N-14/A 1 d15440_n14a.txt As filed with the Securities and Exchange Commission on October 25, 2004 File No. 333-118447 United States Securities and Exchange Commission Washington, D.C. 20549 FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. 1 Post-Effective Amendment No. ______ (Check appropriate box or boxes) PIONEER FUND (Exact Name of Registrant as Specified in Charter) (617) 742-7825 (Area Code and Telephone Number) 60 State Street, Boston, Massachusetts 02109 (Address of Principal Executive Offices: Number, Street, City, State, Zip Code) Dorothy E. Bourassa, Esq. Pioneer Investment Management, Inc. 60 State Street Boston, Massachusetts 02109 (Name and Address of Agent for Service) Copies to: David C. Phelan, Esq. Wilmer Cutler Pickering Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109 Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement. Calculation of Registration Fee under the Securities Act of 1933: No filing fee is due because of reliance on Section 24(f) of the Investment Company Act of 1940, which permits registration of an indefinite number of securities. Title of Securities Being Registered: Shares of beneficial interest of the Registrant. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment, which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall be effective on such date as the Commission, acting pursuant to Section 8(a), may determine. COMBINED PROXY STATEMENT OF SAFECO COMMON STOCK TRUST (the "Safeco Trust") on behalf of its Series: SAFECO BALANCED FUND SAFECO CORE EQUITY FUND SAFECO GROWTH OPPORTUNITIES FUND SAFECO INTERNATIONAL STOCK FUND SAFECO LARGE-CAP GROWTH FUND SAFECO LARGE-CAP VALUE FUND SAFECO MULTI-CAP CORE FUND SAFECO SMALL-CAP VALUE FUND (each, "your Safeco Fund" and collectively, the "Safeco Funds") The address and telephone number of each Safeco Fund is: 4854 154th Place N.E., Redmond, WA 98052 1-800-624-5711 PROSPECTUS FOR INVESTOR CLASS SHARES OF PIONEER BALANCED FUND PIONEER FUND PIONEER GROWTH OPPORTUNITIES FUND PIONEER INTERNATIONAL EQUITY FUND PIONEER GROWTH SHARES PIONEER MID CAP VALUE FUND PIONEER SMALL CAP VALUE FUND PIONEER VALUE FUND (each, a "Pioneer Fund" and collectively, the "Pioneer Funds") The address and telephone number of each Pioneer Fund is: 60 State Street, Boston, Massachusetts 02109 1-800-622-3265 or 1-800-225-6292 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS SCHEDULED FOR DECEMBER 8, 2004 To the Shareholders of the Safeco Funds: A joint special meeting of shareholders (the "Meeting") for each of the Safeco Funds will be held at the offices of Safeco Mutual Funds, King Auditorium, 4854 154th Place, N.E., Redmond, WA 98052, on December 8, 2004 at 2:00 p.m., local time, to consider the following: 1. With respect to each Safeco Fund, a proposal to approve an Agreement and Plan of Reorganization. Under the Agreement and Plan of Reorganization, your Safeco Fund will transfer all of its assets to an investment company (each a "Pioneer Fund") managed by Pioneer Investment Management, Inc. ("Pioneer") in exchange for Investor Class shares of the Pioneer Fund. The Pioneer Fund also will assume your Safeco Fund's liabilities that are included in the calculation of your Safeco Fund's net assets at the closing. Generally, each Pioneer Fund is an existing mutual fund with a substantially similar investment objective and similar investment policies as your Safeco Fund. In the case of certain Safeco Funds, the Pioneer Fund is a newly organized mutual fund with a substantially similar investment objective and similar investment policies as your Safeco Fund. Holders of all share classes of your Safeco Fund will receive Investor Class shares of the corresponding Pioneer Fund. Investor Class shares of the applicable Pioneer Fund will be distributed to shareholders in proportion to the relative net asset value of their share holdings on the closing date of the reorganization. Following the reorganization, your Safeco Fund will then be dissolved. As a result of the reorganization you will become shareholders of the Pioneer Fund. Your board of trustees recommends that you vote FOR this proposal. 2. With respect to each Safeco Fund, a proposal to approve an interim investment advisory agreement between your Safeco Fund and Pioneer. Pioneer has provided advisory services for your Safeco Funds pursuant to this agreement since August 2, 2004, when the advisory agreement between your Safeco Fund and Safeco Asset Management Company terminated. Approval of the interim investment advisory agreement will enable Pioneer to receive advisory fees currently held in escrow. Your board of trustees recommends that you vote FOR this proposal. 3. Any other business that may properly come before the Meeting. Shareholders of record as of the close of business on October 8, 2004, are entitled to vote at the Meeting and any related follow-up meetings. Whether or not you expect to attend the Meeting, please complete and return the enclosed proxy card. If shareholders do not return their proxies in sufficient numbers, your Safeco Fund may be required to make additional solicitations. By order of the Board of Trustees, [Name] [Title] October [ ], 2004 COMBINED PROXY STATEMENT OF SAFECO COMMON STOCK TRUST (the "Safeco Trust") on behalf of its Series: SAFECO BALANCED FUND SAFECO CORE EQUITY FUND SAFECO GROWTH OPPORTUNITIES FUND SAFECO INTERNATIONAL STOCK FUND SAFECO LARGE-CAP GROWTH FUND SAFECO LARGE-CAP VALUE FUND SAFECO MULTI-CAP CORE FUND SAFECO SMALL-CAP VALUE FUND (each, "your Safeco Fund" and collectively, the "Safeco Funds") The address and telephone number of each Safeco Fund is: 4854 154th Place N.E., Redmond, WA 98052 1-800-624-5711 PROSPECTUS FOR INVESTOR CLASS SHARES OF PIONEER BALANCED FUND PIONEER FUND PIONEER GROWTH OPPORTUNITIES FUND PIONEER INTERNATIONAL EQUITY FUND PIONEER GROWTH SHARES PIONEER MID CAP VALUE FUND PIONEER SMALL CAP VALUE FUND PIONEER VALUE FUND (each, a "Pioneer Fund" and collectively, the "Pioneer Funds") The address and telephone number of each Pioneer Fund is: 60 State Street, Boston, Massachusetts 02109 and 1-800-622-3265 or 1-800-225-6292. Shares of the Pioneer Funds have not been approved or disapproved by the Securities and Exchange Commission (the "SEC"). The SEC has not passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. An investment in any Safeco Fund or Pioneer Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. 1 This combined proxy statement and prospectus (the "Proxy Statement/Prospectus"), dated October 25, 2004, is being furnished to shareholders of the Safeco Funds in connection with the solicitation by the board of trustees (the "Board", or the "Trustees") of the Safeco Trust of proxies to be used at a joint meeting of shareholders of the Safeco Funds (the "Meeting") to be held at the offices of Safeco Mutual Funds, King Auditorium, 4854 154th Place, N.E., Redmond, WA 98052, on December 8, 2004 at 2:00 p.m., local time. The Proxy Statement/Prospectus contains information you should know before voting on (i) the approval of a proposed Agreement and Plan of Reorganization (each a "Plan") that provides for the reorganization of each Safeco Fund into a corresponding Pioneer Fund (each a "Reorganization"), and (ii) the approval of an interim investment advisory agreement for each Safeco Fund. The following table indicates (a) the corresponding Pioneer Fund shares that each Safeco Fund shareholder would receive if each Plan is approved, (b) which Safeco Fund shareholders may vote on which proposals and on what page of this Proxy Statement/Prospectus the discussion regarding each proposal begins. Shareholders of each class of shares of a Safeco Fund will vote together as a single class on each proposal. Although each Reorganization is similar in structure, you should read carefully the specific discussion regarding your Safeco Fund's Reorganization.
-------------------------------------------------------------------------------------------------------------------------- Safeco Fund Pioneer Fund Shareholders Entitled to Vote Page -------------------------------------------------------------------------------------------------------------------------- PROPOSAL 1(a) Safeco Balanced Fund Pioneer Balanced Fund Safeco Balanced Fund shareholders 7 -------------------------------------------------------------------------------------------------------------------------- PROPOSAL 1(b) Safeco Core Equity Pioneer Fund Safeco Core Equity Fund shareholders 20 Fund -------------------------------------------------------------------------------------------------------------------------- PROPOSAL 1(c) Safeco Growth Pioneer Growth Safeco Growth Opportunities Fund 33 Opportunities Fund Opportunities Fund shareholders -------------------------------------------------------------------------------------------------------------------------- PROPOSAL 1(d) Safeco International Pioneer International Safeco International Stock Fund shareholders 46 Stock Fund Equity Fund -------------------------------------------------------------------------------------------------------------------------- PROPOSAL 1(e) Safeco Large-Cap Pioneer Growth Shares Safeco Large-Cap Growth Fund shareholders 60 Growth Fund -------------------------------------------------------------------------------------------------------------------------- PROPOSAL 1(f) Safeco Large-Cap Pioneer Value Fund Safeco Large-Cap Value Fund shareholders 74 Value Fund -------------------------------------------------------------------------------------------------------------------------- PROPOSAL 1(g) Safeco Multi-Cap Pioneer Mid Cap Safeco Multi-Cap Core Fund shareholders 88 Core Fund Value Fund -------------------------------------------------------------------------------------------------------------------------- PROPOSAL 1(h) Safeco Small-Cap Pioneer Small Cap Safeco Small-Cap Value Fund shareholders 104 Value Fund Value Fund -------------------------------------------------------------------------------------------------------------------------- PROPOSAL 2 (a)-(h) Each Fund Not applicable Shareholders of each Fund voting separately 120 as to the proposal that affects their Fund -------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------- Where to Get More Information ------------------------------------------------------------------------------------------------------------------------------- The Safeco Funds' prospectuses dated April 30, 2004, as Available to you free of charge by calling 1-800-624-5711. supplemented August 3, 2004. Each prospectus, which is also on file with the SEC, is incorporated by reference into this Proxy Statement/Prospectus. The Safeco Funds' annual report dated December 31, 2003 and semiannual report dated June 30, 2004. Available to you free of charge by calling 1-800-624-5711. Also on file with the SEC. See "Available Information." These reports are incorporated by reference into this Proxy Statement/Prospectus. ------------------------------------------------------------------------------------------------------------------------------- Each Pioneer Funds' current prospectus and each Pioneer Available to you free of charge by calling 1-800-225-6292. Fund's most recent annual and semiannual reports and These prospectuses and reports are also on file with the SEC. supplements (as they apply) to shareholders. These prospectuses and reports are incorporated by reference into this Proxy Statement/Prospectus. ------------------------------------------------------------------------------------------------------------------------------- A statement of additional information for this joint Proxy Available to you free of charge by calling 1-800-225-6292. Statement/Prospectus (the "SAI"), dated October 25, 2004. Also on file with the SEC. This SAI is incorporated by It contains additional information about your Safeco Funds reference into this Proxy Statement/Prospectus. and the Pioneer Funds. ------------------------------------------------------------------------------------------------------------------------------- To ask questions about this Proxy Statement/Prospectus. Call your Safeco Fund's toll-free telephone number: 1-800-624-5711. -------------------------------------------------------------------------------------------------------------------------------
2 Background to the Reorganizations Safeco Asset Management Company ("SAM"), the Safeco Funds' investment adviser until August 2, 2004, was a subsidiary of Safeco Corporation, a multi-line insurance company. On August 2, 2004, Symetra Financial Corporation ("Symetra") acquired certain assets from Safeco Corporation, including all of the capital stock of SAM. While reviewing the operations of SAM in anticipation of that transaction, Symetra determined that engaging in the business of investment adviser to the Safeco Funds was not a core business that it intended to continue. After investigating and discussing several alternatives for ongoing investment management of the Safeco Funds with the Trustees, Symetra conducted a search for a new investment adviser for the Safeco Funds. Ultimately Symetra decided to recommend to the Boards that Pioneer Investment Management, Inc. ("Pioneer") be hired to manage the Safeco Funds on an interim basis until the Reorganizations occur and the Safeco Funds be reorganized into similar mutual funds managed by Pioneer. The Board met at a series of meetings in July 2004. At these meetings, your Trustees received and evaluated materials regarding Pioneer and the Pioneer Funds, including the performance record and expense structure of each of the Pioneer Funds, the impact of the proposed Reorganizations on the Safeco Funds' shareholders, and the quality of the services offered by Pioneer. At these meetings, the Trustees met with representatives of Pioneer. In addition to these general factors, the Trustees also considered these and other factors specifically in the context of each Reorganization. On July 30, 2004, the Board, including all of the Trustees who are not interested persons of SAM (the "Independent Trustees"), unanimously voted to approve each of the Reorganizations. In approving the Reorganizations, the Board determined that the Reorganizations were in the best interests of the Safeco Funds' shareholders and the interests of existing Safeco Funds' shareholders will not be diluted as a result of the Reorganizations. Pioneer believes that it can offer favorable long-term investment performance and enhanced shareholder services to the Safeco Funds' shareholders. The Reorganizations will, by combining the assets of two mutual funds and, by being part of a family of funds with greater distribution capabilities, offer the potential for increased economies of scale. Increased economies of scale have the potential of benefiting the shareholders of your Safeco Funds and the Pioneer Funds by spreading fixed costs over a larger asset base and reducing expenses on a per share basis. There can be no assurance that such economies of scale will be realized. Why the Trustees are Recommending the Reorganizations The Trustees believe that reorganizing your Safeco Fund into a portfolio with a substantially similar investment objective and similar investment policies that is part of the Pioneer family of funds offers you potential benefits. These potential benefits and considerations include: o SAM, the investment adviser to each of the Safeco Funds until August 2, 2004, was acquired by Symetra. Symetra informed the Board that it was not interested in continuing to provide investment advisory services to the Safeco Funds. Therefore, a change in your Safeco Fund's investment adviser was necessary; o The track record of Pioneer in managing the Pioneer Funds as compared to the historical performance of the Safeco Funds; o The resources of Pioneer, including its infrastructure in shareholder services; o The opportunity to be part of a significantly larger family of funds, with additional product offerings and enhanced shareholder servicing options; o Pioneer's commitment until December 10, 2006, or such later date that is the second anniversary of the day on which each Reorganization closes (the "Closing Date"), to limit the expenses of the Investor Class shares of each Pioneer Fund; and o Shareholders who own shares in their name as of the closing of the Reorganizations (i.e., not in the name of a broker or other intermediary) and maintain their account may purchase Class A shares of the corresponding Pioneer Fund through such account in the future or may exchange those shares for Class A shares of another Pioneer Fund or purchase Class A share of another Pioneer Fund without paying any sales charge. Investor Class shares will not be offered after the Reorganizations. How Each Reorganization will Work o Safeco Fund shareholder-directed exchanges and purchases made by check, ACH, or wire will be accepted up until 1 p.m. (Pacific Time) on Wednesday, December 8, 2004. Exchange and purchase requests received after this deadline will be rejected and returned. Purchase and exchange requests made by Safeco Fund shareholders through financial institutions or advisers must do so earlier to ensure the trade can be processed within this deadline. Financial institutions and advisers that trade electronically (NSCC) with the Safeco Funds can place exchange and purchase requests up until 1 p.m. (Pacific Time) on Tuesday, December 7, 2004. Exchanges and purchases received after this deadline will be rejected and returned. The Safeco Funds will not process purchases made via 3 automatic investment method (AIM) after December 8, 2004. Dividend/capital gain reinvestment and established systematic exchanges will continue through December 10, 2004. o Each Safeco Fund will transfer all of its assets to a corresponding Pioneer Fund. Each Pioneer Fund will assume the corresponding Safeco Fund's liabilities that are included in the calculation of such Safeco Fund's net asset value on the Closing Date. o Each Pioneer Fund will issue Investor Class shares to the corresponding Safeco Fund in amounts equal to the aggregate net asset value of that Safeco Fund's shares. Shareholders of your Safeco Fund will receive Investor Class shares of the corresponding Pioneer Fund. These shares will be distributed to shareholders in proportion to the relative net asset value of their share holdings on the Closing Date. On the Closing Date, shareholders will hold the shares of the Pioneer Fund with the same aggregate net asset value as the shares of your Safeco Fund that you held immediately prior to the Reorganization. o Each Safeco Fund will be dissolved after the Closing Date. o Shares of the Investor Class of a Pioneer Fund will automatically convert to Class A shares of the Pioneer Fund at the end of the calendar month that is two years after the Closing Date. o Pioneer acts as investment adviser to each Pioneer Fund. Until December 10, 2006, or such later date that is the second anniversary of the Closing Date, Pioneer has agreed to limit each Pioneer Fund's expenses (excluding extraordinary expenses) for Investor Class shares. Pioneer is not required to limit any expenses after December 10, 2006, or such later date that is the second anniversary of the Closing Date. o The Reorganizations are intended to result in no income, gain or loss being recognized for federal income tax purposes to any of the Pioneer Funds, the Safeco Funds or the shareholders of the Safeco Funds. o In recommending each of the Reorganizations, the Trustees of your Safeco Fund have determined that the Reorganization is in the best interest of your Safeco Fund and will not dilute the interests of shareholders of your Safeco Fund. The Trustees have made that determination on the basis of the factors listed above and discussed in more detail under each proposal. A reorganization might not be in the best interest of the shareholders of a mutual fund if the surviving fund had higher expenses, less experienced management or the adviser did not have adequate resources to manage the affairs of the mutual fund. o If the Reorganizations are approved, the Safeco Trust will file with the SEC an application for deregistration on Form N-8F under the Investment Company Act of 1940, as amended (the "Investment Company Act"), and will cease to exist as an investment company when such application is approved. Who is Pioneer Pioneer is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, and acts as investment adviser to mutual funds and institutional accounts. Pioneer or its predecessors have been managing mutual funds since 1928 and at June 30, 2004 had, together with its affiliates, over $35 billion in assets under management. Pioneer is an indirect, wholly-owned subsidiary of UniCredito Italiano S.p.A., an Italian Bank. In addition to the Investor Class shares to be issued in the Reorganization, each Pioneer Fund also offers Class A shares (subject to an initial sales load and a Rule 12b-1 Plan), Class B shares (subject to a contingent deferred sales charge and a Rule 12b-1 Plan), and Class C shares (subject to a contingent deferred sales charge and a Rule 12b-1 Plan). In addition, most of the Pioneer Funds also offer Class Y shares (which are an institutional class of shares and are not subject to a sales charge or a Rule 12b-1 Plan) and Class R shares (which are offered only to certain retirement plans). Who Bears the Expenses Associated with the Reorganizations Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds and the Pioneer Funds associated with the Reorganizations, including, but not limited to: (1) the expenses associated with the preparation, printing and mailing of any shareholder communications, including this joint Proxy Statement/Prospectus, and any filings with the SEC and other governmental authorities in connection with the Reorganizations; (2) the fees and expenses of any proxy solicitation firm retained in connection with the Reorganizations; (3) the legal fees and expenses incurred by the Safeco Funds in connection with the Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred as a result of the Reorganizations. Will Pioneer and Symetra Benefit from the Reorganizations Pioneer will benefit from managing a larger pool of assets. Pioneer is also acquiring certain assets associated with SAM's mutual funds and institutional account advisory business. In consideration for the acquisition of these assets and certain covenants from Symetra 4 and SAM, including their assistance in facilitating the Reorganizations and their obligation to indemnify Pioneer against certain liabilities, Pioneer has agreed to pay Symetra up to $30 million. This amount is subject to downward adjustment if the net assets of the Safeco Funds that approve the Reorganizations (together with assets in certain other accounts) are less than $2.6 billion. Under this agreement, Pioneer and Symetra have also agreed, among other things, that (i) once the Investor Class converts to Class A shares, Pioneer Funds Distributor, Inc. ("PFD"), the principal underwriter of the Pioneer Funds, shall make payments to Safeco Securities, Inc. ("Safeco Securities") pursuant to a Rule 12b-1 plan equal to 0.25% of the average daily net assets attributable to accounts maintained by former shareholders of the Safeco Funds; (ii) PFD will make additional continuing payments out of its own resources to Safeco Securities, following Pioneer's acquisition of assets from SAM, at an annual rate of 0.05% of the average daily net assets of any Pioneer Fund held by or for the account of any former shareholders of the Safeco Funds (including assets invested in any Pioneer Fund as a result of the Reorganization or otherwise) and, in connection with purchases of shares of the Pioneer Funds by former shareholders of the Safeco Funds after the acquisition, PFD will pay out of its own resources to Safeco Securities an amount equal to 0.20% of the amount of such purchases; and (iii) Symetra and SAM will be subject to certain non-competition provisions. Why is an Interim Investment Advisory Agreements being Voted On Having determined to recommend the Reorganizations, the Trustees elected to appoint Pioneer as investment adviser to each Safeco Fund until the closing of the Reorganizations given that Symetra had indicated that it did not wish to continue to offer investment advisory services to the Safeco Funds. In connection with the retention of Pioneer, the sub-advisory agreement with Bank of Ireland Asset Management (U.S.) Limited with respect to Safeco International Stock Fund, and the sub-advisory agreement with RCM Capital Management LLC with respect to Safeco Large-Cap Growth Fund, were terminated. Under the Investment Company Act, shareholders must approve any new investment advisory agreement for a Safeco Fund. However, Rule 15a-4 under the Investment Company Act permits the Board to appoint an adviser on an interim basis without prior shareholders' approval of an investment advisory agreement with the adviser if the new adviser agrees to provide such services on the same terms as the previous adviser. An adviser may act on such an interim basis for a period of 150 days. Because Pioneer will be making the payment to Symetra as discussed above, any fees that Pioneer would be entitled to under the interim investment advisory agreement will be held in escrow until shareholder approval of the agreement is obtained. If shareholders of a Safeco Fund do not approve the interim investment advisory agreement, Pioneer will not receive the fee under the current investment advisory agreement with SAM but instead would be paid a fee based upon Pioneer's cost in managing the Fund. If the Reorganizations and the interim investment advisory agreements are not approved by December 30, 2004, Pioneer will no longer provide advisory services to the Safeco Funds, unless an extension of the 150 -day period is permitted by a rule or independent position of the staff of the SEC. If both the Reorganization and appointment of Pioneer are approved, the interim investment advisory agreement will continue in effect until the closing of the Reorganization. What Happens if a Reorganization is not Approved If a Reorganization is not approved by shareholders, the Board will consider what action to take. Such action could include liquidating the Safeco Fund or seeking SEC relief to permit Pioneer to serve as investment adviser beyond the 150-day limitation period. 5 Who is Eligible to Vote Shareholders of record on October 8, 2004 are entitled to attend and vote at the Meeting or any adjournment of the Meeting. On each proposal, all shareholders of a Safeco Fund, regardless of the class of shares held, will vote together as a single class. Each share is entitled to one vote. Shares represented by properly executed proxies, unless revoked before or at the Meeting, will be voted according to shareholders' instructions. If you sign a proxy but do not fill in a vote, your shares will be voted to approve the Agreement and Plan of Reorganization and the interim advisory agreement with Pioneer. If any other business comes before the Meeting, your shares will be voted at the discretion of the persons named as proxies. TABLE OF CONTENTS Page --- INTRODUCTION ............................................................................. PROPOSAL 1(a) -- SAFECO BALANCED FUND .................................................... 7 PROPOSAL 1(b) -- SAFECO CORE EQUITY FUND ................................................. 20 PROPOSAL 1(c) -- SAFECO GROWTH OPPORTUNITIES FUND ........................................ 33 PROPOSAL 1(d) -- SAFECO INTERNATIONAL STOCK FUND ......................................... 46 PROPOSAL 1(e) -- SAFECO LARGE-CAP GROWTH FUND ............................................ 60 PROPOSAL 1(f) -- SAFECO LARGE-CAP VALUE FUND ............................................. 74 PROPOSAL 1(g) -- SAFECO MULTI-CAP CORE FUND .............................................. 88 PROPOSAL 1(h) -- SAFECO SMALL-CAP VALUE FUND ............................................. 104 TERMS OF EACH AGREEMENT AND PLAN OF REORGANIZATION ....................................... 118 TAX STATUS OF EACH REORGANIZATION ........................................................ 119 PROPOSAL 2(a)-(h) -- APPROVAL OF AN INTERIM INVESTMENT ADVISORY AGREEMENT WITH PIONEER ... 120 VOTING RIGHTS AND REQUIRED VOTE .......................................................... 122 ADDITIONAL INFORMATION ABOUT THE PIONEER FUNDS ........................................... 122 FINANCIAL HIGHLIGHTS ..................................................................... 129 INFORMATION CONCERNING THE MEETING ....................................................... 136 OWNERSHIP OF SHARES OF THE FUNDS ......................................................... 138 EXPERTS .................................................................................. 146 AVAILABLE INFORMATION .................................................................... 146 EXHIBIT A-1 -- FORM OF AGREEMENT AND PLAN OF REORGANIZATION (C/D) ........................ A-1 EXHIBIT A-2 -- FORM OF AGREEMENT AND PLAN OF REORGANIZATION (F) .......................... A-22 EXHIBIT B -- FORM OF INTERIM ADVISORY AGREEMENT .......................................... B-1 EXHIBIT C -- ADDITIONAL INFORMATION REGARDING PIONEER .................................... C-1 EXHIBIT D -- PORTFOLIO MANAGER'S DISCUSSION OF PERFORMANCE ............................... D-1
6 Safeco Balanced Fund and Pioneer Balanced Fund PROPOSAL 1(a) Approval of Agreement and Plan of Reorganization SUMMARY The following is a summary of more complete information appearing later in this Proxy Statement/Prospectus or incorporated herein. You should read carefully the entire Proxy Statement/Prospectus, including the form of Agreement and Plan of Reorganization attached as EXHIBIT A-1 because they contain details that are not in the summary. The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. In the table below, if a row extends across the entire table, the policy disclosed applies to both your Safeco Fund and the Pioneer Fund. Comparison of Safeco Balanced Fund to the Pioneer Balanced Fund
------------------------------------------------------------------------------------------------------------------------------------ Safeco Balanced Fund Pioneer Balanced Fund ------------------------------------------------------------------------------------------------------------------------------------ Business A series of Safeco Common Stock Trust, A diversified open-end management a diversified open-end management investment company registered under the investment company organized as a Investment Company Act and organized as Delaware statutory trust. a Delaware statutory trust. ------------------------------------------------------------------------------------------------------------------------------------ Net assets as of $19.5 million $132 million June 30, 2004 ------------------------------------------------------------------------------------------------------------------------------------ Investment advisers and Investment adviser (until August 2, 2004): Investment adviser: portfolio managers SAM Pioneer Portfolio Managers (until August 2, 2004): Portfolio Managers: Rex L. Bentley (since 1996) Day-to-day management of the Fund's Lynette D. Sagvold (since 1996) portfolio is the responsibility of co-managers Greg Card (since 2004) Timothy Mulrenan (equity securities) and Tim Hokari (since 2004) Richard Schlanger (fixed income securities). Lesley Fox (since 2004) Nancy McFadden (since 2004) Mr. Mulrenan joined Pioneer in 1997 and has managed portfolios since 1998. Mr. Schlanger Currently Pioneer is acting as investment joined Pioneer in 1988. adviser to Safeco Balanced Fund. The Portfolio Managers of Pioneer Balanced Fund, as indicated in the next column, currently manage Safeco Balanced Fund. ------------------------------------------------------------------------------------------------------------------------------------ Investment objective Safeco Balanced Fund seeks growth and Pioneer Balanced Fund seeks capital growth income consistent with the preservation and current income by actively managing of capital. a diversified portfolio of equity securities and bonds. ------------------------------------------------------------------------------------------------------------------------------------ The investment objective of each Fund is fundamental and cannot be changed without shareholder approval. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Balanced Fund Pioneer Balanced Fund ------------------------------------------------------------------------------------------------------------------------------------ Primary investments Under normal market conditions, Safeco Under normal market conditions, Pioneer Balanced Fund invests from 50% to 70% of its Balanced Fund invests in a diversified portfolio assets in common stocks and at least 25% of of equity securities and bonds. Pioneer its assets in debt securities. allocates the Fund's assets between equity and debt securities based on its assessment of current business, economic and market conditions. Normally, equity and debt securities each represent 75% and 25%, respectively, of the Fund's net assets. ------------------------------------------------------------------------------------------------------------------------------------ Investment strategies Safeco Balanced Fund seeks growth and Pioneer Balanced Fund uses a blended value/ income consistent with the preservation of growth style of management. In selecting capital through a "disciplined value" approach. equity securities, the Fund seeks securities selling at reasonable prices and then holds When evaluating a stock to purchase for the these securities until the market values Fund, SAM historically looked for companies reflect their intrinsic values. In selecting debt having one or more of the following securities, the Fund considers both broad characteristics: economic factors and issuer specific factors. o Undervalued stock price as measured by price-to-earnings ratios and dividend potential relative to comparable companies o Potential to beat the S&P 500 Index average for risk adjusted returns over the next three-to five-year outlook o Good long-term growth potential When evaluating a debt security to buy for the Fund, SAM historically considered factors such as: o The issuer's creditworthiness o The sensitivity of the security to changes in interest rates o The level to which that market sector is already represented by the Fund's assets ------------------------------------------------------------------------------------------------------------------------------------ Other investments Safeco Balanced Fund may invest up to 10% Pioneer Balanced Fund may invest up to of its net assets in debt securities may be 10% of its total assets in debt securities invested in below investment grade bonds. rated below investment grade, including convertible debt. The Fund may invest up to 25% of its total assets in real estate investment trusts. Up to 25% of the Fund's total assets may e invested in equity and debt securities of non-U.S. issuers. The Fund will not invest more than 5% of its total assets in the securities of emerging markets issuers. The Fund may invest in U.S. government securities, mortgage-backed and asset- backed securities. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Balanced Fund Pioneer Balanced Fund ------------------------------------------------------------------------------------------------------------------------------------ Temporary defensive Safeco Balanced Fund may hold cash or invest Pioneer Balanced Fund may invest all or part strategies in high-quality, short-term securities issued of its assets in securities with remaining by an agency or instrumentality of the U.S. maturities of less than one year, cash government, high-quality commercial paper, equivalents or may hold cash. certificates of deposit, shares of no-load, open-end money market funds, or repurchase agreements. ------------------------------------------------------------------------------------------------------------------------------------ Diversification Each Fund is diversified for the purpose of the Investment Company Act and each Fund is subject to diversification requirements under the Internal Revenue Code of 1986, as amended (the "Code"). ------------------------------------------------------------------------------------------------------------------------------------ Industry concentration Each Fund may not invest more than 25% of its assets in any one industry. ------------------------------------------------------------------------------------------------------------------------------------ Restricted and illiquid If immediately after and as a result of such Pioneer Balanced Fund may not invest more securities action the value of the following securities, in than 15% of its net assets in securities which the aggregate, would exceed 15% of Safeco are illiquid and other securities which are not Balanced Fund's net assets, the Fund will not readily marketable. (i) purchase securities for which there is no readily available market, (ii) purchase time deposits maturing in more than seven days, (iii) purchase over-the-counter (OTC) options or hold assets set aside to cover OTC options written by the Fund, (iv) enter into repurchase agreements maturing in more than seven days, or (v) invest in interests in real estate investment trusts which are not readily marketable or interests in real estate limited partnerships which are not listed or traded on the NASDAQ Stock Market. ------------------------------------------------------------------------------------------------------------------------------------ Borrowing Safeco Balanced Fund may borrow money Pioneer Balanced Fund may not borrow (i) from banks or (ii) by engaging in reverse money, except the Fund may: (a) borrow repurchase agreements. from banks or through reverse repurchase agreements in an amount up to 331/3% of the Fund's total assets (including the amount borrowed); (b) to the extent permitted by applicable law, borrow up to an additional 5% of the Fund's assets for temporary purposes; (c) obtain such short-term credits as are necessary for the clearance of portfolio transactions; (d) purchase securities on margin to the extent permitted by applicable law; and (e) engage in transactions in mortgage dollar rolls that are accounted for as financings. ------------------------------------------------------------------------------------------------------------------------------------ Lending Safeco Balanced Fund may lend securities to Pioneer Balanced Fund may make both short- qualified institutional investors with a value term (nine months or less) and long-term of up to 33% of the Fund's total assets. loans of its portfolio securities to the extent of 30% of the value of the Fund's total assets computed at the time of making such loans. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Balanced Fund Pioneer Balanced Fund ------------------------------------------------------------------------------------------------------------------------------------ Derivative instruments Safeco Balanced Fund may write a put or call Pioneer Balanced Fund may use futures and option if, as a result thereof, the aggregate options on securities, indices and currencies, value of the assets underlying all such options forward currency exchange contracts and does not exceed 25% of the Fund's net assets. other derivatives. The Fund does not use The Fund may purchase a put or call option derivatives as a primary investment technique or option on a futures contract if, as a result and generally limits their use to hedging. thereof, the aggregate premiums paid on all However, the Fund may use derivatives for a options or options on futures contracts held variety of non-principal purposes, including: by the Fund do not exceed 20% of the Fund's net assets. o As a hedge against adverse changes in stock market prices, interest rates The Fund may enter into any futures contract or currency exchange rates or option on futures contract if, as a result o As a substitute for purchasing or thereof, the aggregate margin deposits and selling securities premiums required on all such instruments o To increase the Fund's return as a do not exceed 5% of the Fund's net assets. non-hedging strategy that may be considered speculative The Fund may not purchase securities on margin. However, the Fund may (i) obtain short-term credits as necessary to clear its purchases and sales of securities, and (ii) make margin deposits in connection with its use of financial options and futures, forward and spot currency contracts, swap transactions and other financial contracts or derivative instruments. ------------------------------------------------------------------------------------------------------------------------------------ Other investment policies and As described above, the Funds have substantially similar principal investment strategies and restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a more complete discussion of each Fund's other investment policies and fundamental and non- fundamental investment restrictions, see the SAI. ------------------------------------------------------------------------------------------------------------------------------------ Buying, Selling and Exchanging Shares ------------------------------------------------------------------------------------------------------------------------------------ Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer Balanced of the Fund are subject to a 5.75% front-end Fund you receive in the Reorganization will sales charge. not be subject to any sales charge. Moreover, if you own shares in your own name as of the Contingent deferred sales charge of up to 5% closing of the Reorganization (i.e., not in the if you redeem Class B shares within six years name of a broker or other intermediary) and of purchase. maintain your account, you may purchase Class A shares of Pioneer Balanced Fund and Contingent deferred sales charge of 1% if Class A shares of any Fund in the Pioneer you redeem Class C shares within one year family of funds through such account in the of purchase. future without paying any sales charge. Purchases of Investor Class shares of the Fund Except as described above, Class A shares are not subject to a sales load. of Pioneer Balanced Fund are subject to a front-end sales charge of up to 4.50%. The Fund assesses a mandatory redemption fee of 2%, as a percentage of the amount redeemed or exchanged, on Class A and Investor Class shares held less than 30 days. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Balanced Fund Pioneer Balanced Fund ------------------------------------------------------------------------------------------------------------------------------------ Management and other fees Safeco Balanced Fund pays an advisory fee on a Pioneer Balanced Fund pays Pioneer a monthly basis at an annual rate as follows: management fee equal to Pioneer's annual fee is equal to the Fund's average daily net assets $0-$250,000,000: 0.70 of 1% as follows: $250,000,001-$750,000,000: 0.65 of 1% $750,000,001-$1,250,000,000: 0.60 of 1% $0-$1 billion: 0.65% Over $1,250,000,000: 0.55 of 1% Next $4 billion: 0.60% Over $5 billion: 0.55% SAM serves as administrator and fund accounting agent for the Fund. The Fund pays During its most recent fiscal year, Pioneer SAM an administrative services fee of 0.05% Balanced Fund paid an advisory fee at an of the Fund's average daily net assets up to the average rate of 0.65% of average daily first $200,000,000 and 0.01% of its net assets net assets. thereafter, and an accounting fee of 0.04% of the Fund's average daily net assets up to the In addition, the Fund reimburses Pioneer for first $200,000,000 and 0.01% of its net certain fund accounting and legal expenses assets thereafter. incurred on behalf of the Fund and pays a separate shareholder servicing/transfer During its most recent fiscal year, Safeco agency fee to Pioneer Investment Management Balanced Fund paid aggregate advisory and Shareholder Services, Inc. ("PIMSS"), an administration fees at an average rate of affiliate of Pioneer. 0.79% of average daily net assets. SAM had contractually agreed until April 30, For the fiscal year ended December 31, 2003, 2009, to pay certain fund operating expenses the Fund's total annual operating expenses for (but not all of the operating expenses of the Class A shares were 1.38% of average daily Fund) that exceeded the rate of 0.40% per net assets. The Fund does not currently have annum of the Fund's average daily net assets. an expense limitation for its Class A shares. This arrangement included all Fund operating expenses except management fees, Rule 12b-1 Pioneer has agreed until the second anniversary fees, brokerage commissions, interest, and of the closing of the Reorganization to limit the extraordinary expenses. expenses (excluding extraordinary expenses) of the Investor Class to 1.10% of the average daily For the fiscal year ended December 31, 2003, net assets attributable to the Investor Class. the Fund's annual operating expenses for Class A shares, after giving effect to the expense The Investor Class Shares to be issued in limitation were 1.35%, and without giving effect the Reorganization will convert to Class A to the expense limitation, were 1.93% per share. shares after two years. Class A shares will have higher expenses per share than Investor For the fiscal year ended December 31, 2003, Class Shares due to the Rule 12b-1 Plan. In the Fund's annual operating expenses for Class B addition, although Pioneer has agreed to limit shares, after giving effect to the expense the expenses attributable to Investor Class limitation were 2.10%, and without giving effect shares, Pioneer is not required to limit the to the expense limitation, were 2.75% per share. expenses attributable to Class A shares. For the fiscal year ended December 31, 2003, the Fund's annual operating expenses for Class C shares, after giving effect to the expense limitation were 2.10%, and without giving effect to the expense limitation, were 42.09% per share. For the fiscal year ended December 31, 2003, the Fund's annual operating expenses for Investor Class shares, after giving effect to the expense limitation were 1.10%, and without giving effect to the expense limitation, were 1.43% per share. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Balanced Fund Pioneer Balanced Fund ------------------------------------------------------------------------------------------------------------------------------------ Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class (12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets. ------------------------------------------------------------------------------------------------------------------------------------ Buying shares You may buy shares of the Fund directly You may buy shares from any investment firm through Safeco Securities, the Fund's principal that has a sales agreement with PFD. Existing underwriter or through brokers, registered shareholders of Safeco Balanced Fund who investment advisers, banks and other financial own shares in their own name as of the institutions that have entered into selling closing date of the Reorganization and who agreements with the Fund's principal underwriter, maintain their accounts may buy shares of as described in the Fund's prospectus. any fund in the Pioneer family of funds through such accounts in the future without Certain account transactions may be done by paying sales charges. telephone. If the account is established in the shareholder's own name, shareholders may also purchase additional shares of Pioneer Balanced Fund by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------ Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer acquire through dividend reinvestment or other Balanced Fund without incurring any fee on fund distributions or for shares that you have the exchange with the more than 62 other exchanged for shares of the same class of Pioneer Funds. Your exchange would be for another Fund. Class A shares, which would be subject to a Rule 12b-1 fee. An exchange generally is Certain account transactions may be done by treated as a sale and a new purchase of telephone. shares for federal income tax purposes. If the account is established in the shareholder's own name, shareholders may also exchange shares of Pioneer Balanced Fund for shares of other Pioneer Funds by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------ Selling shares Investor Class and Class A shares will be sold at net asset value per share next calculated after each Fund receives your request in good order. ------------------------------------------------------------------------------------------------------------------------------------ You may sell your shares by contacting the Normally, your investment firm will send your Fund directly in writing or by contacting a request to sell shares to PIMSS. You can financial intermediary as described in the also sell your shares by contacting the Fund Fund's prospectus. directly if your account is registered in your name. If the account is established in the shareholder's own name, shareholders may also redeem shares of Pioneer Balanced Fund by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------
Comparison of Principal Risks of Investing in the Funds Because each Fund has a similar investment objective, primary investment policies and strategies, the Funds are subject to the same principal risks. You could lose money on your investment in either Fund or not make as much as if you invested elsewhere if: o The stock market goes down (this risk may be greater in the short term) o The Fund's equity investments do not have the growth potential originally expected o Stocks selected for income do not achieve the same return as securities selected for capital growth 12 Each Fund also has risks associated with investing in debt securities. Each Fund could underperform other investments if: o Interest rates go up causing the value of the Fund's portfolio to decline o The issuer of a debt security owned by the Fund defaults on its obligation to pay principal or interest or has its credit rating downgraded o During periods of declining interest rates, the issuer of a security may exercise its option to repay earlier than scheduled, forcing the Fund to reinvest in lower yielding securities. This is known as a call prepayment risk o During periods of rising interest rates, the average life of certain types of securities may be extended because of slower than expected principal payments. This may lock in a below market interest rate, increase the security's duration (the estimated period until the security is paid in full) and reduce the value of the security. This is known as an extension risk o Pioneer's judgment about the attractiveness, relative value or potential appreciation of a particular sector, security or investment strategy proves to be incorrect The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. Investments in the Funds are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You could lose money by investing in either Fund. Past Performance Set forth below is performance information for each Fund. The bar charts show how each Fund's total return (not including any deduction for sales charges) has varied from year to year for each full calendar year. The tables show average annual total return (before and after taxes) for each Fund over time for each class of shares (including deductions for sales charges) compared with a broad-based securities market index. The bar charts give an indication of the risks of investing in each Fund, including the fact that you could incur a loss and experience volatility of returns year to year. Past performance before and after taxes does not indicate future results. Safeco Balanced Fund -- Investor Class Calendar Year Total Returns* [DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT] '97 '98 '99 '00 '01 '02 '03 16.64 12.56 1.05 5.09 -0.29 -8.74 16.90 * During the period shown in the bar chart, your Safeco Fund's highest quarterly return was 11.10% for the quarter ended June 30, 2003, and the lowest quarterly return was -10.04% for the quarter ended September 30, 2002. 13 Pioneer Balanced Fund -- Class A Shares Calendar Year Total Returns* [DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT] '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 -4.31 22.00 9.89 13.92 1.14 3.15 5.38 -2.87 11.20 15.99 * During the period shown in the bar chart, Pioneer Balanced Fund's highest quarterly return was 8.99% for the quarter ended June 30, 2003, and the lowest quarterly return was -11.66% for the quarter ended September 30, 2002. Safeco Balanced Fund Average Annual Total Returns as of December 31, 2003
--------------------------------------------------------------------------------------------------------- Since 1 Year 5 Years Inception(1) Safeco Balanced Fund, Class A Shares* --------------------------------------------------------------------------------------------------------- Return Before Taxes 9.96% 1.00% 5.48% --------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions(2) 9.45% 0.03% 4.12% --------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares(2) 6.70% 0.27% 3.94% --------------------------------------------------------------------------------------------------------- Safeco Balanced Fund, Class B Shares* --------------------------------------------------------------------------------------------------------- Return Before Taxes 10.79% 1.08% 5.66% --------------------------------------------------------------------------------------------------------- Safeco Balanced Fund, Class C Shares* --------------------------------------------------------------------------------------------------------- Return Before Taxes 14.76% 1.45% 5.53% --------------------------------------------------------------------------------------------------------- Safeco Balanced Fund, Investor Class Shares* --------------------------------------------------------------------------------------------------------- Return Before Taxes 16.90% 2.47% 6.55% --------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions(2) 16.29% 1.37% 5.06% --------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares(2) 11.26% 1.45% 4.79% --------------------------------------------------------------------------------------------------------- S&P 500 Index3 (reflects no deduction for fees, expenses or taxes) 28.67% -0.57% 9.02% --------------------------------------------------------------------------------------------------------- 60% Russell 1000 Value/40% Lehman Brothers Aggregate Bond Index(3) (reflects no deduction for fees, expenses or taxes) 19.66% 4.79% 9.11% ---------------------------------------------------------------------------------------------------------
* Returns for Class A, Class B and Class C shares have not been restated to reflect Rule 12b-1 fees prior to September 30, 1996, and would be lower if they were. 14 (1) The Fund commenced operations on January 31, 1996. (2) After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your situation and may differ from those shown. Furthermore, the after-tax returns shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRA accounts, or to investors that are tax-exempt. (3) The S&P 500 Index, an unmanaged index of 500 stocks, and the 60/40 combination of the Russell 1000 Value Index and the Lehman Brothers Aggregate Bond Index, are for reference only and do not mirror the Fund's investments. Pioneer Balanced Fund -- Class A Shares Average Annual Total Returns as of December 31, 2003
----------------------------------------------------------------------------------------------------- 1 Year 5 Years 10 Years Pioneer Balanced Fund, Class A Shares ----------------------------------------------------------------------------------------------------- Return Before Taxes 10.78% 0.76% 4.38% ----------------------------------------------------------------------------------------------------- Return After Taxes on Distributions(1) 10.19% -0.11% 2.40% ----------------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares(1) 6.98% 0.10% 2.56% ----------------------------------------------------------------------------------------------------- S&P 500 Index(2) (reflects no deduction for fees, expenses or taxes) 28.67% -0.57% 11.06% ----------------------------------------------------------------------------------------------------- Lehman Brothers Aggregate Bond Index(3) (reflects no deduction for fees, expenses or taxes) 4.10% 6.62% 6.95% -----------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your situation and may differ from those shown. Furthermore, the after-tax returns shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRA accounts, or to investors that are tax-exempt. (2) The S&P 500 Index, an unmanaged index of 500 stocks, is for reference only and does not mirror the Fund's investments. (3) The Lehman Brothers Aggregate Bond Index is for reference only and does not mirror the Fund's investments. Pioneer Balanced Fund's Investor Class shares will not be outstanding prior to the closing of the Reorganization and consequently have no performance history. However, the performance record of the Investor Class would be modestly higher than the performance of Class A shares due to the lower expenses applicable to the Investor Class. The most recent portfolio manager's discussion of each Fund's performance is attached as Exhibit D. 15 The Funds' Fees and Expenses Shareholders of both Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy and hold shares of each Fund. The expenses in the tables appearing below are based on (i) for your Safeco Fund, the expenses of your Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer Balanced Fund, the expenses of Pioneer Balanced Fund for the period ended December 31, 2003. Future expenses for all share classes may be greater or less.
