opportunity for the Pioneer Tax Free
Income Fund to acquire investment assets without the obligation to pay
commissions or other transaction costs that a fund normally incurs when
purchasing securities. This opportunity provides an economic benefit to Pioneer
Tax Free Income Fund and its shareholders.
59
CAPITALIZATION
The following table sets forth the capitalization of each Fund, as of
September 30, 2004, and the pro forma capitalization of the combined Fund as of
September 30, 2004.
Safeco
Intermediate-Term Pro Forma
Municipal Pioneer Tax Free Pioneer Tax Free
Bond Fund Income Fund Income Fund
September 30, 2004 September 30, 2004 September 30, 2004
-------------------- -------------------- -------------------
Total Net Assets (in thousands) ......... $11,586 $338,100 $349,686
Class A shares ......................... $ 333 $305,872 $305,872
Class B shares ......................... $ 155 $ 17,626 $ 17,626
Class C shares ......................... $ 109 $ 12,109 $ 12,109
Investor Class shares .................. $10,988 N/A $ 11,586
Class Y shares ......................... N/A $ 2,494 $ 2,494
Net Asset Value Per Share
Class A shares ......................... $ 11.04 $ 11.56 $ 11.56
Class B shares ......................... $ 11.03 $ 11.45 $ 11.45
Class C shares ......................... $ 11.03 $ 11.38 $ 11.56
Investor Class shares .................. $ 11.04 N/A $ 11.56
Class Y shares ......................... N/A $ 11.50 $ 11.50
Shares Outstanding
Class A shares ......................... 30,165 26,462,402 26,462,402
Class B shares ......................... 14,074 1,538,772 1,538,772
Class C shares ......................... 9,874 1,063,730 1,063,730
Investor Class shares .................. 995,214 N/A 1,002,249
Class Y shares ......................... N/A 216,854 216,854
It is impossible to predict how many shares of Pioneer Tax Free Income
Fund will actually be received and distributed by your Safeco Fund on the
Reorganization date. The table should not be relied upon to determine the
amount of Pioneer Tax Free Income Fund's shares that will actually be received
and distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund.
Similarly, the Board of Trustees of Pioneer Tax Free Income Fund, including its
Independent Trustees, approved the Reorganization. They also determined that
the Reorganization is in the best interests of Pioneer Tax Free Income Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
60
Safeco Intermediate-Term U.S. Government Fund and
Pioneer America Income Trust
PROPOSAL 1(e)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire Proxy Statement/Prospectus, including the form of
Agreement and Plan of Reorganization attached as EXHIBIT A-1, because it
contains details that are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Intermediate-Term U.S. Government Fund to Pioneer America
Income Trust
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Safeco Intermediate-Term
U.S. Government Fund Pioneer America Income Trust
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Business A series of Safeco Taxable Bond Trust, a A diversified open-end management
diversified open-end management investment investment company registered under the
company organized as a Delaware statutory Investment Company Act and organized as a
trust. Massachusetts business trust.
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Net assets as of $67 million $204 million
June 30, 2004
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Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers (since 2003 and until Portfolio Manager:
August 2, 2004): Day-to-day management of the Fund's
Paul Stevenson portfolio is the responsibility of a team of
CFA, Vice President, SAM fixed income portfolio managers led by
Joined SAM in 1988 Kenneth J. Taubes.
Tim Hokari Mr. Taubes joined Pioneer as a senior vice
Assistant Vice President, SAM president in September 1998 and has been
Joined SAM in 2000 an investment professional since 1982.
Lesley Fox
Assistant Vice President, SAM
Joined SAM in 2000
Currently Pioneer is acting as investment
adviser to Safeco Intermediate-Term U.S.
Government Fund. The Portfolio Manager of
the Pioneer America Income Trust, as indicated
in the next column, currently manages your
Safeco Fund.
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61
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Safeco Intermediate-Term
U.S. Government Fund Pioneer America Income Trust
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Investment objective Safeco Intermediate-Term U.S. Government Fund Pioneer America Income Trust seeks as high
seeks as high a level of current income as is a level of current income as is consistent with
consistent with the preservation of capital by the preservation of capital and prudent
investing in securities issued or guaranteed by investment risk.
the U.S. government or its agencies or
instrumentalities.
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Primary investments Under normal circumstances, Safeco Pioneer America Income Trust invests
Intermediate-Term U.S. Government Fund exclusively in securities that are backed by the
invests at least 80% of its net assets (plus any full faith and credit of the U.S. government,
borrowings for investment purposes) in and repurchase agreements and "when-
securities issued or guaranteed by the U.S. issued" commitments with respect to these
government or its agencies and securities. These securities include:
instrumentalities.
o U.S. Treasury obligations, which differ only in
U.S. government securities in which Safeco their interest rates, maturities and times of
Intermediate-Term U.S. Government Fund issuance, including U.S. Treasury bills
invests include, but are not limited to: (maturities of one year or less), U.S. Treasury
notes (maturities of one to 10 years), and
o Mortgage-related securities backed by pools U.S. Treasury bonds (generally maturities
of mortgages, including modified pass- greater than 10 years)
through certificates and collateralized o Obligations issued by or guaranteed as
mortgage obligations issued by the to principal and interest by the U.S. Treasury
Government National Mortgage Association and certain agencies and instrumentalities of
(GNMA), the Federal Home Loan Mortgage the U.S. government, such as Government
Corporation (FHLMC), and the Federal National Mortgage Association (GNMA)
National Mortgage Association (FNMA) certificates and Federal Housing
o U.S. Treasury bills, notes, bonds, and Administration (FHA) debentures, for which
interest or principal components of Separate the U.S. Treasury unconditionally guarantees
Trading Registered Interest and Principal payment of principal and interest
Securities (STRIPS)
o Other U.S. government securities guaranteed Pioneer America Income Trust's investments
by the full faith of the U.S. government but may have all types of interest repayment and
not direct obligations of the U.S. Treasury. reset terms, including fixed rate, adjustable
o Government-sponsored agency securities rate, zero coupon, contingent, deferred,
o Securities issued by the Tennessee Valley payment-in-kind and auction rate features.
Authority
Pioneer America Income Trust may invest in
The average dollar weighted maturity of Safeco securities of any maturity. Although the
Intermediate-Term U.S. Government Fund will average dollar weighted maturity of the Fund's
generally range between three and ten years, portfolio may vary significantly, it generally
although the maturity of individual securities may will not exceed 20 years.
be out of that range.
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62
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Safeco Intermediate-Term
U.S. Government Fund Pioneer America Income Trust
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Investment strategies The decision to buy or sell securities in Safeco Pioneer considers both broad economic
Intermediate-Term U.S. Government Fund factors and issuer-specific factors in selecting
generally falls into one or more of the a portfolio designed to achieve the Fund's
following categories: investment objective.
o To move in or out of various sectors based In assessing the appropriate maturity and
upon their relative values rating weighting of Pioneer America Income
o To reduce the Fund's investments in sectors Trust's portfolio, Pioneer considers a variety
viewed as overhauled, which increasing the of factors that are expected to influence
Fund's investment in undervalued sectors economic activity and interest rates. These
o To realign the overall maturity of duration of factors include fundamental economic
the Fund's portfolio indicators such as the rates of economic
o To raise cash to meet shareholder growth and inflation, Federal Reserve monetary
redemptions policy and the relative value of the U.S. dollar
compared to other currencies. Once Pioneer
With each buy/sell decision, SAM also determines the preferable portfolio
considered the effect the transaction may have characteristics, Pioneer selects individual
on the performance of Safeco Intermediate- securities based upon the terms of the
Term U.S. Government Fund's portfolio as securities (such as yields compared to U.S.
a whole. Treasuries or comparable issues), and sector
diversification.
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Other investments Safeco Intermediate-Term U.S. Government Pioneer America Income Trust may invest
Fund may invest in mortgage-backed or asset- in mortgage-backed securities issued by
backed securities. agencies or instrumentalities of the U.S.
government. These securities represent direct
Safeco Intermediate-Term U.S. Government or indirect participation in, or are collateralized
Fund may purchase "when-issued" or "delayed- by and payable from, mortgage loans secured
delivery" securities, and may purchase or sell by real estate.
securities on a "forward commitment" basis.
Pioneer America Income Trust may purchase
Safeco Intermediate-Term U.S. Government and sell securities, including GNMA
Fund may invest up to 20% of assets in certificates, on a when-issued or delayed
foreign securities. delivery basis. The Fund may engage in these
transactions when it believes they would result
in a favorable price and yield for the security
being purchased or sold.
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Temporary defensive Safeco Intermediate-Term U.S. Government Pioneer America Income Trust may invest all
strategies Fund may hold cash or invest in high-quality, or part of its assets in securities with
short-term securities issued by an agency or remaining maturities of less than one year,
instrumentality of the U.S. government, high- cash equivalents or may hold cash.
quality commercial paper, certificates of deposit,
shares of no-load, open-end money market
funds, or repurchase agreements.
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Diversification Each Fund is diversified for the purpose of the Investment Company Act, and each Fund is
subject to diversification requirements under the Code.
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Industry concentration Safeco Intermediate-Term U.S. Government Pioneer America Income Trust does not have
Fund may not invest more than 25% of its a policy against industry concentration.
assets in any one industry.
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63
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Safeco Intermediate-Term
U.S. Government Fund Pioneer America Income Trust
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Restricted and illiquid If immediately after and as a result of such Pioneer America Income Trust will not
securities action the value of the following securities, in invest more than 15% of its net assets in
the aggregate, would exceed 15% of Safeco illiquid and other securities that are not
Intermediate-Term U.S. Government Fund's net readily marketable. Repurchase agreements
assets, the Fund will not (i) purchase securities maturing in more than seven days will be
for which there is no readily available market, included for purposes of the foregoing
(ii) purchase time deposits maturing in more limit. Securities subject to restrictions
than seven days, (iii) purchase over-the-counter on resale under the 1933 Act are considered
(OTC) options or hold assets set aside to cover illiquid unless they are eligible for
OTC options written by the Fund, (iv) enter into resale pursuant to Rule 144A or another
repurchase agreements maturing in more than exemption from the registration
seven days, or (v) invest in interests in real requirements of the 1933 Act and are
estate investment trusts which are not readily determined to be liquid by Pioneer.
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
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Borrowing Safeco Intermediate-Term U.S. Government Pioneer America Income Trust may not borrow
Fund may borrow money (i) from banks or (ii) money, except from banks to meet
by engaging in reverse repurchase agreements. redemptions in amounts not exceeding 33 1/3%
(taken at the lower of cost or current
value) of its total assets (including the
amount borrowed). The Fund does not intend
to borrow money during the coming year, and
will do so only as a temporary measure for
extraordinary purposes or to facilitate
redemptions. The Fund will not purchase
securities while any borrowings are
outstanding.