Pro Forma Safeco Pioneer Safeco Safeco Safeco Balanced Balanced Balanced Balanced Balanced Fund Fund Fund Fund Fund Investor Investor Class A Class B Class C Class Class9 Shareholder transaction fees (paid directly from your investment) -------- -------- -------- -------- --------- Maximum sales charge (load) when you buy shares as a percentage of offering price .................................................. 5.75%(6) None None None None(1) Maximum deferred sales charge (load) as a % of purchase price or the amount you receive when you sell shares, whichever is less ......... None 5.00%(7) 1.00%(8) None None Redemption fees for shares held less than 30 days ................... 2.00% None None 2.00% None Wire redemption fee ................................................. $ 20(4) $ 20(4) $ 20(4) $ 20(4) $ 10 Annual low balance fee .............................................. $ 12(5) $ 12(5) $ 12(5) $ 12(5) None Annual fund operating expenses (deducted from fund assets) (as a % of average net assets) Management fee ...................................................... 0.70% 0.70% 0.70% 0.70% 0.65% Distribution and service (12b-1) fee ................................ 0.25% 1.00% 1.00% None None Other expenses ...................................................... 0.98% 1.05% 40.39% 0.73% 0.61% Total fund operating expenses ....................................... 1.93% 2.75% 42.09% 1.43% 1.26% Expense reimbursement/reduction ..................................... 0.58%(2) 0.65%(2) 39.99%(2) 0.33%(2) 0.16%(3) Net fund operating expenses ......................................... 1.35% 2.10% 2.10% 1.10% 1.10%
---------- (1) No sales load will apply to shares received in the Reorganization by shareholders of your Safeco Fund who become shareholders of record of Pioneer Balanced Fund through the Reorganization. In addition, shareholders of your Safeco Fund who own shares in their own name (i.e., not in the name of a broker or other intermediary) and maintain such account as of the closing of the Reorganization may purchase Class A shares of Pioneer Balanced Fund or of any fund in the Pioneer family of funds through such account in the future without paying a sales charge. (2) As described above, SAM had contractually agreed to reimburse Safeco Balanced Fund for certain Fund operating expenses (but not all of the operating expenses of the Fund) that exceeded the rate of 0.40% per annum of the Fund's average daily net assets. This arrangement included all fund operating expenses except management fees, Rule 12b-1 fees, brokerage commissions, interest, and extraordinary expenses. (3) Pioneer has agreed that through the second anniversary of the closing of the Reorganization, Pioneer will limit the expenses (excluding extraordinary expenses) of the Investor Class shares of Pioneer Balanced Fund to 1.10% of average daily net assets. (4) There is a higher charge for international wire redemptions, which may vary by country or dollar amount. (5) A low balance fee is charged once each year in December for accounts with balances under $1,000 in your Safeco Fund. (6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are not subject to a front-end sales charge, but a 1.00% deferred sales charge will apply to redemptions made in the first twelve months except with respect to participant-directed redemptions from qualified retirement plans. (7) The contingent deferred sales charge on Class B shares of your Safeco Fund reduces to zero after six years from purchase, and the Class B shares convert to Class A shares at that time. (8) The contingent deferred sales charge on Class C shares applies only to redemptions made in the first twelve months after purchase. (9) The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. Class A shares do not currently have an expense limitation. 16 The hypothetical example below helps you compare the cost of investing in each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time periods shown, (b) you reinvest all dividends and distributions, (c) your investment has a 5% return each year, (d) each Fund's gross operating expenses remain the same, (e) the expense limitations are in effect for five years for Safeco Balanced Fund and two years for Pioneer Balanced Fund and (f) the Investor Class shares of Pioneer Balanced Fund convert to Class A shares after two years. The examples are for comparison purposes only and are not a representation of either Fund's actual expenses or returns, either past or future.
Example Safeco Balanced Fund Class A Shares Year 1 ........................ $ 705 Year 3 ........................ $ 978 Year 5 ........................ $1,272 Year 10 ....................... $2,447 With Without Class B Shares redemption redemption Year 1 .............. $ 713 $ 213 Year 3 .............. $ 958 $ 658 Year 5 .............. $1,329 $1,129 Year 10 ............. $2,418 $2,418 With Without Class C Shares redemption redemption Year 1 .............. $ 313 $ 213 Year 3 .............. $ 658 $ 658 Year 5 .............. $1,129 $1,129 Year 10 ............. $2,658 $2,658 Investor Class Shares Year 1 ........................ $ 112 Year 3 ........................ $ 373 Year 5 ........................ $ 677 Year 10 ....................... $1,541 Pro Forma Pioneer Balanced Fund Investor Class Shares Year 1 ........................ $ 112 Year 3 ........................ $ 373 Year 5 ........................ $ 677 Year 10 ....................... $1,541
17 Reasons for the Proposed Reorganization The Trustees believe that the proposed Reorganization is in the best interests of Safeco Balanced Fund. The Trustees considered the following matters, among others, in approving the proposal. First, SAM, the investment adviser to the Fund until August 2, 2004, was acquired by Symetra. Symetra informed the Trustees that it did not intend to continue to provide investment advisory services to the Safeco Funds. Consequently, a change in your Safeco Fund's investment adviser was necessary. Second, the investment performance of Pioneer Balanced Fund is comparable to the investment performance of your Safeco Fund. For the five year period ended June 30, 2004, Class A shares of Pioneer Balanced Fund had an average annual return of 1.34% compared to an average annual return of the Class A shares and Investor shares of your Safeco Fund of 0.32% and 1.78%, respectively, during the same period. In addition, the Trustees considered the track record of Pioneer in managing equity and fixed income mutual funds. Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62 investment companies and accounts with approximately $35 billion in assets. Pioneer is part of the global asset management group of UniCredito Italiano S.p.A., one of the largest banking groups in Italy, providing investment management and financial services to mutual funds, institutions and other clients. As of June 30, 2004, assets under management of UniCredito Italiano S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco Fund would become part of a significantly larger family of funds that offers a more diverse array of investment options and enhanced shareholder account options. The Pioneer family of mutual funds offers over 62 funds, including domestic and international equity and fixed income funds and a money market fund that will be available to your Safeco Fund's shareholders through exchanges. In addition, Pioneer offers shareholders additional options for their accounts, including the ability to transact and exchange shares over the telephone or online and the ability to access account values and transaction history in all of the shareholder's direct accounts in the Pioneer Funds over the telephone or online. Fourth, Pioneer Balanced Fund's lower gross operating expenses and Pioneer's commitment until the second anniversary of the Reorganization to limit the expenses (excluding extraordinary expenses) of the Investor Class of Pioneer Balanced Fund to 1.10% of average daily net assets. This expense ratio is below the gross expenses of each class of shares of your Safeco Fund and is the same or lower than expenses net of expense reimbursement of each class of shares of your Safeco Fund. Fifth, the substantially larger size of Pioneer Balanced Fund offers greater opportunity for diversification of the investment portfolio, which should help to reduce risks. Sixth, shareholders who own shares in their name as of the closing of the Reorganization (i.e., not in the name of a broker or other intermediary) and maintain their account may purchase additional Class A shares of the corresponding Pioneer Fund through such account in the future or may exchange those shares for Class A shares of another Pioneer Fund or purchase Class A share of another Pioneer Fund without paying any sales charge. Seventh, the Investor Class shares of Pioneer Balanced Fund received in the Reorganization will provide Safeco Balanced Fund shareholders with exposure to substantially the same investment product as they currently have. Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds and the Pioneer Funds associated with the Reorganizations, including, but not limited to: (1) the expenses associated with the preparation, printing and mailing of any shareholder communications, including this joint Proxy Statement/Prospectus, and any filings with the SEC and other governmental authorities in connection with the Reorganizations; (2) the fees and expenses of any proxy solicitation firm retained in connection with the Reorganizations; (3) the legal fees and expenses incurred by the Safeco Funds in connection with the Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred as a result of the Reorganizations. The Trustees also considered that Pioneer and Symetra will benefit from the Reorganization. See "Certain Agreements between Pioneer and Symetra." The Board of Trustees of Pioneer Balanced Fund also considered that the Reorganization presents an excellent opportunity for the Pioneer Balanced Fund to acquire investment assets without the obligation to pay commissions or other transaction costs that a fund normally incurs when purchasing securities. This opportunity provides an economic benefit to Pioneer Balanced Fund and its shareholders. 18 CAPITALIZATION The following table sets forth the capitalization of each Fund as of June 30, 2004, and the pro forma capitalization of the combined Fund as of June 30, 2004.
Pro Forma Safeco Pioneer Pioneer Balanced Balanced Balanced Fund Fund Fund June 30, 2004 June 30, 2004 June 30, 2004 --------------- --------------- -------------- Total Net Assets (in thousands) $ 19,459 $ 132,104 $ 151,563 Class A shares ................ $ 1,784 $ 103,881 $ 103,881 Class B shares ................ $ 1,622 $ 18,462 $ 18,462 Class C shares ................ $ 109 $ 9,761 $ 9,761 Investor Class shares ......... $ 15,944 N/A $ 19,459 Net Asset Value Per Share Class A shares ................ $ 11.88 $ 9.57 $ 9.57 Class B shares ................ $ 11.84 $ 9.47 $ 9.47 Class C shares ................ $ 11.84 $ 9.54 $ 9.54 Investor Class shares ......... $ 11.83 N/A $ 9.57 Shares Outstanding Class A shares ................ 150,124 10,851,975 10,851,975 Class B shares ................ 137,010 1,949,543 1,949,543 Class C shares ................ 9,194 1,023,264 1,023,264 Investor Class shares ......... 1,347,406 N/A 2,033,333
It is impossible to predict how many shares of Pioneer Balanced Fund will actually be received and distributed by your Safeco Fund on the Reorganization date. The table should not be relied upon to determine the amount of Pioneer Balanced Fund's shares that will actually be received and distributed. BOARD'S EVALUATION AND RECOMMENDATION For the reasons described above, the Trustees, including the Independent Trustees, approved the Reorganization. In particular, the Trustees determined that the Reorganization is in the best interests of your Safeco Fund. Similarly, the board of trustees of Pioneer Balanced Fund, including its Independent Trustees, approved the Reorganization. They also determined that the Reorganization is in the best interests of Pioneer Balanced Fund. The Trustees recommend that the shareholders of your Safeco Fund vote FOR the proposal to approve the Agreement and Plan of Reorganization. 19 Safeco Core Equity Fund and Pioneer Fund PROPOSAL 1(b) Approval of Agreement and Plan of Reorganization SUMMARY The following is a summary of more complete information appearing later in this Proxy Statement/Prospectus or incorporated herein. You should read carefully the entire Proxy Statement/Prospectus, including the form of Agreement and Plan of Reorganization attached as EXHIBIT A-1 because they contain details that are not in the summary. The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. In the table below, if a row extends across the entire table, the policy disclosed applies to both your Safeco Fund and the Pioneer Fund. Comparison of Safeco Core Equity Fund to the Pioneer Fund
------------------------------------------------------------------------------------------------------------------------------------ Safeco Core Equity Fund Pioneer Fund ------------------------------------------------------------------------------------------------------------------------------------ Business A series of Safeco Common Stock Trust, A diversified open-end management a diversified open-end management investment company registered under investment company organized as a the Investment Company Act organized as Delaware statutory trust. a Delaware statutory trust. ------------------------------------------------------------------------------------------------------------------------------------ Net assets as of $694.6 million $6,321 million June 30, 2004 ------------------------------------------------------------------------------------------------------------------------------------ Investment advisers and Investment adviser (until August 2, 2004): Investment adviser: portfolio managers SAM Pioneer Portfolio Managers (until August 2, 2004): Portfolio Managers: Richard D. Meagley (since 1995) Day-to-day management of the Pioneer Fund's Darcy MacLaren (since 2003) portfolio is the responsibility of John A. Carey and Walter Hunnewell, Jr. Mr. Carey joined Currently Pioneer is acting as investment Pioneer in 1979 and Mr. Hunnewell joined adviser to the Safeco Core Equity Fund. The pioneer in 2001. Portfolio Managers of the Pioneer Fund, as indicated in the next column, currently manage your Safeco Fund. ------------------------------------------------------------------------------------------------------------------------------------ Investment objective Safeco Core Equity Fund seeks long-term Pioneer Fund seeks reasonable income and growth of capital and reasonable current capital growth through investments primarily income. in equity securities of U.S. issuers. ------------------------------------------------------------------------------------------------------------------------------------ The investment objective of each Fund is fundamental and cannot be changed without shareholder approval. ------------------------------------------------------------------------------------------------------------------------------------ Primary investments Under normal market conditions, Safeco Core Pioneer Fund invests a major portion of Equity Fund invests at least 80% of net assets its assets in equity securities, primarily of (plus any borrowings for investment purposes) U.S. issuers. For purposes of the Fund's in equity securities and, to a much lesser investment policies, equity securities include extent, invests in equity related securities. common stocks, convertible debt and other equity instruments such as depositary receipts, warrants, rights and preferred stock. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Core Equity Fund Pioneer Fund ------------------------------------------------------------------------------------------------------------------------------------ Investment strategies Safeco Core Equity Fund seeks investments Pioneer Fund uses a "value" style of in fundamentally sound companies with good management and seeks securities selling at long-term potential. SAM historically evaluated reasonable prices or substantial discounts to numerous measures such as current valuation, their underlying values and then holds these profitability, management, competitive position securities until the market values reflect their and financial soundness. intrinsic values. Pioneer looks at the following factors in selecting investments: favorable expected returns relative to perceived risk; above average potential for earnings and revenue growth; low market valuations relative to earnings forecast, book value, cash flow and sales; a sustainable competitive advantage such as a brand name, customer base, proprietary technology or economies of scale. ------------------------------------------------------------------------------------------------------------------------------------ Other investments Safeco Core Equity Fund may invest up to 20% Pioneer Fund may invest up to 10% of its of its assets in foreign securities which are total assets in equity and debt securities of listed on a national exchange, including non-U.S. corporate issuers and debt securities investments in American Depositary Receipts. of non-U.S. government issuers. The Fund may invest in securities convertible The Fund will not invest more than 5% of into common stock, but less than 35% of its its total assets in securities of emerging total assets will be invested in such securities. market issuers. The Fund may invest up to 5% of its net assets in below investment grade debt securities issued by both U.S. and non-U.S. corporate and government issuers. ------------------------------------------------------------------------------------------------------------------------------------ Temporary defensive Safeco Core Equity Fund may hold cash or Pioneer Fund may invest all or part of its strategies invest in high-quality, short-term securities assets in securities with remaining maturities issued by an agency or instrumentality of the of less than one year, cash equivalents or U.S. government, high-quality commercial may hold cash. paper, certificates of deposit, shares of no-load, open-end money market funds, or repurchase agreements. ------------------------------------------------------------------------------------------------------------------------------------ Diversification Each Fund is diversified for the purpose of the Investment Company Act and each Fund is subject to diversification requirements under the Code. ------------------------------------------------------------------------------------------------------------------------------------ Industry concentration Each Fund may not invest more than 25% of its assets in any one industry. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Core Equity Fund Pioneer Fund ------------------------------------------------------------------------------------------------------------------------------------ Restricted and illiquid If immediately after and as a result of such Pioneer Fund may not invest more than securities action the value of the following securities, in 15% of its net assets in securities which are the aggregate, would exceed 15% of Safeco illiquid and other securities which are not Core Equity Fund's net assets, the Fund will readily marketable. not (i) purchase securities for which there is no readily available market, (ii) purchase time deposits maturing in more than seven days, (iii) purchase over-the-counter (OTC) options or hold assets set aside to cover OTC options written by the Fund, (iv) enter into repurchase agreements maturing in more than seven days, or (v) invest in interests in real estate investment trusts which are not readily marketable or interests in real estate limited partnerships which are not listed or traded on the NASDAQ Stock Market. ------------------------------------------------------------------------------------------------------------------------------------ Borrowing Safeco Core Equity Fund may borrow money Pioneer Fund may not borrow money, except (i) from banks or (ii) by engaging in reverse the Fund may: (a) borrow from banks or repurchase agreements. through reverse repurchase agreements in an amount up to 33 1/3% of the Fund's total assets (including the amount borrowed); (b) to the extent permitted by applicable law, borrow up to an additional 5% of the Fund's assets for temporary purposes; (c) obtain such short-term credits as are necessary for the clearance of portfolio transactions; (d) purchase securities on margin to the extent permitted by applicable law; and (e) engage in transactions in mortgage dollar rolls that are accounted for as financings. ------------------------------------------------------------------------------------------------------------------------------------ Lending Safeco Core Equity Fund may lend securities to Pioneer Fund may lend portfolio securities qualified institutional investors with a value of with a value that may not exceed 331/3% of up to 33% of the Fund's total assets. the value of its assets. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Core Equity Fund Pioneer Fund ------------------------------------------------------------------------------------------------------------------------------------ Derivative instruments Safeco Core Equity Fund may write put or call Pioneer Fund may use futures and options on options if, as a result thereof, the aggregate securities, indices and currencies, forward value of the assets underlying all such options currency exchange contracts and other does not exceed 25% of the Fund's net assets. derivatives. The Fund does not use derivatives as a primary investment technique and Safeco Core Equity Fund may purchase put or generally limits their use to hedging. However, call options or options on futures contracts if, the Fund may use derivatives for a variety of as a result thereof, the aggregate premiums non-principal purposes, including: paid on all options or options on futures contracts do not exceed 20% of the Fund's o As a hedge against adverse changes in net assets. stock market prices, interest rates or currency exchange rates Safeco Core Equity Fund may enter into o As a substitute for purchasing or selling any futures contract or option on a futures securities contract, if as a result thereof, the aggregate o To increase the Fund's return as a non- margin deposits and premiums required on all hedging strategy that may be considered such instruments does not exceed 5% of the speculative Fund's net assets. Safeco Core Equity Fund may not purchase securities on margin. However, the Fund may (i) obtain short-term credits as necessary to clear its purchases and sales of securities and (ii) make margin deposits in connection with its use of financial options and futures, forward and spot currency contracts, swap transactions and other financial contracts or derivative instruments. ------------------------------------------------------------------------------------------------------------------------------------ Other investment policies and As described above, the Funds have substantially similar principal investment strategies and restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a more complete discussion of each Fund's other investment policies and fundamental and non-fundamental investment restrictions, see the SAI. ------------------------------------------------------------------------------------------------------------------------------------ Buying, Selling and Exchanging Shares ------------------------------------------------------------------------------------------------------------------------------------ Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer Fund of Safeco Core Equity Fund are subject to a you receive in the Reorganization will not be 5.75% front-end sales charge. subject to any sales charge. Moreover, if you own shares in your own name as of the Contingent deferred sales charge of up to 5% closing of the Reorganizationm (i.e., not in if you redeem Class B shares within six years the name of a broker or other intermediary) of purchase. and maintain your account, you may purchase Class A shares of Pioneer Fund and Class A Contingent deferred sales charge of 1% if shares of any fund in the Pioneer family of you redeem Class C shares within one year funds through such account in the future of purchase. without paying any sales charge. Purchases of Investor Class shares of Safeco Except as described above, Class A shares of Core Equity Fund Pioneer Fund are subject to a front-end sales are not subject to a sales load. charge of up to 5.75%. Safeco Core Equity Fund assesses a mandatory redemption fee of 2%, as a percentage of the amount redeemed or exchanged, on Class A and Investor Class shares held less than 30 days. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Core Equity Fund Pioneer Fund ------------------------------------------------------------------------------------------------------------------------------------ Management and other fees Safeco Core Equity Fund pays an advisory Pioneer Fund pays Pioneer an annual basic fee fee on a monthly basis at an annual rate of 0.60% of the Fund's average daily net assets. as follows: Pioneer's fee increases or decreases depending $0-$250,000,000: 0.70 of 1% upon whether the Fund's performance exceeds, $250,000,001-$750,000,000: 0.65 of 1% or is exceeded by, that of the S&P 500 Index $750,000,001-$1,250,000,000: 0.60 of 1% over the specified performance period. Each Over $1,250,000,000: 0.55 of 1% percentage point of difference between the performance of the Class A shares and the index SAM serves as administrator and Fund (limited to a maximum of +/-10) is multiplied accounting agent for the Fund. The Fund pays by a performance rate adjustment of 0.01%. SAM an administrative services fee of 0.05% As a result, the fee is subject to a maximum of the Fund's average daily net assets up to the annualized rate adjustment of +/-0.10%. This first $200,000,000 and 0.01% of its net assets performance comparison is made at the end of thereafter, and an accounting fee of 0.04% of each month. An appropriate monthly percentage the Fund's average daily net assets up to the of this annual rate (based on the number of first $200,000,000 and 0.01% of its net days in the current month) is then applied to assets thereafter. the Fund's average net assets for the entire performance period, giving a dollar amount that During its most recent fiscal year, Safeco is added to (or subtracted from) the basic fee. Core Equity Fund paid aggregate advisory and In addition, the fee is also further limited to a administration fees at an average rate of 0.71% maximum annualized rate adjustment of +/-0.10% of average daily net assets. (i.e., the management fee will not exceed 0.70% or be less than 0.50%). However, Pioneer SAM had contractually agreed until April 30, currently is waving the lower limitation on its 2009, to pay certain Fund operating expenses fee, but may reimpose it in the future. Because (but not all of the operating expenses of the any adjustments to the basic fee begin with the Fund) that exceeded the rate of 0.40% per comparative performance of the Fund and the annum of the Fund's average daily net assets. performance record of the index, the controlling This arrangement included all Fund operating factor is not whether fund performance is up or expenses except management fees, Rule 12b-1 down, but whether it is up or down more or fees, brokerage commissions, interest, and less than the performance record of the index, extraordinary expenses. regardless of general market performance. For the fiscal year ended December 31, 2003, During its most recent fiscal year, Pioneer Fund the Fund's annual operating expenses for Class paid an advisory fee at an average rate of 0.50% A shares, after giving effect to the expense of average daily net assets. limitation were 1.32%, and without giving effect to the expense limitation, were 3.40%. In addition, the Fund reimburses Pioneer for certain fund accounting and legal expenses For the fiscal year ended December 31, 2003, incurred on behalf of the Fund and pays a the Fund's annual operating expenses for Class separate shareholder servicing/transfer agency B shares, after giving effect to the expense fee to PIMSS, an affiliate of Pioneer. limitation were 2.07%, and without giving effect to the expense limitation, were 2.38%. For the fiscal year ended December 31, 2003, the Fund's total annual operating expenses for For the fiscal year ended December 31, 2003, Class A shares were 1.09% of average daily net the Fund's annual operating expenses for Class assets. The Fund does not currently have an C shares, after giving effect to the expense expense limitation for its Class A shares. limitation were 2.07%, and without giving effect to the expense limitation, were 2.41%. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Core Equity Fund Pioneer Fund ------------------------------------------------------------------------------------------------------------------------------------ Management and other fees For the fiscal year ended December 31, 2003, Pioneer has agreed until the second (continued) the Fund's annual operating expenses for anniversary of the closing of the Investor Class shares were 1.05%. Reorganization to limit the expenses (excluding extraordinary expenses) of the Investor Class to 1.02% of the average daily net assets attributable to the Investor Class. The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. ------------------------------------------------------------------------------------------------------------------------------------ Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class (12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets. ------------------------------------------------------------------------------------------------------------------------------------ Buying shares You may buy shares of the Fund directly You may buy shares from any investment firm through Safeco Securities, the Fund's principal that has a sales agreement with PFD, Pioneer underwriter or through brokers, registered Fund's distributor. Existing shareholders of investment advisers, banks and other financial Safeco Core Equity Fund who own shares institutions that have entered into selling in their own name as of the closing date of agreements with the Fund's principal the Reorganization and who maintain their underwriter, as described in the Fund's accounts may buy shares of any fund in prospectus. the Pioneer family of funds through such accounts in the future without paying Certain account transactions may be done sales charges. by telephone. If the account is established in the shareholder's own name, shareholders may also purchase additional shares of Pioneer Fund by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------ Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Fund acquire through dividend reinvestment or other without incurring any fee on the exchange fund distributions or for Class A shares that with the more than 62 other Pioneer Funds. you have exchanged for Class A shares of Your exchange would be for Class A shares, another Fund. which would be subject to Rule 12b-1 fees. An exchange generally is treated as a sale and Certain account transactions may be done a new purchase of shares for federal income by telephone. tax purposes. If the account is established in the shareholder's own name, shareholders may also exchange shares of Pioneer Fund for shares of other Pioneer Funds by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Core Equity Fund Pioneer Fund ------------------------------------------------------------------------------------------------------------------------------------ Selling shares Investor Class and Class A shares will be sold at the net asset value per share next calculated after each Fund receives your request in good order. ------------------------------------------------------------------------------------------------------------------------------------ You may sell your shares by contacting the Normally, your investment firm will send Fund directly in writing or by contacting a your request to sell shares to PIMSS. You financial intermediary as described in the can also sell your shares by contacting the Fund's prospectus. Fund directly if your account is registered in your name. If the account is established in the shareholder's own name, shareholders may also redeem shares of Pioneer Fund by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------
Comparison of Principal Risks of Investing in the Funds Because each Fund has a similar investment objective, primary investment policies and strategies, the Funds are subject to the same principal risks. You could lose money on your investment in either Fund or not make as much as if you invested elsewhere if: o The stock market goes down (this risk may be greater in the short term) o Value stocks fall out of favor with investors o The Fund's assets remain undervalued or do not have the potential value originally expected o Stocks selected for income do not achieve the same return as securities selected for capital growth The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. 26 Past Performance Set forth below is performance information for each Fund. The bar charts show how each Fund's total return (not including any deduction for sales charges) has varied from year to year for each full calendar year. The tables show average annual total return (before and after taxes) for each Fund over time for each class of shares (including deductions for sales charges) compared with a broad-based securities market index. The bar charts give an indication of the risks of investing in each Fund, including the fact that you could incur a loss and experience volatility of returns year to year. Past performance before and after taxes does not indicate future results. Safeco Core Equity Fund -- Investor Class Calendar Year Total Returns* [DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT] '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 9.93 25.26 25.01 24.21 24.93 9.37 -10.97 -9.72 -26.33 24.68 * During the period shown in the bar chart, your Safeco Fund's highest quarterly return was 18.72% for the quarter ended December 31, 1998, and the lowest quarterly return was -18.37% for the quarter ended September 30, 2002. Pioneer Fund -- Class A Shares Calendar Year Total Returns* [DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT] '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 -0.57 26.64 19.70 38.47 29.09 15.63 0.12 -11.13 -20.26 24.58 * During the period shown in the bar chart Pioneer Fund's highest quarterly return was 22.33% for the quarter ended December 31, 1998, and the lowest quarterly return was -18.18% for the quarter ended September 30, 2002. 27 Safeco Core Equity Fund Average Annual Total Returns as of December 31, 2003
---------------------------------------------------------------------------------------------------------- 1 Year 5 Years 10 Years ---------------------------------------------------------------------------------------------------------- Safeco Core Equity Fund, Class A Shares ---------------------------------------------------------------------------------------------------------- Return Before Taxes 17.23% -5.61% 7.12% ---------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions(1) 17.15% -6.09% 5.51% ---------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares(1) 11.29% -4.83% 5.36% ---------------------------------------------------------------------------------------------------------- Safeco Core Equity Fund, Class B Shares ---------------------------------------------------------------------------------------------------------- Return Before Taxes 18.53% -5.54% 7.23% ---------------------------------------------------------------------------------------------------------- Safeco Core Equity Fund, Class C Shares ---------------------------------------------------------------------------------------------------------- Return Before Taxes 22.42% -5.17% 7.14% ---------------------------------------------------------------------------------------------------------- Safeco Core Equity Fund, Investor Class Shares ---------------------------------------------------------------------------------------------------------- Return Before Taxes 24.68% -4.19% 7.99% ---------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions(1) 24.55% -4.78% 6.28% ---------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares(1) 16.19% -3.72% 6.08% ---------------------------------------------------------------------------------------------------------- S&P 500 Index(2) (reflects no deduction for fees, expenses or taxes) 28.67% -0.57% 11.06% ----------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your situation and may differ from those shown. Furthermore, the after-tax returns shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRA accounts, or to investors that are tax-exempt. (2) The S&P 500 Index, an unmanaged index of 500 stocks, is for reference only, does not mirror the Fund's investments, and reflects no deduction for fees, expenses or taxes. Pioneer Fund -- Class A Shares Average Annual Total Returns as of December 31, 2003
---------------------------------------------------------------------------------------------------------- 1 Year 5 Years 10 Years ---------------------------------------------------------------------------------------------------------- Pioneer Fund, Class A shares ---------------------------------------------------------------------------------------------------------- Return Before Taxes 17.40% -0.76% 10.00% ---------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions(1) 17.06% -1.46% 8.47% ---------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares(1) 11.28% -0.87% 8.01% ---------------------------------------------------------------------------------------------------------- S&P 500 Index(2) (reflects no deduction for fees, expenses or taxes) 28.67% -0.57% 11.06% ----------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your situation and may differ from those shown. Furthermore, the after-tax returns shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRA accounts, or to investors that are tax-exempt. (2) The S&P 500 Index, an unmanaged index of 500 stocks, is for reference only, does not mirror the Fund's investments, and reflects no deduction for fees, expenses or taxes. 28 Pioneer Fund's Investor Class shares will not be outstanding prior to the closing of the Reorganization and consequently have no performance history. However, the performance record of the Investor Class would be modestly higher than the performance of Class A shares due to the lower expenses applicable to the Investor Class. The most recent portfolio manager's discussion of each Fund's performance is attached as Exhibit D. The Funds' Fees and Expenses Shareholders of both Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy and hold shares of each Fund. The expenses in the tables appearing below are based on (i) for the Safeco Core Equity Fund, the expenses of Safeco Core Equity Fund for the period ended December 31, 2003 and (ii) for Pioneer Fund, the expenses of Pioneer Fund for the period ended December 31, 2003. Future expenses for all share classes may be greater or less.
Pro Forma Safeco Safeco Safeco Safeco Pioneer Core Equity Core Equity Core Equity Core Equity Fund Fund Fund Fund Fund Investor Class A Class B Class C Investor Class Class (9) Shareholder transaction fees (paid directly from your investment) ----------- ----------- ----------- -------------- --------- Maximum sales charge (load) when you buy shares as a percentage of offering price ................................................ 5.75%(6) None None None None(1) Maximum deferred sales charge (load) as a percentage of purchase price or the amount you receive when you sell shares, whichever is less ................................................ None 5.00%(7) 1.00%(8) None None Redemption fees for shares held less than 30 days ................. 2.00% None None 2.00% N/A Wire redemption fee ............................................... $ 20(4) $ 20(4) $ 20(4) $ 20(4) $ 10 Annual low balance fee ............................................ $ 12(5) $ 12(5) $ 12(5) $ 12(5) N/A Annual fund operating expenses (deducted from fund assets) (as a % of average net assets) Management fee .................................................... 0.67% 0.67% 0.67% 0.67% 0.52% Distribution and service (12b-1) fee .............................. 0.25% 1.00% 1.00% None None Other expenses .................................................... 2.48% 0.71% 0.74% 0.38% 0.41% Total fund operating expenses ..................................... 3.40% 2.38% 2.41% 1.05% 0.93% Expense reimbursement/reduction ................................... 2.08%(2) 0.31%(2) 0.34%(2) None(2) None(3) Net fund operating expenses ....................................... 1.32% 2.07% 2.07% 1.05% 0.93%
---------- (1) No sales load will apply to shares received in the Reorganization by shareholders of your Safeco Fund who become shareholders of record of Pioneer Fund through the Reorganization. In addition, shareholders of your Safeco Fund who own shares in their own name (i.e., not in the name of a broker or other intermediary) and maintain such account as of the closing of the Reorganization may purchase Class A Shares of Pioneer Fund or of any fund in the Pioneer family of funds through such account in the future without paying a sales charge. (2) As described above, SAM had contractually agreed to reimburse Safeco Core Equity Fund for certain Fund operating expenses (but not all of the operating expenses of the Fund) that exceeded the rate of 0.40% per annum of the Fund's average daily net assets. This arrangement included all fund operating expenses except management fees, Rule 12b-1 fees, brokerage commissions, interest, and extraordinary expenses. (3) Pioneer has agreed that through the second anniversary of the closing of the Reorganization, Pioneer will limit the expenses (excluding extraordinary expenses) of the Investor Class shares of Pioneer Fund to 1.02% of average daily net assets. (4) There is a higher charge for international wire redemptions, which may vary by country or dollar amount. (5) A low balance fee is charged once each year in December for accounts with balances under $1,000 in your Safeco Fund. (6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are not subject to a front-end sales charge, but a 1.00% deferred sales charge will apply to redemptions made in the first twelve months except with respect to participant-directed redemptions from qualified retirement plans. (7) The contingent deferred sales charge on Class B shares of your Safeco Fund reduces to zero after six years from purchase, and the Class B shares convert to Class A shares at that time. (8) The contingent deferred sales charge on Class C shares applies only to redemptions made in the first twelve months after purchase. 29 (9) The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. The hypothetical example below helps you compare the cost of investing in each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time periods shown, (b) you reinvest all dividends and distributions, (c) your investment has a 5% return each year, (d) each Fund's gross operating expenses remain the same, (e) the expense limitations are in effect for five years for Safeco Core Equity Fund and two years for Pioneer Fund and (f) and the Investor Class shares of Pioneer Fund convert to Class A shares after two years. The examples are for comparison purposes only and are not a representation of either fund's actual expenses or returns, either past or future. Example Safeco Core Equity Fund Class A Shares Year 1 ....................... $ 702 Year 3 ....................... $ 969 Year 5 ....................... $1,257 Year 10 ...................... $3,255
With Without Class B Shares redemption redemption Year 1 .............. $ 710 $ 210 Year 3 .............. $ 949 $ 649 Year 5 .............. $1,314 $1,114 Year 10 ............. $3,057 $3,057 With Without Class C Shares redemption redemption Year 1 .............. $ 310 $ 210 Year 3 .............. $ 649 $ 649 Year 5 .............. $1,114 $1,114 Year 10 ............. $2,599 $2,599 Investor Class Shares Year 1 ....................... $ 107 Year 3 ....................... $ 334 Year 5 ....................... $ 579 Year 10 ...................... $1,283 Pro Forma Pioneer Fund Investor Class Shares Year 1 ....................... $ 95 Year 3 ....................... $ 310 Year 5 ....................... $ 556 Year 10 ...................... $1,261
30 Reasons for the Proposed Reorganization The Trustees believe that the proposed Reorganization is in the best interests of Safeco Core Equity Fund. The Trustees considered the following matters, among others, in approving the proposal. First, SAM, the investment adviser to the Fund until August 2, 2004, was acquired by Symetra. Symetra informed the Trustees that it did not intend to continue to provide investment advisory services to the Safeco Funds. Consequently, a change in your Safeco Fund's investment adviser was necessary. Second, the historical investment performance of Pioneer Fund is higher than your Safeco Fund's investment performance. For the one, five and 10 year periods ended June 30, 2004, Class A shares of Pioneer Fund had an average annual return of 18.13%; -1.14%; and 11.16% compared to an average annual return of the Class A shares and Investor Class shares of 7.30% and 14.16% (one year), -7.12% and -5.70% (five years) and 7.11% and 7.99% (ten years), respectively, during the same period. In addition, the Trustees considered the track record of Pioneer in managing equity and fixed income mutual funds. Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62 investment companies and accounts with approximately $35 billion in assets. Pioneer is part of the global asset management group of UniCredito Italiano S.p.A., one of the largest banking groups in Italy, providing investment management and financial services to mutual funds, institutional and other clients. As of June 30, 2004, assets under management of UniCredito Italiano S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco Fund would become part of a significantly larger family of funds that offers a more diverse array of investment options and enhanced shareholder account options. The Pioneer family of mutual funds offers over 62 funds, including domestic and international equity and fixed income funds and a money market fund that will be available to your Safeco Fund's shareholders through exchanges. In addition, Pioneer offers shareholders additional options for their accounts, including the ability to transact and exchange shares over the telephone or online and the ability to access account values and transaction history in all of the shareholder's direct accounts in the Pioneer Funds over the telephone or online. Fourth, Pioneer Fund's lower operating expenses and Pioneer's commitment until the second anniversary of the Reorganization to limit the expenses (excluding extraordinary expenses) of the Investor Class of Pioneer Fund to 1.02% of average daily net assets. This expense ratio is below the gross expenses and expenses net of expense reimbursement of each class of shares of your Safeco Fund. While you will experience higher expenses once the Investor Class shares convert to Class A shares after two years, the Class A expense ratio for the most recent fiscal year was 1.09% of average daily net assets, which was below the net expenses of the Class A shares of your Safeco Fund and only four basis points above the net expenses of the Investor Class of your Safeco Fund. Fifth, the substantially larger size of Pioneer Fund offers greater opportunity for diversification of the investment portfolio, which should help to reduce risks. Sixth, shareholders who own shares in their name as of the closing of the Reorganization (i.e., not in the name of a broker or other intermediary) and maintain their account may purchase additional Class A shares of the corresponding Pioneer Fund through such account in the future or may exchange those shares for Class A shares of another Pioneer Fund or purchase Class A share of another Pioneer Fund without paying any sales charge. Seventh, the Investor Class shares of Pioneer Fund received in the Reorganization will provide Safeco Core Equity Fund shareholders with exposure to substantially the same investment product as they currently have. Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds and the Pioneer Funds associated with the Reorganizations, including, but not limited to: (1) the expenses associated with the preparation, printing and mailing of any shareholder communications, including this joint Proxy Statement/Prospectus, and any filings with the SEC and other governmental authorities in connection with the Reorganizations; (2) the fees and expenses of any proxy solicitation firm retained in connection with the Reorganizations; (3) the legal fees and expenses incurred by the Safeco Funds in connection with the Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred as a result of the Reorganizations. The Trustees also considered that Pioneer and Symetra will benefit from the Reorganization. See "Certain Agreements between Pioneer and Symetra." The Board of Trustees of Pioneer Fund also considered that the Reorganization presents an excellent opportunity for the Pioneer Fund to acquire investment assets without the obligation to pay commissions or other transaction costs that a fund normally incurs when purchasing securities. This opportunity provides an economic benefit to Pioneer Fund and its shareholders. 31 CAPITALIZATION The following table sets forth the capitalization of each Fund as of June 30, 2004, and the pro forma combined Fund as of June 30, 2004.
Safeco Core Equity Pioneer Pro Forma Fund Fund Pioneer Fund June 30, 2004 June 30, 2004 June 30, 2004 --------------- --------------- -------------- Total Net Assets (in thousands) $ 694,570 $ 6,321,081 $ 7,015,651 Class A shares ................ $ 17,431 $ 5,328,526 $ 5,328,526 Class B shares ................ $ 8,846 $ 538,395 $ 538,395 Class C shares ................ $ 196 $ 295,384 $ 295,384 Investor Class shares ......... $ 668,097 N/A 694,570 Class R shares ................ N/A $ 11,139 $ 11,139 Class Y shares ................ N/A $ 147,637 $ 147,637 Net Asset Value Per Share Class A shares ................ $ 17.04 $ 38.64 $ 38.64 Class B shares ................ $ 16.58 $ 37.77 $ 37.77 Class C shares ................ $ 16.60 $ 37.44 $ 37.44 Investor Class shares ......... $ 17.01 N/A $ 38.64 Class R shares ................ N/A $ 38.69 $ 38.69 Class Y shares ................ N/A $ 38.73 $ 38.73 Shares Outstanding Class A shares ................ 1,022,979 137,918,274 137,918,274 Class B shares ................ 533,442 14,254,949 14,254,949 Class C shares ................ 11,810 7,890,437 7,890,437 Investor Class shares ......... 39,269,334 N/A 17,975,414 Class R shares ................ N/A 287,937 287,937 Class Y shares ................ N/A 3,811,827 3,811,827
It is impossible to predict how many shares of Pioneer Fund will actually be received and distributed by your Safeco Fund on the Reorganization date. The table should not be relied upon to determine the amount of Pioneer Fund's shares that will actually be received and distributed. BOARD'S EVALUATION AND RECOMMENDATION For the reasons described above, the Trustees, including the Independent Trustees, approved the Reorganization. In particular, the Trustees determined that the Reorganization is in the best interests of your Safeco Fund. Similarly, the Board of Trustees of Pioneer Fund, including its Independent Trustees, approved the Reorganization. They also determined that the Reorganization is in the best interests of Pioneer Fund. The Trustees recommend that the shareholders of your Safeco Fund vote FOR the proposal to approve the Agreement and Plan of Reorganization. 32 Safeco Growth Opportunities Fund and Pioneer Growth Opportunities Fund PROPOSAL 1(c) Approval of Agreement and Plan of Reorganization SUMMARY The following is a summary of more complete information appearing later in this Proxy Statement/Prospectus or incorporated herein. You should read carefully the entire proxy statement, including the form of Agreement and Plan of Reorganization attached as EXHIBIT A-2 because they contain details that are not in the summary. The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. In the table below, if a row extends across the entire table, the policy disclosed applies to both your Safeco Fund and the Pioneer Fund. Comparison of Safeco Growth Opportunities Fund to the Pioneer Growth Opportunities Fund
------------------------------------------------------------------------------------------------------------------------------------ Safeco Growth Opportunities Fund Pioneer Growth Opportunities Fund ------------------------------------------------------------------------------------------------------------------------------------ Business A series of Safeco Common Stock Trust, A newly organized series of Pioneer Series a diversified open-end management Trust II, an open-end management investment investment company organized as a registered under the Investment Company Act Delaware statutory trust. and organized as a Delaware statutory trust. ------------------------------------------------------------------------------------------------------------------------------------ Net assets as of $545.5 million None. The Pioneer Growth Opportunities Fund June 30, 2004 is newly organized and does not expect to commence investment operations until the Reorganization occurs. ------------------------------------------------------------------------------------------------------------------------------------ Investment advisers and Investment adviser (until August 2, 2004): Investment adviser: portfolio managers SAM Pioneer Portfolio Managers (since 2003 until Portfolio Managers: August 2, 2004): Day-to-day management of Pioneer Growth Jeffrey Schwartz Opportunities Fund's portfolio will be the CFA, Vice President, SAM responsibility of John A. Carey and Walter Hunnewell, Jr. Mr. Carey joined Pioneer in Bill Whitlow 1979 and Mr. Hunnewell joined Pioneer CFA, Vice President, SAM in 2001. Currently Pioneer is acting as investment Mr. Acheson is Vice President and joined adviser to Safeco Growth Opportunities Fund. Pioneer as a portfolio manager in 2001 The Portfolio Manager of the Pioneer Growth and has been an investment professional Opportunities Fund, as indicated in the next since 1994. column, currently manages your Safeco Fund. ------------------------------------------------------------------------------------------------------------------------------------ Investment objective Each Fund seeks growth of capital. Each Fund provides written notice to shareholders at least 60 days prior to any change to its investment objective as described above. ------------------------------------------------------------------------------------------------------------------------------------ Primary investments To achieve its investment objective, under normal circumstances, each Fund invests most of its assets in common stocks of companies Pioneer considers to be reasonably priced or undervalued, with above average growth potential. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Growth Opportunities Fund Pioneer Growth Opportunities Fund Pioneer Growth Opportunities Fund may invest a significant portion of its assets in equity securities of small companies. ------------------------------------------------------------------------------------------------------------------------------------ Investment strategies When evaluating a stock to buy for each Fund, Pioneer considers factors such as: o The strength of the company's balance sheet o The quality of the management team o The rate at which the company's earnings are projected to grow o Whether the company's stock may be trading at a discount relative to its industry peers or the overall markets ------------------------------------------------------------------------------------------------------------------------------------ Safeco Growth Opportunities Fund may sell Pioneer Growth Opportunities Fund generally as stock if: sells a portfolio security when Pioneer believes that the issuer no longer offers the o Any of the above factors or other relative- potential for growth at a reasonable price or value indicators have deteriorated if any of the above factors have deteriorated. o The stock becomes overvalued, for Pioneer makes that determination based example, as a result of overly optimistic upon the same criteria it uses to select earnings forecasts portfolio securities. o The stock price reaches a specific target o Changes in market value cause the Fund to hold a larger position in the stock than Pioneer wants o Other companies present more attractive investment opportunities o Cash is needed to meet shareholder redemptions ------------------------------------------------------------------------------------------------------------------------------------ Other investments Each Fund may invest in securities convertible into common stock, but less than 35% of its total assets will be invested in such securities. Each Fund may invest up to 20% of assets in foreign securities. ------------------------------------------------------------------------------------------------------------------------------------ Safeco Growth Opportunities Fund may invest Pioneer Growth Opportunities Fund may invest up to 10% of its total assets in debt securities up to 5% of its total assets in debt securities rated below investment grade. rated below investment grade, including below investment grade convertible debt securities. ------------------------------------------------------------------------------------------------------------------------------------ Temporary defensive Safeco Growth Opportunities Fund may hold Pioneer Growth Opportunities Fund may invest strategies cash or invest in high-quality, short-term all or part of its assets in securities with securities issued by an agency or remaining maturities of less than one year, instrumentality of the U.S. government, cash equivalents or may hold cash. high-quality commercial paper, certificates of deposit, shares of no-load, open-end money market funds, or repurchase agreements as a temporary defensive measure when market conditions so warrant. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Growth Opportunities Fund Pioneer Growth Opportunities Fund ------------------------------------------------------------------------------------------------------------------------------------ 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 will not make investments that will result in the concentration (as that term may be defined in the Investment Company Act, any rule or order thereunder, or SEC staff interpretation thereof) of its investments in the securities of issuers primarily engaged in the same industry, provided that this restriction does not limit the Fund from investing in obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, or governmental issuers of special or general tax-exempt securities, or certain bank instruments issued by domestic banks. ------------------------------------------------------------------------------------------------------------------------------------ At times, more than 25% of Pioneer Growth Opportunities Fund's assets may be invested in the same market segment, such as financials or technology. To the extent the Fund emphasizes investments in a market segment, the Fund will be subject to a greater degree to the risks particular to the industries in that segment, and may experience greater market fluctuation, than a fund without the same focus. For example, industries in the financial segment, such as banks, insurance companies, broker-dealers and REITs, may be sensitive to changes in interest rates and general economic activity and are subject to extensive government regulation. Industries in the technology segment, such as information technology, communications equipment, computer hardware and software, and office and scientific equipment, are subject to risks of rapidly evolving technology, short product lives, rates of corporate expenditures, falling prices and profits, competition from new market entrants, and general economic conditions. ------------------------------------------------------------------------------------------------------------------------------------ Restricted and illiquid If immediately after and as a result of such Pioneer Growth Opportunities Fund may securities action the value of the following securities, not invest more than 15% of its net assets in the aggregate, would exceed 15% of the in securities which are illiquid and other Safeco Growth Opportunities Fund's net assets, securities which are not readily marketable. the Fund will not (i) purchase securities for which there is no readily available market, (ii) purchase time deposits maturing in more than seven days, (iii) purchase over-the- counter (OTC) options or hold assets set aside to cover OTC options written by the Fund, (iv) enter into repurchase agreements maturing in more than seven days, or (v) invest in interests in real estate investment trusts which are not readily marketable or interests in real estate limited partnerships which are not listed or traded on the NASDAQ Stock Market. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Growth Opportunities Fund Pioneer Growth Opportunities Fund ------------------------------------------------------------------------------------------------------------------------------------ Borrowing Safeco Growth Opportunities Fund may borrow Pioneer Growth Opportunities Fund may money (i) from banks or (ii) by engaging in not borrow money, except the Fund may: reverse repurchase agreements. (a) borrow from banks or through reverse repurchase agreements in an amount up to 33 1/3% of the Fund's total assets (including the amount borrowed); (b) to the extent permitted by applicable law, borrow up to an additional 5% of the Fund's assets for temporary purposes; (c) obtain such short-term credits as are necessary for the clearance of portfolio transactions; (d) purchase securities on margin to the extent permitted by applicable law; and (e) engage in transactions in mortgage dollar rolls that are accounted for as financings. ------------------------------------------------------------------------------------------------------------------------------------ Lending Safeco Growth Opportunities Fund may lend Pioneer Growth Opportunities Fund may lend securities to qualified institutional investors portfolio securities with a value that may not with a value of up to 33% of the Fund's exceed 331/3% of the value of its assets. total assets. ------------------------------------------------------------------------------------------------------------------------------------ Derivative instruments Safeco Growth Opportunities Fund may not Pioneer Growth Opportunities Fund may purchase securities on margin. However, the use futures and options on securities, indices Fund may (i) obtain short-term credits as and currencies, forward currency exchange necessary to clear its purchases and sales of contracts and other derivatives. The Fund securities, and (ii) make margin deposits in does not use derivatives as a primary connection with its use of financial options and investment technique and generally limits futures, forward and spot currency contracts, their use to hedging. However, the Fund may swap transactions and other financial contracts use derivatives for a variety of non-principal or derivative instruments. purposes, including: o As a hedge against adverse changes in stock market prices, interest rates or currency exchange rates o As a substitute for purchasing or selling securities o To increase the Fund's return as a non-hedging strategy that may be considered speculative ------------------------------------------------------------------------------------------------------------------------------------ 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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-------------------------------------------------------------------------------------------------------------- Safeco Growth Opportunities Fund Pioneer Growth Opportunities Fund -------------------------------------------------------------------------------------------------------------- Buying, Selling and Exchanging Shares -------------------------------------------------------------------------------------------------------------- Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer of Safeco Growth Opportunities Fund are Growth Opportunities Fund you receive in subject to a 5.75% front-end sales charge. the Reorganization will not be subject to any sales charge. Moreover, if you own shares Contingent deferred sales charge of up to 5% in your own name as of the closing of the if you redeem Class B shares within six years Reorganization (i.e., not in the name of a of purchase. broker or other intermediary) and maintain your account, you may purchase Class A Contingent deferred sales charge of 1% if shares of Pioneer Growth Opportunities Fund you redeem Class C shares within one year and Class A shares of any fund in the Pioneer of purchase. family of funds through such account in the future without paying any sales charge. Purchases of Investor Class shares of Safeco Growth Opportunities are not subject to a Except as described above, Class A shares of sales load. Pioneer Growth Opportunities Fund are subject to a front-end sales charge of up to 5.75%. Safeco Growth Opportunities Fund assesses a mandatory redemption fee of 2%, as a percentage of the amount redeemed or exchanged, on Class A and Investor Class shares held less than 30 days. --------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Growth Opportunities Fund Pioneer Growth Opportunities Fund ------------------------------------------------------------------------------------------------------------------------------------ Management and other fees Safeco Growth Opportunities Fund pays an Pioneer Growth Opportunities Fund will pay advisory fee on a monthly basis at an annual rate Pioneer a management fee equal to 0.65% of as follows: the Fund's average daily net assets. $0-$250,000,000: 0.70 of 1% In addition, Pioneer Growth Opportunities $250,000,001-$750,000,000: 0.65 of 1% Fund will reimburse Pioneer for certain fund $750,000,001-$1,250,000,000: 0.60 of 1% accounting and legal expenses incurred on Over $1,250,000,000: 0.55 of 1% behalf of the Fund and will pay a separate shareholder servicing/transfer agency fee to SAM serves as administrator and fund PIMSS, an affiliate of Pioneer. accounting agent for the Fund. The Fund pays SAM an administrative services fee of 0.05% Pioneer has agreed until the second of the Fund's average daily net assets up to the anniversary of the closing of the first $200,000,000 and 0.01% of its net assets Reorganization to limit the expenses thereafter, and an accounting fee of 0.04% of (excluding ordinary expenses) of the Investor the Fund's average daily net assets up to the Class to 1.05% of the average daily net assets first $200,000,000 and 0.01% of its net attributable to the Investor Class. assets thereafter. The Investor Class shares to be issued in the During its most recent fiscal year, Safeco Growth Reorganization will convert to Class A shares Opportunities Fund paid aggregate advisory and after two years. Class A shares will have administration fees at an average rate of 0.73% higher expenses per share than Investor Class of average daily net assets. Shares due to the Rule 12b-1 Plan. SAM had contractually agreed until April 30, 2009, to pay certain fund operating expenses (but not all of the operating expenses of the Fund) that exceeded the rate of 0.40% per annum of the Fund's average daily net assets. This arrangement included all Fund operating expenses except management fees, Rule 12b-1 fees, brokerage commissions, interest, and extraordinary expenses. For the fiscal year ended December 31, 2003, the Fund's annual operating expenses for Class A shares, after giving effect to the expense limitation were 1.33%, and without giving effect to the expense limitation, were 2.38%. For the fiscal year ended December 31, 2003, the Fund's annual operating expenses for Class B shares, after giving effect to the expense limitation were 2.08%, and without giving effect to the expense limitation, were 2.45%. For the fiscal year ended December 31, 2003, the Fund's annual operating expenses for Class C shares, after giving effect to the expense limitation were 2.08%, and without giving effect to the expense limitation, were 2.48%. For the fiscal year ended December 31, 2003, the Fund's annual operating expenses for Investor Class shares, after giving effect to the expense limitation were 1.08%, and without giving effect to the expense limitation, were 1.14%. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Growth Opportunities Fund Pioneer Growth Opportunities Fund ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class (12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets. ------------------------------------------------------------------------------------------------------------------------------------ Buying shares You may buy shares of the Fund directly You may buy shares from any investment through Safeco Securities, the Fund's principal firm that has a sales agreement with PFD, underwriter or through brokers, registered Pioneer Growth Opportunities Fund's investment advisers, banks and other financial distributor. Existing shareholders of Safeco institutions that have entered into selling Growth Opportunities Fund who own shares agreements with the Fund's principal in their own name as of the closing date of underwriter, as described in the Fund's the Reorganization and who maintain their prospectus. accounts may buy shares of any fund in the Pioneer family of funds through such Certain account transactions may be done accounts in the future without paying by telephone. sales charges. If the account is established in the shareholder's own name, shareholders may also purchase additional shares of Pioneer Growth Opportunities Fund by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------ Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Growth acquire through dividend reinvestment or other Opportunities Fund without incurring any fee fund distributions or for Class A shares that on the exchange with the more than 62 other you have exchanged for Class A shares of Pioneer Funds. Your exchange would be for another fund. Class A shares, which would be subject to Rule 12b-1 fees. An exchange generally is Certain account transactions may be done treated as a sale and a new purchase of by telephone. shares for federal income tax purposes. If the account is established in the shareholder's own name, shareholders may also exchange shares of Pioneer Growth Opportunities Fund for shares of other Pioneer Funds by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------ Selling shares Investor Class and Class A shares will be sold at net asset value per share next calculated after each Fund receives your request in good order. ------------------------------------------------------------------------------------------------------------------------------------ You may sell your shares by contacting the Normally, your investment firm will send your Safeco Growth Opportunities Fund directly request to sell shares to PIMSS. You can also in writing or by contacting a financial sell your shares by contacting the Fund intermediary as described in the directly if your account is registered in Fund's prospectus. your name. If the account is established in the shareholder's own name, shareholders may also redeem shares of Pioneer Growth Opportunities Fund by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------
39 Comparison of Principal Risks of Investing in the Funds Because each Fund has a similar investment objective, primary investment policies and strategies, the Funds are subject to the same principal risks. Even though each Fund seeks capital growth, you could lose money on your investment or not make as much as if you invested elsewhere if: o The stock market goes down (this risk factor may be greater in the short term) o Growth stocks fall out of favor with investors o The Fund's investments do not have the growth potential originally expected o The Fund's shares may be subject to frequent and more significant changes in value than the stock market in general due to the volatility of some of the smaller companies in which it invests o During periods of market concern about inflation or deflation, some securities in which the Fund invests may become more volatile or decline in value Investing in non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers. These risks may include: o Inadequate financial information o Smaller, less liquid and more volatile markets o Political and economic upheavals The fund also has risks associated with investing in small companies. Compared to large companies, small companies, and the market for their equity securities, are likely to: o Be more sensitive to changes in the economy, earnings results and investor expectations o Have more limited product lines and capital resources o Experience sharper swings in market values o Be harder to sell at the times and prices Pioneer thinks appropriate o Offer greater potential for gain or loss The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. 40 Past Performance Set forth below is performance information for Safeco Growth Opportunities Fund. The bar chart shows how Safeco Growth Opportunities Fund's total return (not including any deduction for sales charges) has varied from year to year for each full calendar year. The table shows the average annual total return (before and after taxes) for Safeco Growth Opportunities Fund over time for each class of shares (including deductions for sales charges) compared with a broad-based securities market index. The bar chart gives an indication of the risks of investing in the Safeco Growth Opportunities Fund, including the fact that you could incur a loss and experience volatility of returns year to year. Past performance before and after taxes does not indicate future results. Since Pioneer Growth Opportunities Fund has not yet commenced investment operations, it has no prior performance. Safeco Growth Opportunities Fund -- Investor Class Calendar Year Total Returns* [DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT] '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 -1.62 26.10 22.90 49.96 4.37 2.64 -4.16 22.03 -36.92 43.98 * During the period shown in the bar chart, your Safeco Fund's highest quarterly return was 34.64% for the quarter ended June 30, 2001, and the lowest quarterly return was -26.84% for the quarter ended September 30, 2002. Safeco Growth Opportunities Fund Average Annual Total Returns As of December 31, 2003
-------------------------------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------------------------------- Safeco Growth Opportunities Fund, Class A Shares -------------------------------------------------------------------------------------------------------- Return Before Taxes 35.37% 0.28% 9.23% -------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions1 35.37% 0.28% 6.93% -------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares1 22.99% 0.24% 6.62% -------------------------------------------------------------------------------------------------------- Safeco Growth Opportunities Fund, Class B Shares -------------------------------------------------------------------------------------------------------- Return Before Taxes 37.64% 0.35% 9.38% -------------------------------------------------------------------------------------------------------- Safeco Growth Opportunities Fund, Class C Shares -------------------------------------------------------------------------------------------------------- Return Before Taxes 41.64% 0.75% 9.28% -------------------------------------------------------------------------------------------------------- Safeco Growth Opportunities Fund, Investor Class Shares -------------------------------------------------------------------------------------------------------- Return Before Taxes 43.98% 1.74% 10.03% --------------------------------------------------------------------------------------------------------
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-------------------------------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions1 43.98% 1.74% 7.72% -------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares(1) 28.59% 1.49% 7.34% -------------------------------------------------------------------------------------------------------- Russell 2000 Index(2) (reflects no deduction for fees, expenses or taxes) 47.25% 7.13% 9.48% --------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after- tax returns depend on your situation and may differ from those shown. Furthermore, the after-tax returns shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRA accounts, or to investors that are tax-exempt. (2) The Russell 2000 Index, an unmanaged index of 2,000 small capitalization stocks, is for reference only and does not mirror the Fund's investments. The most recent portfolio manager's discussion of the Safeco Fund's performance is attached as Exhibit D. The Funds' Fees and Expenses Shareholders of both Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy and hold shares of each Fund. The expenses in the table appearing below are based on (i) for your Safeco Fund, the expenses of your Safeco Fund for its fiscal year ended December 31, 2003 and (ii) for the Pioneer Growth Opportunities Fund, the estimated annual expenses of the Pioneer Growth Opportunities Fund. The Pioneer Growth Opportunities Fund's actual expenses may be greater or less.
Safeco Safeco Growth Growth Opportunities Opportunities Fund Fund Class A Class B Shareholder transaction fees (paid directly from your investment) --------------- --------------- Maximum sales charge (load) when you buy shares as a percentage of offering price ................................................... 5.75%(6) None Maximum deferred sales charge (load) as a percentage of purchase price or the amount you receive when you sell shares, whichever is less ............................................................. None 5.00%(7) Redemption fees for shares held less than 30 days .................... 2.00% None Wire redemption fee .................................................. $ 204 $ 204 Annual low balance fee ............................................... $ 12(5) $ 12(5) Annual fund operating expenses (deducted from fund assets) (as a % of average net assets) Management fee ....................................................... 0.68% 0.68% Distribution and service (12b-1) fee ................................. 0.25% 1.00% Other expenses ....................................................... 1.45% 0.77% Total fund operating expenses ........................................ 2.38% 2.45% Expense reimbursement/reduction ...................................... 1.05%(2) 0.37%(2) Net fund operating expenses .......................................... 1.33% 2.08% Pro Forma Pioneer Safeco Safeco Growth Growth Growth Opportunities Opportunities Opportunities Fund Fund Fund Investor Class C Investor Class Class (9) Shareholder transaction fees (paid directly from your investment) --------------- ---------------- -------------- Maximum sales charge (load) when you buy shares as a percentage of offering price ................................................... None None None(1) Maximum deferred sales charge (load) as a percentage of purchase price or the amount you receive when you sell shares, whichever is less ............................................................. 1.00%(8) None None Redemption fees for shares held less than 30 days .................... None 2.00% None Wire redemption fee .................................................. $ 204 $ 204 $ 10 Annual low balance fee ............................................... $ 12(5) $ 12(5) None Annual fund operating expenses (deducted from fund assets) (as a % of average net assets) Management fee ....................................................... 0.68% 0.68% 0.65% Distribution and service (12b-1) fee ................................. 1.00% None None Other expenses ....................................................... 0.80% 0.46% 0.32% Total fund operating expenses ........................................ 2.48% 1.14% 0.97% Expense reimbursement/reduction ...................................... 0.40%(2) 0.06%(2) None(3) Net fund operating expenses .......................................... 2.08% 1.08% 0.97%
---------- (1) No sales load will apply to shares received in the Reorganization by shareholders of your Safeco Fund who become shareholders of record of Pioneer Growth Opportunities Fund through the Reorganization. In addition, shareholders of your Safeco Fund who own shares in their own name (i.e., not in the name of a broker or other intermediary) and maintain such account as of the closing of the Reorganization may purchase Class A shares of Pioneer Growth Opportunities Fund or of any fund in the Pioneer family of funds through such account in the future without paying a sales charge. (2) As described above, SAM had contractually agreed to reimburse Safeco Growth Opportunities Fund for certain Fund operating expenses (but not all of the operating expenses of the Fund) that exceeded the rate of 0.40% per annum of the Fund's average daily net assets. 42 This arrangement included all fund operating expenses except management fees, Rule 12b-1 fees, brokerage commissions, interest, and extraordinary expenses. (3) Pioneer has agreed that through the second anniversary of the closing of the Reorganization, Pioneer will limit the expenses (excluding extraordinary expenses) of the Investor Class shares of Pioneer Growth Opportunities Fund to 1.05% of average daily net assets. (4) There is a higher charge for international wire redemptions, which may vary by country or dollar amount. (5) A low balance fee is charged once in year in December for accounts with balances under $1,000 in your Safeco Fund. (6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are not subject to a front-end sales charge, but a 1.00% deferred sales charge will apply to redemptions made in the first twelve months except with respect to participant-directed redemptions from qualified retirement plans. (7) The contingent deferred sales charge on Class B shares of your Safeco Fund reduces to zero after six years from purchase, and the Class B shares convert to Class A shares at that time. (8) The contingent deferred sales charge on Class C shares applies only to redemptions made in the first twelve months after purchase. (9) The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. Class A shares do not currently have an expense limitation and may be subject to higher total operating expenses. The hypothetical example below helps you compare the cost of investing in each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time periods shown, (b) you reinvest all dividends and distributions, (c) your investment has a 5% return each year, (d) each Fund's and Pioneer Growth Opportunities Fund's gross operating expenses remain the same, (e) the expense limitations are in effect for five years for Safeco Growth Opportunities Fund and two years for Pioneer Growth Opportunities Fund and (f) and the Investor Class shares of Pioneer Growth Opportunities Fund convert to Class A shares after two years. The examples are for comparison purposes only and are not a representation of either Fund's actual expenses or returns, either past or future.
Example Safeco Growth Opportunities Fund Class A Shares Year 1 .............. $ 703 Year 3 .............. $ 972 Year 5 .............. $1,262 Year 10 ............. $2,696 With Without Class B Shares redemption redemption Year 1 .............. $ 711 $ 211 Year 3 .............. $ 952 $ 652 Year 5 .............. $ 1,319 $ 1,119 Year 10 ............. $ 2,593 $ 2,593 With Without Class C Shares redemption redemption Year 1 .............. $ 311 $ 211 Year 3 .............. $ 652 $ 652 Year 5 .............. $ 1,119 $ 1,119 Year 10 ............. $ 2,644 $ 2,644 Investor Class Shares Year 1 .............. $ 110 Year 3 .............. $ 343 Year 5 .............. $ 595 Year 10 ............. $1,356
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Pro Forma Pioneer Growth Opportunities Fund Investor Class Shares Year 1 .................................... $ 99 Year 3 .................................... $ 344 Year 5 .................................... $ 645 Year 10 ................................... $1,499
Reasons for the Proposed Reorganization The Trustees believe that the proposed Reorganization is in the best interests of Safeco Growth Opportunities Fund. The Trustees considered the following matters, among others, in approving the proposal. First, SAM, the investment adviser to the Safeco Fund until August 2, 2004, was acquired by Symetra. Symetra informed the Trustees that it did not intend to continue to provide investment advisory services to the Safeco Funds. Consequently, a change in your Safeco Fund's investment adviser was necessary. Second, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62 investment companies and accounts with approximately $35 billion in assets. Pioneer is part of the global asset management group of UniCredito Italiano S.p.A., one of the largest banking groups in Italy, providing investment management and financial services to mutual funds, institutions and other clients. As of June 30, 2004, assets under management of UniCredito Italiano S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco Fund would become part of a significantly larger family of funds that offers a more diverse array of investment options and enhanced shareholder account options. The Pioneer family of mutual funds offers over 62 funds, including domestic and international equity and fixed income funds and a money market fund that will be available to your Safeco Fund's shareholders through exchanges. In addition, Pioneer offers shareholders additional options for their accounts, including the ability to transact and exchange shares over the telephone or online and the ability to access account values and transaction history in all of the shareholder's direct accounts in the Pioneer Funds over the telephone or online. Third, Pioneer's commitment until the second anniversary of the Reorganization to limit the expenses (excluding extraordinary expenses) of the Investor Class of Pioneer Growth Opportunities Fund to 1.05% of average daily net assets. This expense ratio is no higher than both the gross expenses and expenses net of expense reimbursement of the Investor Class shares of your Safeco Fund. Although you will experience higher expenses once the Investor Class shares convert to Class A shares after two years, your expenses will remain the same until the second anniversary of the Reorganization. Fourth, shareholders who own shares in their name as of the closing of the Reorganization (i.e., not in the name of a broker or other intermediary) and maintain their account may purchase additional Class A shares of the corresponding Pioneer Fund through such account in the future or may exchange those shares for Class A shares of another Pioneer Fund or purchase Class A share of another Pioneer Fund without paying any sales charge. Fifth, the Investor Class shares of Pioneer Growth Opportunities Fund received in the Reorganization will provide Safeco Growth Opportunities Fund shareholders with exposure to substantially the same investment product as they currently have. Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds and the Pioneer Funds associated with the Reorganizations, including, but not limited to: (1) the expenses associated with the preparation, printing and mailing of any shareholder communications, including this joint Proxy Statement/Prospectus, and any filings with the SEC and other governmental authorities in connection with the Reorganizations; (2) the fees and expenses of any proxy solicitation firm retained in connection with the Reorganizations; (3) the legal fees and expenses incurred by the Safeco Funds in connection with the Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred as a result of the Reorganizations. The Trustees also considered that Pioneer and Symetra will benefit from the Reorganization. See "Certain Agreements between Pioneer and Symetra." The Trustees of Pioneer Growth Opportunities Fund also considered that the Reorganization presents an excellent opportunity for the Pioneer Growth Opportunities Fund to acquire investment assets without the obligation to pay commissions or other transaction costs that a fund normally incurs when purchasing securities. This opportunity provides an economic benefit to Pioneer Growth Opportunities Fund and its shareholders. 44 CAPITALIZATION The following table sets forth the capitalization of each Fund, as of September 30, 2004, and the pro forma combined Fund as of September 30, 2004.
Pro Forma Safeco Growth Pioneer Growth Pioneer Growth Opportunities Fund Opportunities Fund Opportunities Fund September 30, 2004 September 30, 2004 September 30, 2004 -------------------- -------------------- ------------------- Total Net Assets (in thousands) $515,288 N/A $515,288 Class A shares ................ $ 29,032 N/A N/A Class B shares ................ $ 7,301 N/A N/A Class C shares ................ $ 221 N/A N/A Investor Class shares ......... $478,733 N/A $515,288 Net Asset Value Per Share Class A shares ................ $ 26.42 N/A N/A Class B shares ................ $ 24.84 N/A N/A Class C shares ................ $ 24.84 N/A N/A Investor Class shares ......... $ 26.88 N/A $ 26.88 Shares Outstanding Class A shares ................ 1,098,917 N/A N/A Class B shares ................ 293,942 N/A N/A Class C shares ................ 8,913 N/A N/A Investor Class shares ......... 17,810,634 N/A 19,169,940
It is impossible to predict how many shares of Pioneer Growth Opportunities Fund will actually be received and distributed by your Safeco Fund on the Reorganization date. The table should not be relied upon to determine the amount of Pioneer Growth Opportunities Fund's shares that will actually be received and distributed. BOARD'S EVALUATION AND RECOMMENDATION For the reasons described above, the Trustees, including the Independent Trustees, approved the Reorganization. In particular, the Trustees determined that the Reorganization is in the best interests of your Safeco Fund. Similarly, the Board of Trustees of Pioneer Growth Opportunities Fund, including its Independent Trustees, approved the Reorganization. They also determined that the Reorganization is in the best interests of Pioneer Growth Opportunities Fund. The Trustees recommend that the shareholders of your Safeco Fund vote FOR the proposal to approve the Agreement and Plan of Reorganization. 45 Safeco International Stock Fund and Pioneer International Equity Fund PROPOSAL 1(d) Approval of Agreement and Plan of Reorganization SUMMARY The following is a summary of more complete information appearing later in this Proxy Statement/Prospectus or incorporated herein. You should read carefully the entire proxy statement, including the form of Agreement and Plan of Reorganization attached as EXHIBIT A-1 because they contain details that are not in the summary. The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. In the table below, if a row extends across the entire table, the policy disclosed applies to both your Safeco Fund and the Pioneer Fund. Comparison of Safeco International Stock Fund to the Pioneer International Equity Fund
------------------------------------------------------------------------------------------------------------------------------------ Safeco International Stock Fund Pioneer International Equity Fund ------------------------------------------------------------------------------------------------------------------------------------ Business A series of Safeco Common Stock Trust, A diversified open-end management a diversified open-end management investment company registered under the investment company organized as a Investment Company Act and organized as Delaware statutory trust. a Delaware statutory trust. ------------------------------------------------------------------------------------------------------------------------------------ Net assets as of $37 million $36 million June 30, 2004 ------------------------------------------------------------------------------------------------------------------------------------ Investment advisers and Investment adviser (until August 2, 2004): Investment adviser: portfolio managers SAM Pioneer Investment sub-advisor (until August 2, 2004): Portfolio Manager: Bank of Ireland Asset Management Limited Christopher Smart. Mr. Smart is supported by ("Sub-adviser") a team of portfolio managers and analysts. Portfolio Managers (until August 2, 2004): The Mr. Smart, Senior Vice President and Director Fund is managed by a committee of portfolio of International Investments, joined Pioneer in managers at the Sub-adviser who are jointly 1995 as Director of Research of Pioneer First and primarily responsible for the day-to-day Investments, Moscow, Russia. management of the Fund. Currently Pioneer is acting as investment adviser to Safeco International Stock Fund. The Portfolio Manager of the Pioneer International Equity Fund, as indicated in the next column, currently manages your Safeco Fund. ------------------------------------------------------------------------------------------------------------------------------------ Primary investments Under normal market conditions, Safeco Under normal market conditions, at least International Stock Fund invests at least 80% of total assets (plus any borrowings for 80% of net assets (plus any borrowings for investment purposes) are invested in equity investment purposes) in stocks and at least securities of non-U.S. issuers. 65% of its assets in securities issued by companies domiciled in countries other than the United States. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco International Stock Fund Pioneer International Equity Fund ------------------------------------------------------------------------------------------------------------------------------------ Investment strategies Safeco International Stock Fund uses a "value" Pioneer International Equity Fund uses a style of management. The sub-adviser that balanced growth-value style of management historically managed the Fund focused on and seeks to invest in issuers with above companies that are well established with a average potential for earnings and revenue durable business model and proven track growth that are also trading at attractive record of delivering earnings and dividends; market valuations. undervalued relative to their intrinsic value and/or future growth potential; undervalued when compared to their historic valuations, to competitors, or to companies with similar growth records; and liquid and readily traded on established foreign exchanges. ------------------------------------------------------------------------------------------------------------------------------------ Other investments Pioneer International Equity Fund may invest up to 20% of its total assets in debt securities, cash and cash equivalents. Generally the Fund acquires debt securities that are investment grade, but the Fund may invest up to 5% of its net assets in below investment grade convertible debt securities. ------------------------------------------------------------------------------------------------------------------------------------ Temporary defensive Safeco International Stock Fund may purchase Pioneer International Equity Fund may invest strategies as temporary investments for its cash: all or part of its assets in securities with commercial paper; certificates of deposit; remaining maturities of less than one year, shares of no-load, open-end money market cash equivalents or may hold cash. funds; repurchase agreements (subject to restrictions on the Fund's investment in illiquid securities), and other short-term investments. ------------------------------------------------------------------------------------------------------------------------------------ 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 International Equity Fund may not securities action the value of the following securities, invest more than 15% of its net assets in in the aggregate, would exceed 15% of securities which are illiquid and other the Fund's net assets, the Fund will not securities which are not readily marketable. (i) purchase securities for which there is no readily available market, (ii) purchase time deposits maturing in more than seven days, (iii) purchase over-the-counter (OTC) options or hold assets set aside to cover OTC options written by the Fund, (iv) enter into repurchase agreements maturing in more than seven days, or (v) invest in interests in real estate investment trusts which are not readily marketable or interests in real estate limited partnerships which are not listed or traded on the NASDAQ Stock Market. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco International Stock Fund Pioneer International Equity Fund ------------------------------------------------------------------------------------------------------------------------------------ Safeco International Stock Fund may borrow Pioneer International Equity Fund may money (i) from banks or (ii) by engaging in not borrow money, except the Fund may: reverse repurchase agreements. (a) borrow from banks or through reverse repurchase agreements in an amount up to 33 1/3% of the Fund's total assets (including the amount borrowed); (b) to the extent permitted by applicable law, borrow up to an additional 5% of the Fund's assets for temporary purposes; (c) obtain such short-term credits as are necessary for the clearance of portfolio transactions; (d) purchase securities on margin to the extent permitted by applicable law; and (e) engage in transactions in mortgage dollar rolls that are accounted for as financings. ------------------------------------------------------------------------------------------------------------------------------------ Lending Safeco International Stock Fund may lend Pioneer International Equity Fund may lend securities to qualified institutional investors portfolio securities with a value that may not with a value of up to 33% of the Fund's exceed 33 1/3% of the value of its assets. total assets. ------------------------------------------------------------------------------------------------------------------------------------ Derivative instruments Safeco International Stock Fund may write Pioneer International Equity Fund may use put or call options if, as a result thereof, the futures and options on securities, indices aggregate value of the assets underlying all and currencies, forward currency exchange such options do not exceed 20% of the Fund's contracts and other derivatives. The Fund net assets. does not use derivatives as a primary investment technique and generally limits Safeco International Stock Fund may also their use to hedging. However, the Fund may purchase put or call options or options on use derivatives for a variety of non-principal futures contracts if, as a result thereof, the purposes, including: aggregate premiums paid on all options or options on futures contracts held by the Fund o As a hedge against adverse changes do not exceed 20% of the Fund's net assets. in stock market prices, interest rates or currency exchange rates Safeco International Stock Fund may enter into any futures contracts or options on futures o As a substitute for purchasing or contracts if, as a result thereof, the aggregate selling securities margin deposits and premiums required on all such instruments do not exceed 5% of the o To increase the Fund's return as a Fund's net assets. non-hedging strategy that may be considered speculative Safeco International Stock Fund may not purchase securities on margin. However, the Fund may (i) obtain short-term credits as necessary to clear its purchases and sales of securities, and (ii) make margin deposits in connection with its use of financial options and futures, forward and spot currency contracts, swap transactions and other financial contracts or derivative instruments. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco International Stock Fund Pioneer International Equity Fund ------------------------------------------------------------------------------------------------------------------------------------ Other investment policies and As described above, the Funds have substantially similar principal investment strategies and restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a more complete discussion of each Fund's other investment policies and fundamental and non-fundamental investment restrictions, see the SAI. ------------------------------------------------------------------------------------------------------------------------------------ Buying, Selling and Exchanging Shares ------------------------------------------------------------------------------------------------------------------------------------ Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer of Safeco International Stock Fund are subject International Equity Fund you receive in the to a 5.75% front-end sales charge. Reorganization will not be subject to any sales charge. Moreover, if you own shares Contingent deferred sales charge of up to 5% in your own name as of the closing of the if you redeem Class B shares within six years Reorganization (i.e., not in the name of a of purchase. broker or other intermediary) and maintain your account, you may purchase Class A Contingent deferred sales charge of 1% if you shares of Pioneer International Equity Fund redeem Class C share within one year of and Class A shares of any fund in the Pioneer purchase. family of funds through such account in the future without paying any sales charge. Purchases of Investor Class shares of Safeco International Stock Fund are not subject to a Except as described above, Class A shares of sales load. Pioneer International Equity Fund are subject to a front-end sales charge of up to 5.75%. Safeco International Stock Fund assesses a mandatory redemption fee of 2%, as a percentage of the amount redeemed or exchanged, on Class A and Investor Class shares held less than 30 days. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco International Stock Fund Pioneer International Equity Fund ------------------------------------------------------------------------------------------------------------------------------------ Management and other fees Safeco International Stock Fund pays an Pioneer International Equity Fund pays Pioneer advisory fee on a monthly basis at an annual a management fee equal to Pioneer's annual rate as follows: fee is equal to: $0-$250,000,000: 1.00 of 1% $250,000,001-$750,000,000: 0.90 of 1% 1.00% of average daily net assets up to Over $750,000,000: 0.80 of 1% $300 million; 0.85% of the next $200 million; SAM serves as administrator and fund 0.75% on assets over $500 million. accounting agent for Safeco International Stock Fund. The Fund pays SAM an administrative During its most recent fiscal year, Pioneer services fee of 0.05% of the Fund's average International Equity Fund paid an advisory fee daily net assets up to the first $200,000,000 at an average rate of 1.00% of average daily and 0.01% of its net assets thereafter, and an net assets. accounting fee of 0.04% of the Fund's average daily net assets up to the first $200,000,000 In addition, Pioneer International Equity and 0.01% of its net assets thereafter. Fund reimburses Pioneer for certain fund accounting and legal expenses incurred During its most recent fiscal year, Safeco on behalf of the Fund and pays a separate International Stock Fund paid aggregate shareholder servicing/transfer agency fee to advisory and administration fees at an average PIMSS, an affiliate of Pioneer. rate of 1.09% of average daily net assets. For the fiscal year ended March 31, 2004, SAM had contractually agreed until April 30, Pioneer International Equity Fund's total 2009, to pay certain fund operating expenses annual operating expenses for Class A shares (but not all of the operating expenses of the were 2.80%. Pursuant to an expense limitation Safeco International Stock Fund) that exceeded agreement in effect until August 31, 2005, the the rate of 0.40% per annum of the Fund's net expenses for Class A shares were 1.75%. average daily net assets. This arrangement There can be no assurance that Pioneer will included all Fund operating expenses except extend the expense limitation for its Class A management fees, Rule 12b-1 fees, shares after August 31, 2005. brokerage commissions, interest, and extraordinary expenses. Pioneer has agreed until the second anniversary of the closing of the For the fiscal year ended December 31, 2003, Reorganization to limit the expenses Safeco International Stock Fund's annual (excluding extraordinary expenses) of the operating expenses for the Class A shares, Investor Class to 1.40% of the average daily after giving effect to the expense limitation net assets attributable to the Investor Class. were 1.65%, and without giving effect to the expense limitation, were 2.49%. The Investor Class shares to be issued in the Reorganization will convert to Class A shares For the fiscal year ended December 31, 2003, after two years. Class A shares will have Safeco International Stock Fund's annual higher expenses per share than Investor operating expenses for the Class B shares, Class shares due to the Rule 12b-1 Plan. In after giving effect to the expense limitation addition, although Pioneer has agreed to limit were 2.40%, and without giving effect to the the expenses attributable to Investor Class expense limitation, were 4.16%. shares, Pioneer is not required to extend the current expense limitation agreement for its For the fiscal year ended December 31, 2003, Class A shares after August 31, 2005. Safeco International Stock Fund's annual operating expenses for the Advisor Class C shares, after giving effect to the expense limitation were 2.40%, and without giving effect to the expense limitation, were 3.29%. ------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco International Stock Fund Pioneer International Equity Fund ------------------------------------------------------------------------------------------------------------------------------------ Management and other fees For the fiscal year ended December 31, 2003, (continued) Safeco International Stock Fund's annual net operating expenses for the Institutional Class shares, after giving effect to the contractual expense limitation were 1.40%, and without giving effect to the expense limitation were 2.43%. Beginning in 2003, SAM also began voluntarily reimbursing all expenses of the Institutional Class that exceeded 1.10%. For the fiscal year ended December 31, 2003, Safeco International Stock Fund's annual operating expenses for the Investor Class, after giving effect to the expense limitation were 1.40%, and without giving effect to the expense limitation, were 2.19%. ------------------------------------------------------------------------------------------------------------------------------------ Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class (12b-1) fee shares will convert into Class A shares after two years. Class A shares of each Fund are subject to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets. ------------------------------------------------------------------------------------------------------------------------------------ Buying shares You may buy shares of Safeco International You may buy shares from any investment firm Stock Fund directly through Safeco Securities, that has a sales agreement with PFD, Pioneer the Fund's principal underwriter or through International Equity Fund's distributor. Existing brokers, registered investment advisers, banks shareholders of Safeco International Stock and other financial institutions that have Fund who own shares in their own name as entered into selling agreements with the Fund's of the closing date of the Reorganization and principal underwriter, as described in the who maintain their accounts may buy shares Fund's prospectus. of any Fund in the Pioneer family of funds through such accounts in the future without Institutional Class shares have a minimum paying sales charges. investment amount of $250,000. If the account is established in the Certain account transactions may be done shareholder's own name, shareholders may by telephone. also purchase additional shares of Pioneer International Equity Fund by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------ Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer acquire through dividend reinvestment or other International Equity Fund without incurring any fund distributions or for shares that you have fee on the exchange with the more than 62 exchanged for equivalent shares of another other Pioneer Funds. Your exchange would be Fund. A 2% redemption fee will be assessed for Class A shares, which would be subject to on the value of exchanged shares that are held Rule 12b-1 fees. An exchange generally is less than 30 days in the Safeco International treated as a sale and a new purchase of Stock Fund. shares for federal income tax purposes. Certain account transactions may be done If the account is established in the by telephone. shareholder's own name, shareholders may also exchange shares of Pioneer International Equity Fund for shares of other Pioneer Funds by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco International Stock Fund Pioneer International Equity Fund ------------------------------------------------------------------------------------------------------------------------------------ Selling shares Each class of shares will be sold at the net asset value per share next calculated after the Fund receives your request in good order. ------------------------------------------------------------------------------------------------------------------------------------ You may sell your shares by contacting the Normally, your investment firm will send Fund directly in writing or by contacting a your request to sell shares to PIMSS. You financial intermediary as described in the can also sell your shares by contacting the Safeco International Stock Fund's prospectus. Fund directly if your account is registered in your name. If the account is established in the shareholder's own name, shareholders may also redeem shares of Pioneer International Equity Fund by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------
Comparison of Principal Risks of Investing in the Funds Because each Fund has a similar investment objective, primary investment policies and strategies, the Funds are subject to the same principal risks. You could lose money on your investment in either Fund or not make as much as if you invested elsewhere if: o The non-U.S. stock markets go down or perform poorly relative to other investments (this risk may be greater in the short term) o Equity securities of non-U.S. issuers or growth stocks fall out of favor with investors o The Fund's investments do not have the growth potential originally expected Investing in non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers. Some of these risks do not apply to larger, more developed markets. These risks are more pronounced to the extent the Fund invests in issuers in countries with emerging markets or if the fund invests significantly in one country. These risks may include: o Less information about non-U.S. issuers or markets may be available due to less rigorous disclosure or accounting standards or regulatory practices o Many non-U.S. markets are smaller, less liquid and more volatile. In a changing market, Pioneer may not be able to sell the Fund's portfolio securities at times, in amounts and at prices it considers reasonable o Adverse effect of currency exchange rates or controls on the value of the Fund's investments o The economies of non-U.S. countries may grow at slower rates than expected or may experience a downturn or recession o Economic, political and social developments may adversely affect the securities markets o Withholding and other non-U.S. taxes may decrease the Fund's return Investments in the Funds are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You could lose money by investing in either Fund. The Investor Class Shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class Shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. The current expense limitation agreement for Class A shares is in effect until August 31, 2005. There can be no assurance that Pioneer will extend the expense limitation agreement for its Class A shares after August 31, 2005. 52 Past Performance Set forth below is performance information for each Fund. The bar charts show how each Fund's total return (not including any deduction for sales charges) has varied from year to year for each full calendar year. The tables show average annual total return (before and after taxes) for each Fund over time for each class of shares (including deductions for sales charges) compared with a broad-based securities market index. The bar charts give an indication of the risks of investing in each Fund, including the fact that you could incur a loss and experience volatility of returns year to year. Past performance before and after taxes does not indicate future results. Safeco International Stock Fund -- Investor Class Calendar Year Total Returns* [DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT] '97 '98 '99 '00 '01 '02 '03 4.55 14.26 29.00 -10.95 -24.30 -19.12 27.74 * During the period shown in the bar chart, your Safeco Fund's highest quarterly return was 19.79% for the quarter ended December 31, 1999, and the lowest quarterly return was -21.14% for the quarter ended September 30, 2002. Pioneer International Equity Fund -- Class A Shares Calendar Year Total Returns* [DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT] '97 '98 '99 '00 '01 '02 '03 5.81 7.40 41.19 -17.87 -19.28 -19.61 32.29 * During the period shown in the bar chart, since the Fund's inception on October 31, 1996, Pioneer International Equity Fund's highest quarterly return was 29.50% for the quarter ended December 31, 1999, and the lowest quarterly return was -21.25% for the quarter ended September 30, 2002. 53 Safeco International Stock Fund* Average Annual Total Returns as of December 31, 2003
------------------------------------------------------------------------------------------------------------ Since 1 Year 5 Years Inception(1) ------------------------------------------------------------------------------------------------------------ Safeco International Stock Fund, Class A Shares* ------------------------------------------------------------------------------------------------------------ Return Before Taxes 20.18% -3.53% 1.56% ------------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions(2) 19.98% -4.02% 1.08% ------------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions and Sale of Fund Shares(2) 13.39% -3.14% 1.12% ------------------------------------------------------------------------------------------------------------ Safeco International Stock Fund, Class B Shares* ------------------------------------------------------------------------------------------------------------ Return Before Taxes 21.41% -3.49% 1.71% ------------------------------------------------------------------------------------------------------------ Safeco International Stock Fund, Class C Shares* ------------------------------------------------------------------------------------------------------------ Return Before Taxes 25.38% -3.15% 1.57% ------------------------------------------------------------------------------------------------------------ Safeco International Stock Fund, Institutional Class Shares ------------------------------------------------------------------------------------------------------------ Return Before Taxes 27.99% -2.07% 2.64% ------------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions(2) 27.74% -2.56% 2.13% ------------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions and Sale of Fund Shares(2) 18.19% -1.92% 2.04% ------------------------------------------------------------------------------------------------------------ Safeco International Stock Fund, Investor Class Shares ------------------------------------------------------------------------------------------------------------ Return Before Taxes 27.74% -2.11% 2.61% ------------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions(2) 27.51% -2.60% 2.11% ------------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions and Sale of Fund Shares(2) 18.34% -1.93% 2.03% ------------------------------------------------------------------------------------------------------------ MSCI EAFE Index(3) (reflects no deduction for fees, expenses or taxes) 38.59% -0.05% 3.29% ------------------------------------------------------------------------------------------------------------
* Returns for Class A, Class B and Class C shares have not been restated to reflect Rule 12b-1 fees prior to September 30, 1996, and would be lower if they were. (1) The Fund commenced operations on January 31, 1996. (2) After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your situation and may differ from those shown. Furthermore, the after-tax returns shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRA accounts, or to investors that are tax-exempt. (3) The MSCI EAFE Index (Morgan Stanley Capital International Europe, Australasia, Far East Index), an unmanaged index comprised of 21 developed equity markets outside of North America, is for reference only and does not mirror the Fund's investments. 54 Pioneer International Equity Fund -- Class A Shares Average Annual Total Returns as of December 31, 2003
------------------------------------------------------------------------------------------------------------ Since 1 Year 5 Years Inception(1) ------------------------------------------------------------------------------------------------------------ Pioneer International Equity Fund, Class A Shares ------------------------------------------------------------------------------------------------------------ Return Before Taxes 24.69% -1.27% 1.98% ------------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions(2) 24.69% -1.54% 1.71% ------------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions and Sale of Fund Shares(2) 16.05% -1.12% 1.62% ------------------------------------------------------------------------------------------------------------ MSCI EAFE Index(3) (reflects no deduction for fees, expenses or taxes) 38.59% -0.05% 3.56% ------------------------------------------------------------------------------------------------------------
(1) The Fund commenced operations on October 31, 1996. (2) After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your situation and may differ from those shown. Furthermore, the after-tax returns shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRA accounts, or to investors that are tax-exempt. (3) The MSCI EAFE Index (Morgan Stanley Capital International Europe, Australasia, Far East Index), an unmanaged index comprised of 21 developed equity markets outside of North America, is for reference only, does not mirror the Fund's investments, includes reinvested dividends net of tax withholding, and reflects no deduction of fees or expenses. Pioneer International Equity Fund's Investor Class shares will not be outstanding prior to the closing of the Reorganization and consequently have no performance history. However, the performance record of the Investor Class would be modestly higher than the performance of Class A shares due to the lower expenses applicable to the Investor Class. The most recent portfolio manager's discussion of each Fund's performance is attached as Exhibit D. 55 The Funds' Fees and Expenses Shareholders of both Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy and hold shares of each Fund. The expenses in the tables appearing below are based on (i) for your Safeco Fund, the expenses of your Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer International Equity Fund, the expenses of Pioneer International Equity Fund for the period ended December 31, 2003. Future expenses for all share classes may be greater or less.