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Lending Safeco Intermediate-Term U.S. Government Pioneer America Income Trust may not make
Fund may lend securities to qualified loans, except through the purchase of
institutional investors with a value of up to 33% securities, including repurchase
of the Fund's total assets. agreements, in accordance with its
investment objective, policies and
limitations.
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Derivative instruments Safeco Intermediate-Term U.S. Government Pioneer America Income Trust may not
Fund may not purchase securities on margin. purchase securities on margin.
However, the Fund may (i) obtain short-term
credits as necessary to clear its purchases and
sales of securities, and (ii) make margin
deposits in connection with its use of financial
options and futures, forward and spot currency
contracts, swap transactions and other financial
contracts or derivative instruments.
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Other investment policies As described above, the Funds have substantially similar principal investment strategies and
and restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and non-
fundamental investment restrictions, see the SAI.
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64
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Safeco Intermediate-Term
U.S. Government Fund Pioneer America Income Trust
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Buying, Selling and Exchanging Shares
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Sales charges Purchases under $1,000,000 of Class A shares
of the Fund are subject to a 3.50% front-end The Investor Class shares of Pioneer
sales charge. America Income Trust you receive in the
Reorganization will not be subject to any
Contingent deferred sales charge of up to 4% sales charge. Moreover, if you own shares
if you redeem Class B shares within five years in your own name as of the closing of the
of purchase. Reorganization (i.e., not in the name of a
broker or other intermediary) or own shares
Contingent deferred sales charge of 1% if you in the name of an omnibus account provider
redeem Class C shares within one year of as of the closing of the Reorganization
purchase. that agrees with the Pioneer Fund to
distinguish beneficial holders in the same
Purchases of Investor Class shares of the Fund manner and maintain your account, you may
are not subject to a sales load. purchase Class A shares of Pioneer America
Income Trust and Class A shares of any fund
Safeco Intermediate-Term U.S. Government in the Pioneer family of funds through such
Fund assesses a mandatory redemption fee of account in the future without paying any
2%, as a percentage of the amount redeemed sales charge.
or exchanged, on Class A and Investor Class
shares held less than 30 days. Except as described above, Class A shares
of Pioneer America Income Trust are subject
to a front-end sales charge of up to 4.50%.
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Management and other fees Safeco Intermediate-Term U.S. Government Pioneer America Income Trust pays Pioneer a
Fund pays an advisory fee on a monthly basis management fee equal to 0.50% of the Fund's
at an annual rate as follows: average daily net assets.
$0-$250,000,000: 0.55 of 1% During its most recent fiscal year, Pioneer
$250,000,001-$750,000,000: 0.50 of 1% America Income Trust paid an advisory fee
$750,000,001-$1,250,000,000: 0.45 of 1% at an average rate of 0.50% of average
Over $1,250,000,000: 0.40 of 1% daily net assets.
SAM serves as administrator and fund In addition, the Fund reimburses Pioneer
accounting agent for Safeco Intermediate-Term for certain fund accounting and legal
U.S. Government Fund. The Fund pays SAM an expenses incurred on behalf of the Fund and
administrative services fee of 0.05% of the pays a separate shareholder
Fund's average daily net assets up to the first servicing/transfer agency fee to PIMSS, an
$200,000,000 and 0.01% of its net assets affiliate of Pioneer.
thereafter, and an accounting fee of 0.04% of
the Fund's average daily net assets up to the For the fiscal year ended December 31,
first $200,000,000 and 0.01% of its net assets 2003, the Fund's total annual operating
thereafter. expenses for Class A shares were 1.12% of
average daily net assets. The Fund does not
During its most recent fiscal year, Safeco currently have an expense limitation for
Intermediate-Term U.S. Government Fund paid its Class A shares.
aggregate advisory and administration fees at
an average rate of 0.64%of average daily Pioneer has agreed until the second
net assets. anniversary of the closing of the
Reorganization to limit the expenses
SAM had contractually agreed until April (excluding extraordinary expenses) of the
30,2009, to pay certain Fund operating Investor Class to 0.74% of the average
expenses (but not all of the operating expenses daily net assets attributable to the
Investor Class.
The Investor Class shares to be issued in
the Reorganization will convert to Class A
shares after two years. Class A shares will
have
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65
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Safeco Intermediate-Term
U.S. Government Fund Pioneer America Income Trust
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Management and other fees of the Fund) that exceeded the rate of 0.40% higher expenses per share than Investor
(continued) per annum of the Fund's average daily net Class shares due to the Rule 12b-1 Plan. In
assets. This arrangement included all Fund addition, although Pioneer has agreed to limit
operating expenses except management fees, the expenses attributable to Investor Class
Rule 12b-1 fees, brokerage commissions, shares, Pioneer is not required to limit the
interest, and extraordinary expenses. expenses attributable to Class A shares.
In 2003, SAM began voluntarily reimbursing the
Fund to the extent that its total expenses
exceeded the rate of 0.99% per annum of the
Fund's average daily net assets for Class A
shares, 1.74% per annum of Class B and Class C
shares, and 0.74% per annum for Investor Class
shares.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
A shares, after giving effect to the contractual
expense limitation were 1.20%, and without
giving effect to the expense limitation, were
1.31%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class A shares were 0.99%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
B shares, after giving effect to the contractual
expense limitation were 1.95%, and without
giving effect to the expense limitation, were
2.10%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class B shares were 1.74%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
C shares, after giving effect to the contractual
expense limitation were 1.95%, and without
giving effect to the expense limitation, were
43.56%. After giving effect to the voluntary
expense reimbursement, the operating
expenses for Class C shares were 1.74%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares were 0.94% per share.
After giving effect to the voluntary expense
reimbursement, the operating expenses for
Investor Class shares were 0.74%.
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Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class
(12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject
to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets.
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66
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Safeco Intermediate-Term
U.S. Government Fund Pioneer America Income Trust
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Buying shares You may buy shares of Safeco Intermediate- You may buy shares from any investment firm
Term U.S. Government Fund directly through that has a sales agreement with PFD, Pioneer
Safeco Securities, the Fund's principal America Income Trust's distributor. Existing
underwriter or through brokers, registered shareholders of Safeco Intermediate-Term U.S.
investment advisers, banks and other financial Government Fund who own shares in their
institutions that have entered into selling own name as of the closing of the
agreements with the Fund's principal Reorganization (i.e., not in the name of a
underwriter, as described in the Fund's broker or other intermediary) or own shares in
prospectus. the name of an omnibus account provider as
of the closing of the Reorganization that
Certain account transactions may be done agrees with the Pioneer Fund to distinguish
by telephone. beneficial holders in the same manner and
who maintain their accounts may buy shares
of any fund in the Pioneer family of funds
through such accounts in the future without
paying sales charges.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
America Income Trust by telephone or online.
------------------------------------------------------------------------------------------------------------------------------------
Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer America
acquire through dividend reinvestment or other Income Trust without incurring any fee on the
Fund distributions or for Class A shares that exchange with the more than 62 other Pioneer
you have exchanged for Class A shares of Funds. Your exchange would be for Class A
another fund. shares, which would be subject to a Rule
12b-1 fee. An exchange generally is treated
Certain account transactions may be done as a sale and a new purchase of shares for
by telephone. federal income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer America
Income Trust for shares of other Pioneer
Funds by telephone or online.
------------------------------------------------------------------------------------------------------------------------------------
Selling shares Each class of shares will be sold at net asset value per share next calculated after the Fund
receives your request in good order.
------------------------------------------------------------------------------------------------------------------------------------
You may sell your shares by contacting Safeco Normally, your investment firm will send
Intermediate-Term U.S. Government Fund your request to sell shares to PIMSS. You
directly in writing or by contacting a financial can also sell your shares by contacting the
intermediary as described in the Fund's Fund directly if your account is registered in
prospectus. your name.
If the account is established in the shareholder's
own name, shareholders may also redeem
shares of Pioneer America Income Trust by
telephone or online.
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67
Comparison of Principal Risks of Investing in the Funds
While each Fund has a similar investment objective, primary investment
policies and strategies, there are differences which affect the risk of each
Fund. The market value of fixed income securities tends to be more volatile the
greater the maturity of the security. Pioneer America Income Trust can invest
in securities of greater average maturity than your Safeco Fund and
consequently may have greater risk. However, your Safeco Fund may invest in
U.S. government securities that are not backed by the full faith and credit of
the U.S. Treasury, and consequently have an element of credit risk that is not
present in Pioneer America Income Trust. Generally, however, the Funds are
subject to the same principal risks. You could lose money on your investment in
either Fund or not make as much as if you invested elsewhere if:
o Interest rates go up, causing the value of debt securities in the
Fund's portfolio to decline
o During periods of declining interest rates, the issuer of a security
may exercise its option to prepay principal earlier than scheduled,
forcing the Fund to reinvest in lower yielding securities. This is
known as call or prepayment risk
o During periods of rising interest rates, the average life of certain
types of securities may be extended because of slower than expected
principal payments. This may lock in a below market interest rate,
increase the security's duration (the estimated period until the
security is paid in full) and reduce the value of the security. This
is known as extension risk
o Pioneer's judgment about the attractiveness, relative value or
potential appreciation of a particular sector, security or investment
strategy proves to be incorrect
To the extent the Fund invests significantly in mortgage-backed
securities, its exposure to prepayment and extension risks may be greater than
other investments in fixed income securities.
Although mortgage pools issued by U.S. agencies are guaranteed with
respect to payments of principal and interest, such guarantee does not apply to
losses resulting from declines in the market value of such securities.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return (before and after taxes) for each Fund over
time for each class of shares (including deductions for sales charges) compared
with a broad-based securities market index. The bar charts give an indication
of the risks of investing in each Fund, including the fact that you could incur
a loss and experience volatility of returns year to year. Past performance
before and after taxes does not indicate future results.
Safeco Intermediate-Term U.S. Government Fund -- Investor Class
Calendar Year Total Returns*
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 4.79% for the quarter ended March 31, 1995, and the
lowest quarterly return was -3.58% for the quarter ended March 31, 1994.
68
Pioneer America Income Trust -- Class A shares
Calendar Year Total Returns*
* During the period shown in the bar chart, the Fund's highest quarterly return
was 4.72% for the quarter ended June 30, 1995, and the lowest quarterly
return was -3.14% for the quarter ended March 31, 1994.