Safeco Safeco Safeco International International International Stock Fund Stock Fund Stock Fund Shareholder transaction fees Class A Class B Class C (paid directly from your investment) --------------- --------------- --------------- Maximum sales charge (load) when you buy shares as a percentage of offering price ....................... 5.75%(6) None None Maximum deferred sales charge (load) as a percentage of purchase price or the amount you receive when you sell shares, whichever is less ......... None 5.00%(7) 1.00%(8) Redemption fees for shares held less than 30 days ........ 2.00% None None Wire redemption fee ...................................... $ 20(4) $ 20(4) $ 20(4) Annual low balance fee ................................... $ 12(5) $ 12(5) $ 12(5) Annual fund operating expenses (deducted from fund assets) (as a percentage of average net assets) Management fee ........................................... 1.00% 1.00% 1.00% Distribution and service (12b-1) fee ..................... 0.25% 1.00% 1.00% Other expenses ........................................... 1.24% 2.16% 1.29% Total fund operating expenses ............................ 2.49% 4.16% 3.29% Expense reimbursement/reduction .......................... 0.84%(2) 1.76%2 0.89%(2) Net fund operating expenses .............................. 1.65% 2.40% 2.40% Pro Forma Safeco Safeco Pioneer International Stock International International Fund Institutional Stock Fund Equity Fund Shareholder transaction fees Class Investor Class Investor Class(9) (paid directly from your investment) --------------------- ---------------- ---------------- Maximum sales charge (load) when you buy shares as a percentage of offering price ....................... None None None(1) Maximum deferred sales charge (load) as a percentage of purchase price or the amount you receive when you sell shares, whichever is less ......... None None None Redemption fees for shares held less than 30 days ........ 2.00% 2.00% 2.00% Wire redemption fee ...................................... $ 20(4) $ 20(4) $ 10 Annual low balance fee ................................... $ 12(5) $ 12(5) N/A Annual fund operating expenses (deducted from fund assets) (as a percentage of average net assets) Management fee ........................................... 1.00% 1.00% 1.00% Distribution and service (12b-1) fee ..................... None None None Other expenses ........................................... 1.43% 1.19% 0.76% Total fund operating expenses ............................ 2.43% 2.19% 1.76% Expense reimbursement/reduction .......................... 1.03%(2) 0.79%(2) 0.36%(3) Net fund operating expenses .............................. 1.40% 1.40% 1.40%
---------- (1) No sales load will apply to shares received in the Reorganization by shareholders of your Safeco Fund who become shareholders of record of Pioneer International Equity Fund through the Reorganization. In addition, shareholders of your Safeco Fund who own shares in their own name (i.e., not in the name of a broker or other intermediary) and maintain such account as of the closing of the Reorganization may purchase Class A shares of Pioneer International Equity Fund or of any fund in the Pioneer family of funds through such account in the future without paying a sales charge. (2) As described above, SAM had contractually agreed to reimburse Safeco International Stock Fund for certain Fund operating expenses (but not all of the operating expenses of the Fund) that exceeded the rate of 0.40% per annum of the Fund's average daily net assets. This arrangement included all fund operating expenses except management fees, Rule 12b-1 fees, brokerage commissions, interest, and extraordinary expenses. In 2003, SAM additionally began voluntarily reimbursing the Fund to the extent that the total expenses of the Institutional Class exceeded the rate of 1.10% per annum of the Fund's average daily net assets for Institutional Class. The above table reflects "contractual" expense reimbursements from SAM, if any, but does not reflect "voluntary" expense reimbursements by SAM. (3) Pioneer has agreed that through the second anniversary of the closing of the Reorganization, Pioneer will limit the expenses (excluding extraordinary expenses) of the Investor Class shares of Pioneer International Equity Fund to 1.40% of average daily net assets. (4) There is a higher charge for international wire redemptions, which may vary by country or dollar amount. (5) A low balance fee is charged once each year in December for accounts with balances under $1,000 in your Safeco Fund. (6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are not subject to a front-end sales charge, but a 1.00% deferred sales charge will apply to redemptions mad in the first twelve months except with respect to participant-directed redemptions from qualified retirement plans. (7) The contingent deferred sales charge on Class B shares of your Safeco Fund reduces to zero after six years from purchase, and the Class B shares covert to Class A shares at that time. (8) The contingent deferred sales charge on Class C shares applies only to redemptions made in the first twelve months after purchase. 56 The hypothetical example below helps you compare the cost of investing in each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time periods shown, (b) you reinvest all dividends and distributions, (c) your investment has a 5% return each year, (d) each Fund's gross operating expenses remain the same, (e) the expense limitations are in effect for five years for Safeco International Stock Fund and two years for Pioneer International Equity Fund and (f) and the Investor Class shares of Pioneer International Equity Fund convert to Class A shares after two years, without giving effect to any expense limitation upon conversion. The examples are for comparison purposes only and are not a representation of either Fund's actual expenses or returns, either past or future.
Example Safeco International Stock Fund Class A Shares Year 1 ................... $ 733 Year 3 ................... $1,065 Year 5 ................... $1,420 Year 10 .................. $2,893 With Without Class B Shares Redemption Redemption Year 1 ................... $ 743 $ 243 Year 3 ................... $ 1,048 $ 748 Year 5 ................... $ 1,480 $ 1,280 Year 10 .................. $ 2,956 $ 2,956 With Without Class C Shares Redemption Redemption Year 1 ................... $ 343 $ 243 Year 3 ................... $ 748 $ 748 Year 5 ................... $ 1,280 $ 1,280 Year 10 .................. $ 3,232 $ 3,232 Institutional Class Shares Year 1 ................... $ 143 Year 3 ................... $ 443 Year 5 ................... $ 766 Year 10 .................. $2,168 Investor Class Shares Year 1 ................... $ 143 Year 3 ................... $ 443 Year 5 ................... $ 766 Year 10 .................. $2,168 Pro Forma Pioneer International Equity Fund Investor Class Shares Year 1 ................... $ 143 Year 3 ................... $ 565 Year 5 ................... $1,134 Year 10 .................. $2,686
57 Reasons for the Proposed Reorganization The Trustees believe that the proposed Reorganization is in the best interests of Safeco International Stock Fund. The Trustees considered the following matters, among others, in approving the proposal. First, SAM, the investment adviser to the Safeco Fund until August 2, 2004, was acquired by Symetra. Symetra informed the Trustees that it did not intend to continue to provide investment advisory services to the Safeco Funds. Consequently, a change in your Safeco Fund's investment management was necessary. Second, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62 investment companies and accounts with approximately $35 billion in assets. Pioneer is part of the global asset management group of UniCredito Italiano S.p.A., one of the largest banking groups in Italy, providing investment management and financial services to mutual funds, institutions and other clients. As of June 30, 2004, assets under management of UniCredito Italiano S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco Fund would become part of a significantly larger family of funds that offers a more diverse array of investment options and enhanced shareholder account options. The Pioneer family of mutual funds offers over 62 funds, including domestic and international equity and fixed income funds and a money market fund that will be available to your Safeco Fund's shareholders through exchanges. In addition, Pioneer offers shareholders additional options for their accounts, including the ability to transact and exchange shares over the telephone or online and the ability to access account values and transaction history in all of the shareholder's direct accounts in the Pioneer Funds over the telephone or online. Third, Pioneer's commitment until the second anniversary of the Reorganization to limit the expenses (excluding extraordinary expenses) of the Investor Class of Pioneer International Equity Fund to 1.40% of average daily net assets. The estimated expenses of the Investor Class of Pioneer International Equity Fund are lower than or equal to both the gross and net expenses after contractual reimbursements of each class of shares of your Safeco Fund. Fourth, shareholders who own shares in their name as of the closing of the Reorganization (i.e., not in the name of a broker or other intermediary) and maintain their account may purchase additional Class A shares of the corresponding Pioneer Fund through such account in the future or may exchange those shares for Class A shares of another Pioneer Fund or purchase Class A share of another Pioneer Fund without paying any sales charge. Fifth, the Investor Class shares of Pioneer International Equity Fund received in the Reorganization will provide Safeco International Stock Fund shareholders with exposure to substantially the same investment product as they currently have. Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds and the Pioneer Funds associated with the Reorganizations, including, but not limited to: (1) the expenses associated with the preparation, printing and mailing of any shareholder communications, including this joint Proxy Statement/Prospectus, and any filings with the SEC and other governmental authorities in connection with the Reorganizations; (2) the fees and expenses of any proxy solicitation firm retained in connection with the Reorganizations; (3) the legal fees and expenses incurred by the Safeco Funds in connection with the Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred as a result of the Reorganizations. The Trustees also considered that Pioneer and Symetra will benefit from the Reorganization. See "Certain Agreements between Pioneer and Symetra." The Board of Trustees of Pioneer International Equity Fund also considered that the Reorganization presents an excellent opportunity for the Pioneer International Equity Fund to acquire investment assets without the obligation to pay commissions or other transaction costs that a fund normally incurs when purchasing securities. This opportunity provides an economic benefit to Pioneer International Equity Fund and its shareholders. 58 CAPITALIZATION The following table sets forth the capitalization of each Fund as of March 31, 2004, and the pro forma combined Fund as of March 31, 2004.
Pro Forma Safeco Pioneer Pioneer International International International Stock Fund Equity Fund Equity Fund March 31, 2004 March 31, 2004 March 31, 2004 ---------------- ---------------- --------------- Total Net Assets (in thousands) $36,968 $30,572 $67,540 Class A shares ..................... $ 1,417 $18,345 $18,345 Class B shares ..................... $ 716 $ 8,575 $ 8,575 Class C shares ..................... $ 103 $ 3,652 $ 3,652 Institutional Class shares ......... $ 9,043 N/A N/A Investor Class shares .............. $25,689 N/A $36,968 Net Asset Value Per Share Class A shares ..................... $ 10.82 $ 17.55 $ 17.55 Class B shares ..................... $ 10.57 $ 16.41 $ 16.41 Class C shares ..................... $ 10.58 $ 16.21 $ 16.21 Institutional Class shares ......... $ 11.02 N/A N/A Investor Class shares .............. $ 10.92 N/A $ 17.55 Shares Outstanding Class A shares ..................... 131,004 1,045,193 1,045,193 Class B shares ..................... 67,765 522,503 522,503 Class C shares ..................... 9,689 225,379 225,379 Institutional Class shares ......... 820,220 N/A N/A Investor Class shares .............. 2,351,852 N/A 2,106,439
It is impossible to predict how many shares of Pioneer International Equity Fund will actually be received and distributed by your Safeco Fund on the Reorganization date. The table should not be relied upon to determine the amount of Pioneer International Equity Fund's shares that will actually be received and distributed. BOARD'S EVALUATION AND RECOMMENDATION For the reasons described above, the Trustees, including the Independent Trustees, approved the Reorganization. In particular, the Trustees determined that the Reorganization is in the best interests of your Safeco Fund. Similarly, the Board of Trustees of Pioneer International Equity Fund, including its Independent Trustees, approved the Reorganization. They also determined that the Reorganization is in the best interests of Pioneer International Equity Fund. The Trustees recommend that the shareholders of your Safeco Fund vote FOR the proposal to approve the Agreement and Plan of Reorganization. 59 Safeco Large-Cap Growth Fund and Pioneer Growth Shares PROPOSAL 1(e) Approval of Agreement and Plan of Reorganization SUMMARY The following is a summary of more complete information appearing later in this Proxy Statement/Prospectus or incorporated herein. You should read carefully the entire proxy statement, including the form of Agreement and Plan of Reorganization attached as EXHIBIT A-1 because they contain details that are not in the summary. The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have a higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. In the table below, if a row extends across the entire table, the policy disclosed applies to both your Safeco Fund and the Pioneer Fund. Comparison of Safeco Large-Cap Growth Fund to the Pioneer Growth Shares
------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Growth Fund Pioneer Growth Shares ------------------------------------------------------------------------------------------------------------------------------------ Business A series of Safeco Common Stock Trust, A diversified open-end management a diversified open-end management investment company registered under the investment company organized as a Investment Company Act organized as a Delaware statutory trust. Delaware statutory trust. ------------------------------------------------------------------------------------------------------------------------------------ Net assets as of $7 million $732 million June 30, 2004 ------------------------------------------------------------------------------------------------------------------------------------ Investment advisers and Investment adviser (until August 2, 2004): Investment adviser: portfolio managers SAM Pioneer Sub-adviser (until August 2, 2004): Portfolio Manager: RCM Capital Management LLC ("Sub-adviser") Christopher M. Galizio is responsible for the day-to-day management of Safeco Large-Cap Growth Fund. Mr. Galizio is a vice president and joined Pioneer in 1994 Portfolio Managers: Seth A. Reicher (joined Sub-adviser in 1993) Peter A. Goetz (joined Sub-adviser in 1999) Currently Pioneer is acting as investment adviser to Safeco Large-Cap Growth Fund. The Portfolio Manager of Pioneer Growth Shares, as indicated in the next column, currently manages your Safeco Fund. ------------------------------------------------------------------------------------------------------------------------------------ Investment objective Safeco Large-Cap Growth Fund seeks long- Pioneer Growth Shares seeks capital term growth of capital. appreciation primarily through equity securities of large-cap U.S. companies believed to have better-than-average earnings potential. ------------------------------------------------------------------------------------------------------------------------------------ The investment objective of each Fund is fundamental and cannot be changed without shareholder approval. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Growth Fund Pioneer Growth Shares ------------------------------------------------------------------------------------------------------------------------------------ Primary investments Under normal market conditions, Safeco Under normal market conditions, Pioneer Large-Cap Growth Fund invests at least 80% Growth Shares invests primarily in equity of its net assets (plus any borrowings for securities of U.S. issuers. For purposes of the investment purposes) in equity and equity- Fund's investment policies, equity securities related securities of companies whose total include common stocks, convertible debt and market capitalization at the time of the other equity instruments, such as depositary investment is within the range of market receipts, warrants, rights, interests in real capitalizations of companies included in the estate investment trusts ("REITs") and Russell 1000 Growth Index. preferred stocks. ------------------------------------------------------------------------------------------------------------------------------------ Investment strategies Safeco Large-Cap Growth Fund uses a Pioneer Growth Shares uses a "growth" "growth" style of management. The Sub- style and seeks to invest in issuers with adviser historically has aimed to generate above average potential for earnings and positive returns over a full market cycle by revenue growth. investing in companies that show long-term sustainable growth in revenue, earnings and/or Factors Pioneer looks for in selecting cash flow. investments include: The Sub-adviser considered factors such as: o companies with experienced management teams, strong market positions and the o the strength of the company's balance sheet; potential to support above average o the quality of the management team; earnings growth; o products or services that differentiate the o a sustainable competitive advantage, company from its competitors; such as a brand name, customer base, o the company's commitment to research and proprietary technology or economies of development; and scale; and o ongoing new products and services. o favorable expected returns relative to perceived risk. ------------------------------------------------------------------------------------------------------------------------------------ Other investments Safeco Large-Cap Growth Fund may invest Pioneer Growth Shares may invest a portion in securities convertible into common stock, of its assets not invested in equity securities but less than 35% of its total assets will be in debt securities of corporate and invested in such securities. government issuers. Up to 5% of Pioneer Growth Shares' net assets may be invested in below investment grade debt securities issued by both U.S. and non-U.S. corporate and government issuers. Pioneer Growth Shares may invest up to 25% of its total assets in REITs. Pioneer Growth Shares may invest up to 30% of its total assets in equity and debt securities of non-U.S. corporate issuers and debt securities of non-U.S. government issuers. Pioneer Growth Shares will not invest more than 5% of its total assets in securities of emerging markets issuers. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Growth Fund Pioneer Growth Shares ------------------------------------------------------------------------------------------------------------------------------------ Temporary defensive Safeco Large-Cap Growth Fund may hold cash Pioneer Growth Shares may invest all or part strategies or invest in high-quality, short-term securities of its assets in securities with remaining issued by an agency or instrumentality of the maturities of less than one year, cash U.S. government, high-quality commercial equivalents or may hold cash. paper, certificates of deposit, shares of no- load, open-end money market funds, or repurchase agreements. ------------------------------------------------------------------------------------------------------------------------------------ Diversification Each Fund is diversified for the purpose of the Investment Company Act and each Fund is subject to diversification requirements under the Code. ------------------------------------------------------------------------------------------------------------------------------------ Industry concentration Each Fund may not invest more than 25% of its assets in any one industry. ------------------------------------------------------------------------------------------------------------------------------------ Restricted and illiquid If immediately after and as a result of such Pioneer Growth Shares may not invest more securities action the value of the following securities, in than 15% of its net assets in securities which the aggregate, would exceed 15% of Safeco are illiquid and other securities which are not Large-Cap Growth Fund's net assets, the Fund readily marketable. will not (i) purchase securities for which there is no readily available market, (ii) purchase time deposits maturing in more than seven days, (iii) purchase over-the-counter (OTC) options or hold assets set aside to cover OTC options written by the Fund, (iv) enter into repurchase agreements maturing in more than seven days, or (v) invest in interests in real estate investment trusts which are not readily marketable or interests in real estate limited partnerships which are not listed or traded on the NASDAQ Stock Market. ------------------------------------------------------------------------------------------------------------------------------------ Borrowing Safeco Large-Cap Growth Fund may borrow Borrow money, except Pioneer Growth money (i) from banks or (ii) by engaging in Shares may: (a) borrow from banks or reverse repurchase agreements. through reverse repurchase agreements in an amount up to 33 1/3% of the Fund's total assets (including the amount borrowed); (b) to the extent permitted by applicable law, borrow up to an additional 5% of the Fund's assets for temporary purposes; (c) obtain such short-term credits as are necessary for the clearance of portfolio transactions; (d) purchase securities on margin to the extent permitted by applicable law; and (e) engage in transactions in mortgage dollar rolls that are accounted for as financings. ------------------------------------------------------------------------------------------------------------------------------------ Lending Safeco Large-Cap Growth Fund may lend Pioneer Growth Shares may lend portfolio securities to qualified institutional investors securities with a value that may not exceed with a value of up to 33% of the Fund's 331/3% of the value of its assets. total assets. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Growth Fund Pioneer Growth Shares ------------------------------------------------------------------------------------------------------------------------------------ Derivative instruments Safeco Large-Cap Growth Fund may write Pioneer Growth Shares may use futures and put or call options if, as a result thereof, the options on securities, indices and currencies, aggregate value of the assets underlying all forward currency exchange contracts and such options does not exceed 25% of the other derivatives. The Fund does not use Fund's net assets. derivatives as a primary investment technique and generally limits their use to hedging. Safeco Large-Cap Growth Fund may purchase However, the Fund may use derivatives for a put or call options or options on futures variety of non-principal purposes, including: contracts if, as a result thereof, the aggregate premiums paid on all options or options on o As a hedge against adverse changes in futures contracts do not exceed 20% of the stock market prices, interest rates or Fund's net assets. currency exchange rates o As a substitute for purchasing or selling Safeco Large-Cap Growth Fund may enter into securities option on a futures contract any futures contract or thereof, the aggregate o To increase the Fund's return as a margin deposits and premiums required on all non-hedging strategy that may be such instruments does not exceed 5% of the considered speculative Fund's net assets. Safeco Large-Cap Growth Fund may not purchase securities on margin. However, the Fund may (i) obtain short-term credits as necessary to clear its purchases and sales of securities, and (ii) make margin deposits in connection with its use of financial options and futures, forward and spot currency contracts, swap transactions and other financial contracts or derivative instruments. ------------------------------------------------------------------------------------------------------------------------------------ Other investment As described above, the Funds have substantially similar principal investment strategies and policies and policies. Certain of the non-principal investment policies and restrictions are different. For a restrictions more complete discussion of each Fund's other investment policies and fundamental and non-fundamental investment restrictions, see the SAI. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Growth Fund Pioneer Growth Shares ------------------------------------------------------------------------------------------------------------------------------------ Buying, Selling and Exchanging Shares ------------------------------------------------------------------------------------------------------------------------------------ Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer Growth of Safeco Large-Cap Growth Fund are subject Shares you receive in the Reorganization will to a 5.75% front-end sales charge. not be subject to any sales charge. Moreover, if you own shares in your own name as of the Contingent deferred sales charge of up to 5% closing of the Reorganization (i.e., not in the if you redeem Class B shares within 6 years name of a broker or other intermediary) and of purchase. maintain your account, you may purchase Contingent deferred sales charge of up to 1% Class A shares of Pioneer Growth Shares and if you redeem Class C shares within one year Class A shares of any Fund in the Pioneer of purchase. family of funds through such account in the future without paying any sales charge. Purchases of Investor Class shares of Safeco Large-Cap Growth Fund are not subject to a Except as described above, Class A shares of sales load. Pioneer Growth Shares are subject to a front- end sales charge of up to 5.75%. Safeco Large-Cap Growth Fund assesses a mandatory redemption fee of 2%, as a percentage of the amount redeemed or exchanged, on Class A and Investor Class shares held less than 30 days. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Growth Fund Pioneer Growth Shares ------------------------------------------------------------------------------------------------------------------------------------ Management and other fees Safeco Large-Cap Growth Fund pays an Pioneer Growth Shares pays Pioneer a advisory fee on a monthly basis at an annual management fee, subject to a performance rate as follows: adjustment, equal to Pioneer's annual fee equal to: $0-$250,000,000: 0.80 of 1% $250,000,001-$750,000,000: 0.75 of 1% 0.70% of average daily net assets up to $750,000,001-$1,250,000,000: 0.70 of 1% $500 million; Over $1,250,000,000: 0.65 of 1% 0.65% of the next $500 million; 0.625% on assets over $1 billion. SAM paid the Sub-adviser a fee in accordance with the following schedule: Pioneer's fee increases or decreases depending $0 - $100,000,000: 0.35 of 1% upon whether the Fund's performance exceeds, $100,000,000 - $250,000,000: 0.25 of 1% or is exceeded by, that of Russell 1000 Growth Over $250,000,000: 0.20 of 1% Index over the specified performance period. Each percentage point of difference between the SAM serves as administrator and fund performance of the Class A shares and the index accounting agent for Safeco Large-Cap Growth (limited to a maximum of +/-10) is multiplied Fund. The Fund pays SAM an administrative by a performance rate adjustment of 0.01%. services fee of 0.05% of the Fund's average As a result, the fee is subject to a maximum daily net assets up to the first $200,000,000 annualized rate adjustment of +/-0.10%. This and 0.01% of its net assets thereafter, and an performance comparison is made at the end of accounting fee of 0.04% of the Fund's average each month. An appropriate monthly percentage daily net assets up to the first $200,000,000 of this annual rate (based on the number of and 0.01% of its net assets thereafter. days in the current month) is then applied to the Fund's average net assets for the entire During its most recent fiscal year, Safeco performance period, giving a dollar amount that Large-Cap Growth Fund paid aggregate is added to (or subtracted from) the basic fee. advisory and administration fees at an average In addition, the fee is also further limited to a rate of 0.89% of average daily net assets. maximum annualized rate adjustment of +/-0.10% (i.e., the management fee will not exceed 0.80% In 2003, SAM began voluntarily reimbursing or be less than 0.525%). However, Pioneer Safeco Large-Cap Growth Fund to the extent currently is waiving the lower limitation on its that its total expenses exceeded the rate of fee, but may reimpose it in the future. Because 1.40% per annum of the Fund's average daily any adjustments to the basic fee begin with the net assets for Class A shares, 2.15% per comparative performance of the Fund and the annum for Class B and Class C shares, and performance record of the index, the controlling 1.15% per annum for Investor Class shares. factor is not whether fund performance is up or down, but whether it is up or down more or For the fiscal year ended December 31, 2003, less than the performance record of the index, Safeco Large-Cap Growth Fund's annual regardless of general market performance. operating expenses for Class A shares were 2.79%. After giving effect to the voluntary During its most recent fiscal year, Pioneer expense reimbursement, the operating Growth Shares paid an advisory fee at an expenses for Class A shares were 1.40%. average rate of 0.59% of average daily net assets. For the fiscal year ended December 31, 2003, Safeco Large-Cap Growth Fund's annual In addition, Pioneer Growth Shares reimburses operating expenses for Class B shares were Pioneer for certain fund accounting and legal 3.55%. After giving effect to the voluntary expenses incurred on behalf of the Fund and expense reimbursement, the operating pays a separate shareholder servicing/transfer expenses for Class B shares were 2.15%. agency fee to PIMSS, an affiliate of Pioneer. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Growth Fund Pioneer Growth Shares ------------------------------------------------------------------------------------------------------------------------------------ Management and other fees For the fiscal year ended December 31, 2003, For the fiscal year ended December 31, 2003, (continued) Safeco Large-Cap Growth Fund's annual Pioneer Growth Shares' total annual operating operating expenses for Class C shares were expenses for Class A shares were 1.45% of 3.46%. After giving effect to the voluntary average daily net assets. The Fund does not expense reimbursement, the operating currently have an expense limitation for its expenses for Class C shares were 2.15%. Class A shares. For the fiscal year ended December 31, 2003, Pioneer has agreed until the second Safeco Large-Cap Growth Fund's annual anniversary of the closing of the operating expenses for Investor Class Reorganization to limit the expenses shares were 2.55%. After giving effect to (excluding extraordinary expenses) of the the voluntary expense reimbursement, the Investor Class to 1.15% of the average daily operating expenses for Investor Class shares net assets attributable to the Investor Class. were 1.15%. The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class Shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. ------------------------------------------------------------------------------------------------------------------------------------ Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class (12b-1) fee shares will convert into Class A share after two years. Class A shares of each Fund are subject to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets. ------------------------------------------------------------------------------------------------------------------------------------ Buying shares You may buy shares of the Fund directly You may buy shares from any investment through Safeco Securities, the Fund's firm that has a sales agreement with PFD, principal underwriter or through brokers, Pioneer Growth Shares' distributor. Existing registered investment advisers, banks and shareholders of Safeco Large-Cap Growth other financial institutions that have entered Fund who own shares in their own name as into selling agreements with the Fund's of the closing date of the Reorganization and principal underwriter, as described in the who maintain their accounts may buy shares Fund's prospectus. of any fund in the Pioneer family of funds through such accounts in the future without Certain account transactions may be done paying sales charges. by telephone. If the account is established in the shareholder's own name, shareholders may also purchase additional shares of Pioneer Growth Shares by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Growth Fund Pioneer Growth Shares ------------------------------------------------------------------------------------------------------------------------------------ Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Growth acquire through dividend reinvestment or other Shares without incurring any fee on the fund distributions or for Class A shares that exchange with the more than 62 other Pioneer you have exchanged for Class A shares of Funds. Your exchange would be for Class A another Fund. shares, which would be subject to Rule 12b-1 fees. An exchange generally is treated as a Certain account transactions may be done sale and a new purchase of shares for federal by telephone. income tax purposes. If the account is established in the shareholder's own name, shareholders may also exchange shares of Pioneer Growth Shares for shares of other Pioneer Funds by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------ Selling shares Each class of shares is sold at the net asset value per share next calculated after the Fund receives your request in good order. ------------------------------------------------------------------------------------------------------------------------------------ You may sell your shares by contacting Safeco Normally, your investment firm will send Large-Cap Growth Fund directly in writing or your request to sell shares to PIMSS. You by contacting a financial intermediary as can also sell your shares by contacting the described in the Fund's prospectus. Fund directly if your account is registered in your name. If the account is established in the shareholder's own name, shareholders may also redeem shares of Pioneer Growth Shares by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------
Comparison of Principal Risks of Investing in the Funds Because each Fund has a similar investment objective, primary investment policies and strategies, the Funds are subject to the same principal risks. You could lose money on your investment in either Fund or not make as much as if you invested elsewhere if: o The stock market goes down (this risk may be greater in the short-term) o Growth stocks fall out of favor with investors o The Fund's investments do not have the growth potential originally expected Investing in non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers. These risks may include: o Less information about non-U.S. issuers or markets may be available due to less rigorous disclosure or accounting standards or regulatory practices o Many non-U.S. markets are small, less liquid and more volatile. In a changing market, Pioneer might not be able to sell the Fund's portfolio securities at times, in amounts and at prices it considers reasonable o Adverse effect of currency exchange rates or controls on the value of the Fund's investments o The economies of non-U.S. countries may grow at slower rates than expected or may experience a downturn or recession o Economic, political and social developments may adversely affect the securities markets o Withholding and other non-U.S. taxes may decrease the Fund's return The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. 67 Past Performance Set forth below is performance information for each Fund. The bar charts show how each Fund's total return (not including any deduction for sales charges) has varied from year to year for each full calendar year. The tables show average annual total return (before and after taxes) for each Fund over time for each class of shares (including deductions for sales charges) compared with a broad-based securities market index. The bar charts give an indication of the risks of investing in each Fund, including the fact that you could incur a loss and experience volatility of returns year to year. Past performance before and after taxes does not indicate future results. Safeco Large-Cap Growth Fund -- Investor Class Calendar Year Total Returns* [DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT] '02 '03 -26.95 20.16 * During the period shown in the bar chart, your Safeco Fund's highest quarterly return was 10.31% for the quarter ended June 30, 2003, and the lowest quarterly return was -16.72% for the quarter ended June 30, 2002. Pioneer Growth Shares -- Class A Shares Calendar Year Total Returns* [DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT] '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 -2.60 29.82 26.95 43.78 33.54 7.40 -9.57 -19.23 -34.89 26.19 * During the period shown in the bar chart, Pioneer Growth Shares' highest quarterly return was 24.06% for the quarter ended June 30, 1997, and the lowest quarterly return was -20.20% for the quarter ended June 30, 2002. 68 Safeco Large-Cap Growth Fund Average Annual Total Returns as of December 31, 2003
---------------------------------------------------------------------------------------------- Since 1 Year Inception(1) ---------------------------------------------------------------------------------------------- Safeco Large-Cap Growth Fund, Class A Shares ---------------------------------------------------------------------------------------------- Return Before Taxes 13.05% -5.94% ---------------------------------------------------------------------------------------------- Return After Taxes on Distributions(2) 13.05% -5.98% ---------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares(2) 8.48% -5.05% ---------------------------------------------------------------------------------------------- Safeco Large-Cap Growth Fund, Class B Shares ---------------------------------------------------------------------------------------------- Return Before Taxes 14.06% -5.40% ---------------------------------------------------------------------------------------------- Safeco Large-Cap Growth Fund, Class C Shares ---------------------------------------------------------------------------------------------- Return Before Taxes 18.06% -4.06% ---------------------------------------------------------------------------------------------- Safeco Large-Cap Growth Fund, Investor Class Shares ---------------------------------------------------------------------------------------------- Return Before Taxes 20.16% -3.11% ---------------------------------------------------------------------------------------------- Return After Taxes on Distributions(2) 20.16% -3.18% ---------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares(2) 13.10% -2.68% ---------------------------------------------------------------------------------------------- Russell 1000 Growth Index(3) (reflects no deduction for fees, expenses or taxes) 29.76% 1.09% ----------------------------------------------------------------------------------------------
(1) The Fund commenced operations on October 31, 2001. (2) After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your situation and may differ from those shown. Furthermore, the after-tax returns shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRA accounts, or to investors that are tax-exempt. (3) The Russell 1000 Growth Index, an unmanaged index of growth stocks in the Russell 1000 Index of the 1,000 largest-capitalization U.S. stocks, is for reference only and does not mirror the Fund's investments. Pioneer Growth Shares -- Class A Shares Average Annual Total Returns as of December 31, 2003
-------------------------------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------------------------------- Pioneer Growth Shares, Class A Shares -------------------------------------------------------------------------------------------------------- Return Before Taxes 18.96% -9.49% 6.47% -------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions1 18.96% -10.10% 4.23% -------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares(1) 12.32% -7.87% 4.47% -------------------------------------------------------------------------------------------------------- Russell 1000 Growth Index(2) (reflects no deduction for fees, expenses or taxes) 29.75% -5.11% 9.21% --------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your situation and may differ from those shown. Furthermore, the after-tax returns shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRA accounts, or to investors that are tax-exempt. 69 (2) The Russell 1000 Growth Index, an unmanaged index of growth stocks in the Russell 1000 Index of the 1,000 largest-capitalization U.S. stocks, is for reference only and does not mirror the Fund's investments. Pioneer Growth Shares' Investor Class shares will not be outstanding prior to the closing of the Reorganization and consequently have no performance history. However, the performance record of the Investor Class would be modestly higher than the performance of Class A shares due to the lower expenses applicable to the Investor Class. The most recent portfolio manager's discussion of each Fund's performance is attached as Exhibit D. The Funds' Fees and Expenses Shareholders of both Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy and hold shares of each Fund. The expenses in the tables appearing below are based on (i) for your Safeco Fund, the expenses of your Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer Growth Shares, the expenses of Pioneer Growth Shares for the period ended December 31, 2003. Future expenses for all share classes may be greater or less.
Safeco Safeco Large-Cap Large-Cap Growth Fund Growth Fund Shareholder Transaction fees Class A Class B (paid directly From your Investment) ------------- ------------- Maximum sales charge (load) when you buy shares as a percentage of offering price ..................................................... 5.75%(6) None Maximum deferred sales charge (load) as a % of purchase price or the amount you receive when you sell shares, whichever is less ............ None 5.00%7 Redemption fees for shares held less than 30 days ...................... 2.00% None Wire redemption fee .................................................... $ 20(4) $ 20(4) Annual low balance fee ................................................. $ 12(5) $ 12(5) Annual fund Operating expenses (deducted from fund Assets) (as a % of average Net assets) Management fee ......................................................... 0.80% 0.80% Distribution and service (12b-1) fee ................................... 0.25% 1.00% Other expenses ......................................................... 1.74% 1.75% Total fund operating expenses .......................................... 2.79% 3.55% Expense reimbursement/reduction ........................................ None(2) None(2) Net fund operating expenses ............................................ 2.79% 3.55% Pro Forma Pioneer Safeco Safeco Growth Large-Cap Large-Cap Shares Growth Fund Growth Fund Investor Shareholder Transaction fees Class C Investor Class Class(9) (paid directly From your Investment) ------------- ---------------- ---------- Maximum sales charge (load) when you buy shares as a percentage of offering price ..................................................... None None None(1) Maximum deferred sales charge (load) as a % of purchase price or the amount you receive when you sell shares, whichever is less ............ 1.00%(8) None None Redemption fees for shares held less than 30 days ...................... None 2.00% N/A Wire redemption fee .................................................... $ 20(4) $ 20(4) $ 10 Annual low balance fee ................................................. $ 12(5) $ 12(5) N/A Annual fund Operating expenses (deducted from fund Assets) (as a % of average Net assets) Management fee ......................................................... 0.80% 0.80% 0.59% Distribution and service (12b-1) fee ................................... 1.00% None None Other expenses ......................................................... 1.66% 1.75% 0.44% Total fund operating expenses .......................................... 3.46% 2.55% 1.03% Expense reimbursement/reduction ........................................ None(2) None(2) None(3) Net fund operating expenses ............................................ 3.46% 2.55% 1.03%
---------- (1) No sales load will apply to shares received in the Reorganization by shareholders of your Safeco Fund who become shareholders of record of Pioneer Growth Shares through the Reorganization. In addition, shareholders of your Safeco Fund who own shares in their own name (i.e., not in the name of a broker or other intermediary) and maintain such account as of the closing of the Reorganization may purchase Class A Shares of Pioneer Growth Shares or of any fund in the Pioneer family of funds through such account in the future without paying a sales charge. (2) In 2003, SAM began voluntarily reimbursing the Fund to the extent that its total expenses exceeded the rate of 1.40% per annum of the Fund's average daily net assets for Class A shares, 2.15% per annum for Class B and Class C shares, and 1.15% per annum for Investor Class shares. The above table reflects "contractual" expense reimbursements by SAM, if any, but does not reflect "voluntary" expense reimbursements by SAM. (3) Pioneer has agreed that through the second anniversary of the closing of the Reorganization, Pioneer will limit the expenses (excluding extraordinary expenses) of the Investor Class shares of Pioneer Growth Shares to 1.15% of average daily net assets (4) There is a higher charge for international wire redemptions, which may vary by country or dollar amount. (5) A low balance fee is charged once each year in December for accounts with balances under $1,000 in your Safeco Fund. (6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are not subject to a front-end sales charge, but a 1.00% deferred sales charge will apply to redemptions made in the first twelve months except with respect to participant-directed redemptions from qualified retirement plans. 70 (7) The contingent deferred sales charge on Class B shares of your Safeco Fund reduces to zero after six years from purchase, and the Class B shares convert to Class A shares at that time. (8) The contingent deferred sales charge on Class C shares applies only to redemptions made in the first twelve months after purchase. (9) The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. Class A shares do not currently have an expense limitation and may be subject to higher total operating expenses. The hypothetical example below helps you compare the cost of investing in each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time periods shown, (b) you reinvest all dividends and distributions, (c) your investment has a 5% return each year, (d) each Fund's gross operating expenses remain the same, (e) the expense limitations are in effect for one year for Safeco Large-Cap Growth Fund and two years for Pioneer Growth Shares and (f) and the Investor Class shares of Pioneer Growth Shares convert to Class A shares after two years. The examples are for comparison purposes only and are not a representation of either Fund's actual expenses or returns, either past or future.