Safeco Intermediate-Term U.S. Government Fund
Average Annual Total Returns as of December 31, 2003
-----------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
-----------------------------------------------------------------------------------------------------
Safeco Intermediate-Term U.S. Government Fund, Class A shares
-----------------------------------------------------------------------------------------------------
Return Before Taxes -2.41% 4.60% 5.30%
-----------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) -3.81% 2.47% 2.93%
-----------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) -1.57% 2.58% 2.99%
-----------------------------------------------------------------------------------------------------
Safeco Intermediate-Term U.S. Government Fund, Class B shares
-----------------------------------------------------------------------------------------------------
Return Before Taxes -3.50% 4.62% 5.39%
-----------------------------------------------------------------------------------------------------
Safeco Intermediate-Term U.S. Government Fund, Class C shares
-----------------------------------------------------------------------------------------------------
Return Before Taxes -0.49% 4.81% 5.40%
-----------------------------------------------------------------------------------------------------
Safeco Intermediate-Term U.S. Government Fund, Investor Class shares
-----------------------------------------------------------------------------------------------------
Return Before Taxes 1.40% 5.56% 5.78%
-----------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) -0.14% 3.34% 3.36%
-----------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) 0.91% 3.34% 3.39%
-----------------------------------------------------------------------------------------------------
Lehman Brothers Intermediate Government Index(2)
(reflects no deduction for fees, expenses or taxes) 2.30% 6.16% 6.33%
-----------------------------------------------------------------------------------------------------
Merrill Lynch U.S. Treasury/Agency Master Index(2)
(reflects no deduction for fees, expenses or taxes) 2.36% 6.22% 6.71%
-----------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The Lehman Brothers Intermediate Government Index, an unmanaged index
comprised of U.S. Treasury and U .S. agency issues from its more
comprehensive U.S. Aggregate Index, excluding maturities below one year and
above 9.9 years, and the Merrill Lynch U.S. Treasury/Agency Master Index,
an unmanaged index of U.S. Treasury and U.S. agency securities, are for
reference only and do not mirror the Fund's investments.
69
Pioneer America Income Trust -- Class A shares
Average Annual Total Returns as of December 31, 2003
-----------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
-----------------------------------------------------------------------------------------------------
Pioneer America Income Trust, Class A shares
-----------------------------------------------------------------------------------------------------
Return Before Taxes -3.06% 4.14% 5.04%
-----------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(1) -4.61% 2.05% 2.65%
-----------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares(1) -2.00% 2.20% 2.75%
-----------------------------------------------------------------------------------------------------
Lehman Brothers Government Bond Index(2)
(reflects no deduction for fees, expenses or taxes) 2.36% 6.26% 6.72%
-----------------------------------------------------------------------------------------------------
Lehman Brothers Fixed Rate Mortgage-Backed Securities Index(2)
(reflects no deduction for fees, expenses or taxes) 3.05% 6.55% 6.89%
-----------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on your situation and may
differ from those shown. Furthermore, the after-tax returns shown are not
relevant to those who hold their shares through tax-deferred arrangements
such as 401(k) plans or IRA accounts, or to investors that are tax-exempt.
(2) The Lehman Brothers Government Bond Index, an unmanaged measure of the
performance of U.S. Treasury debt, all publicly issued debt of U.S.
government agencies and quasi-federal corporations, and corporate debt
guaranteed by the U.S. government, and the Lehman Brothers Fixed Rate
Mortgage-Backed Securities Index, an unmanaged index including 15- and
30-year fixed rate securities backed by mortgage pools of the GNMA, FHLMC
and FNMA, are for reference only and do not mirror the Fund's investments.
Pioneer America Income Trust's Investor Class shares will not be
outstanding prior to the closing of the Reorganization and consequently have no
performance history. However, the performance record of the Investor Class
would be modestly higher than the performance of Class A shares due to the
lower expenses applicable to the Investor Class.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
The Funds' Fees and Expenses
Shareholders of both Funds pay various fees and expenses, either directly
or indirectly. The tables below show the fees and expenses that you would pay
if you were to buy and hold shares of each Fund. The expenses in the tables
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer America
Income Trust, the expenses of Pioneer America Income Trust for the period ended
December 31, 2003. Future expenses for all share classes may be greater or
less.
Safeco
Safeco Safeco Safeco Intermediate- Pro Forma
Intermediate- Intermediate- Intermediate- Term U.S. Pioneer
Term U.S. Term U.S. Term U.S. Government America
Government Government Government Fund Income Trust
Fund Fund Fund Investor Investor
Shareholder transaction fees Class A Class B Class C Class Class(9)
(paid directly from your investment) --------------- --------------- -------------- --------------- -------------
Maximum sales charge (load) when you buy shares as a
percentage of offering price ......................... 3.50%(6) None None None None1
Maximum deferred sales charge (load) as a percentage of
purchase price or the amount you receive when you sell
shares, whichever is less ............................ None 4.00%(7) 1.00%(8) None None
Redemption fees for shares held less than 30 days ..... 2.00% None None 2.00% N/A
Wire redemption fee ................................... $ 204 $ 204 $ 204 $ 204 $ 10
Annual low balance fee ................................ $ 125 $ 125 $ 125 $ 125 N/A
70
Safeco
Safeco Safeco Safeco Intermediate- Pro Forma
Intermediate- Intermediate- Intermediate- Term U.S. Pioneer
Term U.S. Term U.S. Term U.S. Government America
Government Government Government Fund Income Trust
Fund Fund Fund Investor Investor
Shareholder transaction fees Class A Class B Class C Class Class(9)
(paid directly from your investment) --------------- --------------- --------------- --------------- -------------
Annual fund operating expenses (deducted from fund assets)
(as a % of average net assets)
Management fee ............................ 0.55% 0.55% 0.55% 0.55% 0.50%
Distribution and service (12b-1) fee ...... 0.25% 1.00% 1.00% None None
Other expenses ............................ 0.51% 0.55% 42.01% 0.39% 0.35%
Total fund operating expenses ............. 1.31% 2.10% 43.56% 0.94% 0.85%
Expense reimbursement/reduction ........... 0.11%(2) 0.15%(2) 41.61%(2) N/A 0.11%(3)
Net fund operating expenses ............... 1.20% 1.95% 1.95% 0.94% 0.74%
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer America Income Trust through the Reorganization. In addition,
shareholders of your Safeco Fund who own shares in their own name as of the
closing of the Reorganization (i.e., not in the name of a broker or other
intermediary) or own shares in the name of an omnibus account provider that
agrees with the Pioneer Fund to distinguish beneficial holders in the same
manner and who maintain their accounts may purchase Class A shares of
Pioneer America Income Trust or of any fund in the Pioneer family of funds
through such account in the future without paying this sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco
Intermediate-Term U.S. Government Bond Fund for certain Fund operating
expenses (but not all of the operating expenses of the Fund) that exceeded
the rate of 0.40% per annum of the Fund's average daily net assets. This
arrangement included all Fund operating expenses except management fees,
Rule 12b-1 fees, brokerage commissions, interest, and extraordinary
expenses. In 2003, SAM began voluntarily reimbursing the Fund to the extent
that its total expenses exceeded the rate of 0.99% per annum of the Fund's
average daily net assets for Class A shares, 1.74% per annum for Class B
and Class C shares, and 0.74% per annum for Investor Class shares. The
above table reflects "contractual" expense reimbursements from SAM, if any,
but does not reflect "voluntary" expense reimbursements by SAM.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer America
Income Trust to 0.74% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once in year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are
not subject to a front-end sales charge, but a 1.00% deferred sales charge
will apply to redemptions made in the first twelve months except with
respect to participant-directed redemptions from qualified retirement
plans.
(7) The contingent deferred sales charge on Class B shares of your Safeco Fund
reduces to zero after five years from purchase, and the Class B shares
convert to Class A shares at that time.
(8) The contingent deferred sales charge on Class C shares applies only to
redemptions made in the first twelve months after purchase.
(9) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares.
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for five years for
Safeco Intermediate-Term U.S. Government Fund and two years for Pioneer America
Income Trust and (f) and the Investor Class shares of Pioneer America Income
Trust convert to Class A shares after two years. The examples are for
comparison purposes only and are not a representation of either Fund's actual
expenses or returns, either past or future.
71
Example
Safeco Intermediate-Term U.S. Government Fund
Class A shares
Year 1 .............. $ 468
Year 3 .............. $ 718
Year 5 .............. $ 987
Year 10 ............. $1,822
Class B shares With redemption Without redemption
Year 1 .............. $ 598 $ 198
Year 3 .............. $ 812 $ 612
Year 5 .............. $1,152 $1,052
Year 10 ............. $1,974 $1,974
Class C shares With redemption Without redemption
Year 1 .............. $ 298 $ 198
Year 3 .............. $ 612 $ 612
Year 5 .............. $1,052 $1,052
Year 10 ............. $2,399 $2,399
Investor Class shares
Year 1 .............. $ 96
Year 3 .............. $ 300
Year 5 .............. $ 520
Year 10 ............. $1,155
Pro Forma Pioneer America Income Trust
Investor Class shares
Year 1 .............. $ 76
Year 3 .............. $ 284
Year 5 .............. $ 558
Year 10 ............. $1,341
COMPARISON OF DELAWARE STATUTORY TRUST AND MASSACHUSETTS BUSINESS TRUST
Characteristics of Safeco Intermediate-Term U.S. Government Trust (a series of
a Delaware statutory trust)
o GOVERNANCE AND MANAGEMENT. Safeco Intermediate-Term U.S. Government
Fund is a series of the Safeco Taxable Bond Trust, a Delaware
statutory trust. The governing instrument of Safeco Taxable Bond Trust
is its Trust Instrument (the "Trust Instrument"). The Trustees of the
Safeco Taxable Bond Trust are responsible for the management and
supervision of Safeco Intermediate-Term U.S. Government Fund.
o SHARE CAPITAL AND CLASSES. The Trust Instrument of Safeco Taxable Bond
Trust permits the Trustees to issue an unlimited number of full and
fractional shares of beneficial interest of Safeco Intermediate-Term
U.S. Government Fund without par value. As of the date of this Proxy
Statement/Prospectus, the Trustees have authorized shares of Safeco
Intermediate-Term U.S. Government Fund and have authorized the
issuance of four classes of shares of Safeco Intermediate-Term U.S.
Government Fund, designated as Class A, Class B, Class C and Investor
Class shares. The shares of each class of Safeco Intermediate-Term
U.S. Government Fund represent an equal proportionate interest in the
aggregate net assets attributable to that class of the Fund. Holders
of each class of shares have certain exclusive voting rights on
matters relating to their respective distribution plans. The different
classes of Safeco Intermediate-Term U.S. Government Fund may bear
different expenses relating to the cost of holding shareholder
meetings necessitated by the exclusive voting rights of any class of
shares. In the event of liquidation, shareholders of each class are
entitled to share pro rata in the net assets of their Fund available
for distribution to these shareholders. Shares of each class entitle
their holders to one vote per share, are freely transferable and have
no preemptive, subscription or conversion rights.
o MEETINGS. Under Delaware law, Safeco Taxable Bond Trust is not
required to hold annual shareholder meetings for any Fund. Unless
otherwise required by the Investment Company Act, the Fund has no
intention of holding annual meetings of shareholders. Pursuant to the
Trust Instrument, shareholders have power to vote only on certain
matters, including (a) the election and removal
72
of Trustees; (b) approval of any investment management agreement; (c)
termination of the Safeco Taxable Bond Trust; (d) certain amendments
to the Trust Instrument; and (e) such additional matters relating to
the Trust as may be required by law or as the Trustees may consider
desirable.
o LIABILITY OF SHAREHOLDERS. Delaware law affords shareholders of a
Delaware statutory trust with the same protections afforded
stockholders of a Delaware corporation, which means shareholders are
not generally subject to liability for the debts or obligations of the
statutory trust unless the entity's trust instrument provides
otherwise. The Trust Instrument of the Safeco Taxable Bond Trust
contains an express disclaimer of shareholder liability for acts,
obligations or affairs of Safeco Intermediate-Term U.S. Government
Fund and provides for indemnification out of the Fund's assets for all
losses and expenses of any shareholder held personally liable for
reason of being or having been a shareholder.
Characteristics of Pioneer America Income Trust (a Massachusetts business
trust)
o GOVERNANCE AND MANAGEMENT. Pioneer America Income Trust is a
Massachusetts business trust. The governing instrument of Pioneer
America Income Trust is its Agreement and Declaration of Trust
("Declaration of Trust"). The business of Pioneer America Income Trust
is managed under the direction of its Board of Trustees. The Trustees,
in addition to viewing the actions of the Pioneer America Income
Trust's investment adviser, decide upon matters of general policy at
their regular meetings. The officers of Pioneer America Income Trust
supervise its business operations.
o SHARES AND CLASSES. Pioneer America Income Trust is authorized to
issue shares of beneficial interest and to increase or decrease the
aggregate number of shares of beneficial interest or the number of
shares of any class that the Fund has authority to issue. Each share
is entitled to one vote on all questions relating to the Fund, and
each share is entitled to participate equally in dividends and capital
gains distributions and in the residual assets of the respective class
in the event of liquidation.
o MEETINGS. Under Massachusetts law, Pioneer America Income Trust, as a
registered open-end investment company, is not required to hold annual
shareholder meetings. Unless otherwise required by the Investment
Company Act, the Pioneer America Income Trust has no intention of
holding annual meetings of shareholders. Pursuant to the Declaration
of Trust, special meetings of shareholders may be called at any time
by the Chairman, President or by the Board of Trustees or by the
secretary upon the written request of shareholders entitled to cast at
least 25% of the votes entitled to be cast at such meeting, provided
that such request shall state the purposes of such meeting and the
matters proposed to be acted on.
o LIABILITY OF SHAREHOLDERS. Shareholders of a Massachusetts business
trust may, under certain circumstances, be held personally liable for
the obligations of the trust. However, the Declaration of Trust
contains an express disclaimer of shareholder liability for acts or
obligations of the Pioneer America Income Trust or any series of the
Pioneer America Income Trust and provides that notice of such
disclaimer may be given in each agreement, obligation or instrument
entered into or executed by the Pioneer America Income Trust or its
Trustees. Moreover, the Declaration of Trust provides for the
indemnification out of Pioneer America Income Trust property of any
shareholders held personally liable for any obligations of the Pioneer
America Income Trust or any series of the Pioneer America Income
Trust. The Declaration of Trust also provides that the Pioneer America
Income Trust shall, upon request, assume the defense of any claim made
against any shareholder for any act or obligation of the Pioneer
America Income Trust and satisfy any judgment thereon. Thus, the risk
of a shareholder incurring financial loss beyond his or her investment
because of shareholder liability would be limited to circumstances in
which the Fund itself will be unable to meet its obligations. In light
of the nature of the Pioneer America Income Trust's business and the
nature and amount of its assets, the possibility of the Pioneer
America Income Trust's liabilities exceeding its assets, and therefore
a shareholder's risk of personal liability, is remote.
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Intermediate-Term U.S. Government Fund. The Trustees
considered the following matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Safeco Fund until August 2,
2004, was acquired by Symetra. Symetra informed the Trustees that it did not
intend to continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the performance of Pioneer America Income Trust is generally
consistent with the historical investment performance of your Safeco Fund. For
the one, five and ten year periods ended June 30, 2004, Class A shares of
Pioneer America Income Trust had an average annual return of -0.37%, 5.64%, and
5.97%, respectively, compared to an average annual return of the Class A shares
and Investor Class shares of -4.56% and -0.73% (one year), 4.73% and 5.73%
(five years) and 5.79% and 6.29% (ten years), respectively, during the same
periods. In addition, the Trustees considered the track record of Pioneer in
managing equity and fixed income mutual funds.
73
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutional and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholder account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market
fund that will be available to your Safeco Fund's shareholders through
exchanges. In addition, Pioneer offers shareholders additional options for
their accounts, including the ability to transact and exchange shares over the
telephone or online and the ability to access account values and transaction
history in all of the shareholder's direct accounts in the Pioneer Funds over
the telephone or online.
Fourth, Pioneer America Income Trust's lower operating expenses and
Pioneer's commitment until the second anniversary of the Reorganization to
limit the expenses (excluding extraordinary expenses) of the Investor Class of
Pioneer America Income Trust to 0.74% of average daily net assets. The
estimated expenses of the Investor Class of Pioneer America Income Trust are
below both the gross expenses and expenses net of contractual expense
reimbursement of the end class of shares of your Safeco Fund. Although you will
experience higher expenses once the Investor Class shares convert to Class A
shares after two years, based upon the Class A expense ratio of Pioneer America
Income Trust for the most recent fiscal year, Pioneer America Income Trust's
expenses were lower than the gross and net expense ratio of each class of
shares of your Safeco Fund. While there are some differences between the
policies of the two Funds, the Trustees believe that the two Funds represent
substantially equivalent investments.
Fifth, the substantially larger size of Pioneer America Income Trust
offers greater opportunity for diversification of the investment portfolio,
which should help to reduce risks.
Sixth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Seventh, the Investor Class shares of Pioneer America Income Trust
received in the Reorganization will provide Safeco Intermediate-Term U.S.
Government Fund shareholders with exposure to substantially the same investment
product as they currently have.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco
Funds and the Pioneer Funds associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses
of any proxy solicitation firm retained in connection with the Reorganizations;
(3) the legal fees and expenses incurred by the Safeco Funds in connection with
the Reorganizations; and (4) the Trustees' fees and out of pocket expenses
incurred as a result of the Reorganizations.
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Will Pioneer and Symetra Benefit from the
Reorganizations."
The Board of Trustees of Pioneer America Income Trust also considered that
the Reorganization presents an excellent opportunity for the Pioneer America
Income Trust to acquire investment assets without the obligation to pay
commissions or other transaction costs that a fund normally incurs when
purchasing securities. This opportunity provides an economic benefit to Pioneer
America Income Trust and its shareholders.
74
CAPITALIZATION
The following table sets forth the capitalization of each Fund, and the
pro forma combined Fund as of June 30, 2004.
Safeco
Intermediate- Pro Forma
Term U.S. Pioneer America Pioneer America
Government Fund Income Trust Income Trust
June 30, 2004 June 30, 2004 June 30, 2004
----------------- ----------------- ----------------
Total Net Assets (in thousands) ......... $66,742 $204,736 $271,478
Class A shares ......................... $ 5,109 $129,465 $129,465
Class B shares ......................... $ 2,338 $ 44,300 $ 44,300
Class C shares ......................... $ 97 $ 30,487 $ 30,487
Investor Class shares .................. $59,198 N/A $ 66,742
Class R shares ......................... N/A $ 484 $ 484
Net Asset Value Per Share
Class A shares ......................... $ 9.41 $ 9.72 $ 9.72
Class B shares ......................... $ 9.42 $ 9.66 $ 9.66
Class C shares ......................... $ 9.42 $ 9.69 $ 9.69
Investor Class shares .................. $ 9.41 N/A $ 9.72
Class R shares ......................... N/A $ 9.82 $ 9.82
Shares Outstanding
Class A shares ......................... 542,858 13,322,479 13,322,479
Class B shares ......................... 248,086 4,585,782 4,585,782
Class C shares ......................... 10,304 3,147,571 3,147,571
Investor Class shares .................. 6,290,727 N/A 6,866,461
Class R shares ......................... N/A 49,339 49,339
It is impossible to predict how many shares of Pioneer America Income
Trust will actually be received and distributed by your Safeco Fund on the
Reorganization date. The table should not be relied upon to determine the
amount of Pioneer America Income Trust's shares that will actually be received
and distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund.
Similarly, the Board of Trustees of Pioneer America Income Trust, including its
Independent Trustees, approved the Reorganization. They also determined that
the Reorganization is in the best interests of Pioneer America Income Trust.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
75
Safeco Money Market Fund and
Pioneer Cash Reserves Fund
PROPOSAL 1(f)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire Proxy Statement/Prospectus, including the form of
Agreement and Plan of Reorganization attached as EXHIBIT A-1, because it
contains details that are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Money Market Fund to Pioneer Cash Reserves Fund
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Safeco Money Market Fund Pioneer Cash Reserves Fund
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Business A series of Safeco Money Market Trust, a A series of Pioneer Money Market Trust, a
diversified open-end management investment diversified open-end management investment
company organized as a Delaware statutory company registered under the Investment
trust. Company Act and organized as a Delaware
statutory trust.
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Net assets as of $286 million $510 million
June 30, 2004
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Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers: Portfolio Manager:
Lesley Fox (since 2000 and until August 2, Day-to-day management of the Fund's
2004) Assistant Vice President, SAM portfolio is the responsibility of a team of
Joined SAM in 2000 fixed income portfolio managers led by
Kenneth J. Taubes.
Cathleen Beauchamp (since 2003 until
July 31, 2004) Mr. Taubes, a senior vice president, joined
CFA Pioneer in 1998 and has been an investment
professional since 1982.
Currently Pioneer is acting as investment
adviser to the Safeco Money Market Fund. The
Portfolio Manager of the Pioneer Cash
Reserves Fund, as indicated in the next
column, currently manages your Safeco Fund.
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Investment objective Safeco Money Market Fund seeks as high a Safeco Money Market Fund seeks high current
level of current income as is consistent with income, preservation of capital and liquidity
the preservation of capital and liquidity through through investments in high-quality short-term
investment in high-quality money market securities.
instruments maturing in 13 months or less.
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76
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Safeco Money Market Fund Pioneer Cash Reserves Fund
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Primary investments To achieve its investment objective, Safeco Safeco Money Market Fund seeks to maintain a
Money Market Fund will purchase only high- constant net asset value of $1.00 per share by
quality securities with remaining maturities of investing in high-quality, U.S. dollar
397 days or less. The Fund will maintain a denominated money market securities,
dollar-weighted average portfolio maturity of including those issued by:
no more than 90 days.
o U.S. and foreign banks
o U.S. and foreign corporate issuers
o The U.S. government and its agencies and
instrumentalities
o Foreign governments
o Multinational organizations such as the
World Bank
Safeco Money Market Fund invests exclusively
in securities with a maximum remaining
maturity of 397 days and maintains a dollar-
weighted average portfolio maturity of 90 days
or less.