Example Safeco Large-Cap Growth Fund Class A Shares Year 1 .............. $ 841 Year 3 .............. $1,390 Year 5 .............. $1,964 Year 10 ............. $3,514 With Without Class B Shares Redemption Redemption Year 1 .............. $ 858 $ 358 Year 3 .............. $ 1,388 $ 1,088 Year 5 .............. $ 2,040 $ 1,840 Year 10 ............. $ 3,496 $ 3,496 With Without Class C Shares Redemption Redemption Year 1 .............. $ 449 $ 349 Year 3 .............. $ 1,062 $ 1,062 Year 5 .............. $ 1,798 $ 1,798 Year 10 ............. $ 3,738 $ 3,738 Investor Class Shares Year 1 .............. $ 258 Year 3 .............. $ 793 Year 5 .............. $1,355 Year 10 ............. $2,885 Pro Forma Pioneer Growth Shares Investor Class Shares Year 1 .............. $ 105 Year 3 .............. $ 367 Year 5 .............. $ 690 Year 10 ............. $1,604
71 Reasons for the Proposed Reorganization The Trustees believe that the proposed Reorganization is in the best interests of Safeco Large-Cap Growth Fund. The Trustees considered the following matters, among others, in approving the proposal. First, SAM, the investment adviser to the Safeco Fund until August 2, 2004, was acquired by Symetra. Symetra informed the Trustees that it did not intend to continue to provide investment advisory services to the Safeco Funds. Consequently, a change in your Safeco Fund's investment adviser was necessary. Second, Pioneer Growth Shares has a strong short term performance record and a substantially longer performance history. For the one year period ended June 30, 2004, Class A shares of Pioneer Growth Shares had an average annual return of 9.31% compared to an average annual return of the Class A shares and Investor Class shares of 4.25% and 10.77%, respectively, during the same periods. In addition, the Trustees considered the track record of Pioneer in managing equity and fixed income mutual funds. Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62 investment companies and accounts with approximately $35 billion in assets. Pioneer is part of the global asset management group of UniCredito Italiano S.p.A., one of the largest banking groups in Italy, providing investment management and financial services to mutual funds, institutions and other clients. As of June 30, 2004, assets under management of UniCredito Italiano S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco Fund would become part of a significantly larger family of funds that offers a more diverse array of investment options and enhanced shareholder account options. The Pioneer family of mutual funds offers over 62 funds, including domestic and international equity and fixed income funds and a money market fund that will be available to your Safeco Fund's shareholders through exchanges. In addition, Pioneer offers shareholders additional options for their accounts, including the ability to transact and exchange shares over the telephone or online and the ability to access account values and transaction history in all of the shareholder's direct accounts in the Pioneer Funds over the telephone or online. Fourth, Pioneer Growth Shares' lower operating expenses and Pioneer's commitment until the second anniversary of the Reorganization to limit the expenses (excluding extraordinary expenses) of the Investor Class of Pioneer Growth Shares to 1.15% of average daily net assets. The estimated expense ratio of the Investor Class of Pioneer Growth Shares is lower than the gross and net expense ratio of each class of shares of your Safeco Fund other than Investor Class Shares of your Safeco Fund. The expense limitation applicable to Investor Class Shares of Pioneer Growth Shares is equivalent to the voluntary expense limit applicable to the Investor Class shares of your Safeco Fund and lower than the limit on all the other classes of your Safeco Fund. Pioneer has contractually agreed to keep that limit in place for two years while the expense limit applicable to your Safeco Fund could be terminated at any time. While you may experience higher expenses once the Investor Class shares convert to Class A shares after two years, the Class A shares expense ratio for the most recent fiscal year was 1.45% of average daily net assets, which was below the gross expenses of Class A shares of your Safeco Fund. Fifth, the substantially larger size of Pioneer Growth Shares offers greater opportunity for diversification of the investment portfolio, which should help to reduce risks. Sixth, shareholders who own shares in their name as of the closing of the Reorganization (i.e., not in the name of a broker or other intermediary) and maintain their account may purchase additional Class A shares of the corresponding Pioneer Fund through such account in the future or may exchange those shares for Class A shares of another Pioneer Fund or purchase Class A shares of another Pioneer Fund without paying any sales charge. Seventh, the Investor Class shares of Pioneer Growth Shares received in the Reorganization will provide Safeco Large-Cap Growth Fund shareholders with exposure to substantially the same investment product as they currently have. Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds and the Pioneer Funds associated with the Reorganizations, including, but not limited to: (1) the expenses associated with the preparation, printing and mailing of any shareholder communications, including this joint Proxy Statement/Prospectus, and any filings with the SEC and other governmental authorities in connection with the Reorganizations; (2) the fees and expenses of any proxy solicitation firm retained in connection with the Reorganizations; (3) the legal fees and expenses incurred by the Safeco Funds in connection with the Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred as a result of the Reorganizations. The Trustees also considered that Pioneer and Symetra will benefit from the Reorganization. See "Certain Agreements between Pioneer and Symetra." The Board of Trustees of Pioneer Growth Shares also considered that the Reorganization presents an excellent opportunity for the Pioneer Growth Shares to acquire investment assets without the obligation to pay commissions or other transaction costs that a fund normally incurs when purchasing securities. This opportunity provides an economic benefit to Pioneer Growth Shares and its shareholders. 72 Pioneer offers several growth oriented equity funds. From time to time, Pioneer considers recommending to trustees and shareholders the combination of certain Pioneer funds that have similar investment strategies and where the Pioneer funds may benefit from economies of scale. It is possible that Pioneer will recommend the combination of Pioneer Growth Shares with another Pioneer fund in the future. If such a recommendation is made, there can be no assurance that the trustees or shareholders of the relevant funds would approve the transaction. CAPITALIZATION The following table sets forth the capitalization of each Fund as of September 30, 2004, and pro forma combined Fund as of September 30, 2004.
Safeco Pro Forma Large-Cap Pioneer Pioneer Growth Fund Growth Shares Growth Shares September 30, 2004 September 30, 2004 September 30, 2004 -------------------- -------------------- ------------------- Total Net Assets (in thousands) $6,128 $663,767 $669,895 Class A shares ................ $1,162 $444,912 $444,912 Class B shares ................ $ 931 $168,879 $168,879 Class C shares ................ $ 887 $ 46,992 $ 46,992 Investor Class shares ......... $3,148 N/A $ 6,128 Class Y shares ................ N/A $ 2,719 $ 2,719 Class R shares ................ N/A $265,000 $265,000 Net Asset Value Per Share Class A shares ................ $ 8.90 $ 10.78 $ 10.78 Class B shares ................ $ 8.70 $ 9.89 $ 9.89 Class C shares ................ $ 8.70 $ 9.99 $ 9.99 Investor Class shares ......... $ 8.94 N/A $ 10.78 Class Y shares ................ N/A $ 11.35 $ 11.35 Class R shares ................ N/A $ 10.81 $ 10.81 Shares Outstanding Class A shares ................ 130,597 41,259,524 41,259,524 Class B shares ................ 106,917 17,082,803 17,082,803 Class C shares ................ 101,854 4,703,127 4,703,127 Investor Class shares ......... 351,993 N/A 568,460 Class Y shares ................ N/A 239,683 239,683 Class R shares ................ N/A 24,523 24,523
It is impossible to predict how many shares of Pioneer Growth Shares will actually be received and distributed by your Safeco Fund on the Reorganization date. The table should not be relied upon to determine the amount of Pioneer Growth Shares' shares that will actually be received and distributed. BOARD'S EVALUATION AND RECOMMENDATION For the reasons described above, the Trustees, including the Independent Trustees, approved the Reorganization. In particular, the Trustees determined that the Reorganization is in the best interests of your Safeco Fund. Similarly, the Board of Trustees of Pioneer Growth Shares, including its Independent Trustees, approved the Reorganization. They also determined that the Reorganization is in the best interests of Pioneer Growth Shares. The Trustees recommend that the shareholders of your Safeco Fund vote FOR the proposal to approve the Agreement and Plan of Reorganization. 73 Safeco Large-Cap Value Fund and Pioneer Value Fund PROPOSAL 1(f) Approval of Agreement and Plan of Reorganization SUMMARY The following is a summary of more complete information appearing later in this Proxy Statement/Prospectus or incorporated herein. You should read carefully the entire proxy statement, including the form of Agreement and Plan of Reorganization attached as EXHIBIT A-1 because they contain details that are not in the summary. The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. In the table below, if a row extends across the entire table, the policy disclosed applies to both your Safeco Fund and the Pioneer Fund. Comparison of Safeco Large-Cap Value Fund to the Pioneer Value Fund
------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Value Fund Pioneer Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Business A series of Safeco Common Stock Trust, A diversified open-end management a diversified open-end management investment company registered under the investment company organized as a Investment Company Act and organized as Delaware statutory trust. a Delaware statutory trust. ------------------------------------------------------------------------------------------------------------------------------------ Net assets as of $153 million $3,855 million June 30, 2004 ------------------------------------------------------------------------------------------------------------------------------------ Investment advisers and Investment adviser (until August 2, 2004): Investment adviser: portfolio managers SAM Pioneer Portfolio Managers (until August 2, 2004): Portfolio Managers: Rex L. Bentley Day-to-day management of Pioneer Value Vice President, SAM Fund's portfolio is the responsibility of J. Lynette D. Sagvold Rodman Wright, who is assisted by Sean Vice President, SAM Gavin. Mr. Wright is a senior vice president and joined Pioneer in 1994 and has been an Currently Pioneer is acting as investment investment professional since 1988. Mr. Gavin adviser to Safeco Large-Cap Value Fund. The is a vice president and joined Pioneer in 2002. Portfolio Managers of the Pioneer Fund, as indicated in the next column, currently manage your Safeco Fund. ------------------------------------------------------------------------------------------------------------------------------------ Investment objective Safeco Large-Cap Value Fund seeks long-term Pioneer Value Fund seeks reasonable income growth of capital plus current income. and capital growth primarily through equity securities. ------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Value Fund provides written The investment objective of Pioneer Value notice to shareholders at least 60 days prior to Fund is fundamental and cannot be changed any change to its investment objective as without shareholder approval. described above. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Value Fund Pioneer Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Primary investments Under normal circumstances, Safeco Large-Cap Under normal market conditions, Pioneer Value Fund invests at least 80% of net assets Value Fund invests the major portion of its (plus any borrowings for investment purposes) assets in equity securities, primarily U.S. in equity and equity-related securities of issuers. For purposes of Pioneer Value Fund's companies whose total market capitalization at investment policies, equity securities include the time of the investment is at least $4 billion. common stocks, convertible debt and other equity instruments, such as depositary receipts, warrants, rights and preferred stocks. Up to 25% of Pioneer Value Fund's portfolio may be invested in the equity securities of non-U.S. companies. ------------------------------------------------------------------------------------------------------------------------------------ Investment strategies In managing the portfolio and selecting Pioneer uses a "value" approach to select securities, SAM historically analyzed various Pioneer Value Fund's investments. Pioneer valuation measures such as the ratio of a evaluates a security's potential value, company's price-to-cash flow compared to its including the attractiveness of its market historical ratios, industry comparisons, the valuation, based on the company's assets ratio for the company's competitors, and and prospects for earnings and revenue companies with similar growth rates. growth. Factors Pioneer looks for in selecting investments include: SAM generally sought companies having good earnings, good value relative to share price, or o Above average potential for earnings and attractive growth potential. revenue growth o Favorable expected returns relative to perceived risks o Management with demonstrated ability and commitment to the company o Low market valuations relative to earnings forecast, book value, cash flow and sales o Turnaround potential for companies that have been through difficult periods o Good prospects for dividend growth ------------------------------------------------------------------------------------------------------------------------------------ Other investments Pioneer Value Fund may invest up to 25% of its total assets in securities of non-U.S. issuers. The Fund will not invest more than 5% of its total assets in the securities of emerging market issuers. Pioneer Value Fund may invest the balance of its assets in debt securities of corporate and government issuers. The Fund may invest up to 5% of its net assets in below investment grade debt securities issued by both U.S. and non-U.S. corporate and government issuers, including convertible debt securities. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Value Fund Pioneer Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Temporary defensive Safeco Large-Cap Value Fund may hold cash Pioneer Value Fund may invest all or part strategies or invest in high-quality, short-term securities of its assets in securities with remaining issued by an agency or instrumentality of the maturities of less than one year, cash U.S. government, high-quality commercial equivalents or may hold cash. paper, certificates of deposit, shares of no-load, open-end money market funds, or repurchase agreements. ------------------------------------------------------------------------------------------------------------------------------------ Diversification Each Fund is diversified for the purpose of the Investment Company Act and each Fund is subject to diversification requirements under the Code. ------------------------------------------------------------------------------------------------------------------------------------ Industry Concentration Each Fund may not invest more than 25% of its assets in any one industry. ------------------------------------------------------------------------------------------------------------------------------------ Restricted and illiquid If immediately after and as a result of such Pioneer Value Fund may not invest more than securities action the value of the following securities, in 15% of its net assets in securities which are the aggregate, would exceed 15% of Safeco illiquid and other securities which are not Large-Cap Value Fund's net assets, the Fund readily marketable. will not (i) purchase securities for which there is no readily available market, (ii) purchase time deposits maturing in more than seven days, (iii) purchase over-the-counter (OTC) options or hold assets set aside to cover OTC options written by the Fund, (iv) enter into repurchase agreements maturing in more than seven days, or (v) invest in interests in real estate investment trusts which are not readily marketable or interests in real estate limited partnerships which are not listed or traded on the NASDAQ Stock Market. ------------------------------------------------------------------------------------------------------------------------------------ Borrowing Safeco Large-Cap Value Fund may borrow Borrow money, except Pioneer Value Fund money (i) from banks or (ii) by engaging in may: (a) borrow from banks or through reverse repurchase agreements. reverse repurchase agreements in an amount up to 33 1/3% of the Fund's total assets (including the amount borrowed); (b) to the extent permitted by applicable law, borrow up to an additional 5% of the Fund's assets for temporary purposes; (c) obtain such short-term credits as are necessary for the clearance of portfolio transactions; (d) purchase securities on margin to the extent permitted by applicable law; and (e) engage in transactions in mortgage dollar rolls that are accounted for as financings. ------------------------------------------------------------------------------------------------------------------------------------ Lending Safeco Large-Cap Value Fund may lend Pioneer Value Fund may lend portfolio securities to qualified institutional investors securities with a value that may not exceed with a value of up to 33% of the Fund's 33 1/3% of the value of its total assets. total assets. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Value Fund Pioneer Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Derivative instruments Safeco Large-Cap Value Fund may write a Pioneer Value Fund may use futures and put or call option if, as a result thereof, the options on securities, indices and currencies, aggregate value of the assets underlying all forward currency exchange contracts and such options does not exceed 25% of the other derivatives. The Fund does not use Fund's net assets. derivatives as a primary investment technique and generally limits their use to hedging. Safeco Large-Cap Value Fund may purchase However, the Fund may use derivatives for a a put or call option or option on a futures variety of non-principal purposes, including: contract if, as a result thereof, the aggregate premiums paid on all options or options on o As a hedge against adverse changes in a futures contracts held by the Fund do not stock market prices, interest rates or exceed 20% of the Fund's net assets. currency exchange rates o As a substitute for purchasing or selling Safeco Large-Cap Value Fund may enter into a securities futures contract or option on futures contract o To increase the Fund's return as a non- if, as a result thereof, the aggregate margin hedging strategy that may be considered deposits and premiums required on all such speculative instruments do not exceed 5% of the Fund's net assets. Safeco Large-Cap Value Fund may not purchase securities on margin. However, the Fund may (i) obtain short-term credits as necessary to clear its purchases and sales of securities and (ii) make margin deposits in connection with its use of financial options and futures, forward and spot currency contracts, swap transactions and other financial contracts or derivative instruments. ------------------------------------------------------------------------------------------------------------------------------------ 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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------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Value Fund Pioneer Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Buying, Selling and Exchanging Shares ------------------------------------------------------------------------------------------------------------------------------------ Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer Value of Safeco Large-Cap Value Fund are subject to Fund you receive in the Reorganization will a 5.75% front-end sales charge. not be subject to any sales charge. Moreover, if you own shares in your own name as of the Contingent deferred sales charge of up to 5% closing of the Reorganization (i.e., not in the if you redeem Class B shares within six years name of a broker or other intermediary) and of purchase. maintain your account, you may purchase Class A shares of Pioneer Value Fund and Contingent deferred sales charge of 1% if Class A shares of any fund in the Pioneer you redeem Class C share within one year family of funds through such account in the of purchase. future without paying any sales charge. Purchases of Investor Class shares of Safeco Except as described above, Class A shares of Large-Cap Value Fund are not subject to a Pioneer Value Fund are subject to a front-end sales load. sales charge of up to 5.75%. Safeco Large-Cap Value Fund assesses a mandatory redemption fee of 2%, as a percentage of the amount redeemed or exchanged, on Class A and Investor Class shares held less than 30 days. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Value Fund Pioneer Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Management and other fees Safeco Large-Cap Value Fund pays an advisory Pioneer's annual basic fee is 0.60% of Pioneer fee on a monthly basis at an annual rate Value Fund's average daily net assets. as follows: Pioneer's fee increases or decreases $0-$250,000,000: 0.70 of 1% depending upon whether the Fund's $250,000,001-$750,000,000: 0.65 of 1% performance exceeds, or is exceeded by, $750,000,001-$1,250,000,000: 0.60 of 1% that of the Russell 1000 Value Index over the Over $1,250,000,000: 0.55 of 1% specified performance period. Each percentage point of difference between the performance SAM serves as administrator and fund of the Class A shares and the index (limited accounting agent for Safeco Large-Cap Value to a maximum of +/-10) is multiplied by a Fund. The Fund pays SAM an administrative performance rate adjustment of 0.01%. As services fee of 0.05% of the Fund's average a result, the fee is subject to a maximum daily net assets up to the first $200,000,000 annualized rate adjustment of +/-0.10%. This and 0.01% of its net assets thereafter, and an performance comparison is made at the end accounting fee of 0.04% of the Fund's average of each month. An appropriate monthly daily net assets up to the first $200,000,000 percentage of this annual rate (based on the and 0.01% of its net assets thereafter. number of days in the current month) is then applied to the Fund's average net assets for During its most recent fiscal year, Safeco the entire performance period, giving a dollar Large-Cap Value Fund paid aggregate advisory amount that is added to (or subtracted from) and administration fees at an average rate of the basic fee. In addition, the fee is also 0.79% of average daily net assets. further limited to a maximum annualized rate adjustment of +/-0.10% (i.e., the management SAM had contractually agreed until April 30, fee will not exceed 0.70% or be less than 2009, to pay certain fund operating expenses 0.50%). However, Pioneer currently is (but not all of the operating expenses of the waving the lower limitation on its fee, but Fund) that exceeded the rate of 0.40% per may reimpose it in the future. Because any annum of Safeco Large-Cap Value Fund's adjustments to the basic fee begin with the average daily net assets. This arrangement comparative performance of the Fund and included all Fund operating expenses the performance record of the index, the except management fees, Rule 12b-1 fees, controlling factor is not whether fund brokerage commissions, interest, and performance is up or down, but whether extraordinary expenses. it is up or down more or less than the performance record of the index, regardless For the fiscal year ended December 31, 2003, of general market performance. Safeco Large-Cap Value Fund's annual operating expenses for Class A shares, after During its most recent fiscal year, Pioneer giving effect to the expense limitation were Value Fund paid an advisory fee at an average 1.35%, and without giving effect to the rate of 0.70% of average daily net assets. expense limitation, were 1.71%. In addition, the Fund reimburses Pioneer for For the fiscal year ended December 31, 2003, certain Fund accounting and legal expenses Safeco Large-Cap Value Fund's annual incurred on behalf of the fund and pays a operating expenses for Class B shares, after separate shareholder servicing/transfer agency giving effect to the expense limitation were fee to PIMSS, an affiliate of Pioneer. 2.10%, and without giving effect to the expense limitation, were 2.55%. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Value Fund Pioneer Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Management and other fees For the fiscal year ended December 31, 2003, For the fiscal year ended September 30, 2003, (continued) Safeco Large-Cap Value Fund's annual the Fund's total annual operating expenses for operating expenses for Class C shares, after Class A shares were 1.19% of average daily giving effect to the expense limitation were net assets. The Fund does not currently have 2.10%, and without giving effect to the an expense limitation for its Class A shares. expense limitation, were 2.33%. Pioneer has agreed until the second For the fiscal year ended December 31, 2003, anniversary of the closing of the Safeco Large-Cap Value Fund's annual Reorganization to limit the expenses operating expenses for Investor Class shares, (excluding extraordinary expenses) of the after giving effect to the expense limitation Investor Class to 1.10% of the average daily were 1.10%, and without giving effect to the net assets attributable to the Investor Class. expense limitation, were 1.14%. The Investor Class Shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class Shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. ------------------------------------------------------------------------------------------------------------------------------------ Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class (12b-1) fee shares will convert into Class A share after two years. Class A shares of each Fund are subject to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets. ------------------------------------------------------------------------------------------------------------------------------------ Buying shares You may buy shares of Safeco Large-Cap You may buy shares from any investment firm Value Fund directly through Safeco Securities, that has a sales agreement with PFD, Pioneer the Fund's principal underwriter or through Value Fund's distributor. Existing shareholders brokers, registered investment advisers, of Safeco Large-Cap Value Fund who own banks and other financial institutions that shares in their own name as of the closing have entered into selling agreements with the date of the Reorganization and who maintain Fund's principal underwriter, as described in their accounts may buy shares of any fund in the Fund's prospectus. the Pioneer family of funds through such accounts in the future without paying Certain account transactions may be done by sales charges. telephone. If the account is established in the shareholder's own name, shareholders may also purchase additional shares of Pioneer Value Fund by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Large-Cap Value Fund Pioneer Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer acquire through dividend reinvestment or other Value Fund without incurring any fee on fund distributions or for Class A shares that the exchange with the more than 62 other you have exchanged for Class A shares of Pioneer Funds. Your exchange would be for another Fund. Class A shares, which is subject to Rule 12b-1 fees. An exchange generally is treated Certain account transactions may be done as a sale and a new purchase of shares for by telephone. federal income tax purposes. If the account is established in the shareholder's own name, shareholders may also exchange shares of Pioneer Value Fund for shares of other Pioneer Funds by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------ Selling shares Investor Class and Class A shares will be sold at net asset value per share next calculated after each Fund receives your request in good order. ------------------------------------------------------------------------------------------------------------------------------------ You may sell your shares by contacting Safeco Normally, your investment firm will send Large-Cap Value Fund directly in writing or by your request to sell shares to PIMSS. You contacting a financial intermediary as described can also sell your shares by contacting the in the Fund's prospectus. Fund directly if your account is registered in your name. If the account is established in the shareholder's own name, shareholders may also redeem shares of Pioneer Value Fund by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------
Comparison of Principal Risks of Investing in the Funds Because each Fund has a similar investment objective, primary investment policies and strategies, the Funds are subject to the same principal risks. You could lose money on your investment in either Fund or not make as much as if you invested elsewhere if: o Stock market goes down (this risk may be greater in the short-term) o Value stocks fall out of favor with investors o The Fund's assets remain undervalued or do not have the potential value originally expected o Stocks selected for income do not achieve the same return as securities selected for capital appreciation Investments in the Funds are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You could lose money by investing in either Fund. The Investor Class Shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class Shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. 81 Past Performance Set forth below is performance information for each Fund. The bar charts show how each Fund's total return (not including any deduction for sales charges) has varied from year to year for each full calendar year. The tables show average annual total return (before and after taxes) for each Fund over time for each class of shares (including deductions for sales charges) compared with a broad-based securities market index. The bar charts give an indication of the risks of investing in each Fund, including the fact that you could incur a loss and experience volatility of returns year to year. Past performance before and after taxes does not indicate future results. Safeco Large-Cap Value Fund -- Investor Class Calendar Year Total Returns* [DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT] '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 -1.09 30.36 23.99 26.43 6.31 1.17 -6.36 -7.06 17.40 4.20 * During the period shown in the bar chart, your Safeco Fund's highest quarterly return was 14.77% for the quarter ended June 30, 2003, and the lowest quarterly return was -17.60% for the quarter ended September 30, 2002. Pioneer Value Fund -- Class A Shares Calendar Year Total Returns* [DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT] '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 -1.73 27.15 21.99 23.70 -7.99 1.61 15.95 -3.09 -18.79 28.54 * During the period shown in the bar chart, Pioneer Value Fund's highest quarterly return was 15.93% for the quarter ended June 30, 2003, and the lowest quarterly return was -22.31% for the quarter ended September 30, 1998. 82 Safeco Large-Cap Value Fund Average Annual Total Returns as of December 31, 2003
-------------------------------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------------------------------- Safeco Large-Cap Value Fund, Class A Shares -------------------------------------------------------------------------------------------------------- Return Before Taxes 16.75% -3.39% 5.98% -------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions(1) 16.57% -4.07% 4.11% -------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares(1) 11.10% -3.20% 4.18% -------------------------------------------------------------------------------------------------------- Safeco Large-Cap Value Fund, Class B Shares -------------------------------------------------------------------------------------------------------- Return Before Taxes 17.98% -3.36% 6.19% -------------------------------------------------------------------------------------------------------- Safeco Large-Cap Value Fund, Class C Shares -------------------------------------------------------------------------------------------------------- Return Before Taxes 22.00% -2.92% 6.11% -------------------------------------------------------------------------------------------------------- Safeco Large-Cap Value Fund, Investor Class Shares -------------------------------------------------------------------------------------------------------- Return Before Taxes 24.20% -2.01% 6.86% -------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions(1) 23.94% -2.79% 4.86% -------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares(1) 16.01% -2.11% 4.87% -------------------------------------------------------------------------------------------------------- Russell 1000 Value Index(2) (reflects no deduction for fees, expenses or taxes) 30.03% 3.57% 11.87% --------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your situation and may differ from those shown. Furthermore, the after-tax returns shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRA accounts, or to investors that are tax-exempt. (2) The Russell 1000 Value Index, an unmanaged index of value stocks in the Russell 1000 Index of 1,000 largest-capitalization U.S. stocks, is for reference only and does not mirror the Fund's investments. Pioneer Value Fund -- Class A Shares Average Annual Total Returns as of December 31, 2003
------------------------------------------------------------------------------------------------------ 1 Year 5 Years 10 Years ------------------------------------------------------------------------------------------------------ Pioneer Value Fund, Class A Shares ------------------------------------------------------------------------------------------------------ Return Before Taxes 21.13% 2.36% 6.90% ------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions(1) 20.74% 0.96% 4.80% ------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions and Sale of Fund Shares(1) 13.76% 1.44% 4.94% ------------------------------------------------------------------------------------------------------ Russell 1000 Value Index(2) (reflects no deduction for fees, expenses or taxes) 30.03% 3.56% 11.88% ------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your situation and may differ from those shown. Furthermore, the after-tax returns shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRA accounts, or to investors that are tax-exempt. (2) The Russell 1000 Value Index, an unmanaged index of value stocks in the Russell 1000 Index of 1,000 largest-capitalization U.S. stocks, is for reference only and does not mirror the Fund's investments. 83 Pioneer Value Fund's Investor Class shares will not be outstanding prior to the closing of the Reorganization and consequently have no performance history. However, the performance record of the Investor Class would be modestly higher than the performance of Class A, B and C shares due to the lower expenses applicable to the Investor Class. The most recent portfolio manager's discussion of each Fund's performance is attached as Exhibit D. The Funds' Fees and Expenses Shareholders of both Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy and hold shares of each Fund. The expenses in the tables appearing below are based on (i) for your Safeco Fund, the expenses of your Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer Value Fund, the expenses of Pioneer Value Fund for the period ended June 30, 2003. Future expenses for all share classes may be greater or less.
Safeco Safeco Large-Cap Large-Cap Value Value Fund Fund Class A Class B Shareholder transaction fees (paid directly from your investment) ------------ ----------- Maximum sales charge (load) when you buy shares as a percentage of offering price ................................................... 5.75%(6) None Maximum deferred sales charge (load) as a percentage of purchase price or the amount you receive when you sell shares, whichever is less ............................................................. None 5.00%(7) Redemption fees for shares held less than 30 days .................... 2.00% None Wire redemption fee .................................................. $ 20(4) $ 20(4) Annual low balance fee ............................................... $ 12(5) $ 12(5) Annual fund operating expenses (deducted from fund assets) (as a % of average net assets) Management fee ....................................................... 0.70% 0.70% Distribution and service (12b-1) fee ................................. 0.25% 1.00% Other expenses ....................................................... 0.76% 0.85% Total fund operating expenses ........................................ 1.71% 2.55% Expense reimbursement/reduction ...................................... 0.36%(2) 0.45%(2) Net fund operating expenses .......................................... 1.35% 2.10% Safeco Safeco Pro Forma Large-Cap Large-Cap Pioneer Value Value Value Fund Fund Fund Investor Class C Investor Class Class(9) Shareholder transaction fees (paid directly from your investment) ----------- ---------------- ----------- Maximum sales charge (load) when you buy shares as a percentage of offering price ................................................... None None None(1) Maximum deferred sales charge (load) as a percentage of purchase price or the amount you receive when you sell shares, whichever is less ............................................................. 1.00%(8) None None Redemption fees for shares held less than 30 days .................... None 2.00% None Wire redemption fee .................................................. $ 20(4) $ 20(4) $ 10 Annual low balance fee ............................................... $ 12(5) $ 12(5) N/A Annual fund operating expenses (deducted from fund assets) (as a % of average net assets) Management fee ....................................................... 0.70% 0.70% 0.63% Distribution and service (12b-1) fee ................................. 1.00% None None Other expenses ....................................................... 0.63% 0.44% 0.47% Total fund operating expenses ........................................ 2.33% 1.14% 1.10% Expense reimbursement/reduction ...................................... 0.23%(2) 0.04%(2) None(3) Net fund operating expenses .......................................... 2.10% 1.10% 1.10%
---------- (1) No sales load will apply to shares received in the Reorganization by shareholders of your Safeco Fund who become shareholders of record of Pioneer Value Fund through the Reorganization. In addition, shareholders of your Safeco Fund who own shares in their own name (i.e., not in the name of a broker or other intermediary) and maintain such account as of the closing of the Reorganization may purchase Class A Shares of Pioneer Value Fund or of any Fund in the Pioneer family of funds through such account in the future without paying a sales charge. (2) As described above, SAM had contractually agreed to reimburse Safeco Large-Cap Value Fund for certain Fund operating expenses (but not all of the operating expenses of the Fund) that exceeded the rate of 0.40% per annum of the Fund's average daily net assets. This arrangement included all fund operating expenses except management fees, Rule 12b-1 fees, brokerage commissions, interest, and extraordinary expenses. (3) Pioneer has agreed that through the second anniversary of the closing of the Reorganization, Pioneer will limit the expenses (excluding extraordinary expenses) of the Investor Class shares of Pioneer Value Fund to 1.10% of average daily net assets. (4) There is a higher charge for international wire redemptions, which may vary by country or dollar amount. (5) A low balance fee is charged once in year in December for accounts with balances under $1,000 in your Safeco Fund. (6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are not subject to a front-end sales charge, but a 1.00% deferred sales charge will apply to redemptions made in the first twelve months except with respect to participant-directed redemptions from qualified retirement plans. (7) The contingent deferred sales charge on Class B shares of your Safeco Fund reduces to zero after six years from purchase, and the Class B shares convert to Class A shares at that time. (8) The contingent deferred sales charge on Class C shares applies only to redemptions made in the first twelve months after purchase. 84 (9) The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. Class A shares do not currently have an expense limitation. The hypothetical example below helps you compare the cost of investing in each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time periods shown, (b) you reinvest all dividends and distributions, (c) your investment has a 5% return each year, (d) each Fund's gross operating expenses remain the same, (e) the expense limitations are in effect for five years for Safeco Large-Cap Value Fund and two years for Pioneer Value Fund and (f) and the Investor Class shares of Pioneer Value Fund convert to Class A shares after two years. The examples are for comparison purposes only and are not a representation of either Fund's actual expenses or returns, either past or future.
Example Safeco Large-Cap Value Fund Class A Shares Year 1 .............. $ 705 Year 3 .............. $ 978 Year 5 .............. $1,272 Year 10 ............. $2,318 With Without Class B Shares Redemption Redemption Year 1 .............. $ 713 $ 213 Year 3 .............. $ 958 $ 658 Year 5 .............. $ 1,329 $ 1,129 Year 10 ............. $ 2,290 $ 2,290 With Without Class C Shares Redemption Redemption Year 1 .............. $ 313 $ 213 Year 3 .............. $ 658 $ 658 Year 5 .............. $ 1,129 $ 1,129 Year 10 ............. $ 2,565 $ 2,565 Investor Class Shares Year 1 .............. $ 112 Year 3 .............. $ 350 Year 5 .............. $ 606 Year 10 ............. $1,366 Pro FormaPioneer Value Fund Investor Class Shares Year 1 .............. $ 113 Year 3 .............. $ 346 Year 5 .............. $ 594 Year 10 ............. $1,430
85 Reasons for the Proposed Reorganization The Trustees believe that the proposed Reorganization is in the best interests of Safeco Large-Cap Value Fund. The Trustees considered the following matters, among others, in approving the proposal. First, SAM, the investment adviser to the Safeco Fund until August 2, 2004, was acquired by Symetra. Symetra informed the Trustees that it did not intend to continue to provide investment advisory services to the Safeco Funds. Consequently, a change in your Safeco Fund's investment adviser was necessary. Second, Pioneer Value Fund's short and long-term performance record is superior to the performance record of your Safeco Fund. For the one, five and ten year periods ended June 30, 2004, Class A shares of Pioneer Value Fund had an average annual return of 20.04%, 3.24%, and 8.43%, respectively, compared to an average annual return of the Class A shares and Investor Class shares of 11.80% and 18.91% (one year) -3.11% and -1.71% (five year) and 6.63% and 7.52% (ten year), respectively, during the same period. In addition, the Trustees considered the track record of Pioneer in managing equity and fixed income mutual funds. Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62 investment companies and accounts with approximately $35 billion in assets. Pioneer is part of the global asset management group of UniCredito Italiano S.p.A., one of the largest banking groups in Italy, providing investment management and financial services to mutual funds, institutions and other clients. As of June 30, 2004, assets under management of UniCredito Italiano S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco Fund would become part of a significantly larger family of funds that offers a more diverse array of investment options and enhanced shareholder account options. The Pioneer family of mutual funds offers over 62 funds, including domestic and international equity and fixed income funds and a money market fund that will be available to your Safeco Fund's shareholders through exchanges. In addition, Pioneer offers shareholders additional options for their accounts, including the ability to transact and exchange shares over the telephone or online and the ability to access account values and transaction history in all of the shareholder's direct accounts in the Pioneer Funds over the telephone or online. Fourth, Pioneer Value Fund's lower operating expenses and Pioneer's commitment until the second anniversary of the Reorganization to limit the expenses (excluding extraordinary expenses) of the Investor Class of Pioneer Value Fund to 1.10% of average daily net assets. The estimated expense ratio of the Investor Class shares of Pioneer Value Fund is lower or equal to both the gross expenses and expenses net of expense reimbursement of each class of shares of your Safeco Fund. Although you will experience higher expenses once the Investor Class shares convert to Class A shares after two years, the Class A expense ratio for the most recent fiscal year was 1.19% of average daily net assets, which was below the total gross and net expenses of the Class A shares of your Safeco Fund. Fifth, the substantially larger size of Pioneer Value Fund offers greater opportunity for diversification of the investment portfolio, which should help to reduce risks. Sixth, shareholders who own shares in their name as of the closing of the Reorganization (i.e., not in the name of a broker or other intermediary) and maintain their account may purchase additional Class A shares of the corresponding Pioneer Fund through such account in the future or may exchange those shares for Class A shares of another Pioneer Fund or purchase Class A share of another Pioneer Fund without paying any sales charge. Seventh, the Investor Class shares of Pioneer Value Fund received in the Reorganization will provide Safeco Large-Cap Value Fund shareholders with exposure to substantially the same investment product as they currently have. Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds and the Pioneer Funds associated with the Reorganizations, including, but not limited to: (1) the expenses associated with the preparation, printing and mailing of any shareholder communications, including this joint Proxy Statement/Prospectus, and any filings with the SEC and other governmental authorities in connection with the Reorganizations; (2) the fees and expenses of any proxy solicitation firm retained in connection with the Reorganizations; (3) the legal fees and expenses incurred by the Safeco Funds in connection with the Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred as a result of the Reorganizations. The Trustees also considered that Pioneer and Symetra will benefit from the Reorganization. See "Certain Agreements between Pioneer and Symetra." The Board of Trustees of Pioneer Value Fund also considered that the Reorganization presents an excellent opportunity for the Pioneer Value Fund to acquire investment assets without the obligation to pay commissions or other transaction costs that a fund normally incurs when purchasing securities. This opportunity provides an economic benefit to Pioneer Value Fund and its shareholders. 86 CAPITALIZATION The following table sets forth the capitalization of each Fund as of September 30, 2004, and pro forma combined Fund as of September 30, 2004.
Safeco Pro Forma Large-Cap Pioneer Pioneer Value Fund Value Fund Value Fund September 30, 2004 September 30, 2004 September 30, 2004 -------------------- -------------------- ------------------- Total Net Assets (in thousands) $147,084 $3,788,405 $3,935,489 Class A shares ................ $ 1,654 $3,745,064 $3,745,064 Class B shares ................ $ 996 $ 32,311 $ 32,311 Class C shares ................ $ 143 $ 9,168 $ 9,168 Investor Class shares ......... $144,291 N/A $ 147,084 Class Y shares ................ N/A $ 1,852 $ 1,852 Class R shares ................ N/A $ 10 $ 10 Net Asset Value Per Share Class A shares ................ $ 19.46 $ 18.83 $ 18.83 Class B shares ................ $ 19.47 $ 17.87 $ 17.87 Class C shares ................ $ 19.55 $ 17.87 $ 17.87 Investor Class shares ......... $ 19.34 N/A $ 18.83 Class Y shares ................ N/A $ 18.84 $ 18.84 Class R shares ................ N/A $ 18.64 $ 18.64 Shares Outstanding Class A shares ................ 85,000 198,896,441 198,896,441 Class B shares ................ 51,153 1,807,707 1,807,707 Class C shares ................ 7,334 513,049 513,049 Investor Class shares ......... 7,459,486 N/A 7,811,152 Class Y shares ................ N/A 98,313 98,313 Class R shares ................ N/A 539 539
It is impossible to predict how many shares of Pioneer Value Fund will actually be received and distributed by your Safeco Fund on the Reorganization date. The table should not be relied upon to determine the amount of Pioneer Value Fund's shares that will actually be received and distributed. BOARD'S EVALUATION AND RECOMMENDATION For the reasons described above, the Trustees, including the Independent Trustees, approved the Reorganization. In particular, the Trustees determined that the Reorganization is in the best interests of your Safeco Fund. Similarly, the Board of Trustees of Pioneer Value Fund, including its Independent Trustees, approved the Reorganization. They also determined that the Reorganization is in the best interests of Pioneer Value Fund. The Trustees recommend that the shareholders of your Safeco Fund vote FOR the proposal to approve the Agreement and Plan of Reorganization. 87 Safeco Multi-Cap Core Fund and Pioneer Mid Cap Value Fund PROPOSAL 1(g) Approval of Agreement and Plan of Reorganization SUMMARY The following is a summary of more complete information appearing later in this Proxy Statement/Prospectus or incorporated herein. You should read carefully the entire proxy statement, including the form of Agreement and Plan of Reorganization attached as EXHIBIT A-1 because they contain details that are not in the summary. The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. In the table below, if a row extends across the entire table, the policy disclosed applies to both your Safeco Fund and the Pioneer Fund. Comparison of Safeco Multi-Cap Core Fund to the Pioneer Mid Cap Value Fund
------------------------------------------------------------------------------------------------------------------------------------ Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Business A series of Safeco Common Stock Trust, A diversified open-end management a diversified open-end management investment company registered under the investment company organized as a Investment Company Act organized as a Delaware statutory trust. Delaware statutory trust. ------------------------------------------------------------------------------------------------------------------------------------ Net assets as of $90 million $1,820 million ------------------------------------------------------------------------------------------------------------------------------------ June 30, 2004 Investment advisers and Investment adviser (until August 2, 2004): Investment adviser: portfolio managers SAM Pioneer Portfolio Managers: Portfolio Managers: Bill Whitlow (since 1997 and until J. Rodman Wright August 2, 2004) Senior Vice President, Pioneer CFA, Vice President, SAM Joined Pioneer in 1994 Joined SAM in 2001 Investment professional since 1988 Brian Clancy (since 2003) Sean Gavin CFA, Equity Analyst, SAM Vice President, Pioneer Joined SAM in 1996 Joined Pioneer in 2002 Currently Pioneer is acting as investment adviser to Safeco Multi-Cap Core Fund. The Portfolio Managers of Pioneer Mid Cap Value Fund, as indicated in the next column, currently manage your Safeco Fund. ------------------------------------------------------------------------------------------------------------------------------------ Investment objective Safeco Multi-Cap Core Fund seeks long-term Pioneer Mid Cap Value Fund seeks capital growth of capital. appreciation by investing in a diversified portfolio of securities consisting primarily of common stocks. ------------------------------------------------------------------------------------------------------------------------------------ Each Fund provides written notice to shareholders at least 60 days prior to any change to its investment objective as described above. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Primary investments Under normal circumstances, Safeco Multi-Cap Normally, Pioneer Mid Cap Value Fund invests Core Fund invests in a blend of growth and at least 80% of its total assets in equity value-oriented stocks of companies of any size. securities of mid-size companies, that is companies with market values within the range of market values of companies included in the Russell Midcap Value Index. Pioneer Mid Cap Value Fund focuses on issuers with capitalizations within the $1 billion to $10 billion range, and that range will change depending on market conditions. The equity securities in which Pioneer Mid Cap Value Fund principally invests are common stocks, preferred stocks, depositary receipts and convertible debt, but the Fund may invest in other types of equity securities to a lesser extent, such as warrants and rights. ------------------------------------------------------------------------------------------------------------------------------------ Investment strategies In managing the portfolio and selecting Pioneer Mid Cap Value Fund takes a securities, SAM considered companies with: fundamental, research-driven approach in seeking to provide superior returns over time. o Faster earnings growth than their Pioneer seeks securities selling at substantial competitors discounts to their underlying values and then o Low price-to-earnings ratios when compared holds these securities until the market values to competitors reflect their intrinsic values. o A share price that represents good value o Potential for long-term appreciation Pioneer evaluates a security's potential value, including the attractiveness of its market valuation, based on the company's assets and earnings growth. Pioneer evaluates the issuer based on its financial statements and operations, employing a bottom-up analytic style. Factors Pioneer looks for in selecting investments include: o Favorable expected returns relative to perceived risk o Management with demonstrated ability and commitment to the company o Low market valuations relative to earnings forecast, book value, cash flow and sales o Turnaround potential for companies that have been through difficult periods o Estimated private market value in excess of current stock price o Whether the issuer's industry has strong fundamentals, such as increasing or sustainable demand and barriers to entry ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Other investments Safeco Multi-Cap Core Fund may invest in Pioneer Mid Cap Value Fund may invest up securities convertible into common stock, to 25% of its total assets in equity and debt but less than 35% of its total assets will be securities of non-U.S. issuers. The Fund will invested in such securities. not invest more than 5% of its total assets in the securities of emerging markets issuers. Safeco Multi-Cap Core Fund may invest up to 20% of assets in foreign securities. Pioneer Mid Cap Value Fund may invest up to 20% of its total assets in debt securities of Safeco Multi-Cap Core Fund may invest up to corporate and government issuers. Generally 10% of its total assets in debt securities rated the Fund acquires debt securities that are below investment grade. investment grade, but the Fund may invest up to 5% of its net assets in below investment grade convertible debt securities issued by both U.S. and non-U.S. issuers. The Fund invests in debt securities when Pioneer believes they are consistent with the Fund's investment objective by offering the potential for capital appreciation, to diversify the Fund's portfolio or for greater liquidity. ------------------------------------------------------------------------------------------------------------------------------------ Temporary defensive Safeco Multi-Cap Core Fund may hold cash or Pioneer Mid Cap Value Fund may invest all or strategies invest in high-quality, short-term securities part of its assets in securities with remaining issued by an agency or instrumentality of the maturities of less than one year, cash U.S. government, high-quality commercial equivalents or may hold cash. paper, certificates of deposit, shares of no-load, open-end money market funds, or repurchase agreements as a temporary defensive measure when market conditions so warrant. ------------------------------------------------------------------------------------------------------------------------------------ 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 Mid Cap Value Fund will not invest securities action the value of the following securities, in more than 15% of its net assets in illiquid the aggregate, would exceed 15% of Safeco and other securities that are not readily Multi-Cap Core Fund's net assets, the Fund will marketable. Repurchase agreements maturing not (i) purchase securities for which there is in more than seven days will be included for no readily available market, (ii) purchase time purposes of the foregoing limit. Securities deposits maturing in more than seven days, subject to restrictions on resale under the (iii) purchase over-the-counter (OTC) options 1933 Act, are considered illiquid unless they or hold assets set aside to cover OTC options are eligible for resale pursuant to Rule 144A written by the Fund, (iv) enter into repurchase or another exemption from the registration agreements maturing in more than seven requirements of the 1933 Act and are days, or (v) invest in interests in real estate determined to be liquid by Pioneer. investment trusts which are not readily marketable or interests in real estate limited partnerships which are not listed or traded on the NASDAQ Stock Market. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Borrowing Safeco Multi-Cap Core Fund may borrow Pioneer Mid Cap Value Fund may not borrow money (i) from banks or (ii) by engaging in money in amounts exceeding 10% of the reverse repurchase agreements. Fund's total assets (including the amount borrowed) taken at market value. ------------------------------------------------------------------------------------------------------------------------------------ Lending Safeco Multi-Cap Core Fund may lend Pioneer Mid Cap Value Fund may not make securities to qualified institutional investors loans, except that the Fund may (i) lend with a value of up to 33% of the Fund's portfolio securities in accordance with the total assets. Fund's investment policies, (ii) enter into repurchase agreements, (iii) purchase all or a portion of an issue of publicly distributed debt securities, bank loan participation interests, bank certificates of deposit, bankers' acceptances, debentures or other securities, whether or not the purchase is made upon the original issuance of the securities, (iv) participate in a credit facility whereby the Fund may directly lend to and borrow money from other affiliated funds to the extent permitted under the Investment Company Act or an exemption therefrom, and (v) make loans in any other manner consistent with applicable law, as amended and interpreted or modified from time to time by any regulatory authority having jurisdiction. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Derivative instruments Safeco Multi-Cap Core Fund may write a put or Pioneer Mid Cap Value Fund may use call option if, as a result thereof, the aggregate futures and options on securities, indices value of the assets underlying all such options and currencies, forward currency exchange does not exceed 25% of the Fund's net assets. contracts and other derivatives. The Fund does not use derivatives as a primary Safeco Multi-Cap Core Fund may purchase a investment technique and generally limits put or call option or option on a futures their use to hedging. However, the Fund may contract if, as a result thereof, the aggregate use derivatives for a variety of non-principal premiums paid on all options or options on purposes, including: futures contracts held by the Fund do not exceed 20% of the Fund's net assets. o As a hedge against adverse changes in stock market prices, interest rates Safeco Multi-Cap Core Fund may enter into any or currency exchange rates futures contract or option on futures contract o As a substitute for purchasing or if, as a result thereof, the aggregate margin selling securities deposits and premiums required on all such o To increase the Fund's return as a instruments do not exceed 5% of the Fund's non-hedging strategy that may be net assets. considered speculative Safeco Multi-Cap Core Fund may not purchase securities on margin. However, the Fund may (i) obtain short-term credits as necessary to clear its purchases and sales of securities, and (ii) make margin deposits in connection with its use of financial options and futures, forward and spot currency contracts, swap transactions and other financial contracts or derivative instruments. ------------------------------------------------------------------------------------------------------------------------------------ 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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------------------------------------------------------------------------------------------------------------------------------------ Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Buying, Selling and Exchanging Shares ------------------------------------------------------------------------------------------------------------------------------------ Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer Mid Cap of Safeco Multi-Cap Core Fund are subject to a Value Fund you receive in the Reorganization 5.75% front-end sales charge. will not be subject to any sales charge. Moreover, if you own shares in your own Contingent deferred sales charge of up to 5% name as of the closing of the Reorganization if you redeem Class B shares within six years (i.e., not in the name of a broker or other of purchase. intermediary) and maintain your account, you may purchase Class A shares of Pioneer Mid Contingent deferred sales charge of 1% if Cap Value Fund and Class A shares of any you redeem Class C shares within one year fund in the Pioneer family of funds through of purchase. such account in the future without paying any sales charge. Purchases of Investor Class shares of Safeco Multi-Cap Core Fund are not subject to a Except as described above, Class A shares of sales load. Pioneer Mid Cap Value Fund are subject to a front-end sales charge of up to 5.75%. Safeco Multi-Cap Core Fund assesses a mandatory redemption fee of 2%, as a percentage of the amount redeemed or exchanged, on Class A and Investor Class shares held less than 30 days. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Management and other fees Safeco Multi -Cap Core Fund pays an advisory Pioneer Mid Cap Value Fund pays Pioneer a fee on a monthly basis at an annual rate management fee equal to: as follows: 0.70% of average daily net assets up to $0-$250,000,000: 0.70 of 1% $500 million; $250,000,001-$750,000,000: 0.65 of 1% 0.65% of the next $500 million; and $750,000,001-$1,250,000,000: 0.60 of 1% 0.625% on assets over $1 billion, based Over $1,250,000,000: 0.55 of 1% on the Fund's performance and the size of the Fund. SAM serves as administrator and fund accounting agent for Safeco Multi-Cap Core Pioneer's fee increases or decreases Fund. The Fund pays SAM an administrative depending upon whether the Fund's services fee of 0.05% of the Fund's average performance exceeds, or is exceeded by, daily net assets up to the first $200,000,000 that of the Russell Midcap Value Index over and 0.01% of its net assets thereafter, and an the specified performance period. Each accounting fee of 0.04% of the Fund's average percentage point of difference between the daily net assets up to the first $200,000,000 performance of the Class A shares and the and 0.01% of its net assets thereafter. index (limited to a maximum of +/-10) is multiplied by a performance rate adjustment During its most recent fiscal year, Safeco of 0.01%. As a result, the fee is subject to Multi-Cap Core Fund paid aggregate advisory a maximum annualized rate adjustment of and administration fees at an average rate of +/-0.10%. This performance comparison 0.79% of average daily net assets. is made at the end of each month. An appropriate monthly percentage of this annual SAM had contractually agreed until April 30, rate (based on the number of days in the 2009, to pay certain Fund operating expenses current month) is then applied to the Fund's (but not all of the operating expenses of the average net assets for the entire performance Fund) that exceeded the rate of 0.40% per period, giving a dollar amount that is added to annum of the Fund's average daily net assets. (or subtracted from) the basic fee. In addition, This arrangement included all Fund operating the fee is also further limited to a maximum expenses except management fees, Rule 12b-1 annualized rate adjustment of +/-0.10% (i.e., the fees, brokerage commissions, interest, and management fee will not exceed 0.80% or be extraordinary expenses. less than 0.525%). However, Pioneer currently is waving the lower limitation on its fee, but For the fiscal year ended December 31, 2003, may reimpose it in the future. Because any the Fund's annual operating expenses for Class adjustments to the basic fee begin with the A shares, after giving effect to the expense comparative performance of the Fund and the limitation were 1.35%, and without giving performance record of the index, the effect to the expense limitation, were 1.78%. controlling factor is not whether fund performance is up or down, but whether it is For the fiscal year ended December 31, 2003, up or down more or less than the the Fund's annual operating expenses for Class performance record of the index, regardless B shares, after giving effect to the expense of general market performance. limitation were 2.10%, and without giving effect to the expense limitation, were 2.54%. During its most recent fiscal year, Pioneer Mid Cap Value Fund paid an advisory fee at an average rate of 0.76% of average daily net assets. In addition, the Fund reimburses Pioneer for certain fnd accounting and legal expenses incurred on behalf of the Fund and pays a separate shareholder servicing/transfer agency fee to PIMSS, an affiliate of Pioneer. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Management and other fees For the fiscal year ended December 31, 2003, For the fiscal year ended October 31, 2003, (continued) the Fund's annual operating expenses for Class the Fund's total annual operating expenses for C shares, after giving effect to the expense Class A shares were 1.37% of average daily limitation were 2.10%, and without giving net assets. The Fund does not currently have effect to the expense limitation, were 2.46%. an expense limitation for its Class A shares. For the fiscal year ended December 31, 2003, Pioneer has agreed until the second the Fund's annual operating expenses for anniversary of the closing of the Investor Class shares, after giving effect to Reorganization to limit the expenses the expense limitation were 1.10%, and (excluding extraordinary expenses) of the without giving effect to the expense limitation, Investor Class to 1.10% of the average daily were 1.23%. net assets attributable to the Investor Class. The Investor Class sares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. ------------------------------------------------------------------------------------------------------------------------------------ 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 Multi-Cap You may buy shares from any investment firm Core Fund directly through Safeco Securities, that has a sales agreement with PFD, Pioneer the Fund's principal underwriter or through Mid Cap Value Fund's distributor. Existing brokers, registered investment advisers, banks shareholders of Safeco Multi-Cap Core and other financial institutions that have Fund who own Investor Class shares in their entered into selling agreements with the Fund's own name as of the closing date of the principal underwriter, as described in the Reorganization and who maintain their Fund's prospectus. accounts may buy shares of any Fund in the Pioneer family of funds through such Certain account transactions may be done accounts in the future without paying by telephone. sales charges. If the account is established in the shareholder's own name, shareholders may also purchase additional shares of Pioneer Mid Cap Value Fund by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Multi-Cap Core Fund Pioneer Mid Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Mid Cap acquire through dividend reinvestment or other Value Fund without incurring any fee on the Fund distributions or for Class A shares that exchange with the more than 62 other Pioneer you have exchanged for Class A shares of Funds. Your exchange would be for Class A another fund. shares, which is subject to Rule 12b-1 fees. An exchange generally is treated as a sale and Certain account transactions may be done a new purchase of shares for federal income by telephone. tax purposes. If the account is established in the shareholder's own name, shareholders may also exchange shares of Pioneer Mid Cap Value Fund for shares of other Pioneer Funds by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------ Selling shares Investor Class and Class A shares will be sold at net asset value per share next calculated after each Fund receives your request in good order. ------------------------------------------------------------------------------------------------------------------------------------ You may sell your shares by contacting Safeco Normally, your investment firm will send Multi-Cap Core Fund directly in writing or by your request to sell shares to PIMSS. You contacting a financial intermediary as described can also sell your shares by contacting the in the Fund's prospectus. Fund directly if your account is registered in your name. If the account is established in the shareholder's own name, shareholders may also redeem shares of Pioneer Mid Cap Fund by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------
Comparison of Principal Risks of Investing in the Funds Because each Fund has a similar investment objective, primary investment policies and strategies, the Funds are subject to the same principal risks. Even though each Fund seeks capital appreciation, you could lose money on your investment or not make as much as if you invested elsewhere if: o The stock market goes down (this risk may be greater in the short term) o Mid-size or value stocks fall out of favor with investors o The Fund's assets remain undervalued or do not have the potential value originally expected Each Fund also has risks associated with investing in mid-size companies. Compared to large companies, mid-size companies, and the market for their equity securities, are likely to: o Be more sensitive to changes in earnings results and investor expectations o Have more limited product lines and capital resources o Experience sharper swings in market values o Be harder to sell at the times and prices Pioneer thinks appropriate o Offer greater potential for gain and loss 96 Investing in non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers. These risks may include: o Less information about non-U.S. issuers or markets may be available due to less rigorous disclosure or accounting standards or regulatory practices o Many non-U.S. markets are smaller, less liquid and more volatile. In a changing market, Pioneer may not be able to sell the Fund's portfolio securities at times, in amounts and at prices it considers reasonable o Adverse effect of currency exchange rates or controls on the value of the Fund's investments o The economies of non-U.S. countries may grow at slower rates than expected or may experience a downturn or recession o Economic, political and social developments may adversely affect the securities markets o Withholding and other non-U.S. taxes may decrease the Fund's return The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. Past Performance Set forth below is performance information for each Fund. The bar charts show how each Fund's total return (not including any deduction for sales charges) has varied from year to year for each full calendar year. The tables show average annual total return (before and after taxes) for each Fund over time for each class of shares (including deductions for sales charges) compared with a broad-based securities market index. The bar charts give an indication of the risks of investing in each Fund, including the fact that you could incur a loss and experience volatility of returns year to year. Past performance before and after taxes does not indicate future results. Safeco Multi-Cap Core Fund -- Investor Class Calendar Year Total Returns* [DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT] '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 -1.55 20.17 15.04 31.12 3.50 54.25 -16.11 -11.25 24.13 45.18 * During the period shown in the bar chart, your Safeco Fund's highest quarterly return was 34.90% for the quarter ended December 31, 1999, and the lowest quarterly return was -21.03 for the quarter ended September 30, 2001. 97 Pioneer Mid Cap Value Fund -- Class A Shares Calendar Year Total Returns* [DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT] '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 14.83 30.73 11.66 17.45 -4.71 12.60 17.64 5.56 -11.99 36.87 * During the period shown in the bar chart, Pioneer Mid Cap Value Fund's highest quarterly return was 17.27% for the quarter ended June 30, 2003, and the lowest quarterly return was -21.42% for the quarter ended September 30, 1998. Safeco Multi-Cap Core Fund Average Annual Total Returns as of December 31, 2003
------------------------------------------------------------------------------------------------------ 1 Year 5 Years 10 Years ------------------------------------------------------------------------------------------------------ Safeco Multi-Cap Core Fund, Class A Shares ------------------------------------------------------------------------------------------------------ Return Before Taxes 36.47% 3.34% 7.99% ------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions(1) 36.47% 2.92% 7.03% ------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions and Sale of Fund Shares(1) 23.70% 2.72% 6.53% ------------------------------------------------------------------------------------------------------ Safeco Multi-Cap Core Fund, Class B Shares ------------------------------------------------------------------------------------------------------ Return Before Taxes 38.77% 3.46% 8.20% ------------------------------------------------------------------------------------------------------ Safeco Multi-Cap Core Fund, Class C Shares ------------------------------------------------------------------------------------------------------ Return Before Taxes 42.74% 3.82% 8.09% ------------------------------------------------------------------------------------------------------ Safeco Multi-Cap Core Fund, Investor Class Shares ------------------------------------------------------------------------------------------------------ Return Before Taxes 45.18% 4.81% 8.86% ------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions(1) 45.18% 4.39% 7.89% ------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions and Sale of Fund Shares(1) 29.38% 4.00% 7.32% ------------------------------------------------------------------------------------------------------ Russell 3000 Index(2) (reflects no deduction for fees, expenses or taxes) 31.04% 0.36% 10.77% ------------------------------------------------------------------------------------------------------ S&P 500 Index(2) (reflects no deduction for fees, expenses or taxes) 28.67% -0.57% 11.06% ------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your situation and may differ from those shown. Furthermore, the after-tax 98 returns shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRA accounts, or to investors that are tax-exempt. (2) The Russell 3000 Index, an unmanaged index of the 3,000 largest U.S. companies based on market capitalization, and the S&P 500 Index, an unmanaged index of 500 stocks, are for reference only and do not mirror the Fund's investments. Pioneer Mid Cap Value Fund -- Class A Shares Average Annual Total Returns as of December 31, 2003
------------------------------------------------------------------------------------------------------- 1 Year 5 Years 10 Years ------------------------------------------------------------------------------------------------------- Pioneer Mid Cap Value Fund, Class A Shares ------------------------------------------------------------------------------------------------------- Return Before Taxes 28.98% 9.68% 11.53% ------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions(1) 28.29% 8.04% 9.51% ------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares(1) 19.16% 7.58% 9.05% ------------------------------------------------------------------------------------------------------- Russell Midcap Value Index(2) (reflects no deduction for fees, expenses or taxes) 38.07% 8.73% 13.04% -------------------------------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your situation and may differ from those shown. Furthermore, the after-tax returns shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRA accounts, or to investors that are tax-exempt. (2) The Russell Midcap Value Index, an unmanaged index that measures the performance of those companies in the Russell Midcap Value Index with lower price-to-book ratios and lower forecasted growth values, is for reference only and does not mirror the Fund's investments. Pioneer Mid Cap Value Fund's Investor Class shares will not be outstanding prior to the closing of the Reorganization and consequently have no performance history. However, the performance record of the Investor Class would be modestly higher than the performance of Class A, B and C shares due to the lower expenses applicable to the Investor Class. The most recent portfolio manager's discussion of each Fund's performance is attached as Exhibit D. 99 The Funds' Fees and Expenses Shareholders of both Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy and hold shares of each Fund. The expenses in the tables appearing below are based on (i) for your Safeco Fund, the expenses of your Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer Mid Cap Value Fund, the expenses of Pioneer Mid Cap Fund for the period ended October 31, 2003. Future expenses for all share classes may be greater or less.
Pro Forma Safeco Safeco Safeco Safeco Pioneer Multi-Cap Multi-Cap Multi-Cap Multi-Cap Mid Cap Core Core Core Core Fund Value Fund Fund Fund Fund Investor Investor Class A Class B Class C Class Class(9) Shareholder transaction fees (paid directly from your investment) ----------- ----------- ----------- ----------- ----------- Maximum sales charge (load) when you buy shares as a percentage of offering price ................................................ 5.75%(6) None None None None(1) Maximum deferred sales charge (load) as a percentage of purchase price or the amount you receive when you sell shares, whichever is less .......................................................... None 5.00%(7) 1.00%(8) None None Redemption fees for shares held less than 30 days ................. 2.00% None None 2.00% N/A Wire redemption fee ............................................... $ 20(4) $ 20(4) $ 20(4) $ 20(4) $ 10 Annual low balance fee ............................................ $ 12(5) $ 12(5) $ 12(5) $ 12(5) N/A Annual Fund Operating Expenses (deducted from fund assets) (as a % of average net assets) Management fee .................................................... 0.70% 0.70% 0.70% 0.70% 0.74% Distribution and service (12b-1) fee .............................. 0.25% 1.00% 1.00% None None Other expenses .................................................... 0.83% 0.84% 0.76% 0.53% 0.51% Total fund operating expenses ..................................... 1.78% 2.54% 2.46% 1.23% 1.25% Expense reimbursement/reduction ................................... 0.43%(2) 0.44%(2) 0.36%(2) 0.13%(2) 0.15%(3) Net fund operating expenses ....................................... 1.35% 2.10% 2.10% 1.10% 1.10%
---------- (1) No sales load will apply to shares received in the Reorganization by shareholders of your Safeco Fund who become shareholders of record of Pioneer Mid Cap Value Fund through the Reorganization. In addition, shareholders of your Safeco Fund who own shares in their own name (i.e., not in the name of a broker or other intermediary) and maintain such account as of the closing of the Reorganization may purchase Class A Shares of Pioneer Mid Cap Value Fund or of any fund in the Pioneer family of funds through such account in the future without paying a sales charge. (2) As described above, SAM had contractually agreed to reimburse Safeco Multi-Cap Core Fund for certain Fund operating expenses (but not all of the operating expenses of the Fund) that exceeded the rate of 0.40% per annum of the Fund's average daily net assets. This arrangement included all Fund operating expenses except management fees, Rule 12b-1 fees, brokerage commissions, interest, and extraordinary expenses. (3) Pioneer has agreed that through the second anniversary of the closing of the Reorganization, Pioneer will limit the expenses (excluding extraordinary expenses) of the Investor Class shares of Pioneer Mid Cap Value Fund to 1.10% of average daily net assets. (4) There is a higher charge for international wire redemptions, which may vary by country or dollar amount. (5) A low balance fee is charged once in year in December for accounts with balances under $1,000 in your Safeco Fund. (6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are not subject to a front-end sales charge, but a 1.00% deferred sales charge will apply to redemptions made in the first twelve months except with respect to participant-directed redemptions from qualified retirement plans. (7) The contingent deferred sales charge on Class B shares of your Safeco Fund reduces to zero after six years from purchase, and the Class B shares convert to Class A shares at that time. (8) The contingent deferred sales charge on Class C shares applies only to redemptions made in the first twelve months after purchase. (9) The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. Class A shares do not currently have an expense limitation. 100 The hypothetical example below helps you compare the cost of investing in each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time periods shown, (b) you reinvest all dividends and distributions, (c) your investment has a 5% return each year, (d) each Fund's gross operating expenses remain the same, (e) the expense limitations are in effect for five years for Safeco Multi-Cap Core Fund and two years for Pioneer Mid Cap Value Fund and (f) and the Investor Class shares of Pioneer Mid Cap Value Fund convert to Class A shares after two years. The examples are for comparison purposes only and are not a representation of either Fund's actual expenses or returns, either past or future.
Example Safeco Multi-Cap Core Fund Class A Shares Year 1 .............. $ 705 Year 3 .............. $ 978 Year 5 .............. $1,272 Year 10 ............. $2,359 With Without Class B Shares Redemption Redemption Year 1 .............. $ 713 $ 213 Year 3 .............. $ 958 $ 658 Year 5 .............. $ 1,329 $ 1,129 Year 10 ............. $ 2,323 $ 2,323 With Without Class C Shares Redemption Redemption Year 1 .............. $ 313 $ 213 Year 3 .............. $ 658 $ 658 Year 5 .............. $ 1,129 $ 1,129 Year 10 ............. $ 2,641 $ 2,641 Investor Class Shares Year 1 .............. $ 112 Year 3 .............. $ 350 Year 5 .............. $ 606 Year 10 ............. $1,424 Pro Forma Pioneer Mid Cap Value Fund Investor Class Shares Year 1 .............. $ 112 Year 3 .............. $ 359 Year 5 .............. $ 636 Year 10 ............. $1,426
101 Reasons for the Proposed Reorganization The Trustees believe that the proposed Reorganization is in the best interests of Safeco Multi-Cap Core Fund. The Trustees considered the following matters, among others, in approving the proposal. First, SAM, the investment adviser to the Safeco Fund until August 2, 2004, was acquired by Symetra. Symetra informed the Trustees that it did not intend to continue to provide investment advisory services to the Safeco Funds. Consequently, a change in your Safeco Fund's investment adviser was necessary. Second, the performance of Pioneer Mid Cap Value Fund is higher than the historical investment performance of your Safeco Fund. For the one, five and ten year periods ended June 30, 2004, Class A shares of Pioneer Mid Cap Value Fund had an average annual return of 31.89%, 9.49% and 12.55%, respectively, compared to an average annual return of the Class A shares and Investor Class shares of 18.34% and 25.78% (one year), 0.89% and 2.32% (five years), and 8.64% and 9.53% (ten years), respectively, during the same periods. In addition, the Trustees considered the track record of Pioneer in managing equity and fixed income mutual funds. Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62 investment companies and accounts with approximately $35 billion in assets. Pioneer is part of the global asset management group of UniCredito Italiano S.p.A., one of the largest banking groups in Italy, providing investment management and financial services to mutual funds, institutions and other clients. As of June 30, 2004, assets under management of UniCredito Italiano S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco Fund would become part of a significantly larger family of funds that offers a more diverse array of investment options and enhanced shareholder account options. The Pioneer family of mutual funds offers over 62 funds, including domestic and international equity and fixed income funds and a money market fund that will be available to your Safeco Fund's shareholders through exchanges. In addition, Pioneer offers shareholders additional options for their accounts, including the ability to transact and exchange shares over the telephone or online and the ability to access account values and transaction history in all of the shareholder's direct accounts in the Pioneer Funds over the telephone or online. Fourth, Pioneer's commitment until the second anniversary of the Reorganization to limit the expenses (excluding extraordinary expenses) of the Investor Class of Pioneer Mid Cap Value Fund to 1.10% of average daily net assets. The estimated expenses of the Investor Class shares of Pioneer Mid Cap Value Fund are below both the gross expenses and expenses net of expense reimbursement of each class of shares of your Safeco Fund other than Investor Class shares, and equal to the net expenses of the Investor Class shares of your Safeco Fund. Although you will experience higher expenses once the Investor Class shares convert to Class A shares after two years, your expenses will remain the same until the second anniversary of the Reorganization. Fifth, the substantially larger size of Pioneer Mid Cap Value Fund offers greater opportunity for diversification of the investment portfolio, which should help to reduce risks. Sixth, shareholders who own shares in their name as of the closing of the Reorganization (i.e., not in the name of a broker or other intermediary) and maintain their account may purchase additional Class A shares of the corresponding Pioneer Fund through such account in the future or may exchange those shares for Class A shares of another Pioneer Fund or purchase Class A share of another Pioneer Fund without paying any sales charge. Seventh, the Investor Class shares of Pioneer Mid Cap Value Fund received in the Reorganization will provide your Safeco Fund's shareholders with exposure to substantially the same investment product as they currently have. Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds and the Pioneer Funds associated with the Reorganizations, including, but not limited to: (1) the expenses associated with the preparation, printing and mailing of any shareholder communications, including this joint Proxy Statement/Prospectus, and any filings with the SEC and other governmental authorities in connection with the Reorganizations; (2) the fees and expenses of any proxy solicitation firm retained in connection with the Reorganizations; (3) the legal fees and expenses incurred by the Safeco Funds in connection with the Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred as a result of the Reorganizations. The Trustees also considered that Pioneer and Symetra will benefit from the Reorganization. See "Certain Agreements between Pioneer and Symetra." The Board of Trustees of Pioneer Mid Cap Value Fund also considered that the Reorganization presents an excellent opportunity for the Pioneer Mid Cap Value Fund to acquire investment assets without the obligation to pay commissions or other transaction costs that a fund normally incurs when purchasing securities. This opportunity provides an economic benefit to Pioneer Mid Cap Value Fund and its shareholders. 102 CAPITALIZATION The following table sets forth the capitalization of each Fund as of September 30, 2004, and pro forma combined Fund as of September 30, 2004.
Pro Forma Safeco Pioneer Pioneer Multi-Cap Mid Cap Mid Cap Core Fund Value Fund Value Fund September 30, 2004 September 30, 2004 September 30, 2004 -------------------- -------------------- ------------------- Total Net Assets (in thousands) $75,773 $1,842,494 $1,918,267 Class A shares ................ $ 6,989 $1,507,440 $1,507,440 Class B shares ................ $ 3,128 $ 220,239 $ 220,239 Class C shares ................ $ 120 $ 100,705 $ 100,705 Investor Class shares ......... $65,536 N/A $ 75,773 Class R shares ................ N/A $ 2,696 $ 2,696 Class Y shares ................ N/A $ 11,414 $ 11,414 Net Asset Value Per Share Class A shares ................ $ 21.05 $ 25.40 $ 25.40 Class B shares ................ $ 19.86 $ 23.18 $ 23.18 Class C shares ................ $ 19.88 $ 23.01 $ 23.01 Investor Class shares ......... $ 21.56 N/A $ 25.40 Class R shares ................ N/A $ 25.29 $ 25.29 Class Y shares ................ N/A $ 25.98 $ 25.98 Shares Outstanding Class A shares ................ 331,954 59,348,209 59,348,209 Class B shares ................ 157,479 9,502,592 9,502,592 Class C shares ................ 6,029 4,376,222 4,376,222 Investor Class shares ......... 3,039,744 N/A 2,983,189 Class R shares ................ N/A 106,595 106,595 Class Y shares ................ N/A 439,348 439,348
It is impossible to predict how many shares of Pioneer Mid Cap Value Fund will actually be received and distributed by your Safeco Fund on the Reorganization date. The table should not be relied upon to determine the amount of Pioneer Mid Cap Value Fund's shares that will actually be received and distributed. BOARD'S EVALUATION AND RECOMMENDATION For the reasons described above, the Trustees, including the Independent Trustees, approved the Reorganization. In particular, the Trustees determined that the Reorganization is in the best interests of your Safeco Fund. Similarly, the board of trustees of Pioneer Mid Cap Value Fund, including its Independent Trustees, approved the Reorganization. They also determined that the Reorganization is in the best interests of Pioneer Mid Cap Value Fund. The Trustees recommend that the shareholders of your Safeco Fund vote FOR the proposal to approve the Agreement and Plan of Reorganization. 103 Safeco Small-Cap Value Fund and Pioneer Small Cap Value Fund PROPOSAL 1(h) Approval of Agreement and Plan of Reorganization SUMMARY The following is a summary of more complete information appearing later in this Proxy Statement/Prospectus or incorporated herein. You should read carefully the entire proxy statement, including the form of Agreement and Plan of Reorganization attached as EXHIBIT A-1 because they contain details that are not in the summary. The Investor Class Shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. In the table below, if a row extends across the entire table, the policy disclosed applies to both your Safeco Fund and the Pioneer Fund. Comparison of Safeco Small-Cap Value Fund to the Pioneer Small Cap Value Fund
------------------------------------------------------------------------------------------------------------------------------------ Safeco Small-Cap Value Fund Pioneer Small Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Business A series of Safeco Common Stock Trust, A diversified open-end management a diversified open-end management investment company registered under the investment company organized as a Investment Company Act and organized as Delaware statutory trust. a Delaware statutory trust. ------------------------------------------------------------------------------------------------------------------------------------ Net assets as of $77 million $522 million June 30, 2004 ------------------------------------------------------------------------------------------------------------------------------------ Investment advisers and Investment adviser (until August 2, 2004): Investment adviser: portfolio managers SAM Pioneer Portfolio Manager (until August 2, 2004): Portfolio Managers: Greg Eisen Day-to-day management of Pioneer Small Cap CFA, Assistant Vice President, SAM Value Fund's portfolio is the responsibility of David M. Adams and John McPherson. Currently Pioneer is acting as investment adviser to Safeco Small-Cap Value Fund. The Mr. Adams is a vice president of Pioneer and Portfolio Managers of the Pioneer Small Cap joined Pioneer in 1994. Mr. McPherson joined Value Fund, as indicated in the next column, Pioneer in 2002. currently manage your Safeco Fund. ------------------------------------------------------------------------------------------------------------------------------------ Investment objective Safeco Small-Cap Value Fund seeks long-term Pioneer Small Cap Value Fund seeks long- growth of capital through investing primarily in term growth through small-capitalization small-sized companies. value companies. ------------------------------------------------------------------------------------------------------------------------------------ Each Fund provides written notice to shareholders at least 60 days prior to any change to its investment object as described above. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Small-Cap Value Fund Pioneer Small Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Primary investments Under normal circumstances Safeco Small-Cap Under normal market conditions, Pioneer Value Fund invests at least 80% of its net Small Cap Value Fund invests at least 80% assets (plus any borrowings for investment of its net assets in equity securities of small purposes) in equity and equity-related companies. Small companies are those with securities of companies with total market market values, at the time of the investment, capitalizations at the time of the investment that do not exceed the greater of the market of less than $1.5 billion. capitalization of the largest company within the Russell 2000 Index. For purposes of the Fund's investment policies, equity securities include common stocks, convertible debt and other equity instruments, such as depositary receipts, warrants, rights, interest in REITs and preferred stocks. ------------------------------------------------------------------------------------------------------------------------------------ Investment strategies When evaluating a stock to buy for Safeco Pioneer uses a "value" approach to select Small-Cap Value Fund, SAM historically looked Pioneer Small Cap Value Fund's investments. for companies having one or more of the Pioneer seeks securities selling at substantial following characteristics: discounts to their underlying values and then holds these securities until the market values o Long-term potential for above-average or reflect their intrinsic values. improving earnings growth o Involvement in new or innovative products Pioneer evaluates a security's potential value, or services including the attractiveness of its market o A share price that represents good relative valuation, based on the company's assets and value as determined by price-to-earnings prospects for earnings and revenue growth. ratio or other commonly used valuation Factors Pioneer looks for in selecting measures investments include: o Above average potential for earnings and revenue growth o Favorable expected returns relative to perceived risks o Management with demonstrated ability and commitment to the company o Low market valuations relative to earnings forecast, book value, cash flow and sales o Turnaround potential for companies that have been through difficult periods o Low debt levels relative to equity o Issuer's industry has strong fundamentals, such as increasing or sustainable demand and barriers to entry ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Small-Cap Value Fund Pioneer Small Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Other investments Safeco Small-Cap Value Fund may invest in Pioneer Small Cap Value Fund may invest up securities convertible into common stock, but to 25% of its total assets in REITs. less than 35% of its total assets will be invested in such securities. Pioneer Small Cap Value Fund may invest in securities of Canadian issuers to the same extent as securities of U.S. issuers. Pioneer Small Cap Value Fund may invest up to 5% of its total assets in equity and debt securities of other non-U.S. issuers, including securities of emerging market issuers. Pioneer Small Cap Value Fund may invest up to 20% of its total assets in debt securities of corporate and government issuers. The Fund may invest up to 5% of its net assets in below investment grade debt securities issued by both U.S. and non-U.S. issuers, including below investment grade convertible debt securities. ------------------------------------------------------------------------------------------------------------------------------------ Temporary defensive Safeco Small-Cap Value Fund may hold cash Pioneer Small Cap Value Fund may invest strategies or invest in high-quality, short-term securities all or part of its assets in securities with issued by an agency or instrumentality of the remaining maturities of less than one year, U.S. government, high-quality commercial cash equivalents or may hold cash. paper, certificates of deposit, shares of no-load, open-end money market funds, or repurchase agreements. ------------------------------------------------------------------------------------------------------------------------------------ Diversification Each Fund is diversified for the purpose of the Investment Company Act and each Fund is subject to diversification requirements under the Code. ------------------------------------------------------------------------------------------------------------------------------------ Industry Concentration Each Fund may not invest more than 25% of its assets in any one industry. ------------------------------------------------------------------------------------------------------------------------------------ Restricted and Illiquid If immediately after and as a result of such Pioneer Small Cap Value Fund may not invest Securities action the value of the following securities, in more than 15% of its net assets in securities the aggregate, would exceed 15% of Safeco which are illiquid and other securities which Small-Cap Value Fund's net assets, the Fund are not readily marketable. will not (i) purchase securities for which there is no readily available market, (ii) purchase time deposits maturing in more than seven days, (iii) purchase over-the-counter (OTC) options or hold assets set aside to cover OTC options written by the Fund, (iv) enter into repurchase agreements maturing in more than seven days, or (v) invest in interests in real estate investment trusts which are not readily marketable or interests in real estate limited partnerships which are not listed or traded on the NASDAQ Stock Market. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Small-Cap Value Fund Pioneer Small Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Borrowing Safeco Small-Cap Value Fund may borrow Borrow money, except Pioneer Small Cap money (i) from banks or (ii) by engaging in Value Fund may: (a) borrow from banks or reverse repurchase agreements. through reverse repurchase agreements in an amount up to 33 1/3% of the Fund's total assets (including the amount borrowed); (b) to the extent permitted by applicable law, borrow up to an additional 5% of the Fund's assets for temporary purposes; (c) obtain such short-term credits as are necessary for the clearance of portfolio transactions; (d) purchase securities on margin to the extent permitted by applicable law; and (e) engage in transactions in mortgage dollar rolls that are accounted for as financings. ------------------------------------------------------------------------------------------------------------------------------------ Lending Safeco Small-Cap Value Fund may lend Pioneer Small Cap Value Fund may lend securities to qualified institutional investors portfolio securities with a value that may not with a value of up to 33% of the Fund's total exceed 331/3% of the value of its total assets. assets. ------------------------------------------------------------------------------------------------------------------------------------ Derivative instruments Safeco Small-Cap Value Fund may write a Pioneer Small Cap Value Fund may use put or call option if, as a result thereof, the futures and options on securities, indices aggregate value of the assets underlying all and currencies, forward currency exchange such options does not exceed 25% of the contracts and other derivatives. The Fund Fund's net assets. Safeco Small-Cap Value does not use derivatives as a primary Fund may purchase a put or call option or investment technique and generally limits option on a futures contract if, as a result their use to hedging. However, the Fund may thereof, the aggregate premiums paid on all use derivatives for a variety of non-principal options or options on futures contracts held purposes, including: by the Fund do not exceed 20% of the Fund's net assets. o As a hedge against adverse changes in stock market prices, interest rates Safeco Small-Cap Value Fund may enter into a or currency exchange rates futures contract or option on futures contract o As a substitute for purchasing or if, as a result thereof, the aggregate margin selling securities deposits and premiums required on all such o To increase the Fund's return as a instruments do not exceed 5% of the Fund's non-hedging strategy that may be net assets. considered speculative Safeco Small-Cap Value Fund may not purchase securities on margin. However, the Fund may (i) obtain short-term credits as necessary to clear its purchases and sales of securities and (ii) make margin deposits in connection with its use of financial options and futures, forward and spot currency contracts, swap transactions and other financial contracts or derivative instruments. ------------------------------------------------------------------------------------------------------------------------------------ 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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------------------------------------------------------------------------------------------------------------------------------------ Safeco Small-Cap Value Fund Pioneer Small Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Buying, Sellingand Exchanging Shares ------------------------------------------------------------------------------------------------------------------------------------ Sales charges Purchases under $1,000,000 of Class A shares The Investor Class shares of Pioneer of Safeco Small-Cap Value Fund are subject to Small Cap Value Fund you receive in the a 5.75% front-end sales charge. Reorganization will not be subject to any sales charge. Moreover, if you own shares Contingent deferred sales charge of up to 5% in your own name as of the closing of the if you redeem Class B shares within six years Reorganization (i.e., not in the name of a of purchase. broker or other intermediary) and maintain your account, you may purchase Class A Contingent deferred sales charge of 1% if shares of Pioneer Small Cap Value Fund and you redeem Class C share within one year Class A shares of any fund in the Pioneer of purchase. family of funds through such account in the future without paying any sales charge. Purchases of Investor Class shares of Safeco Small-Cap Value Fund are not subject to a Except as described above, Class A shares of sales load. Pioneer Small Cap Value Fund are subject to a front-end sales charge of up to 5.75%. Safeco Small-Cap Value Fund assesses a mandatory redemption fee of 2%, as a percentage of the amount redeemed or exchanged, on Class A and Investor Class shares held less than 30 days. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ Safeco Small-Cap Value Fund Pioneer Small Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Management and other fees Safeco Small-Cap Value Fund pays an advisory Pioneer Small Cap Value Fund pays Pioneer a fee on a monthly basis at an annual rate management fee equal to 0.85% of the Fund's as follows: average daily net assets. $0-$250,000,000: 0.75 of 1% During its most recent fiscal year, Pioneer $250,000,001-$750,000,000: 0.70 of 1% Small Cap Value Fund paid an advisory fee $750,000,001-$1,250,000,000: 0.65 of 1% at an average rate of 0.85% of average daily Over $1,250,000,000: 0.60 of 1% net assets. SAM serves as administrator and fund In addition, Pioneer Small Cap Value accounting agent for Safeco Small-Cap Value Fund reimburses Pioneer for certain fund Fund. The Fund paid SAM an administrative accounting and legal expenses incurred services fee of 0.05% of the Fund's average on behalf of the Fund and pays a separate daily net assets up to the first $200,000,000 shareholder servicing/transfer agency fee and 0.01% of its net assets thereafter, and an to PIMSS, an affiliate of Pioneer. accounting fee of 0.04% of the Fund's average daily net assets up to the first $200,000,000 For the fiscal year ended November 30, 2003, and 0.01% of its net assets thereafter. Pioneer Small Cap Value Fund's total annual operating expenses for Class A shares were During its most recent fiscal year, Safeco 1.66% of average daily net assets. The Fund Small-Cap Value Fund paid aggregate advisory does not currently have an expense limitation and administration fees at an average rate of for its Class A shares. 0.84% of average daily net assets. Pioneer has agreed until the second SAM had contractually agreed until April 30, anniversary of the closing of the 2009, to pay certain fund operating expenses Reorganization to limit the expenses (but not all of the operating expenses of the (excluding extraordinary expenses) of the Fund) that exceeded the rate of 0.40% per Investor Class to 1.15% of the average daily annum of the Fund's average daily net assets. net assets attributable to the Investor Class. This arrangement included all Fund operating expenses except management fees, Rule 12b-1 The Investor Class shares to be issued in the fees, brokerage commissions, interest, and Reorganization will convert to Class A shares extraordinary expenses. after two years. Class A shares will have higher expenses per share than Investor For the fiscal year ended December 31, 2003, Class shares due to the Rule 12b-1 Plan. In the Fund's annual operating expenses for Class addition, although Pioneer has agreed to limit A shares, after giving effect to the expense the expenses attributable to Investor Class limitation were 1.40%, and without giving shares, Pioneer is not required to limit the effect to the expense limitation, were 1.82%. expenses attributable to Class A shares. For the fiscal year ended December 31, 2003, the Fund's annual operating expenses for Class B shares, after giving effect to the expense limitation were 2.15%, and without giving effect to the expense limitation, were 2.72%. ------------------------------------------------------------------------------------------------------------------------------------
109
------------------------------------------------------------------------------------------------------------------------------------ Safeco Small-Cap Value Fund Pioneer Small Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Management and other fees For the fiscal year ended December 31, 2003, (continued) the Fund's annual operating expenses for Class C shares, after giving effect to the expense limitation were 2.15%, and without giving effect to the expense limitation, were 39.37%. For the fiscal year ended December 31, 2003, the Fund's annual operating expenses for Investor Class shares, after giving effect to the expense limitation were 1.15%, and without giving effect to the expense limitation, were 1.43%. ------------------------------------------------------------------------------------------------------------------------------------ Distribution and service Investor Class shares of each Fund are not subject to a Rule 12b-1 fee. Pioneer Investor Class (12b-1) fee shares will convert into Class A share after two years. Class A shares of each Fund are subject to a Rule 12b-1 fee equal to 0.25% annually of average daily net assets. ------------------------------------------------------------------------------------------------------------------------------------ Buying shares You may buy shares of Safeco Small-Cap You may buy shares from any investment firm Value Fund directly through Safeco Securities, that has a sales agreement with PFD, Pioneer the Fund's principal underwriter or through Small Cap Value Fund's distributor. Existing brokers, registered investment advisers, shareholders of Safeco Small-Cap Value Fund banks and other financial institutions that who own shares in their own name as of the have entered into selling agreements with the closing date of the Reorganization and who Fund's principal underwriter, as described in maintain their accounts may buy shares of the Fund's prospectus. any fund in the Pioneer family of funds through such accounts in the future without Certain account transactions may be done paying sales charges. by telephone. If the account is established in the shareholder's own name, shareholders may also purchase additional shares of Pioneer Small Cap Value Fund by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------ Exchange privilege There are no sales charges on shares you You may exchange shares of Pioneer Small acquire through dividend reinvestment or other Cap Value Fund without incurring any fee fund distributions or for Class A shares that on the exchange with the more than 62 you have exchanged for Class A shares of other Pioneer Funds. Your exchange would another Fund. be for Class A shares, which is subject to Rule 12b-1 fees. An exchange generally is Certain account transactions may be done treated as a sale and a new purchase of by telephone. shares for federal income tax purposes. If the account is established in the shareholder's own name, shareholders may also exchange shares of Pioneer Small Cap Value Fund for shares of other Pioneer Funds by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------
110
------------------------------------------------------------------------------------------------------------------------------------ Safeco Small-Cap Value Fund Pioneer Small Cap Value Fund ------------------------------------------------------------------------------------------------------------------------------------ Selling Shares Investor Class and Class A shares will be sold at net asset value per share next calculated after the Fund receives your request in good order. ------------------------------------------------------------------------------------------------------------------------------------ You may sell your shares by contacting Safeco Normally, your investment firm will send Small-Cap Value Fund directly in writing or by your request to sell shares to PIMSS. You contacting a financial intermediary as described can also sell your shares by contacting the in the Fund's prospectus. fund directly if your account is registered in your name. If the account is established in the shareholder's own name, shareholders may also redeem shares of Pioneer Small Cap Value Fund by telephone or online. ------------------------------------------------------------------------------------------------------------------------------------
Comparison of Principal Risks of Investing in the Funds Because each Fund has a similar investment objective, primary investment policies and strategies, the Funds are subject to the same principal risks. You could lose money on your investment in either Fund or not make as much as if you invested elsewhere if: o The stock market goes down (this risk may be greater in the short-term) o Small company or value stocks fall out of favor with investors o The Fund's assets remain undervalued or do not have the potential value originally expected Each Fund also has risks associated with investing in small companies. Compared to large companies, small companies, and the market for their equity securities, are likely to: o Be more sensitive to changes in the economy, earnings results and investor expectations o Have more limited product lines and capital resources o Experience sharper swings in market values o Be harder to sell at the times and prices Pioneer thinks appropriate o Offer greater potential for gain and loss Investments in the Funds are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You could lose money by investing in either Fund. The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. 111 Past Performance Set forth below is performance information for each Fund. The bar charts show how each Fund's total return (not including any deduction for sales charges) has varied from year to year for each full calendar year. The tables show average annual total return (before and after taxes) for each Fund over time for each class of shares (including deductions for sales charges) compared with a broad-based securities market index. The bar charts give an indication of the risks of investing in each Fund, including the fact that you could incur a loss and experience volatility of returns year to year. Past performance before and after taxes does not indicate future results. Safeco Small-Cap Value Fund -- Investor Class Calendar Year Total Returns* [DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT] '97 '98 '99 '00 '01 '02 '03 23.38 -21.57 14.07 -7.54 18.20 -3.76 43.1 * During the period shown in the bar chart, your Safeco Fund's highest quarterly return was 27.05% for the quarter ended December 31, 1999, and the lowest quarterly return was -33.97% for the quarter ended September 30, 1998. Pioneer Small Cap Value Fund -- Class A Shares Calendar Year Total Returns* [DATA BELOW IS REPRESENTED BY A BAR CHART IN THE ORIGINAL REPORT] '98 '99 '00 '01 '02 '03 -12.69 35.96 15.30 13.08 -12.70 37.11 * During the period shown in the bar chart, Pioneer Small Cap Value Fund's highest quarterly return was 22.18% for the quarter ended June 30, 2003, and the lowest quarterly return was -26.57% for the quarter ended September 30, 1998. 112 Safeco Small-Cap Value Fund Average Annual Total Returns as of December 31, 2003
---------------------------------------------------------------------------------------------------------- Since 1 Year 5 Years Inception(1) ---------------------------------------------------------------------------------------------------------- Safeco Small-Cap Value Fund, Class A Shares ---------------------------------------------------------------------------------------------------------- Return Before Taxes 34.45% 9.71% 8.52% ---------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions(2) 34.39% 9.63% 8.14% ---------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares(2) 22.47% 8.41% 7.26% ---------------------------------------------------------------------------------------------------------- Safeco Small-Cap Value Fund, Class B Shares ---------------------------------------------------------------------------------------------------------- Return Before Taxes 36.67% 9.93% 8.69% ---------------------------------------------------------------------------------------------------------- Safeco Small-Cap Value Fund, Class C Shares ---------------------------------------------------------------------------------------------------------- Return Before Taxes 40.67% 10.21% 8.57% ---------------------------------------------------------------------------------------------------------- Safeco Small-Cap Value Fund, Investor Class Shares ---------------------------------------------------------------------------------------------------------- Return Before Taxes 43.10% 11.42% 9.67% ---------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions(2) 42.97% 11.28% 9.25% ---------------------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares(2) 28.18% 9.90% 8.27% ---------------------------------------------------------------------------------------------------------- Russell 2000 Value Index(3) (reflects no deduction for fees, expenses or taxes) 46.02% 12.28% 13.06% ----------------------------------------------------------------------------------------------------------
(1) The Fund commenced operations on January 31, 1996. (2) After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your situation and may differ from those shown. Furthermore, the after-tax returns shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRA accounts, or to investors that are tax-exempt. (3) The Russell 2000 Value Index, an unmanaged index of value stocks in the Russell 2000 Index of small-capitalization U.S. stocks, is for reference only and does not mirror the Fund's investments. Pioneer Small Cap Value Fund -- Class A Shares Average Annual Total Returns as of December 31, 2003
------------------------------------------------------------------------------------------------------------ Since 1 Year 5 Years Inception(1) ------------------------------------------------------------------------------------------------------------ Pioneer Small Cap Value Fund, Class A Shares ------------------------------------------------------------------------------------------------------------ Return Before Taxes 29.20% 14.87% 10.86% ------------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions(2) 29.11% 14.61% 10.28% ------------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions and Sale of Fund Shares(2) 19.09% 12.99% 9.21% ------------------------------------------------------------------------------------------------------------ Russell 2000 Value Index(3) (reflects no deduction for fees, expenses or taxes) 46.03% 12.28% 11.83% ------------------------------------------------------------------------------------------------------------
(1) The Fund commenced operations on February 28, 1997. (2) After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your situation and may differ from those shown. Furthermore, the after-tax 113 returns shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRA accounts, or to investors that are tax-exempt. (3) The Russell 2000 Value Index, an unmanaged index of value stocks in the Russell 2000 Index of small-capitalization U.S. stocks, is for reference only and does not mirror the Fund's investments. Pioneer Small Cap Value Fund's Investor Class shares will not be outstanding prior to the closing of the Reorganization and consequently have no performance history. However, the performance record of the Investor Class would be modestly higher than the performance of Class A shares due to the lower expenses applicable to the Investor Class. The most recent portfolio manager's discussion of each Fund's performance is attached as Exhibit D. The Funds' Fees and Expenses Shareholders of both Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy and hold shares of each Fund. The expenses in the tables appearing below are based on (i) for your Safeco Fund, the expenses of your Safeco Fund for the period ended December 31, 2003 and (ii) for Pioneer Small Cap Value Fund, the expenses of Pioneer Small Cap Value Fund for the period ended November 30, 2003. Future expenses for all share classes may be greater or less.