Safeco Money Market Fund's investments may
have fixed, floating or variable interest rates.
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Investment strategies When evaluating a security to buy, SAM In selecting Safeco Money Market Fund's
historically considered, among other things: portfolio, Pioneer complies with the rating,
maturity and diversification requirements
o Yield applicable to money market funds. Within
o Maturity those factors, Pioneer's assessment of broad
o Issuer credit quality economic factors that are expected to affect
o Relative value compared with other economic activity and interest rates influence
alternatives its securities selection.
Safeco Money Market Fund may sell a
security if:
o The adviser becomes concerned about the
issuer's creditworthiness
o A more attractive alternative is available
o Cash is needed to meet shareholder
redemptions
After evaluating a bond, SAM compared the
bond to other available bonds, which may have
different features, and would buy the bond if it
appeared to offer the best relative value.
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Other investments Safeco Money Market Fund will limit its Safeco Money Market Fund may invest
investment in municipal obligations the interest more than 25% of its total assets in U.S.
on which is payable from the revenues of government securities and obligations of U.S.
similar types of projects to less than 25% of banks. The Fund may invest in any money
the Fund's total assets. As a matter of market instrument that is a permissible
operating policy, "similar types of projects" investment for a money market fun under the
may include sports, convention or trade show rules of the SEC, including commercial paper,
facilities; airports or mass transportation; certificates of deposit, time deposits, bankers'
sewage or solid waste disposal facilities; or air acceptances, mortgage-backed and asset-
and water pollution control projects. backed securities, repurchase agreements,
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77
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Safeco Money Market Fund Pioneer Cash Reserves Fund
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Other investments (continued) Safeco Money Market Fund will limit its municipal obligations and other short-term
investment in securities whose issuers are debt securities.
located in the same state to less than 25% of
the Fund's total assets. Safeco Money Market Fund invests in U.S.
government obligations and money market
Safeco Money Market Fund may invest up to securities rated in one of the two highest
25% of its total assets in the "first tier rating categories for short-term debt by a
securities" of a single issuer for up to three nationally recognized statistical rating
business days after purchase. First tier organization or, if unrated, determined to
securities are securities (1) rated in the highest be of equivalent credit quality by Pioneer.
short-term category by two nationally
recognized statistical rating organizations
(NRSROs); (2) rated in the highest short-term
rating category by a single NRSRO if only that
NRSRO has assigned the securities a short-
term rating; or (3) unrated, but determined by
SAM to be of comparable quality.
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Temporary defensive Safeco Money Market Fund may hold cash or Safeco Money Market Fund may invest all or
strategies invest in high-quality, short-term securities issued part of its assets in securities with
by an agency or instrumentality of the U.S. remaining maturities of less than one year,
government, high-quality commercial paper, cash equivalents or may hold cash.
certificates of deposit, shares of no-load, open-
end money market funds, or repurchase
agreements as a temporary defensive measure
when market conditions so warrant.
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Diversification Each Fund is diversified for the purpose of the Investment Company Act, and each Fund is
subject to diversification requirements under the Code.
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Industry concentration Safeco Money Market Fund will not make Safeco Money Market Fund will not
investments that will result in the concentration concentrate its assets in the securities of
(as defined in the Investment Company Act, issuers in any one industry except with
any rule or order there under, or SEC staff respect to investments in obligations of
interpretation thereof) of its investments in the (a) the U.S. government, its agencies,
securities of issuers primarily engaged in the authorities or instrumentalities and (b)
same industry, provided that this restriction domestic banks, purchase any security if,
does not limit the Fund from investing in as a result (i) more than 5% of the assets
obligations issued or guaranteed by the U.S. of the Fund would be in the securities of
government, its agencies or instrumentalities, any one issuer, or (ii) more than 25% of
or certain bank instruments issued by its assets would be in a particular
domestic banks. industry.
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Restricted and illiquid If immediately after and as a result of such Safeco Money Market Fund will not invest
securities action the value of the following securities, in more than 10% of its net assets in illiquid
the aggregate, would exceed 10% of the Fund's and other securities that are not readily
net assets, the Fund will not (i) purchase marketable. Repurchase agreements maturing
securities for which there is no readily available in more than seven days will be included
market, (ii) purchase time deposits maturing in for purposes of the foregoing limit.
more than seven days, (iii) purchase over-the- Securities subject to restrictions on
counter (OTC) options or hold assets set aside resale under the 1933 Act are considered
to cover OTC options written by the Fund, (iv) illiquid unless they are eligible for
enter into repurchase agreements maturing in resale pursuant to Rule 144A or another
exemption from the registration
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78
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Safeco Money Market Fund Pioneer Cash Reserves Fund
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Restricted and illiquid more than seven days, or (v) invest in interests requirements of the 1933 Act and are
securities (continued) in real estate investment trusts which are not determined to be liquid by Pioneer.
readily marketable or interests in real estate
limited partnerships which are not listed or
traded on the NASDAQ Stock Market.
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Borrowing Safeco Money Market Fund may borrow money Safeco Money Market Fund may not borrow
(i) from banks or (ii) by engaging in reverse money, except from banks for extraordinary
repurchase agreements. purposes or to meet redemptions in amounts
not exceeding 33 1/3% of its total assets
(including the amount borrowed). The Fund
does not intend to borrow money during the
coming year.
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Lending Safeco Money Market Fund may lend securities Safeco Money Market Fund may not make loans
to qualified institutional investors with a value to any person, except by (a) the purchase
of up to 33% of the Fund's total assets. of a debt obligation in which the Fund is
permitted to invest and (b) engaging in
repurchase agreements.
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Derivative instruments Safeco Money Market Fund may not purchase Safeco Money Market Fund may not purchase
securities on margin. However, the Fund may (i) securities on margin.
obtain short-term credits as necessary to clear its
purchases and sales of securities, and (ii) make
margin deposits in connection with its use of
financial options and futures, forward and spot
currency contracts, swap transactions and other
financial contracts or derivative instruments.
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Other investment policies and As described above, the Funds have substantially
similar principal investment strategies and
restrictions policies. Certain of the non-principal investment
policies and restrictions are different. For a
more complete discussion of each Fund's other
investment policies and fundamental and non-
fundamental investment restrictions, see the SAI.
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Buying, Selling and Exchanging Shares
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Sales charges Purchases of Class A shares of Safeco Money The Investor Class shares of Pioneer Cash
Market Fund are not subject to a sales load. Reserves Fund you receive in the
Reorganization will not be subject to any
A contingent deferred sales charge may apply sales charge. Moreover, if you own shares
if you redeem Class B shares that were in your own name as of the closing of the
purchased by exchange from another fund. Reorganization (i.e., not in the name of a
broker or other intermediary) or own shares
A contingent deferred sales charge of 1% if in the name of an omnibus account provider
you redeem Class C shares within one year of as of the closing of the Reorganization
purchase, and the shares were purchased by that agrees with the Pioneer Fund to
exchange from another fund. distinguish beneficial holders in the same
manner and maintain your account, you may
Purchases of Investor Class shares of the Fund purchase Class A shares of Pioneer Cash
are not subject to a sales load. Reserves Fund and Class A shares of any
fund in the Pioneer family of funds through
such account in the future without paying
any sales charge.
Except as described above, Class A shares of
Pioneer Cash Reserves Fund are not subject
to a front-end sales charge.
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79
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Safeco Money Market Fund Pioneer Cash Reserves Fund
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Management and other fees Safeco Money Market Fund pays an advisory Pioneer Cash Reserves Fund pays Pioneer a
fee on a monthly basis at an annual rate as management fee equal to 0.40% of the Fund's
average daily net assets. During its most
follows: recent fiscal year, Pioneer Cash Reserves
$0-$250,000,000: 0.50 of 1% Fund paid an advisory fee at an average
$250,000,001-$750,000,000: 0.45 of 1% rate of 0.40% of average daily net assets.
$750,000,001-$1,250,000,000: 0.40 of 1%
Over $1,250,000,000: 0.35 of 1% In addition, the Fund reimburses Pioneer
for certain fund accounting and legal
SAM serves as administrator and fund expenses incurred on behalf of the Fund and
accounting agent for Safeco Money Market pays a separate shareholder
Fund. The Fund pays SAM an administrative servicing/transfer agency fee to PIMSS, an
services fee of 0.05% of the Fund's average affiliate of Pioneer.
daily net assets up to the first $200,000,000
and 0.01% of its net assets thereafter, and an For the fiscal year ended December 31,
accounting fee of 0.04% of the Fund's average 2003, the Fund's total annual operating
daily net assets up to the first $200,000,000 expenses for Class A shares were 1.06% of
and 0.01% of its net assets thereafter. average daily net assets. The Fund does not
During its most recent fiscal year, Safeco Money currently have an expense limitation for
Market Fund paid aggregate advisory and its Class A shares.
administration fees at an average rate of 0.53%
of average daily net assets. Pioneer has agreed until the second
anniversary of the closing of the
SAM had contractually agreed until April 30, Reorganization to limit the expenses
2009, to pay certain Fund operating expenses (excluding extraordinary expenses) of the
(but not all of the operating expenses of the Investor Class to 0.71% of the average
Fund) that exceeded the rate of 0.30% per daily net assets attributable to the
annum of the Fund's average daily net assets. Investor Class.
This arrangement included all Fund operating
expenses except management fees, Rule 12b-1 The Investor Class shares to be issued in
fees, brokerage commissions, interest, and the Reorganization will convert to Class A
extraordinary expenses. shares after two years. Class A shares will
have higher expenses per share than
For the fiscal year ended December 31, 2003, Investor Class shares due to the Rule 12b-1
the Fund's annual operating expenses for Class Plan. In addition, although Pioneer has
A shares, after giving effect to the expense agreed to limit the expenses attributable
limitation were 0.78%, and without giving to Investor Class shares, Pioneer is not
effect to the expense limitation, were 0.98%. required to limit the expenses attributable
to Class A shares.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
B shares, after giving effect to the expense
limitation were 0.78%, and without giving
effect to the expense limitation, were 1.17%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
C shares, after giving effect to the expense
limitation were 0.78%, and without giving
effect to the expense limitation, were 1.01%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares were 0.67%.
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80
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Safeco Money Market Fund Pioneer Cash Reserves Fund
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Distribution and service Class A shares of Safeco Money Market Fund Class A shares of Pioneer Cash Reserves Fund
(12b-1) fee are not currently subject to a Rule 12b-1 fee. are subject to a Rule 12b-1 fee equal to
0.15% annually of average daily net assets.
--------------------------------------------------------------------------------------------------------
Investor Class shares of the Pioneer Fund are not subject to a Rule 12b-1 fee. Pioneer Investor
Class shares will convert into Class A shares after two years.