Safeco Safeco Small-Cap Small-Cap Value Fund Value Fund Class A Class B Shareholder transaction fees (paid directly from your investment) ------------ ------------ Maximum sales charge (load) when you buy shares as a percentage of offering price ....................................................... 5.75%(6) None Maximum deferred sales charge (load) as a percentage of purchase price or the amount you receive when you sell shares, whichever is less ....... None 5.00%(7) Redemption fees for shares held less than 30 days ........................ 2.00% None Wire redemption fee ...................................................... $ 20(4) $ 20(4) Annual low balance fee ................................................... $ 12(5) $ 12(5) Annual fund operating expenses (deducted from fund assets) (as a % of average net assets) Management fee ........................................................... 0.75% 0.75% Distribution and service (12b-1) fee ..................................... 0.25% 1.00% Other expenses ........................................................... 0.82% 0.97% Total fund operating expenses ............................................ 1.82% 2.72% Expense reimbursement/reduction .......................................... 0.42%(2) 0.57% Net fund operating expenses .............................................. 1.40% 2.15% Pro Forma Pioneer Safeco Safeco Small Cap Small-Cap Small-Cap Value Value Fund Value Fund Investor Class C Investor Class Class(9) Shareholder transaction fees (paid directly from your investment) ------------ ---------------- ----------- Maximum sales charge (load) when you buy shares as a percentage of offering price ....................................................... None None None(1) Maximum deferred sales charge (load) as a percentage of purchase price or the amount you receive when you sell shares, whichever is less ....... 1.00%(8) None None Redemption fees for shares held less than 30 days ........................ None 2.00% N/A Wire redemption fee ...................................................... $ 20(4) $ 20(4) $ 10 Annual low balance fee ................................................... $ 12(5) $ 12(5) N/A Annual fund operating expenses (deducted from fund assets) (as a % of average net assets) Management fee ........................................................... 0.75% 0.75% 0.85% Distribution and service (12b-1) fee ..................................... 1.00% None None Other expenses ........................................................... 37.62% 0.68% 0.43% Total fund operating expenses ............................................ 39.37% 1.43% 1.28% Expense reimbursement/reduction .......................................... 37.22%(2) 0.28%(2) 0.13%(3) Net fund operating expenses .............................................. 2.15% 1.15% 1.15%
---------- (1) No sales load will apply to shares received in the Reorganization by shareholders of your Safeco Fund who become shareholders of record of Pioneer Small Cap Value Fund through the Reorganization. In addition, shareholders of your Safeco Fund who own shares in their own name (i.e., not in the name of a broker or other intermediary) and maintain such account as of the closing of the Reorganization may purchase Class A Shares of Pioneer Small Cap Value Fund or of any fund in the Pioneer family of funds through such account in the future without paying a sales charge. (2) As described above, SAM had contractually agreed to reimburse Safeco Small-Cap Value Fund for certain Fund operating expenses (but not all of the operating expenses of the Fund) that exceeded the rate of 0.40% per annum of the Fund's average daily net assets. This arrangement included all fund operating expenses except management fees, Rule 12b-1 fees, brokerage commissions, interest, and extraordinary expenses. (3) Pioneer has agreed that through the second anniversary of the closing of the Reorganization, Pioneer will limit the expenses (excluding extraordinary expenses) of the Investor Class shares of Pioneer Small Cap Value Fund to 1.15% of average daily net assets. (4) There is a higher charge for international wire redemptions, which may vary by country or dollar amount. (5) A low balance fee is charged once each year in December for accounts with balances under $1,000 in your Safeco Fund. 114 (6) Purchases of $1,000,000 or more of Class A shares of your Safeco Fund are not subject to a front-end sales charge, but a 1.00% deferred sales charge will apply to redemptions made in the first twelve months except with respect to participant-directed redemptions from qualified retirement plans. (7) The contingent deferred sales charge on Class B shares of your Safeco Fund reduces to zero after six years from purchase, and the Class B shares convert to Class A shares at that time. (8) The contingent deferred sales charge on Class C shares applies only to redemptions made in the first twelve months after purchase. (9) The Investor Class shares to be issued in the Reorganization will convert to Class A shares after two years. Class A shares will have higher expenses per share than Investor Class shares due to the Rule 12b-1 Plan. In addition, although Pioneer has agreed to limit the expenses attributable to Investor Class shares, Pioneer is not required to limit the expenses attributable to Class A shares. The hypothetical example below helps you compare the cost of investing in each Fund. It assumes that: (a) you invest $10,000 in each Fund for the time periods shown, (b) you reinvest all dividends and distributions, (c) your investment has a 5% return each year, (d) each Fund's gross operating expenses remain the same, (e) the expense limitations are in effect for five years for Safeco Small-Cap Value Fund and two years for Pioneer Small Cap Value Fund and (f) and the Investor Class shares of Pioneer Small Cap Value Fund convert to Class A shares after two years. The examples are for comparison purposes only and are not a representation of either Fund's actual expenses or returns, either past or future.
Example Safeco Small-Cap Value Fund Class A Shares Year 1 .............. $ 709 Year 3 .............. $ 993 Year 5 .............. $1,297 Year 10 ............. $2,405 With Without Class B Shares Redemption Redemption Year 1 .............. $ 718 $ 218 Year 3 .............. $ 973 $ 673 Year 5 .............. $ 1,354 $ 1,154 Year 10 ............. $ 2,384 $ 2,384 With Without Class C Shares Redemption Redemption Year 1 .............. $ 318 $ 218 Year 3 .............. $ 673 $ 673 Year 5 .............. $ 1,154 $ 1,154 Year 10 ............. $ 2,558 $ 2,558 Investor Class Shares Year 1 .............. $ 117 Year 3 .............. $ 365 Year 5 .............. $ 633 Year 10 ............. $1,577 Pro Forma Pioneer Small Cap Value Fund Investor Class Shares Year 1 .............. $ 117 Year 3 .............. $ 405 Year 5 .............. $ 754 Year 10 ............. $1,738
115 Reasons for the Proposed Reorganization The Trustees believe that the proposed Reorganization is in the best interests of Safeco Small-Cap Value Fund. The Trustees considered the following matters, among others, in approving the proposal. First, SAM, the investment adviser to the Safeco Fund until August 2, 2004, was acquired by Symetra. Symetra informed the Trustees that it did not intend to continue to provide investment advisory services to the Safeco Funds. Consequently, a change in your Safeco Fund's investment adviser was necessary. Second, the long-term investment performance of Pioneer Small Cap Value Fund is superior to your Safeco Fund's performance, although your Safeco Fund had better performance during the most recent 12 month period. For the one and five year periods ended June 30, 2004, Class A shares of Pioneer Small Cap Value Fund had an average annual return of 31.83% and 13.77%, respectively, compared to an average annual return of the Class A shares and Investor Class shares of 23.99% and 31.58% (one year) and 13.21% and 14.80% (five years), respectively, during the same period. In addition, the Trustees considered the track record of Pioneer in managing equity and fixed income mutual funds. Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62 investment companies and accounts with approximately $35 billion in assets. Pioneer is part of the global asset management group of UniCredito Italiano S.p.A., one of the largest banking groups in Italy, providing investment management and financial services to mutual funds, institutions and other clients. As of June 30, 2004, assets under management of UniCredito Italiano S.p.A. were approximately $151 billion worldwide. Shareholders of your Safeco Fund would become part of a significantly larger family of funds that offers a more diverse array of investment options and enhanced shareholder account options. The Pioneer family of mutual funds offers over 62 funds, including domestic and international equity and fixed income funds and a money market fund that will be available to your Safeco Fund's shareholders through exchanges. In addition, Pioneer offers shareholders additional options for their accounts, including the ability to transact and exchange shares over the telephone or online and the ability to access account values and transaction history in all of the shareholder's direct accounts in the Pioneer Funds over the telephone or online. Fourth, Pioneer's commitment until the second anniversary of the Reorganization to limit the expenses (excluding extraordinary expenses) of the Investor Class of Pioneer Small Cap Value Fund to 1.15% of average daily net assets. This expense ratio is lower than both the gross expenses and expenses net of expense reimbursement of the Class A, Class B and Class C shares of your Safeco Fund and no higher than the gross and the same as the net expense of your Safeco Fund's Investor Class shares. Although without the expense limitation Pioneer Small Cap Value Fund's expenses are significantly higher than your Safeco Fund's net expenses, the trustees believe that Pioneer Small Cap Value Fund offers the potential for lower expenses through economies of scale. Fifth, the substantially larger size of Pioneer Small Cap Value Fund offers greater opportunity for diversification of the investment portfolio, which should help to reduce risks. Sixth, shareholders who own shares in their name as of the closing of the Reorganization (i.e., not in the name of a broker or other intermediary) and maintain their account may purchase additional Class A shares of the corresponding Pioneer Fund through such account in the future or may exchange those shares for Class A shares of another Pioneer Fund or purchase Class A share of another Pioneer Fund without paying any sales charge. Seventh, the Investor Class shares of Pioneer Small Cap Value Fund received in the Reorganization will provide Safeco Small-Cap Value Fund shareholders with exposure to substantially the same investment product as they currently have. Pioneer and Symetra will pay all out of pocket expenses of the Safeco Funds and the Pioneer Funds associated with the Reorganizations, including, but not limited to: (1) the expenses associated with the preparation, printing and mailing of any shareholder communications, including this joint Proxy Statement/Prospectus, and any filings with the SEC and other governmental authorities in connection with the Reorganizations; (2) the fees and expenses of any proxy solicitation firm retained in connection with the Reorganizations; (3) the legal fees and expenses incurred by the Safeco Funds in connection with the Reorganizations; and (4) the Trustees' fees and out of pocket expenses incurred as a result of the Reorganizations. The Trustees also considered that Pioneer and Symetra will benefit from the Reorganization. See "Certain Agreements between Pioneer and Symetra." The Board of Trustees of Pioneer Small Cap Value Fund also considered that the Reorganization presents an excellent opportunity for the Pioneer Small Cap Value Fund to acquire investment assets without the obligation to pay commissions or other transaction costs that a fund normally incurs when purchasing securities. This opportunity provides an economic benefit to Pioneer Small Cap Value Fund and its shareholders. 116 CAPITALIZATION The following table sets forth the capitalization of each Fund as of May 31, 2004, and pro forma combined Fund as of May 31, 2004.
Pro Forma Safeco Pioneer Pioneer Small-Cap Small Cap Small Cap Value Fund Value Fund Value Fund May 31, 2004 May 31, 2004 May 31, 2004 -------------- -------------- ------------- Total Net Assets (in thousands) $69,484 $487,436 $556,920 Class A shares ................ $ 4,147 $256,248 $256,248 Class B shares ................ $ 1,380 $149,851 $149,851 Class C shares ................ $ 120 $ 79,412 $ 79,412 Investor Class shares ......... $63,837 N/A $ 69,484 Class R shares ................ N/A $ 1,925 $ 1,925 Net Asset Value Per Share Class A shares ................ $ 19.01 $ 29.70 $ 29.70 Class B shares ................ $ 18.11 $ 28.10 $ 28.10 Class C shares ................ $ 18.17 $ 29.16 $ 29.16 Investor Class shares ......... $ 19.32 N/A $ 29.70 Class R shares ................ N/A $ 29.71 $ 29.71 Shares Outstanding Class A shares ................ 218,133 8,629,200 8,629,200 Class B shares ................ 76,212 5,332,727 5,332,727 Class C shares ................ 6,612 2,723,047 2,723,047 Investor Class shares ......... 3,303,596 N/A 2,339,529 Class R shares ................ N/A 64,816 64,816
It is impossible to predict how many shares of Pioneer Small Cap Value Fund will actually be received and distributed by your Safeco Fund on the Reorganization date. The table should not be relied upon to determine the amount of Pioneer Small Cap Value Fund's shares that will actually be received and distributed. BOARD'S EVALUATION AND RECOMMENDATION For the reasons described above, the Trustees, including the Independent Trustees, approved the Reorganization. In particular, the Trustees determined that the Reorganization is in the best interests of your Safeco Fund. Similarly, the Board of Trustees of Pioneer Small Cap Value Fund, including its Independent Trustees, approved the Reorganization. They also determined that the Reorganization is in the best interests of Pioneer Small Cap Value Fund. The Trustees recommend that the shareholders of your Safeco Fund vote FOR the proposal to approve the Agreement and Plan of Reorganization. 117 TERMS OF EACH AGREEMENT AND PLAN OF REORGANIZATION The Reorganizations o Each Reorganization is scheduled to occur at 4:00 p.m., Eastern time, on December 10, 2004, unless your Safeco Fund and the corresponding Pioneer Fund agree in writing to a later date. Your Safeco Fund will transfer all of its assets to the corresponding Pioneer Fund. The corresponding Pioneer Fund will assume your Safeco Fund's liabilities that are included in the calculation of your Safeco Fund's net asset value on the Closing Date. The net asset value of both Funds will be computed as of 4:00 p.m., Eastern time, on the Closing Date. o Each corresponding Pioneer Fund will issue to the corresponding Safeco Fund Investor Class shares with an aggregate net asset value equal to the net assets attributable to the corresponding Safeco Fund's shares. These shares will immediately be distributed to your Safeco Fund's shareholders in proportion to the relative net asset value of their holdings of your Safeco Fund's shares on the Closing Date. As a result, each Safeco Fund's shareholders will end up as Investor Class shareholders of the corresponding Pioneer Fund. o After the distribution of shares, your Safeco Fund will be liquidated and dissolved. o Each Reorganization is intended to result in no income, gain or loss being recognized for federal income tax purposes and will not take place unless both Funds receive a satisfactory opinion concerning the tax consequences of the Reorganization from Wilmer Cutler Pickering Hale and Dorr LLP, counsel to the Pioneer Funds. Agreement and Plan of Reorganization The shareholders of each Safeco Fund are being asked to approve an Agreement and Plan of Reorganization substantially in the form attached as EXHIBIT A-1 or A-2 (each, a "Plan"). The description of the Plan contained herein is qualified in its entirety by the attached copies, as appropriate. Conditions to Closing each Reorganization. The obligation of each Fund to consummate each Reorganization is subject to the satisfaction of certain conditions, including your Safeco Fund's performance of all of its obligations under the Plan, the receipt of certain documents and financial statements from your Safeco Fund and the receipt of all consents, orders and permits necessary to consummate the Reorganization (see Sections 7 and 8 of the Plan). The obligations of both Funds are subject to the approval of the Plan by the necessary vote of the outstanding shares of your Safeco Fund, in accordance with the provisions of your Trust's trust instrument and by-laws. The Funds' obligations are also subject to the receipt of a favorable opinion of Wilmer Cutler Pickering Hale and Dorr LLP as to the federal income tax consequences of each Reorganization (see Section 8.5 of the Plan). Termination of the Plan. The board of either the Safeco Trust or the corresponding Pioneer Fund may terminate the Plan (even if the shareholders of your Safeco Fund have already approved it) at any time before the Closing Date, if that board believes in good faith that proceeding with the Reorganization would no longer be in the best interests of shareholders. 118 TAX STATUS OF EACH REORGANIZATION Each Reorganization is intended to result in no income, gain or loss being recognized for United States federal income tax purposes and will not take place unless both Funds involved in the Reorganization receive a satisfactory opinion from Wilmer Cutler Pickering Hale and Dorr LLP, counsel to the Pioneer Funds, substantially to the effect that each Reorganization will be a "reorganization" within the meaning of Section 368(a) of the Code. As a result, for federal income tax purposes: o No gain or loss will be recognized by your Safeco Fund upon (1) the transfer of all of its assets to the Pioneer Fund as described in this Proxy Statement/Prospectus or (2) the distribution by your Safeco Fund of Pioneer Fund shares to your Safeco Fund's shareholders; o No gain or loss will be recognized by the Pioneer Fund upon the receipt of your Safeco Fund's assets solely in exchange for the issuance of Pioneer Fund shares to your Safeco Fund and the assumption of your Safeco Fund's liabilities by the corresponding Pioneer Fund; o The basis of the assets of your Safeco Fund acquired by the corresponding Pioneer Fund will be the same as the basis of those assets in the hands of your Safeco Fund immediately before the transfer; o The tax holding period of the assets of your Safeco Fund in the hands of the corresponding Pioneer Fund will include your Safeco Fund's tax holding period for those assets; o You will not recognize gain or loss upon the exchange of your shares of your Safeco Fund solely for the Pioneer Fund shares as part of the Reorganization; o The basis of the Pioneer Fund shares received by you in the Reorganization will be the same as the basis of your shares of your Safeco Fund surrendered in exchange; and o The tax holding period of the Pioneer Fund shares you receive will include the tax holding period of the shares of your Safeco Fund surrendered in the exchange, provided that you held the shares of your Safeco Fund as capital assets on the date of the exchange. In rendering such opinions, counsel shall rely upon, among other things, reasonable assumptions as well as representations of your Safeco Fund and the Pioneer Fund (see the annexes to the Plan). No tax ruling has been or will be received from the Internal Revenue Service ("IRS") in connection with the Reorganizations. An opinion of counsel is not binding on the IRS or a court, and no assurance can be given that the IRS would not assert, or a court would not sustain, a contrary position. You should consult your tax adviser for the particular tax consequences to you of the Reorganization, including the applicability of any state, local or foreign tax laws. 119 PROPOSALS 2(a)-(h) APPROVAL OF INTERIM INVESTMENT ADVISORY AGREEMENT WITH PIONEER Background Having determined to recommend the Reorganizations, the Trustees appointed Pioneer as investment adviser to each Fund commencing August 2, 2004, until the closing of the Reorganizations given that Symetra had indicated that it did not wish to continue to offer investment advisory services to the Safeco Funds. If both the Reorganization and appointment of Pioneer are approved, the interim investment advisory agreement will continue in effect until the closing of the Reorganization. In connection with the retention of Pioneer, the sub-advisory agreement with Bank of Ireland Asset Management (U.S.) Limited with respect to Safeco International Stock Fund, and the sub-advisory agreement with RCM Capital Management LLC with respect to Safeco Large-Cap Growth Fund, were terminated. Interim Investment Advisory Agreement Under the Investment Company Act, shareholders must approve any new investment advisory agreement for the Funds. However, Rule 15a-4 under the Investment Company Act permits your Trustees to appoint an adviser on an interim basis without prior shareholder approval if the new adviser agrees to provide such services on the same terms as the previous adviser and approves the investment advisory agreement with that adviser. An adviser may manage on such an interim basis for a period of 150-days. Because Pioneer will be making the payment to Symetra discussed under "Background to the Reorganizations," any fees that Pioneer would be entitled to under the interim investment advisory agreement will be held in escrow by the Fund until shareholder approval of the agreement is obtained. If shareholders of a Safeco Fund do not approve the interim advisory agreement, Pioneer will not receive the fee under the current investment advisory agreement with SAM but instead would be paid a fee based upon Pioneer's cost in managing the Fund. During this period prior to the meeting, the Fund will be managed as separate Funds and will not be combined with a Pioneer Fund. During this period, you also will not be able to exchange your shares in a Fund for shares of a Pioneer Fund. If the appointment of Pioneer as interim investment adviser is not approved by December 30, 2004, Pioneer will no longer provide advisory services to the Funds, unless an extension of the 150 day period is permitted by a rule or independent position of the staff of the SEC. Reasons for Approving the Interim Investment Advisory Agreement and Board's Recommendation Reasons for Approving the Interim Investment Advisory Agreement and Board's Recommendation The Trustees recommend that the shareholders of the Safeco Funds approve the interim investment advisory agreements. In determining to appoint Pioneer as investment advisor on an interim basis, the Trustees considered many of the same factors on which the recommendation to approve the Reorganizations are based. These factors include: o SAM, the investment adviser to the Safeco Funds until August 2, 2004, was acquired by Symetra. Symetra informed the Trustees that it was not interested in continuing to provide investment advisory services to the Safeco Funds. Consequently, a change in your Fund's investment adviser was necessary. o The resources of Pioneer. At June 30, 2004, Pioneer managed over 62 investment companies and accounts with approximately $35 billion in assets. Pioneer is part of the global asset management group of UniCredito Italiano S.p.A., one of the largest banking groups in Italy, providing investment management and financial services to mutual funds, institutions, and other clients. As of June 30, 2004, assets under management of UniCredito Italiano S.p.A. were approximately $151 billion worldwide. o The track record of Pioneer in managing other investment companies with similar strategies. o Pioneer's willingness to proceed with the Reorganizations and to limit expenses of the Fund as discussed above. o Pioneer's investment process, style and philosophy with respect to equity and fixed income investing. o The expertise of John Carey as portfolio manager of Pioneer Fund and the head of equity investments at Pioneer. o Pioneer's willingness to act as investment adviser to each of the Funds. Safeco Advisory Agreement The following is a summary of the material terms of the Safeco Advisory Agreement. The Safeco Advisory Agreement terminated on August 2, 2004. Services. Under the terms of the Safeco Advisory Agreement, SAM managed the Funds' investments, subject to the supervision of the Board. At its expense, SAM provided office space and all necessary office facilities, equipment and personnel for managing the investments of the Funds. 120 Compensation. As compensation under the Safeco Advisory Agreement, each Safeco Fund paid SAM a monthly advisory fee at an annual rate as listed in the below table of the Fund's average daily net assets calculated each business day and paid monthly, as listed in the table below. In addition, SAM had contractually agreed to reimburse each Fund to the extent a Fund's total annual expenses during any of the Fund's fiscal years, exceed 0.40% of its average daily net asset value in such year. This arrangement included all Fund operating expenses except management fees, Rule 12b-1 fees, brokerage commissions, interest, and extraordinary expenses.
Fund Net Assets Annual Fee ---------------------------------------------------------------------------------- SAFECO BALANCED FUND $0-$250,000,000 0.70 of 1% SAFECO CORE EQUITY FUND $250,000,001-$750,000,000 0.65 of 1% SAFECO GROWTH OPPORTUNITIES FUND $750,000,001-$1,250,000,000 0.60 of 1% SAFECO LARGE-CAP VALUE FUND Over $1,250,000,000 0.55 of 1% SAFECO MULTI-CAP CORE FUND ---------------------------------------------------------------------------------- SAFECO INTERNATIONAL STOCK FUND $0-$250,000,000 1.00 of 1% $250,000,001-$750,000,000 0.90 of 1% Over $750,000,000 0.80 of 1% ---------------------------------------------------------------------------------- SAFECO LARGE-CAP GROWTH FUND $0-$250,000,000 0.80 of 1% $250,000,001-$750,000,000 0.75 of 1% $750,000,001-$1,250,000,000 0.70 of 1% Over $1,250,000,000 0.65 of 1% ---------------------------------------------------------------------------------- SAFECO SMALL-CAP VALUE FUND $0-$250,000,000 0.75 of 1% $250,000,001-$750,000,000 0.70 of 1% $750,000,001-$1,250,000,000 0.65 of 1% Over $1,250,000,000 0.60 of 1% ----------------------------------------------------------------------------------
In addition to the management fee, your Safeco Fund paid SAM, in its capacity as administrator and fund accounting agent an administrative services fee of 0.05% of your Safeco Fund's average daily net assets up to the first $200,000,000 and 0.01% of its net assets thereafter, and an accounting fee of 0.04% of the Fund's average daily net assets up to the first $200,000,000 and 0.01% of its net assets thereafter. The table below shows gross advisory fees paid by each Fund and any expense reimbursements by SAM during the fiscal year ended December 31, 2003:
FUND (In Thousands) ---- -------------- SAFECO BALANCED FUND Advisory Fee ............................ $ 124 Reimbursement ........................... $ 79 SAFECO CORE EQUITY FUND Advisory Fee ............................ $4,663 Reimbursement ........................... $ 353 SAFECO GROWTH OPPORTUNITIES FUND Advisory Fee ............................ $3,156 Reimbursement ........................... $ 499 SAFECO INTERNATIONAL STOCK FUND Advisory Fee ............................ $ 256 Reimbursement ........................... $ 235 SAFECO LARGE-CAP GROWTH FUND Advisory Fee ............................ $ 40 Reimbursement ........................... $ 70 SAFECO LARGE-CAP VALUE FUND Advisory Fee ............................ $ 965 Reimbursement ........................... $ 58
121
FUND (In Thousands) ---- -------------- SAFECO MULTI-CAP CORE FUND Advisory Fee ....................... $523 Reimbursement ...................... $122 SAFECO SMALL-CAP VALUE FUND Advisory Fee ....................... $345 Reimbursement ...................... $149
Limitation of Liability. The Safeco Advisory Agreement provided that SAM shall not be subject to liability to the Funds or to any shareholder of the Funds for any loss suffered by a Fund or its shareholders from or as a consequence of any act or omission of SAM, or of any of the partners, employees or agents of SAM in connection with or pursuant to the Agreement, except by reason of willful misfeasance, bad faith or gross negligence on the part of SAM in the performance of its duties or by reason of reckless disregard by SAM of its obligations and duties under the Agreement. VOTING RIGHTS AND REQUIRED VOTE Each share of your Safeco Fund is entitled to one vote and each fractional share shall be entitled to a proportionate fractional vote. A quorum is required to conduct business at the Meeting. With respect to each Safeco Fund, the presence in person or by proxy of one-third of the outstanding shares of a Safeco Fund entitled to cast votes at the Meeting will constitute a quorum with respect to that Safeco Fund. A favorable vote of a "majority of the outstanding voting securities" of the applicable Fund is required to approve each Proposal. Under the Investment Company Act, the vote of a majority of the outstanding voting securities means the affirmative vote of the lesser of (i) 67% or more of the shares of the applicable Safeco Fund represented at the meeting, if at least 50% of all outstanding shares of the Safeco Fund are represented at the meeting, or (ii) 50% or more of the outstanding shares of the Safeco Fund entitled to vote at the meeting.
--------------------------------------------------------------------------------------------------------------------------------- Shares Quorum Voting --------------------------------------------------------------------------------------------------------------------------------- In General All shares "present" in person or by proxy are Shares "present" in person will be voted in counted towards a quorum. person at the Meeting. Shares present by proxy will be voted in accordance with instructions. --------------------------------------------------------------------------------------------------------------------------------- Broker Non-Vote (where the Considered "present" at Meeting for purposes Broker non-votes do not count as a vote "for" underlying holder has not of quorum. and effectively result in a vote "against" voted and the broker does not Proposals 1(a)-(h), and Proposal 2(a)-(h) if have discretionary authority to less than 50% of the outstanding shares are vote the shares) present at the Meeting --------------------------------------------------------------------------------------------------------------------------------- Proxy with No Voting Considered "present" at Meeting for purposes Voted "for" the proposal. Instruction (other than Broker of quorum. Non-Vote) --------------------------------------------------------------------------------------------------------------------------------- Vote to Abstain Considered "present" at Meeting for purposes Abstentions do not constitute a vote "for" and of quorum. effectively result in a vote "against" Proposals 1(a)-(h), and Proposal 2(a)-(h) if less than 50% of the outstanding shares are present at the Meeting. ---------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT THE PIONEER FUNDS Investment Adviser Pioneer serves as the investment adviser to each Pioneer Fund. Pioneer is an indirect, wholly owned subsidiary of UniCredito Italiano S.p.A., one of the largest banking groups in Italy. Pioneer is part of the global asset management group providing investment management and financial services to mutual funds, institutions and other clients. As of June 30, 2004, assets under management were approximately $150 billion worldwide, including over $35 billion in assets under management by Pioneer. Pioneer's main office is at 60 State Street, Boston, Massachusetts 02109. Pioneer's U.S. mutual fund investment history includes creating one of the first mutual funds in 1928. 122 The Board of Trustees of the Pioneer Funds is responsible for overseeing the performance of each of Pioneer Fund's investment adviser and subadviser, if any, and determining whether to approve and renew the fund's investment advisory agreement and the subadvisory agreements. Pioneer has received an order (the "Exemptive Order") from the SEC that permits Pioneer, subject to the approval of the Pioneer Funds' board of trustees, to hire and terminate a subadviser or to materially modify an existing subadvisory agreement for a Pioneer Fund without shareholder approval. Pioneer retains the ultimate responsibility to oversee and recommend the hiring, termination and replacement of any subadviser. To the extent that the SEC adopts a rule that would supersede the Exemptive Order, Pioneer and the Pioneer Funds intend to rely on such rule to permit Pioneer, subject to the approval of the Pioneer Funds' board of trustees and any other applicable conditions of the rule, to hire and terminate a subadviser or to materially modify an existing subadvisory agreement for a Pioneer Fund without shareholder approval. Buying, Exchanging and Selling Shares of the Pioneer Funds Net Asset Value. Each Pioneer Fund's net asset value is the value of its portfolio of securities plus any other assets minus its operating expenses and any other liabilities. Each Pioneer Fund calculates a net asset value for each class of shares every day the New York Stock Exchange is open when regular trading closes (normally 4:00 p.m. Eastern time). Each Pioneer Fund generally values its portfolio securities using closing market prices or readily available market quotations. When closing market prices or market quotations are not available or are considered by Pioneer to be unreliable, a Pioneer Fund may use a security's fair value. Fair value is the valuation of a security determined on the basis of factors other than market value in accordance with procedures approved by the Pioneer Funds' trustees. Each Pioneer Fund also may use the fair value of a security, including a non-U.S. security, when Pioneer determines that the closing market price on the primary exchange where the security is traded no longer accurately reflects the value of the security due to factors affecting one or more relevant securities markets or the specific issuer. The use of fair value pricing by a Pioneer Fund may cause the net asset value of its shares to differ from the net asset value that would be calculated using closing market prices. International securities markets may be open on days when the U.S. markets are closed. For this reason, the value of any international securities owned by a Pioneer Fund could change on a day you cannot buy or sell shares of the fund. Each Pioneer Fund may use a pricing service or a pricing matrix to value some of its assets. Debt securities with remaining maturities of 60 days or less are valued at amortized cost, which is a method of determining a security's fair value. The Pioneer International Equity Fund primarily invests in securities of non-U.S. issuers and the markets for these securities generally close prior to the time the Fund determines its net asset value. However, the value of these securities continues to be influenced by changes in the global markets. Consequently, the trustees have determined to use the fair value of these securities as of the time the fund determines its net asset value, based upon data from a pricing service. On a daily basis, the pricing service recommends changes, based upon a proprietary model, to the closing market prices of each non-U.S. security held by the fund to reflect the security's fair value at the time the fund determines its net asset value. The fund applies these recommendations in accordance with procedures approved by the trustees. A security's fair value determined in this manner may differ from the security's closing market price on the date the fund determines its net asset value or the opening price of the security on the next business day. The fund's use of this method may significantly affect its net asset value compared to the net asset value that would have been determined using closing market prices. The fund also may take other factors influencing specific markets or issuers into consideration in determining the fair value of a non-U.S. security. You buy or sell shares at the share price. When you buy Class A shares, you pay an initial sales charge unless you qualify for a waiver or reduced sales charge. The Class A shares of the Pioneer Funds you receive in the Reorganizations will not be subject to any sales charge. Moreover, if you own shares in your own name as of the closing of the Reorganizations (i.e., not in the name of a broker or other intermediary) and maintain your account, you may purchase additional Class A shares of the corresponding Pioneer Fund through such account in the future or may exchange those shares for Class A shares of another Pioneer Fund without paying any sales charge. Opening Your Account. If your shares are held in your investment firm's name, the options and services available to you may be different from those described herein or in the Pioneer Fund's prospectus. Ask your investment professional for more information. If you invest in a Pioneer Fund through investment professionals or other financial intermediaries, including wrap programs and fund supermarkets, additional conditions may apply to your investment in a Pioneer Fund, and the investment professional or intermediary may charge you a transaction-based or other fee for its services. These conditions and fees are in addition to those imposed by the Pioneer Fund and its affiliates. You should ask your investment professional or financial intermediary about its services and any applicable fees. Account Options. Use your account application to select options and privileges for your account. You can change your selections at any time by sending a completed account options form to the transfer agent. You may be required to obtain a signature guarantee to make certain changes to an existing account. 123 Call or write to the Pioneer Funds' transfer agent for account applications, account options forms and other account information: PIONEER INVESTMENT MANAGEMENT SHAREHOLDER SERVICES, INC. P.O. Box 55014 Boston, Massachusetts 02205-5014 Telephone 1-800-225-6292 Telephone Transaction Privileges. If your account is registered in your name, you can buy, exchange or sell shares of the Pioneer Funds by telephone. If you do not want your account to have telephone transaction privileges, you must indicate that choice on your account application or by writing to the transfer agent. When you request a telephone transaction the transfer agent will try to confirm that the request is genuine. The transfer agent records the call, requires the caller to provide the personal identification number for the account and sends you a written confirmation. Each Pioneer Fund may implement other confirmation procedures from time to time. Different procedures may apply if you have a non-U.S. account or if your account is registered in the name of an institution, broker-dealer or other third party. Online Transaction Privileges. If your account is registered in your name, you may be able to buy, exchange or sell fund shares online. Your investment firm may also be able to buy, exchange or sell your Pioneer Fund shares online. To establish online transaction privileges complete an account options form, write to the transfer agent or complete the online authorization screen on: www.pioneerfunds.com. To use online transactions, you must read and agree to the terms of an online transaction agreement available on the Pioneer website. When you or your investment firm requests an online transaction the transfer agent electronically records the transaction, requires an authorizing password and sends a written confirmation. The Pioneer Funds may implement other procedures from time to time. Different procedures may apply if you have a non-U.S. account or if your account is registered in the name of an institution, broker-dealer or other third party. You may not be able to use the online transaction privilege for certain types of accounts, including most retirement accounts. Share Price. If you place an order with your investment firm before the New York Stock Exchange closes and your investment firm submits the order to PFD prior to PFD's close of business (usually 5:30 p.m. Eastern time), your share price will be calculated that day. Otherwise, your price per share will be calculated at the close of the New York Stock Exchange after the distributor receives your order. Your investment firm is responsible for submitting your order to the distributor. Buying Pioneer Fund Shares. You may buy shares of each Pioneer Fund from any investment firm that has a sales agreement with PFD. If you do not have an investment firm, please call 1-800-225-6292 for information on how to locate an investment professional in your area. You can buy shares of the Pioneer Funds at the offering price. The distributor may reject any order until it has confirmed the order in writing and received payment. The fund reserves the right to stop offering any class of shares. Minimum Investment Amounts. Your initial investment must be at least $1,000. Additional investments must be at least $100 for Class A shares. You may qualify for lower initial or subsequent investment minimums if you are opening a retirement plan account, establishing an automatic investment plan or placing your trade through your investment firm. The minimum investment amount does not apply for purposes of the Reorganization. Exchanging Pioneer Fund Shares. You may exchange your shares in a Pioneer Fund for shares of the same class of another Pioneer mutual fund. Your exchange request must be for at least $1,000 unless the fund you are exchanging into has a different minimum. Each Pioneer Fund allows you to exchange your shares at net asset value without charging you either an initial or contingent deferred sales charge at the time of the exchange. Shares you acquire as part of an exchange will continue to be subject to any contingent deferred sales charge that applies to the shares you originally purchased. When you ultimately sell your shares, the date of your original purchase will determine your contingent deferred sales charge. Before you request an exchange, consider each Fund's investment objective and policy as described in each fund's prospectus. Selling Pioneer Fund Shares. Your shares will be sold at net asset value per share next calculated after the Pioneer Fund, or authorized agent, and as a broker-dealer, receives your request in good order. If the shares you are selling are subject to a deferred sales charge, it will be deducted from the sale proceeds. Each Pioneer Fund generally will send your sale proceeds by check, bank wire or electronic funds transfer. Normally you will be paid within seven days. If you are selling shares from a non-retirement account or certain IRAs, you may use any of the methods described below. If you are selling shares from a retirement account other than an IRA, you must make your request in writing. You may have to pay federal income taxes on a sale or an exchange. 124 Good Order means that: o You have provided adequate instructions o There are no outstanding claims against your account o There are no transaction limitations on your account o If you have any Pioneer Fund share certificates, you submit them and they are signed by each record owner exactly as the shares are registered o Your request includes a signature guarantee if you: o Are selling over $100,000 or exchanging over $500,000 worth of shares o Changed your account registration or address within the last 30 days o Instruct the transfer agent to mail the check to an address different from the one on your account o Want the check paid to someone other than the account owner(s) o Are transferring the sale proceeds to a Pioneer mutual fund account with a different registration Buying, Exchanging and Selling Pioneer Fund Shares
Buying Shares Through Normally, your investment firm will send your purchase request your investment to the Pioneer Funds' transfer agent. Consult your investment firm professional for more information. Your investment firm may receive a commission from the distributor for your purchase of fund shares. The distributor or its affiliates may pay additional compensation, out of their own assets, to certain investment firms or their affiliates based on objective criteria established by the distributor. By phone or online You can use the telephone or online privilege if you have an existing non-retirement account or certain IRAs. You can purchase additional fund shares by phone if: o You established your bank account of record at least 30 days ago o Your bank information has not changed for at least 30 days o You are not purchasing more than $25,000 worth of shares per account per day o You can provide the proper account identification information When you request a telephone or online purchase, the transfer agent will electronically debit the amount of the purchase from your bank account of record. The transfer agent will purchase Pioneer Fund shares for the amount of the debit at the offering price determined after the transfer agent receives your telephone or online purchase instruction and good funds. It usually takes three business days for the transfer agent to receive notification from your bank that good funds are available in the amount of your investment. In writing, You can purchase Pioneer Fund shares for an existing fund by mail or by fax account by mailing a check to the transfer agent. Make your check payable to the Pioneer Fund. Neither initial nor subsequent investments should be made by third party check. Your check must be in U.S. dollars and drawn on a U.S. bank. Include in your purchase request the fund's name, the account number and the name or names in the account registration. Exchanging Shares Through Normally, your investment firm will send your exchange request to your investment the Pioneer Fund's transfer agent. Consult your investment firm professional for more information about exchanging your shares. By phone or online After you establish your Pioneer Fund account, you can exchange Fund shares by phone or online if: o You are exchanging into an existing account or using the exchange to establish a new account, provided the new account has a registration identical to the original account o The fund into which you are exchanging offers the same class of shares o You are not exchanging more than $500,000 worth of shares per account per day o You can provide the proper account identification information In writing, You can exchange fund shares by mailing or faxing a letter of by mail or by fax instruction to the transfer agent. You can exchange Pioneer Fund shares directly through the Pioneer Fund only if your account is registered in your name. However, you may not fax an exchange request for more than $500,000. Include in your letter: o The name, social security number and signature of all registered owners o A signature guarantee for each registered owner if the amount of the exchange is more than $500,000 o The name of the fund out of which you are exchanging and the name of the fund into which you are exchanging o The class of shares you are exchanging o The dollar amount or number of shares you are exchanging
125
Selling Shares Normally, your investment firm will send your request to sell shares to the Pioneer Funds' transfer agent. Consult your investment professional for more information. Each Pioneer Fund has authorized PFD to act as its agent in the repurchase of Pioneer Fund shares from qualified investment firms. Each Pioneer Fund reserves the right to terminate this procedure at any time. You may sell up to $100,000 per account per day by phone or online. You may sell Pioneer Fund shares held in a retirement plan account by phone only if your account is an eligible IRA (tax penalties may apply). You may not sell your shares by phone or online if you have changed your address (for checks) or your bank information (for wires and transfers) in the last 30 days. You may receive your sale proceeds: o By check, provided the check is made payable exactly as your account is registered o By bank wire or by electronic funds transfer, provided the sale proceeds are being sent to your bank address of record You can sell some or all of your Pioneer Fund shares by writing directly to the Pioneer fund only if your account is registered in your name. Include in your request your name, your social security number, the fund's name and any other applicable requirements as described below. The transfer agent will send the sale proceeds to your address of record unless you provide other instructions. Your request must be signed by all registered owners and be in good order. You may not sell more than $100,000 per account per day by fax. How to contact Pioneer By phone For information or to request a telephone transaction between 8:00 a.m. and 7:00 p.m. (Eastern time) by speaking with a shareholder services representative call 1-800-225-6292 To request a transaction using FactFoneSM call 1-800-225-4321 Telecommunications Device for the Deaf (TDD) 1-800-225-1997 By mail Send your written instructions to: Pioneer Investment Management Shareholder Services, Inc. P.O. Box 55014 Boston, Massachusetts 02205-5014 By fax Fax your exchange and sale requests to: 1-800-225-4240 Exchange Privilege You may make up to four exchange redemptions of $25,000 or more per account per calendar year. Excessive Trading The fund discourages excessive and/or trading practices, such as market timing, that may disrupt portfolio management strategies and harm fund request until it is received in performance. These practices consist of: o Selling shares purchased within the preceding 90 days; o Two or more purchases and redemptions in any 90-day period; or o Any other series of transactions indicative of a timing pattern If we identify an account that engages in such activity, the fund and the distributor reserve the right to refuse or restrict any purchase order (including exchanges) for that account and other accounts under common ownership or control.