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Buying shares You may buy shares of the Fund directly You may buy shares from any investment firm
through Safeco Securities, the Fund's principal that has a sales agreement with PFD, Pioneer
underwriter, or through brokers, registered Cash Reserves Fund's distributor. Existing
investment advisers, banks and other financial shareholders of Safeco Money Market Fund
institutions that have entered into selling who own shares in their own name as of the
agreements with the Fund's principal closing of the Reorganization (i.e., not in the
underwriter, as described in the Fund's name of a broker or other intermediary) or
prospectus. own shares in the name of an omnibus
account provider as of the closing of the
Certain account transactions may be done by Reorganization that agrees with the Pioneer
telephone. Fund to distinguish beneficial holders in the
same manner and who maintain their
accounts may buy shares of any fund in the
Pioneer family of funds through such
accounts in the future without paying sales
charges.
If the account is established in the
shareholder's own name, shareholders may
also purchase additional shares of Pioneer
Cash Reserves Fund by telephone or online.
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Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Cash
acquire through dividend reinvestment or other Reserves Fund without incurring any fee on
Fund distributions or for Class A shares that the exchange with the more than 62 other
you have exchanged for Class A shares of Pioneer Funds. Your exchange would be for
another fund. Class A shares, which is subject to Rule
12b-1 fees. An exchange generally is treated
Certain account transactions may be done by as a sale and a new purchase of shares for
telephone. federal income tax purposes.
If the account is established in the
shareholder's own name, shareholders may
also exchange shares of Pioneer Cash
Reserves Fund for shares of other Pioneer
Funds by telephone or online.
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81
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Safeco Money Market Fund Pioneer Cash Reserves Fund
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Selling shares Each class of shares will be sold at net asset value per share next calculated after the Fund
receives your request in good order.
------------------------------------------------------------------------------------------------------------------
You may sell your shares by contacting Safeco Normally, your investment firm will send your
Money Market Fund directly in writing or by request to sell shares to PIMSS. You can
contacting a financial intermediary as described also sell your shares by contacting the Fund
in the Fund's prospectus. directly if your account is registered in
your name.
If the account is established in the
shareholder's own name, shareholders may
also redeem shares of Pioneer Cash Reserves
Fund by telephone or online. After the
Reorganization, Investor Class shares will not
be entitled to check writing privileges, and you
should no longer write checks issued by your
Safeco Fund.
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Comparison of Principal Risks of Investing in the Funds
Because each Fund has a similar investment objective, primary investment
policies and strategies, the Funds are subject to the same principal risks.
Even though the Funds seek to maintain a $1 share price, you could lose money
on your investment or the Fund could fail to generate high current income if:
o Interest rates go up, causing the value of the Fund's investments to
decline
o The issuer of a security owned by the Fund defaults on its obligation
to pay principal and/or interest or has its credit rating downgraded
o The investment adviser's judgment about the credit quality,
attractiveness or relative value of a particular security proves to be
incorrect
Investing in non-U.S. issuers may involve unique risks compared to
investing in securities of U.S. issuers. These risks may include:
o Inadequate financial information
o Smaller, less liquid and more volatile markets
o Political and economic upheavals
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
82
Past Performance
Set forth below is performance information for each Fund. The bar charts
show how each Fund's total return (not including any deduction for sales
charges) has varied from year to year for each full calendar year. The tables
show average annual total return for each Fund over time for each class of
shares (including deductions for sales charges) compared with a broad-based
securities market index. The bar charts give an indication of the risks of
investing in each Fund, including the fact that you could incur a loss and
experience volatility of returns year to year. Past performance before and
after taxes does not indicate future results.
Safeco Money Market Fund -- Investor Class
Calendar Year Total Returns*
* During the period shown in the bar chart, your Safeco Fund's highest
quarterly return was 1.52% for the quarter ended December 31, 2000, and the
lowest quarterly return was 0.13% for the quarter ended September 30, 2003.
Pioneer Cash Reserves Fund -- Class A shares
Calendar Year Total Returns*
* During the period shown in the bar chart, Pioneer Cash Reserves Fund's
highest quarterly return was 1.45% for the quarter ended December 31, 2000,
and the lowest quarterly return was 0.01% for the quarter ended December 31,
2003.
83
Safeco Money Market Fund
Average Annual Total Returns as of December 31, 2003
---------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
---------------------------------------------------------------------------------------
Safeco Money Market Fund, Class A shares 0.55% 3.20% 3.95%
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Safeco Money Market Fund, Class B shares 0.55% 3.21% 3.93%
---------------------------------------------------------------------------------------
Safeco Money Market Fund, Class C shares 0.55% 3.20% 3.93%
---------------------------------------------------------------------------------------
Safeco Money Market Fund, Investor Class shares 0.65% 3.24% 3.97%
---------------------------------------------------------------------------------------
Pioneer Cash Reserves Fund -- Class A shares
Average Annual Total Returns as of December 31, 2003
---------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
---------------------------------------------------------------------------------------
Pioneer Cash Reserves Fund, Class A shares 0.26% 2.88% 3.74%
---------------------------------------------------------------------------------------
90-day U.S. Treasury Bill
(reflects no deduction for taxes) 1.03% 3.34% 4.18%
---------------------------------------------------------------------------------------
Pioneer Cash Reserves Fund's Investor Class shares will not be outstanding
prior to the closing of the Reorganization and consequently have no performance
history. However, the performance record of the Investor Class would be
modestly higher than the performance of Class A, B and C shares due to the
lower expenses applicable to the Investor Class.
The most recent portfolio manager's discussion of each Fund's performance
is attached as Exhibit D.
The Funds' Fees and Expenses
Shareholders of both Funds pay various fees and expenses, either directly
or indirectly. The tables below show the fees and expenses that you would pay
if you were to buy and hold shares of each Fund. The expenses in the tables
appearing below are based on (i) for your Safeco Fund, the expenses of your
Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer Cash
Reserves Fund, the expenses of Pioneer Cash Reserves Fund for the period ended
December 31, 2003. Future expenses for all share classes may be greater or
less.
Pro Forma
Safeco Money Safeco Money Safeco Money Safeco Money Pioneer Cash
Market Fund Market Fund Market Fund Market Fund Reserves Fund
Shareowner transaction fees Class A Class B Class C Investor Class Investor Class(8)
(paid directly from your investment) ------------- ------------- ------------- -------------- ---------------
Maximum sales charge (load) when you buy shares as a
percentage of offering price ............................ None None None None None(1)
Maximum deferred sales charge (load) as a percentage of
purchase price or the amount you receive when you sell
shares, whichever is less ............................... None None(6) None(7) None None
Redemption fees for shares held less than 30 days ........ None None None None N/A
Wire redemption fee ...................................... $ 204 $ 204 $ 204 $ 204 $ 10
Annual low balance fee ................................... $ 125 $ 125 $ 125 $ 125 N/A
Annual fund operating expenses (deducted from fund assets)
(as a % of average net assets)
Management fee ........................................... 0.48% 0.48% 0.48% 0.48% 0.40%
Distribution and service (12b-1) fee ..................... None None None None None
Other expenses ........................................... 0.50% 0.69% 0.53% 0.19% 0.41%
Total fund operating expenses ............................ 0.98% 1.17% 1.01% 0.67% 0.81%
Expense reimbursement/reduction .......................... 0.20%(2) 0.39%2 0.23%2 N/A 0.10%(3)
Net fund operating expenses .............................. 0.78% 0.78% 0.78% 0.67% 0.71%
84
(1) No sales load will apply to shares received in the Reorganization by
shareholders of your Safeco Fund who become shareholders of record of
Pioneer Cash Reserves Fund through the Reorganization. In addition,
shareholders of your Safeco Fund who own shares in their own name as of the
closing of the Reorganization (i.e., not in the name of a broker or other
intermediary) or own shares in the name of an omnibus account provider that
agrees with the Pioneer Fund to distinguish beneficial holders in the same
manner and who maintain their accounts may purchase Class A shares of
Pioneer Cash Reserves Fund or of any fund in the Pioneer family of funds
through such account in the future without paying this sales charge.
(2) As described above, SAM had contractually agreed to reimburse Safeco Money
Market Fund for certain Fund operating expenses (but not all of the
operating expenses of the Fund) that exceeded the rate of 0.30% per annum
of the Fund's average daily net assets. This arrangement included all Fund
operating expenses except management fees, Rule 12b-1 fees, brokerage
commissions, interest, and extraordinary expenses.
(3) Pioneer has agreed that through the second anniversary of the closing of
the Reorganization, Pioneer will limit the expenses (excluding
extraordinary expenses) of the Investor Class shares of Pioneer Cash
Reserves Fund to 0.71% of average daily net assets.
(4) There is a higher charge for international wire redemptions, which may vary
by country or dollar amount.
(5) A low balance fee is charged once in year in December for accounts with
balances under $1,000 in your Safeco Fund.
(6) A contingent deferred sales charge may apply if you redeem Class B shares
of your Safeco Fund that were purchased by exchange from another fund.
(7) A 1.00% contingent deferred sales charge may apply if, within the first
twelve months of the initial purchase, you redeem Class C shares that were
purchased by exchange from another fund
(8) The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses
per share than Investor Class shares due to the Rule 12b-1 Plan. In
addition, although Pioneer has agreed to limit the expenses attributable to
Investor Class shares, Pioneer is not required to limit the expenses
attributable to Class A shares. Class A shares do not currently have an
expense limitation and may be subject to higher total operating expenses.
The hypothetical example below helps you compare the cost of investing in
each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Fund's gross operating expenses
remain the same, (e) the expense limitations are in effect for five years for
Safeco Money Market Fund and two years for Pioneer Cash Reserves Fund and (f)
and the Investor Class shares of Pioneer Cash Reserves Fund convert to Class A
shares after two years. The examples are for comparison purposes only and are
not a representation of either Fund's actual expenses or returns, either past
or future.
Example
Safeco Money Market Fund
Class A shares
Year 1 .............. $ 80
Year 3 .............. $ 249
Year 5 .............. $ 433
Year 10 ............. $1,099
Class B shares
Year 1 .............. $ 80
Year 3 .............. $ 249
Year 5 .............. $ 433
Year 10 ............. $1,122
Class C shares
Year 1 .............. $ 80
Year 3 .............. $ 249
Year 5 .............. $ 433
Year 10 ............. $1,119
Investor Class shares
Year 1 .............. $ 68
Year 3 .............. $ 214
Year 5 .............. $ 373
Year 10 ............. $ 835
Pro Forma Pioneer Cash Reserves Fund
Investor Class shares
Year 1 .............. $ 73
Year 3 .............. $ 257
Year 5 .............. $ 488
Year 10 ............. $1,151
85
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best
interests of Safeco Money Market Fund. The Trustees considered the following
matters, among others, in approving the proposal.
First, SAM, the investment adviser to the Safeco Fund until August 2,
2004, was acquired by Symetra. Symetra informed the Trustees that it did not
intend to continue to provide investment advisory services to the Safeco Funds.
Consequently, a change in your Safeco Fund's investment adviser was necessary.
Second, the investment performance of Pioneer Cash Reserves Fund is
comparable to the historical investment performance of your Safeco Fund. For
the one, five and ten year periods ended June 30, 2004, Class A shares of
Pioneer Cash Reserves Fund had an average annual return of 0.12%, 2.50%, and
3.60%, respectively, compared to an average annual return of the Class A shares
and Investor Class shares of 0.42% and 0.51% (one year), 2.82% and 2.86% (five
years), and 3.82% and 3.85% (ten years), respectively, during the same periods.
In addition, the Trustees considered the track record of Pioneer in managing
equity and fixed income mutual funds.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutional and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco
Fund would become part of a significantly larger family of funds that offers a
more diverse array of investment options and enhanced shareholders account
options. The Pioneer family of mutual funds offers over 62 funds, including
domestic and international equity and fixed income funds and a money market
fund that will be available to your Safeco Fund's shareholders through
exchanges. In addition, Pioneer offers shareholders additional options for
their accounts, including the ability to transact and exchange shares over the
telephone or online and the ability to access account values and transaction
history in all of the shareholder's direct accounts in the Pioneer Funds over
the telephone or online.
Fourth, Pioneer's commitment until the second anniversary of the
Reorganization to limit the expenses (excluding extraordinary expenses) of the
Investor Class of Pioneer Cash Reserves Fund to 0.71% of average daily net
assets. Although you will experience higher expenses once the Investor Class
shares convert to Class A shares after two years, your expenses will remain the
same until the second anniversary of the Reorganization.
Fifth, shareholders who own shares in their name as of the closing of the
Reorganization (i.e., not in the name of a broker or other intermediary) and
maintain their account may purchase additional Class A shares of the
corresponding Pioneer Fund through such account in the future or may exchange
those shares for Class A shares of another Pioneer Fund or purchase Class A
share of another Pioneer Fund without paying any sales charge.
Sixth, the Investor Class shares of Pioneer Cash Reserves Fund received in
the Reorganization will provide Safeco Money Market Fund shareholders with
exposure to substantially the same investment product as they currently have.
Pioneer and Symetra will pay all out of pocket expenses of the Safeco
Funds and the Pioneer Funds associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareholder communications, including this joint Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses
of any proxy solicitation firm retained in connection with the Reorganizations;
(3) the legal fees and expenses incurred by the Safeco Funds in connection with
the Reorganizations; and (4) the Trustees' fees and out of pocket expenses
incurred as a result of the Reorganizations.
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Will Pioneer and Symetra Benefit from the
Reorganizations."
The Board of Trustees of Pioneer Cash Reserves Fund also considered that
the Reorganization presents an excellent opportunity for the Pioneer Cash
Reserves Fund to acquire investment assets without the obligation to pay
commissions or other transaction costs that a fund normally incurs when
purchasing securities. This opportunity provides an economic benefit to Pioneer
Cash Reserves Fund and its shareholders.
86
CAPITALIZATION
The following table sets forth the capitalization of each Fund, as of June
30, 2004, and the pro forma combined Fund as of June 30, 2004.
Pro Forma
Safeco Money Pioneer Cash Pioneer Cash
Market Fund Reserves Fund Reserves Fund
June 30, 2004 June 30, 2004 June 30, 2004
--------------- --------------- --------------
Total Net Assets (in thousands) ......... 286,380 509,605 795,985
Class A shares ......................... 5,488 301,140 301,140
Class B shares ......................... 1,194 89,406 89,406
Class C shares ......................... 124 118,820 118,820
Investor Class shares .................. 279,574 N/A 286,380
Class R shares ......................... N/A 239 239
Net Asset Value Per Share
Class A shares ......................... $1.00 $1.00 $1.00
Class B shares ......................... $1.00 $1.00 $1.00
Class C shares ......................... $1.00 $1.00 $1.00
Investor Class shares .................. $1.00 N/A $1.00
Class R shares ......................... N/A $1.00 $1.00
Shares Outstanding
Class A shares ......................... 588,000 301,284,833 301,284,833
Class B shares ......................... 1,194,000 89,371,274 89,371,274
Class C shares ......................... 124,000 118,809,103 118,809,103
Investor Class shares .................. 279,574,000 N/A 286,380,000
Class R shares ......................... N/A 239,463 239,463
It is impossible to predict how many shares of Pioneer Cash Reserves Fund
will actually be received and distributed by your Safeco Fund on the
Reorganization date. The table should not be relied upon to determine the
amount of Pioneer Cash Reserves Fund's shares that will actually be received
and distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Safeco Fund.
Similarly, the Board of Trustees of Pioneer Cash Reserves Fund, including its
Independent Trustees, approved the Reorganization. They also determined that
the Reorganization is in the best interests of Pioneer Cash Reserves Fund.
The Trustees recommend that the shareholders of your Safeco Fund vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
87
Safeco Municipal Bond Fund and
Pioneer Municipal Bond Fund
PROPOSAL 1(g)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire Proxy Statement/Prospectus, including the form of
Agreement and Plan of Reorganization attached as EXHIBIT A-2, because it
contains details that are not in the summary.
The Investor Class shares to be issued in the Reorganization will convert
to Class A shares after two years. Class A shares will have higher expenses per
share than Investor Class shares due to the Rule 12b-1 Plan. In addition,
although Pioneer has agreed to limit the expenses attributable to Investor
Class shares, Pioneer is not required to limit the expenses attributable to
Class A shares.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Safeco Fund and the Pioneer Fund.
Comparison of Safeco Municipal Bond Fund to Pioneer Municipal Bond Fund
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Safeco Municipal Bond Fund Pioneer Municipal Bond Fund
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Business A series of Safeco Tax-Exempt Bond Trust, a A newly organized diversified open-end
diversified open-end management investment management investment company registered
company organized as a Delaware statutory under the Investment Company Act and
trust. organized as a Delaware statutory trust.
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Net assets as of $550 million None. Pioneer Municipal Bond Fund is newly
June 30, 2004 organized and does not expect to commence
investment operations until the Reorganization
occurs.
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Investment advisers and Investment adviser (until August 2, 2004): Investment adviser:
portfolio managers SAM Pioneer
Portfolio Managers: Portfolio Manager:
Stephen C. Bauer (since 1981 and until Day-to-day management of Pioneer Municipal
August 2, 2004) Bond Fund's portfolio is the responsibility of a
President and Director, SAM team of fixed income portfolio managers led
by Kenneth J. Taubes.
Mary Metastasio (since 2003 and until
July 31, 2004) Mr. Taubes joined Pioneer as a senior vice
president in September 1998 and has been an
Currently Pioneer is acting as investment investment professional since 1982.
adviser to Safeco Municipal Bond Fund. The
Portfolio Manager of the Pioneer Municipal
Bond Fund, as indicated in the next column,
currently manages your Safeco Fund.
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Investment objective Each Fund seeks to provide as high a level of current interest income exempt from federal
income tax as is consistent with the relative stability of capital.
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88
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Safeco Municipal Bond Fund Pioneer Municipal Bond Fund
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Primary investments During normal market conditions, Safeco Normally, Pioneer Municipal Bond Fund
Municipal Bond Fund will not invest less than invests at least 80% of its net assets in
80% of its net assets in obligations the interest investment grade municipal bonds with a
on which is exempt from federal income tax. maturity of more than one year, that
provide income that is exempt from federal
To achieve its investment objective, Safeco income tax.
Municipal Bond Fund invests primarily in
municipal bonds rated investment grade or Pioneer Municipal Bond Fund's investments
better with average maturities of 15 years include bonds, notes and other debt
or longer. instruments issued by or on behalf of
states, counties, municipalities, territories
Under normal circumstances, Safeco Municipal and possessions of the United States and
Bond Fund invests: the District of Columbia and their
authorities, political subdivisions, agencies
o at least 80% of its assets in investment- or instrumentalities.
grade municipal bonds with a maturity of
more than one year and the interest on Pioneer Municipal Bond Fund's investments
which is exempt from federal income tax; may have fixed or variable principal
and payments and all types of interest rate
o up to 20% of its assets in unrated municipal payment and reset terms, including fixed
bonds, as long as the adviser determines and floating rates, inverse floating rate, zero
they are of comparable quality to coupon, contingent, deferred and payment
investment-grade securities. in kind and auction rate features.
Pioneer Municipal Bond Fund may invest in
municipal securities of any maturity,
although under normal circumstances it is
anticipated that the Fund will generally
invest in longer-term investments. Municipal
securities with longer maturities are
generally more volatile than other fixed
income securities with shorter maturities.
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Each Fund will not invest in securities the interest on which is a tax preference item for
purposes of the federal alternative minimum tax.
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Investment strategies When evaluating a bond to buy, SAM historically Pioneer considers both broad economic factors
considered among other things: and issuer specific factors in selecting a
portfolio designed to achieve Pioneer Municipal
o Yield Bond Fund's investment objective. In assessing
o Maturity the appropriate maturity and rating weighting of
o Structural features such as an issuer's right the Fund's portfolio, Pioneer considers a variety
to buy the bond back at a stated price (a of factors that are expected to influence
"call") or the Fund's right to require the economic activity and interest rates. These
issuer to buy the bond back at a stated price factors include fundamental economic indicators,
(a "put") such as the rates of economic growth and
o Credit quality (including the underlying rating inflation, Federal Reserve monetary policy and
of insured bonds) the relative value of the U.S. dollar compared to
o The project the issuer is financing other currencies.
o The original offering price
o Any state or local tax exemption Once Pioneer determines the preferable portfolio
o The amount of discount off or premium on characteristics, Pioneer selects individual
the stated principal amount of the bond securities based upon the terms of the securities
represented by the price offered (such as yields compared to U.S. Treasuries
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89
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Safeco Municipal Bond Fund Pioneer Municipal Bond Fund
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Investment strategies SAM may have used the rating services provided or comparable issues), liquidity and rating and
(continued) by Moody's, S&P, or Fitch. Bond ratings indicate issuer diversification.
an issuer's financial strength and ability to meet
its debt obligations. Pioneer also employs due diligence and
fundamental research, an evaluation of the
Safeco Municipal Bond Fund may sell bonds issuer based on its financial statements and
when: operations, to assess an issuer's credit
quality, taking into account financial condition,
o They become fully valued future capital needs and potential for change
o More attractively valued bonds become in rating.
available
o Cash is needed to meet shareholder In making these portfolio decisions, Pioneer
redemptions relies on the knowledge, experience and
judgment of its staff who have access to a
Because it often takes years for attractive wide variety of research.
relative valuations to be recognized by the
municipal securities market, turnover of the
Fund's portfolio can be low.
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Other investments Safeco Municipal Bond Fund will limit its At times, more than 25% of Pioneer Municipal
investment in municipal obligations the interest Bond Fund's assets may be invested in the
on which is payable from the revenues of same market segment, such as financials. To
similar types of projects less than 25% of each the extent the Fund emphasizes investments in
Funds' total assets. As a matter of operating a market segment, the Fund will be subject to a
policy, "similar types of projects" may include greater degree to the risks particular to the
sports, convention or trade show facilities; industries in that segment, and may experience
airports or mass transportation; sewage or greater market fluctuation, than a fund without
solid waste disposal facilities; or air and water the same focus. For example, industries in the
pollution control projects. financial segment, such as banks, insurance
companies, broker-dealers and REITs, may be
Safeco Municipal Bond Fund may invest in any sensitive to changes in interest rates and
of the following short-term, tax-exempt general economic activity and are subject to
obligations: municipal notes of issuers rated, at extensive government regulation.
the time of the purchase, within one of the
three highest grades assigned by a nationally Pioneer Municipal Bond Fund may invest up to
recognized statistical rating organization 10% of its net assets in debt securities rated
("NRSRO"); unrated municipal notes offered by below investment grade or, if unrated, of
issuers having outstanding municipal bonds equivalent quality as determined by Pioneer.
rated within one of the three highest grades Debt securities rated below investment grade
assigned by an NRSRO; notes issued by or on are commonly referred to as "junk bonds" and
behalf of municipal issuers that are guaranteed are considered speculative. Below investment
by the U.S. government; tax-exempt grade debt securities involve greater risk of
commercial paper assigned one of the two loss, are subject to greater price volatility and
highest grades by an NRSRO; certificates of are less liquid, especially during periods of
deposit issued by banks with assets of economic uncertainty or change, than higher
$1,000,000,000 or more; and municipal quality debt securities.
obligations that have a maturity of one year or
less from the date of purchase.
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90
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Safeco Municipal Bond Fund Pioneer Municipal Bond Fund
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Other investments (continued) Pioneer Municipal Bond Fund may invest up
to 10% of its net assets in inverse
floating rate obligations (a type of
derivative instrument). Inverse floating
rate obligations represent interests in
tax-exempt bonds. The interest rate on
inverse floating rate obligations will
generally decrease as short-term interest
rates increase, and increase as short-ter
rates decrease. Due to their leveraged
structure, the sensitivity of the market
value of an inverse floating rate
obligation to changes in interest rates i
generally greater than a comparable
long-term bond issued by the same
municipality and with similar credit
quality, redemption and maturity
provisions. Inverse floating rate
obligations may be volatile and involve
leverage risk.
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Each Fund may invest in obligations of the U.S. government, its agencies or instrumentalities
or in qualified repurchase agreements, the net interest on which is taxable for federal income
tax purposes.
Each Fund will limit its investment in securities whose issuers are located in the same state to
less than 25% of each Fund's total assets.
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Temporary defensive Safeco Municipal Bond Fund may hold cash or Pioneer Municipal Bond Fund may invest all
strategies as a temporary defensive measure when or part of its assets in securities with
market conditions so warrant. remaining maturities of less than one year,
cash equivalents or may hold cash.
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Diversification Each Fund is diversified for the purpose of the Investment Company Act, and each Fund is
subject to diversification requirements under the Code.
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Industry concentration Each Fund will not make investments that will result in the concentration (as that term may be
defined in the Investment Company Act, any rule or order thereunder, or SEC staff interpretation
thereof) of its investments in the securities of issuers primarily engaged in the same industry,
provided that this restriction does not limit each Fund from investing in obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
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Restricted and illiquid If immediately after and as a result of such Pioneer Municipal Bond Fund will not invest
securities action the value of the following securities, in more than 10% of its net assets in illiquid
the aggregate, would exceed 10% of Safeco and other securities that are not readily
Municipal Bond Fund's net assets, the Fund marketable. Repurchase agreements maturing
will not (i) purchase securities for which there in more than seven days will be included
is no readily available market, (ii) purchase for purposes of the foregoing limit.
time deposits maturing in more than seven Securities subject to restrictions on
days, (iii) purchase over-the-counter (OTC) resale under the 1933 Act, are considered
options or hold assets set aside to cover OTC illiquid unless they are eligible for
options written by the Fund, (iv) enter into resale pursuant to Rule 144A or another
repurchase agreements maturing in more than exemption from the registration
seven days, or (v) invest in interests in real requirements of the 1933 Act and are
estate investment trusts which are not readily determined to be liquid by Pioneer.
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
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91
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Safeco Municipal Bond Fund Pioneer Municipal Bond Fund
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Borrowing Safeco Municipal Bond Fund may borrow Pioneer Municipal Bond Fund may not borrow
money (i) from banks or (ii) by engaging in money, except on a temporary basis and to
reverse repurchase agreements. the extent permitted by applicable law, as
amended and interpreted or modified from
time to time by any regulatory authority
having jurisdiction.
Under current regulatory requirements,
Pioneer Municipal Bond Fund may: (a) borrow
from banks or through reverse repurchase
agreements in an amount up to 33 1/3% of the
fund's total assets (including the amount
borrowed); (b) borrow up to an additional 5%
of the fund's assets for temporary purposes;
(c) obtain such short-term credits as are
necessary for the clearance of portfolio
transactions; (d) purchase securities on
margin to the extent permitted by applicable
law; and (e) engage in transactions in
mortgage dollar rolls that are accounted for
as financings.
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Lending Safeco Municipal Bond Fund may lend Pioneer Municipal Bond Fund may not make
securities to qualified institutional investors loans, except that the Fund may (i) lend
with a value of up to 33% of the Fund's total portfolio securities in accordance with the
assets. Fund's investment policies, (ii) enter into
repurchase agreements, (iii) purchase all or a
portion of an issue of publicly distributed debt
securities, bank loan participation interests,
bank certificates of deposit, bankers'
acceptances, debentures or other securities,
whether or not the purchase is made upon the
original issuance of the securities, (iv)
participate in a credit facility whereby the Fund
may directly lend to and borrow money from
other affiliated funds to the extent permitted
under the Investment Company Act or an
exemption therefrom, and (v) make loans in
any other manner consistent with applicable
law, as amended and interpreted or modified
from time to time by any regulatory authority
having jurisdiction.
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92
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Safeco Municipal Bond Fund Pioneer Municipal Bond Fund
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Derivative instruments Safeco Municipal Bond Fund may not purchase Pioneer Municipal Bond Fund may use futures
securities on margin. However, the Fund may (i) and options on securities, indices and
obtain short-term credits as necessary to clear its currencies, forward currency exchange
purchases and sales of securities, and (ii) make contracts and other derivatives. The Fund
margin deposits in connection with its use of does not use derivatives as a primary
financial options and futures, forward and spot investment technique and generally limits
currency contracts, swap transactions and other their use to hedging. However, the Fund may
financial contracts or derivative instruments. use derivatives for a variety of
non-principal purposes, including:
o As a hedge against adverse changes in
stock market prices, interest rates or
currency exchange rates
o As a substitute for purchasing or selling
securities
o To increase the Fund's return as a non-
hedging strategy that may be considered
speculative
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Other investment policies and As described above, the Funds have substantially similar principal investment strategies and
restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Fund's other investment policies and fundamental and non-
fundamental investment restrictions, see the SAI.
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Buying, Selling and Exchanging Shares
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Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer
of Safeco Municipal Bond Fund are subject to Municipal Bond Fund you receive in the
a 4.50% front-end sales charge. Reorganization will not be subject to any
sales charge. Moreover, if you own shares
A contingent deferred sales charge of up to in your own name as of the closing of the
5.00% if you redeem Class B shares within six Reorganization (i.e., not in the name of a
years of purchase. broker or other intermediary) or own shares
in the name of an omnibus account provider
A contingent deferred sales charge of up to as of the closing of the Reorganization
1.00% if you redeem Class C shares within that agrees with the Pioneer Fund to
one year of purchase. distinguish beneficial holders in the same
manner and maintain your account, you may
Purchases of Investor Class shares of the Fund purchase Class A shares of Pioneer
are not subject to a sales load. Municipal Bond Fund and Class A shares of
any fund in the Pioneer family of funds
The Fund assesses a mandatory redemption through such account in the future without
fee of 2%, as a percentage of the amount paying any sales charge.
redeemed or exchanged, on Class A and
Investor Class shares held less than 30 days. Except as described above, Class A shares
of Pioneer Municipal Bond Fund are subject
to a front-end sales charge of up to 4.50%.
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93
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Safeco Municipal Bond Fund Pioneer Municipal Bond Fund
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Management and other fees Safeco Municipal Bond Fund pays an advisory Pioneer Municipal Bond Fund pays Pioneer a
fee on a monthly basis at an annual rate as management monthly fee at an annual rate
follows: equal to the Fund's average daily net
assets as follows:
$0-$250,000,000: 0.50 of 1%
$250,000,001-$750,000,000: 0.45 of 1% $0-$250,000,000: 0.50%
Over $750,000,000: 0.40 of 1% $250,000,001-$750,000,000: 0.45%
Over $750,000,000: 0.40%
SAM serves as administrator and fund
accounting agent for the Fund. The Fund pays In addition, the Fund reimburses Pioneer
SAM an administrative services fee of 0.05% for certain fund accounting and legal
of the Fund's average daily net assets up to the expenses incurred on behalf of the Fund and
first $200,000,000 and 0.01% of its net assets pays a separate shareholder
thereafter, and an accounting fee of 0.04% of servicing/transfer agency fee to PIMSS, an
the Fund's average daily net assets up to the affiliate of Pioneer.
first $200,000,000 and 0.01% of its net assets
thereafter. Pioneer has agreed until the second
anniversary of the closing of the
During its most recent fiscal year, Safeco Reorganization to limit the expenses
Municipal Bond Fund paid aggregate advisory (excluding extraordinary expenses) of the
and administration fees at an average rate of Investor Class to 0.62% of the average
0.51% of average daily net assets. daily net assets attributable to the
Investor Class.
SAM had contractually agreed until April 30,
2009, to pay certain fund operating expenses The Investor Class shares to be issued in
(but not all of the operating expenses of the the Reorganization will convert to Class A
Fund) that exceeded the rate of 0.40% per shares after two years. Class A shares will
annum of the Fund's average daily net assets. have higher expenses per share than
This arrangement included all fund operating Investor Class shares due to the Rule 12b-1
expenses except management fees, Rule 12b-1 Plan.
fees, brokerage commissions, interest, and
extraordinary expenses.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
A shares were 0.87%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
B shares were 1.66%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for Class
C shares, after giving effect to the expense
limitation were 1.87%, and without given effect
to the expense limitation, were 43.13%.
For the fiscal year ended December 31, 2003,
the Fund's annual operating expenses for
Investor Class shares were 0.61%.
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Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer
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