Pioneer Fund Shareholder Account Policies Signature Guarantees and Other Requirements. You are required to obtain a signature guarantee when you are: o Requesting certain types of exchanges or sales of Pioneer Fund shares o Redeeming shares for which you hold a share certificate o Requesting certain types of changes for your existing account You can obtain a signature guarantee from most broker-dealers, banks, credit unions (if authorized under state law) and federal savings and loan associations. You cannot obtain a signature guarantee from a notary public. All Pioneer Funds will accept only medallion signature guarantees. A medallion signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency, savings association, or other financial institution that is participating in a medallion program recognized by the Securities Transfer Association. Signature guarantees from financial institutions that are not participating in one of these programs are not accepted. Fiduciaries and corporations are required to submit additional documents to sell Pioneer Fund shares. Exchange Limitation. You may only make up to four exchange redemptions of $25,000 or more per account per calendar year out of a fund. Each fund's exchange limitation is intended to discourage short-term trading in fund shares. Short-term trading can increase the expenses incurred by the fund and make portfolio management less efficient. In determining whether the exchange redemption limit has been reached, Pioneer may aggregate a series of exchanges (each valued at less than $25,000) and/or fund accounts that appear to be under common ownership or control. Pioneer may view accounts for which one person gives instructions or accounts that act on advice provided by a single source to be under common control. The exchange limitation does not apply to automatic exchange transactions or to exchanges made by participants in employer-sponsored retirement plans qualified under Section 401(a) of the IRC. While financial intermediaries that maintain omnibus accounts that 126 invest in the fund are requested to apply the exchange limitation policy to shareholders who hold shares through such accounts, we do not impose the exchange limitation policy at the level of the omnibus account and are not able to monitor compliance by the financial intermediary with this policy. Redemption Fee. Pioneer International Equity Fund has adopted a redemption fee on short term holdings of the fund's shares. If you sell or exchange shares within 30 days of any purchase of fund shares, the fund will apply a 2% fee to the entire amount of your sales proceeds. The fund's redemption fee is intended to discourage short-term trading in fund shares. Short-term trading can increase the expenses incurred by the fund and make portfolio management less efficient. Excessive Trading. The fund discourages excessive and short-term trading practices, such as market timing, that may disrupt portfolio management strategies and harm fund performance. Although there is no generally applied standard in the marketplace as to what level of trading activity is excessive, we may consider trading in the fund's shares to be excessive if: o You sell shares within a short period of time after the shares were purchased; o You make two or more purchases and redemptions within a short period of time; o You enter into a series of transactions that is indicative of a timing pattern or strategy; or o We reasonably believe that you have engaged in such practices in connection with other mutual funds. We monitor selected trades on a daily basis in an effort to detect excessive short-term trading. If we determine that an investor or a client of a broker has engaged in excessive short-term trading that we believe may be harmful to the fund, we will ask the investor or broker to cease such activity and we will refuse to process purchase orders (including purchases by exchange) of such investor, broker or accounts that we believe are under their control. In determining whether to take such actions, we seek to act in a manner that is consistent with the best interests of the fund's shareholders. We also limit the number of exchanges of $25,000 or more in any calendar year. While we use our reasonable efforts to detect excessive trading activity, there can be no assurance that our efforts will be successful or that market timers will not employ tactics designed to evade detection. Frequently, fund shares are held through omnibus accounts maintained by financial intermediaries such as brokers and retirement plan administrators where the holdings of multiple shareholders, such as all the clients of a particular broker, are aggregated. Our ability to monitor trading practices by investors purchasing shares through omnibus accounts is limited and dependent upon the cooperation of the financial intermediary in observing the fund's policies. Minimum Account Size. Each Pioneer Fund requires that you maintain a minimum account value of $500. If you hold less than the minimum in your account because you have sold or exchanged some of your shares, the Pioneer Fund will notify you of its intent to sell your shares and close your account. You may avoid this by increasing the value of your account to at least the minimum within six months of the notice from the fund. Telephone Access. You may have difficulty contacting the Pioneer Fund by telephone during times of market volatility or disruption in telephone service. If you are unable to reach the Pioneer Fund by telephone, you should communicate with the fund in writing. Share Certificates. Normally, your shares will remain on deposit with the transfer agent and certificates will not be issued. If you are legally required to obtain a certificate, you may request one for your Class A shares only. A fee may be charged for this service. Any share certificates of the Safeco Funds outstanding at the Closing of the Reorganization will be deemed to be cancelled and will no longer represent shares of the Funds. Other Policies. Each Pioneer Fund may suspend transactions in shares when trading on the New York Stock Exchange is closed or restricted, when an emergency exists that makes it impracticable, as determined by the SEC, for the fund to sell or value its portfolio securities or with the permission of the SEC. Each Pioneer Fund or PFD may revise, suspend or terminate the account options and services available to shareholders at any time. Each Pioneer Fund reserves the right to redeem in kind by delivering portfolio securities to a redeeming shareholder, provided that the Pioneer Fund must pay redemptions in cash if a shareholder's aggregate redemptions in a 90 day period are less than $250,000 or 1% of the fund's net assets. Dividends and Capital Gains Each Pioneer Fund generally pays any distributions of net short- and long-term capital gains and dividends from any net investment income at least annually. 127 Each Pioneer Fund may also pay dividends and capital gain distributions at other times if necessary for the fund to avoid U.S. federal income or excise tax. If you invest in a Pioneer Fund close to the time that the fund makes a distribution, generally you will pay a higher price per share and you will pay taxes on the amount of the distribution whether you reinvest the distribution or receive it as cash. Taxes For U.S. federal income tax purposes, distributions from each Pioneer Fund's net long-term capital gains (if any) are considered long-term capital gains and may be taxable to you at different maximum rates depending upon their source and other factors. Short-term capital gain distributions for each Pioneer Fund are taxable as ordinary income. Dividends from net investment income are taxable either as ordinary income or, if so designated by the fund and certain other conditions, including holding period requirements, are met by the fund and the shareholder, as "qualified dividend income" taxable to individual shareholders at the maximum 15% U.S. federal tax rate. Dividends and distributions generally are taxable, whether you take payment in cash or reinvest them to buy additional Pioneer Fund shares. When you sell or exchange Pioneer Fund shares you will generally recognize a capital gain or capital loss in an amount equal to the difference between the net amount of sale proceeds (or, in the case of an exchange, the fair market value of the shares) that you receive and your tax basis for the shares that you sell or exchange. In January of each year each Pioneer Fund will mail to you information about your dividends, distributions and any shares you sold in the previous calendar year. You must provide your social security number or other taxpayer identification number to the fund along with the certifications required by the Internal Revenue Service when you open an account. If you do not or if it is otherwise legally required to do so, the Pioneer Fund will withhold 28% "backup withholding" tax from your dividends and distributions, sale proceeds and any other payments to you. You should ask your tax adviser about any federal, state and foreign tax considerations, including possible additional withholding taxes for non-U.S. shareholders. You may also consult the "Tax Status" section of each Pioneer Fund's statement of additional information for a more detailed discussion of U.S. federal income tax considerations, including qualified dividend income considerations that may affect the Pioneer Fund and its shareholders. Pioneer Funds' Class A Rule 12b-1 Plans. As described above, each Pioneer Fund has adopted a Rule 12b-1 plan for its Class A shares (the "Class A Plans" or the "Plans"). Because the 12b-1 fees payable under each Plan are an ongoing expense, over time they may increase the cost of your investment and your shares may cost more than shares that are not subject to a distribution or service fee or sales charge. Compensation and Services. Each Class A Plan is a reimbursement plan, and distribution expenses of PFD are expected to substantially exceed the distribution fees paid by the fund in a given year. Pursuant to each Class A Plan the fund reimburses PFD for its actual expenditures to finance any activity primarily intended to result in the sale of Class A shares or to provide services to holders of Class A shares, provided the categories of expenses for which reimbursement is made are approved by the board of trustees. The expenses of the fund pursuant to the Class A Plan are accrued daily at a rate which may not exceed the annual rate of 0.25% of the fund's average daily net assets attributable to Class A shares. Trustee Approval and Oversight. Each Plan was last approved by the board of trustees of each Pioneer Fund, including a majority of the independent trustees, by votes cast in person at meetings called for the purpose of voting on the Plan on December 6, 2003. Pursuant to the Plan, at least quarterly, PFD will provide each fund with a written report of the amounts expended under the Plan and the purpose for which these expenditures were made. The trustees review these reports on a quarterly basis to determine their continued appropriateness. Term, Termination and Amendment. Each Plan's adoption, terms, continuance and termination are governed by Rule 12b-1 under the Investment Company Act. The board of trustees believes that there is a reasonable likelihood that the Plans will benefit each fund and its current and future shareholders. The Plans may not be amended to increase materially the annual percentage limitation of average net assets which may be spent for the services described therein without approval of the shareholders of the fund affected thereby, and material amendments of the Plans must also be approved by the trustees as provided in Rule 12b-1. 128 FINANCIAL HIGHLIGHTS The following tables show the financial performance of each Pioneer Fund for the past five fiscal years and, if applicable, for any recent semiannual period (or the period during which each Pioneer Fund has been in operation, if less than five years). Certain information reflects financial results for a single Pioneer Fund share. "Total return" shows how much an investment in a Pioneer Fund would have increased or decreased during each period, assuming you had reinvested all dividends and other distributions. In the case of each Pioneer Fund, each fiscal year ended on or after the fiscal year ended June 30, 2002 has been audited by Ernst & Young LLP, each Pioneer Fund's independent registered public accounting firm, as stated in their reports incorporated by reference in this registration statement. For fiscal years prior to the fiscal year ended June 30, 2002, the financial statements of each Pioneer Fund were audited by Arthur Anderson LLP. The information for any semiannual period has not been audited. PIONEER BALANCED FUND FINANCIAL HIGHLIGHTS
Six Months Ended Year 6/30/04 Ended CLASS A (Unaudited) 12/31/03 ------- ----------- -------- Net asset value, beginning of period ......................... $ 9.47 $ 8.29 -------- -------- Increase (decrease) from investment operations: Net investment income ....................................... $ 0.06 $ 0.12 Net realized and unrealized gain (loss) on investments ...... 0.09 1.20 -------- -------- Net increase (decrease) from investment operations .......... $ 0.15 $ 1.32 Distributions to shareholders: Net investment income ....................................... (0.05) (0.14) Net increase (decrease) in net asset value .................. $ 0.10 $ 1.18 -------- -------- Net asset value, end of period .............................. $ 9.57 $ 9.47 -------- -------- Total return* ................................................ 1.59% 15.99% ======== ======== Ratio of net expenses to average net assets+ ................. 1.31%** 1.38% Ratio of net investment income to average net assets+ ....... 1.31%** 1.25% Portfolio turnover rate ..................................... 34%** 44% Net assets, end of period (in thousands) .................... $103,881 $107,265 Ratios with reductions for fees paid indirectly: Net expenses ................................................ 1.31%** 1.38% Net investment income ....................................... 1.31%** 1.25% Year Year Year Year Ended Ended Ended Ended CLASS A 12/31/02 12/31/01 (a) 12/31/00 12/31/99 ------- -------- ------------ -------- -------- Net asset value, beginning of period ......................... $ 9.46 $ 9.94 $ 9.73 $ 9.74 -------- -------- -------- -------- Increase (decrease) from investment operations: Net investment income ....................................... $ 0.11 $ 0.19 $ 0.30 $ 0.31 Net realized and unrealized gain (loss) on investments ...... (1.17) (0.47) 0.22 (0.01) -------- -------- -------- -------- Net increase (decrease) from investment operations .......... $ (1.06) $ (0.28) $ 0.52 $ 0.30 Distributions to shareholders: Net investment income ....................................... (0.11) (0.20) (0.31) (0.31) Net increase (decrease) in net asset value .................. $ (1.17) $ (0.48) $ 0.21 $ (0.01) -------- -------- -------- -------- Net asset value, end of period .............................. $ 8.29 $ 9.46 $ 9.94 $ 9.73 -------- -------- -------- -------- Total return* ................................................ (11.20)% (2.87)% 5.38% 3.15% ======== ======== ======== ======== Ratio of net expenses to average net assets+ ................. 1.41% 1.31% 1.23% 1.23% Ratio of net investment income to average net assets+ ....... 1.19% 1.97% 2.96% 3.21% Portfolio turnover rate ..................................... 180% 133% 17% 46% Net assets, end of period (in thousands) .................... $106,734 $141,746 $162,855 $214,866 Ratios with reductions for fees paid indirectly: Net expenses ................................................ 1.41% 1.30% 1.20% 1.21% Net investment income ....................................... 1.19% 1.98% 2.99% 3.23%
---------- * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions, the complete redemption of the investment at net asset value at the end of each period, and no sales charges. Total return would be reduced if sales charges were taken into account. ** Annualized. + Ratios with no reduction for fees paid indirectly. (a) At January 1, 2001, the Fund began accreting discounts and amortizing premiums on debt securities. The effect of this change for the year ended December 31, 2001 was to decrease net investment income by less than one cent per share, increase net realized and unrealized gain (loss) by less than one cent per share and decrease the ratio of net investment income to average net assets assuming reduction for fees paid indirectly from 2.02% to 1.98%. Per share ratios and supplemental data for periods prior to January 1, 2002, have not been restated to reflect this change in presentation. 129 PIONEER FUND FINANCIAL HIGHLIGHTS
Six Months Ended Year 6/30/04 Ended CLASS A (Unaudited) 12/31/03 ------- ----------- -------- Net asset value, beginning of period .......................... $ 38.00 $ 30.76 ---------- ---------- Increase (decrease) from investment operations: Net investment income ........................................ $ 0.14 $ 0.28 Net realized and unrealized gain (loss) on investments and foreign currency transactions ............................... 0.63 7.24 ---------- ---------- Net increase (decrease) from investment operations ........... $ 0.77 $ 7.52 Distributions to shareholders: Net investment income ........................................ $ (0.13) $ (0.28) Net realized gain ............................................ -- -- ---------- ---------- Net increase (decrease) in net asset value ................... $ 0.64 $ 7.24 ---------- ---------- Net asset value, end of period ................................ $ 38.64 $ 38.00 ========== ========== Total return* ................................................. 2.03% 24.58% Ratio of net expenses to average net assets+ .................. 1.05%** 1.09% Ratio of net investment income to average net assets+ ........ 0.71%** 0.86% Portfolio turnover rate ...................................... 22%** 6% Net assets, end of period (in thousands) ..................... $5,328,526 $5,370,888 Ratios with reductions for fees paid indirectly: Net expenses ................................................. 1.05%** 1.09% Net investment income ........................................ 0.71%** 0.86% Year Year Year Year Ended Ended Ended Ended CLASS A 12/31/02 12/31/01 12/31/00 12/31/99 ------- -------- -------- -------- -------- Net asset value, beginning of period .......................... $ 38.87 $ 44.26 $ 47.60 $ 43.30 ---------- ---------- ---------- ---------- Increase (decrease) from investment operations: Net investment income ........................................ $ 0.27 $ 0.18 $ 0.16 $ 0.18 Net realized and unrealized gain (loss) on investments and foreign currency transactions ............................... (8.12) (5.11) (0.14) 6.51 ---------- ---------- ---------- ---------- Net increase (decrease) from investment operations ........... $ (7.85) $ (4.93) $ 0.02 $ 6.69 Distributions to shareholders: Net investment income ........................................ $ (0.26) $ (0.16) $ (0.12) $ (0.17) Net realized gain ............................................ -- (0.30) (3.24) (2.22) ---------- ---------- ---------- ---------- Net increase (decrease) in net asset value ................... $ (8.11) $ (5.39) $ (3.34) $ 4.30 ---------- ---------- ---------- ---------- Net asset value, end of period ................................ $ 30.76 $ 38.87 $ 44.26 $ 47.60 ========== ========== ========== ========== Total return* ................................................. (20.26%) (11.13%) 0.12% 15.54% Ratio of net expenses to average net assets+ .................. 1.11% 1.14% 1.11% 1.10% Ratio of net investment income to average net assets+ ........ 0.75% 0.43% 0.31% 0.39% Portfolio turnover rate ...................................... 7% 6% 20% 10% Net assets, end of period (in thousands) ..................... $4,584,649 $6,140,520 $6,645,954 $6,638,130 Ratios with reductions for fees paid indirectly: Net expenses ................................................. 1.10% 1.13% 1.09% 1.09% Net investment income ........................................ 0.76% 0.44% 0.33% 0.40%
---------- * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions, the complete redemption of the investment at net asset value at the end of each period, and no sales charges. Total return would be reduced if sales charges were taken into account. ** Annualized. + Ratios with no reduction for fees paid indirectly. 130 PIONEER INTERNATIONAL EQUITY FUND FINANCIAL HIGHLIGHTS
Year Year CLASS A Ended Ended ------- 3/31/04 3/31/03 Net asset value, beginning of period ................................. $ 11.64 $ 15.94 ------- ------- Increase (decrease) from investment operations: Net investment income (loss) ........................................ $ 0.10 $ 0.05 Net realized and unrealized gain (loss)on investments and foreign currency transactions .............................................. 5.81 (4.35) Net increase (decrease) from investment operations .................. $ 5.91 $ (4.30) Distributions to shareholders: Net investment income ............................................... -- -- Net realized gain ................................................... -- -- ------- ------- Net increase (decrease) in net asset value .......................... $ 5.91 $ (4.30) ------- ------- Net asset value, end of period ....................................... $ 17.55 $ 11.64 ======= ======= Total return* ........................................................ 50.77% (26.98)% Ratio of net expenses to average net assets+ ......................... 1.75% 1.76% Ratio of net investment income (loss) to average net assets+ ......... 0.67% 0.30% Portfolio turnover rate .............................................. 169% 45% Net assets, end of period (in thousands) ............................. $18,345 $11,578 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses ........................................................ 2.80% 2.94% Net investment loss ................................................. (0.38)% (0.88)% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses ........................................................ 1.75% 1.75% Net investment income (loss) ........................................ 0.67% 0.31% Year Year Year CLASS A Ended Ended Ended ------- 3/31/02 3/31/01 3/31/00 Net asset value, beginning of period ................................. $ 16.81 $ 27.50 $ 18.55 ------- ------- ------- Increase (decrease) from investment operations: Net investment income (loss) ........................................ $ (0.06) $ (0.16) $ (0.06) Net realized and unrealized gain (loss)on investments and foreign currency transactions .............................................. (0.78) (9.25) 9.09 Net increase (decrease) from investment operations .................. $ (0.84) $ (9.41) $ 9.03 Distributions to shareholders: Net investment income ............................................... -- -- (0.08) Net realized gain ................................................... (0.03) (1.28) -- ------- ------- ------- Net increase (decrease) in net asset value .......................... $ (0.87) $(10.69) $ 8.95 ------- ------- ------- Net asset value, end of period ....................................... $ 15.94 $ 16.81 $ 27.50 ======= ======= ======= Total return* ........................................................ (4.98)% (34.95)% 48.62% Ratio of net expenses to average net assets+ ......................... 1.75% 1.77% 1.76% Ratio of net investment income (loss) to average net assets+ ......... (0.35)% (0.75)% (0.23)% Portfolio turnover rate .............................................. 77% 50% 59% Net assets, end of period (in thousands) ............................. $16,455 $20,689 $41,276 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses ........................................................ 2.68% 2.12% 2.10% Net investment loss ................................................. (1.28)% (1.10) (0.57)% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses ........................................................ 1.75% 1.75% 1.75% Net investment income (loss) ........................................ (0.35)% (0.73)% (0.22)%
---------- * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions, the complete redemption of the investment at net asset value at the end of each period, and no sales charges. Total return would be reduced if sales charges were taken into account. + Ratios with no reduction for fees paid indirectly. 131 PIONEER GROWTH SHARES FINANCIAL HIGHLIGHTS
Six Months Ended Year 6/30/04 Ended CLASS A (Unaudited) 12/31/03 ------- ----------- -------- Net asset value, beginning of period ..................... $ 11.42 $ 9.05 -------- -------- Increase (decrease) from investment operations: Net investment loss ..................................... $ (0.02) $ (0.04) Net realized and unrealized gain (loss) on investments .. (0.13) 2.41 -------- -------- Net increase (decrease) from investment operations ...... $ (0.15) $ 2.37 Distributions to shareholders: Net realized gain ....................................... -- -- -------- -------- Net increase (decrease) in net asset value .............. $ (0.15) $ 2.37 -------- -------- Net asset value, end of period .......................... $ 11.27 $ 11.42 ======== ======== Total return* ............................................ (1.31)% 26.19% Ratio of net expenses to average net assets+ ............. 1.39%** 1.45% Ratio of net investment loss to average net assets+ ...... (0.44)%** (0.42)% Portfolio turnover rate .................................. 197%** 47% Net assets, end of period (in thousands) ................. $486,992 $516,234 Ratios with reductions for fees paid indirectly: Net expenses ............................................ 1.39%** 1.45% Net investment loss ..................................... (0.44)%** (0.42)% Year Year Year Year Ended Ended Ended Ended CLASS A 12/31/02 (a) 12/31/01 12/31/00 12/31/99 ------- ------------ -------- -------- -------- Net asset value, beginning of period ..................... $ 13.90 $ 17.21 $ 20.16 $ 20.34 -------- -------- ---------- ---------- Increase (decrease) from investment operations: Net investment loss ..................................... $ (0.04) $ (0.04) $ (0.09) $ (0.09) Net realized and unrealized gain (loss) on investments .. (4.81) (3.27) (1.81) 1.59 -------- -------- ---------- ---------- Net increase (decrease) from investment operations ...... $ (4.85) $ (3.31) $ (1.90) $ 1.50 Distributions to shareholders: Net realized gain ....................................... -- -- (1.05) (1.68) -------- -------- ---------- ---------- Net increase (decrease) in net asset value .............. $ (4.85) $ (3.31) $ (2.95) $ (0.18) -------- -------- ---------- ---------- Net asset value, end of period .......................... $ 9.05 $ 13.90 $ 17.21 $ 20.16 ======== ======== ========== ========== Total return* ............................................ (34.89)% (19.23)% (9.57)% 7.40% Ratio of net expenses to average net assets+ ............. 1.39% 1.18% 1.22% 1.02% Ratio of net investment loss to average net assets+ ...... (0.39)% (0.29)% (0.60)% (0.41)% Portfolio turnover rate .................................. 88% 111% 58% 48% Net assets, end of period (in thousands) ................. $452,070 $836,149 $1,197,025 $1,935,072 Ratios with reductions for fees paid indirectly: Net expenses ............................................ 1.38% 1.16% 1.19% 1.00% Net investment loss ..................................... (0.38)% (0.27)% (0.57)% (0.39)%
---------- (a) The per share data presented above is based upon the average shares outstanding for the year presented. * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions, the complete redemption of the investment at net asset value at the end of each period, and no sales charges. Total return would be reduced if sales charges were taken into account. ** Annualized. + Ratio with no reduction for fees paid indirectly. 132 PIONEER VALUE FUND FINANCIAL HIGHLIGHTS
Six Months Ended Year 3/31/04 Ended CLASS A (Unaudited) 9/30/03 ------- ----------- ------- Net asset value, beginning of period .......................... $ 16.25 $ 15.29 ---------- ---------- Increase (decrease) from investment operations: Net investment income ........................................ $ 0.07 $ 0.11 Net realized and unrealized gain (loss) on investments and foreign currency transactions ............................... 2.52 3.20 ---------- ---------- Net increase (decrease) from investment operations ........... $ 2.59 $ 3.31 Distributions to shareholders: Net investment income ........................................ (0.08) (0.24) Net realized gain ............................................ (0.04) (2.11) ---------- ---------- Net increase (decrease) in net asset value ................... $ 2.47 $ 0.96 ---------- ---------- Net asset value, end of period ............................... $ 18.72 $ 16.25 ========== ========== Total return* ................................................. 15.98% 22.94% Ratio of net expenses to average net assets ................... 1.06%** 1.19% Ratio of net investment income to average net assets+ ......... 0.70%** 0.85% Portfolio turnover rate ....................................... 35%** 40% Net assets, end of period (in thousands) ...................... $3,843,212 $3,424,962 Ratios assuming reduction for fees paid indirectly: Net expenses ................................................. 1.06%** 1.19% Net investment income ........................................ 0.70%** 0.85% Year Year Year Year Ended Ended Ended Ended CLASS A 9/30/02 9/30/01 9/30/00 9/30/99 ------- ------- ------- ------- ------- Net asset value, beginning of period .......................... $ 19.12 $ 22.67 $ 20.16 $ 18.32 ---------- ---------- ---------- ---------- Increase (decrease) from investment operations: Net investment income ........................................ $ 0.15 $ 0.17 $ 0.20 $ 0.21 Net realized and unrealized gain (loss) on investments and foreign currency transactions ............................... (3.17) (2.05) 3.0 21.97 ---------- ---------- ---------- ---------- Net increase (decrease) from investment operations ........... $ (3.02) $ (1.88) $ 3.22 $ 2.18 Distributions to shareholders: Net investment income ........................................ (0.09) (0.14) (0.20) (0.19) Net realized gain ............................................ (0.72) (1.53) (0.51) (0.15) ---------- ---------- ---------- ---------- Net increase (decrease) in net asset value ................... $ (3.83) $ (3.55) $ 2.51 $ 1.84 ---------- ---------- ---------- ---------- Net asset value, end of period ............................... $ 15.29 $ 19.12 $ 22.67 $ 20.16 ========== ========== ========== ========== Total return* ................................................. (16.78)% (8.88)% 16.29% 11.86% Ratio of net expenses to average net assets ................... 1.16% 1.01% 0.96% 0.96% Ratio of net investment income to average net assets+ ......... 0.74% 0.76% 0.81% 0.93% Portfolio turnover rate ....................................... 61% 3% 3% 12% Net assets, end of period (in thousands) ...................... $3,016,623 $3,885,560 $4,614,739 $5,125,858 Ratios assuming reduction for fees paid indirectly: Net expenses ................................................. 1.16% 0.99% 0.94% 0.95% Net investment income ........................................ 0.74% 0.78% 0.83% 0.94%
---------- * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions, the complete redemption of the investment at net asset value at the end of each period, and no sales charges. Total return would be reduced if sales charges were taken into account. ** Annualized. + Ratios assuming no reduction for fees paid indirectly. 133 PIONEER MID CAP VALUE FUND FINANCIAL HIGHLIGHTS
Six Months Ended Year 4/30/04 Ended CLASS A (Unaudited) 10/31/03 ------- ----------- -------- Net asset value, beginning of period ............................ $ 22.25 $ 16.93 ---------- ---------- Increase (decrease) from investment operations: Net investment income (loss) ................................... $ 0.01 $ 0.04 Net realized and unrealized gain (loss) on investments ......... 2.03 5.28 ---------- ---------- Net increase (decrease) from investment operations ............. $ 2.04 $ 5.32 Distributions to shareholders: Net investment income .......................................... (0.03) -- Net realized gain .............................................. (0.49) -- ---------- ---------- Net increase (decrease) in net asset value ..................... 1.52 $ 5.32 ---------- ---------- Net asset value, end of period ................................. $ 23.77 $ 22.25 ========== ========== Total return* ................................................... 9.37% 31.42% Ratio of net expenses to average net assets+ .................... 1.19%**(a) 1.37% Ratio of net investment income (loss) to average net assets+ .... 0.08%**(a) 0.24% Portfolio turnover rate ......................................... 46%** 58% Net assets, end of period (in thousands) ........................ $1,363,097 $1,208,400 Ratios with reduction for fees paid indirectly: Net expenses ................................................... 1.19%**(a) 1.37% Net investment income (loss) ................................... 0.08%**(a) 0.24% Year Year Year Year Ended Ended Ended Ended CLASS A 10/31/02 10/31/01 10/31/00 10/31/99 ------- -------- -------- -------- -------- Net asset value, beginning of period ............................ $ 19.29 $ 20.83 $ 19.90 $ 19.02 -------- -------- -------- ---------- Increase (decrease) from investment operations: Net investment income (loss) ................................... $ (0.02) $ (0.01) $ 0.11 $ 0.12 Net realized and unrealized gain (loss) on investments ......... (0.97) 0.34 3.46 1.70 -------- -------- -------- ---------- Net increase (decrease) from investment operations ............. $ (0.99) $ 0.33 $ 3.57 $ 1.82 Distributions to shareholders: Net investment income .......................................... -- -- -- (0.02) Net realized gain .............................................. (1.37) (1.87) (2.64) (0.92) -------- -------- -------- ---------- Net increase (decrease) in net asset value ..................... $ (2.36) $ (1.54) $ 0.93 $ 0.88 -------- -------- -------- ---------- Net asset value, end of period ................................. $ 16.93 $ 19.29 $ 20.83 $ 19.90 ======== ======== ======== ========== Total return* ................................................... (5.99)% 1.85% 20.00% 10.02% Ratio of net expenses to average net assets+ .................... 1.30% 1.24% 1.13% 1.18% Ratio of net investment income (loss) to average net assets+ .... (0.09)% 0.01% 0.27% 0.37% Portfolio turnover rate ......................................... 65% 95% 70% 75% Net assets, end of period (in thousands) ........................ $890,856 $921,310 $945,583 $1,067,562 Ratios with reduction for fees paid indirectly: Net expenses ................................................... 1.30% 1.22% 1.11% 1.16% Net investment income (loss) ................................... (0.09)% 0.03% 0.29% 0.39%
---------- * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions, the complete redemption of the investment at net asset value at the end of each period, and no sales charges. Total return would be reduced if sales charges were taken into account. ** Annualized. + Ratios with no reduction for fees paid indirectly. (a) In the absence of the negative printing fees in the statement of operations, which relates to a change in estimate for printing fees in the period ended October 31, 2003, the gross expense ratio and net investment income ratio to average net assets would have been 1.20% and 0.07%, respectively. 134 PIONEER SMALL CAP VALUE FUND FINANCIAL HIGHLIGHTS
Six Months Ended Year 5/31/04 Ended CLASS A (Unaudited) 11/30/03 ------- ----------- -------- Net asset value, beginning of period ........................ $ 27.10 $ 21.51 -------- -------- Increase (decrease) from investment operations: Net investment loss ........................................ $ (0.07) $ (0.07) Net realized and unrealized gain (loss) on investments and futures contracts ......................................... 2.67 5.78 -------- -------- Net increase (decrease) from investment operations ......... $ 2.60 $ 5.71 Distributions to shareholders: Net realized gain .......................................... -- (0.12) -------- -------- Net increase (decrease) in net asset value ................. $ 2.60 $ 5.59 -------- -------- Net asset value, end of period ............................. $ 29.70 $ 27.10 ======== ======== Total return* ............................................... 9.59% 26.56% Ratio of net expenses to average net assets+ ................ 1.51%** 1.66% Ratio of net investment loss to average net assets+ ......... (0.50)%* (0.32)% Portfolio turnover rate ..................................... 31%** 37% Net assets, end of period (in thousands) .................... $256,248 $201,892 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses ............................................... 1.51%** 1.66% Net investment loss ........................................ (0.50)%** (0.32)% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses ............................................... 1.51%** 1.65% Net investment loss ........................................ (0.50)%** (0.31)% Year Year Year Year Ended Ended Ended Ended CLASS A 11/30/02 11/30/01 11/30/00 11/30/99 ------- -------- -------- -------- -------- Net asset value, beginning of period ........................ $ 22.46 $ 20.10 $ 17.40 $ 13.85 -------- ------- ------- ------- Increase (decrease) from investment operations: Net investment loss ........................................ $ (0.24) $ (0.09) $ (0.12) $ (0.08) Net realized and unrealized gain (loss) on investments and futures contracts ......................................... (0.69) 3.29 3.13 3.63 -------- ------- ------- ------- Net increase (decrease) from investment operations ......... $ (0.93) $ 3.20 $ 3.01 $ 3.55 ------- ------- Distributions to shareholders: Net realized gain .......................................... (0.02) (0.84) (0.31) -- -------- ------- ------- ------- Net increase (decrease) in net asset value ................. $ (0.95) $ 2.36 $ 2.70 $ 3.55 -------- ------- ------- ------- Net asset value, end of period ............................. $ 21.51 $ 22.46 $ 20.10 $ 17.40 ======== ======= ======= ======= Total return* ............................................... (4.16)% 15.92% 17.26% 25.63% Ratio of net expenses to average net assets+ ................ 1.65% 1.79% 1.72% 2.02% Ratio of net investment loss to average net assets+ ......... (0.49)% (0.33)% (0.27)% (0.71)% Portfolio turnover rate ..................................... 31% 49% 61% 78% Net assets, end of period (in thousands) .................... $139,170 $73,855 $58,323 $33,714 Ratios with no waiver of management fees and assumption of expenses by PIM and no reduction for fees paid indirectly: Net expenses ............................................... 1.65% 1.79% 1.72% 2.02% Net investment loss ........................................ (0.49)% (0.33)% (0.27)% (0.71)% Ratios with waiver of management fees and assumption of expenses by PIM and reduction for fees paid indirectly: Net expenses ............................................... 1.63% 1.76% 1.69% 1.98% Net investment loss ........................................ (0.47)% (0.30)% (0.24)% (0.67)%
---------- * Assumes initial investment at net asset value at the beginning of each period, reinvestment of all distributions, the complete redemption of the investment at net asset value at the end of each period, and no sales charges. Total return would be reduced if sales charges were taken into account. ** Annualized + Ratios with no reduction for fees paid indirectly. 135 INFORMATION CONCERNING THE MEETING Solicitation of Proxies In addition to the mailing of these proxy materials, proxies may be solicited by telephone, by fax or in person by the trustees and officers of your Safeco Fund or its affiliates, including personnel of your Safeco Fund's transfer agent, Pioneer Funds' investment adviser, Pioneer, Pioneer Funds' transfer agent, PIMSS, or by broker-dealer firms. Georgeson Shareholder Communications Corporation, 17 State Street, New York, NY 10004, has been retained to provide proxy solicitation services to the Funds at a cost of approximately $30,000. Pioneer and Symetra will bear the cost of such solicitation. Revoking Proxies A Safeco Fund shareholder signing and returning a proxy has the power to revoke it at any time before it is exercised: o by filing a written notice of revocation with your Safeco Fund's transfer agent, Safeco Services Corporation, at 4854 154th Place, N.E., Redmond, WA 98052, or o by returning a duly executed proxy with a later date before the time of the Meeting, or o if a shareholder has executed a proxy but is present at the Meeting and wishes to vote in person, by notifying the secretary of your Safeco Fund (without complying with any formalities) at any time before it is voted. Being present at the Meeting alone does NOT revoke a previously executed and returned proxy. Outstanding Shares and Quorum Only shareholders of record on October 8, 2004 (the "record date") are entitled to notice of and to vote at the Meetings. As of the record date, the following number of shares of each Safeco Fund were outstanding.
Shares Outstanding Safeco Fund (as of October 8, 2004) ----------- ----------------------- Safeco Balanced Fund ..................... 1,524,501.995 Safeco Core Equity Fund .................. 37,767,966.955 Safeco Growth Opportunities Fund ......... 19,115,534.708 Safeco International Stock Fund .......... 3,191,887.818 Safeco Large-Cap Growth Fund ............. 694,809.278 Safeco Large-Cap Value Fund .............. 7,551,928.230 Safeco Multi-Cap Core Fund ............... 3,514,922.442 Safeco Small-Cap Value Fund .............. 3,908,412.105
Other Business Your Safeco Fund's board of trustees knows of no business to be presented for consideration at the Meetings other than Proposals 1(a)-(h) and 2(a)-(h). If other business is properly brought before a Meeting, proxies will be voted according to the best judgment of the persons named as proxies. Adjournments If, by the time scheduled for a Meeting, a quorum of shareholders of a Fund is not present or if a quorum is present but sufficient votes "for" the proposals have not been received, the persons named as proxies may propose the Meeting with respect to one or more of the Funds to another date and time, and the Meeting may be held as adjourned within a reasonable time after the date set for the original Meeting for that Fund without further notice. Any such adjournment will require the affirmative vote of a majority of the votes cast on the question in person or by proxy at the session of the Meeting to be adjourned. The persons named as proxies will vote all proxies in favor of the adjournment that voted in favor of the proposal or that abstained. They will vote against such adjournment those proxies required to be voted against the proposal. Broker non-votes will be disregarded in the vote for adjournment. If the adjournment requires setting a new record date or the adjournment is for more than 120 days of the original Meeting (in which case the board of trustees of your Safeco Fund will set a new record date), your Safeco Fund will give notice of the adjourned meeting to its shareholders. 136 Telephone Voting In addition to soliciting proxies by mail, by fax or in person, your Safeco Fund may also arrange to have votes recorded by telephone by officers and employees of your Safeco Fund or by personnel of the adviser or transfer agent or a third party solicitation firm. The telephone voting procedure is designed to verify a shareholder's identity, to allow a shareholder to authorize the voting of shares in accordance with the shareholder's instructions and to confirm that the voting instructions have been properly recorded. If these procedures were subject to a successful legal challenge, these telephone votes would not be counted at the Meeting. Your Safeco Fund has not obtained an opinion of counsel about telephone voting, but is currently not aware of any challenge. o A shareholder will be called on a recorded line at the telephone number in the Fund's account records and will be asked to provide the shareholder's social security number or other identifying information. o The shareholder will then be given an opportunity to authorize proxies to vote his or her shares at the Meeting in accordance with the shareholder's instructions. o To ensure that the shareholder's instructions have been recorded correctly, the shareholder will also receive a confirmation of the voting instructions by mail. o A toll-free number will be available in case the voting information contained in the confirmation is incorrect. o If the shareholder decides after voting by telephone to attend the Meeting, the shareholder can revoke the proxy at that time and vote the shares at the Meeting. Internet Voting You will also have the opportunity to submit your voting instructions via the Internet by utilizing a program provided through a vendor. Voting via the Internet will not affect your right to vote in person if you decide to attend the Meeting. Do not mail the proxy card if you are voting via the Internet. To vote via the Internet, you will need the "control number" that appears on your proxy card. These Internet voting procedures are designed to authenticate shareholder identities, to allow shareholders give their voting instructions, and to confirm that shareholders instructions have been recorded properly. If you are voting via the Internet you should understand that there may be costs associated with electronic access, such as usage charges from Internet access providers and telephone companies, that must be borne by you. o Read the proxy statement and have your proxy card at hand. o Go to the Web site listed on your proxy card. o Enter control number found on your proxy card. o Follow the simple instructions on the Web site. Please call [ ] us at [1-800 ] if you have any problems. o To insure that your instructions have been recorded correctly you will receive a confirmation of your voting instructions immediately after your submission and also by e-mail if chosen. Shareholders' Proposals Your Safeco Fund is not required, and does not intend, to hold meetings of shareholders each year. Instead, meetings will be held only when and if required. Any shareholders desiring to present a proposal for consideration at the next meeting for shareholders must submit the proposal in writing, so that it is received by the your Safeco Fund to Safeco Mutual Funds, Attention: Legal Department at 4854 154th Place N.E., Redmond, WA 98052 within a reasonable time before any meeting. If the Reorganization is completed, your Safeco Fund will not hold another shareholder meeting. Appraisal Rights If the Reorganization of your Safeco Fund is approved at the Meeting, shareholders of your Safeco Fund will not have the right to dissent and obtain payment of the fair value of their shares because the exercise of appraisal rights is subject to the forward pricing requirements of Rule 22c-1 under the Investment Company Act, which supersede state law. Shareholders of your Safeco Funds, however, have the right to redeem their Fund shares until the closing date of the Reorganizations. After the Reorganization, shareholders of your Safeco Fund will hold shares of a Pioneer Fund which may also be redeemed at net asset value without being subject to any deferred sales charges. 137 OWNERSHIP OF SHARES OF THE SAFECO FUNDS To the knowledge of your Safeco Fund, as of September 30, 2004, the following persons owned of record or beneficially 5% or more of the outstanding shares of each of the Safeco Funds.
------------------------------------------------------------------------------------------------------ Safeco Fund Shareholder Name and Address Percentage Owned ------------------------------------------------------------------------------------------------------ Safeco Balanced Fund Symetra Asset Management Co. 35.03% 4854 154th Place NE Redmond, WA 98052 ------------------------------------------------------------------------------------------------------ Safeco Core Equity Fund Charles Schwab & Co. Inc. 17.66% Exclusive Benefit of Its Customers Attn: Mutual Fund Department 101 Montgomery Street San Francisco, CA 94104-4122 ------------------------------------------------------------------------------------------------------ Safeco Growth Opportunities Fund Charles Schwab & Co. Inc. 19.44% Exclusive Benefit of Its Customers Attn: Mutual Fund Department 101 Montgomery Street San Francisco, CA 94104-4122 ------------------------------------------------------------------------------------------------------ Wells Fargo & Company 5.66% 420 Montgomery Street San Francisco, California 94163 ------------------------------------------------------------------------------------------------------ National Financial Services Corp. 5.61% for the Exclusive Benefit of Our Customers Attn.: Mutual Funds Dept. 5th Fl. 200 Liberty St., 1 World Financial Center New York, NY 10281-1003 ------------------------------------------------------------------------------------------------------ Safeco International Stock Fund Wells Fargo & Company 30.77% 420 Montgomery Street San Francisco, California 94163 ------------------------------------------------------------------------------------------------------ Symetra Asset Management Co. 21.91% 4854 154th Place NE Redmond, WA 98052 ------------------------------------------------------------------------------------------------------ Charles Schwab & Co. Inc. 16.93% Exclusive Benefit of Its Customers Attn: Mutual Fund Department 101 Montgomery Street San Francisco, CA 94104-4122 ------------------------------------------------------------------------------------------------------ Safeco Large-Cap Growth Fund Symetra Asset Management Co. 72.10% 4854 154th Place NE Redmond, WA 98052 ------------------------------------------------------------------------------------------------------ Safeco Large-Cap Value Fund Wells Fargo & Company 6.65% 420 Montgomery Street San Francisco, California 94163 ------------------------------------------------------------------------------------------------------ Charles Schwab & Co. Inc. 6.60% Exclusive Benefit of Its Customers Attn: Mutual Fund Department 101 Montgomery Street San Francisco, CA 94104-4122 ------------------------------------------------------------------------------------------------------
138
------------------------------------------------------------------------------------------------- Safeco Fund Shareholder Name and Address Percentage Owned ------------------------------------------------------------------------------------------------- Safeco Multi-Cap Core Fund Charles Schwab & Co. Inc. 5.10% Exclusive Benefit of Its Customers Attn: Mutual Fund Department 101 Montgomery Street San Francisco, CA 94104-4122 ------------------------------------------------------------------------------------------------- Safeco Small-Cap Value Fund Wells Fargo & Company 27.04% 420 Montgomery Street San Francisco, California 94163 ------------------------------------------------------------------------------------------------- National Financial Services Corp. 16.55% for the Exclusive Benefit of Our Customers Attn.: Mutual Funds Dept. 5th Fl. 200 Liberty St., 1 World Financial Center New York, NY 10281-1003 ------------------------------------------------------------------------------------------------- Charles Schwab & Co. Inc. 15.56% Exclusive Benefit of Its Customers Attn: Mutual Fund Department 101 Montgomery Street San Francisco, CA 94104-4122 -------------------------------------------------------------------------------------------------
As of December 31, 2003, the trustees and officers of your Safeco Fund, as a group, owned in the aggregate less than 1% of the outstanding shares of your Safeco Fund. Symetra or other companies controlled by Symetra own shares of certain Safeco Funds. Those shares will be voted pro rata in accordance with the vote cast by shareholders of the applicable Fund. 139 OWNERSHIP OF SHARES OF THE PIONEER FUNDS To the knowledge of your Pioneer Fund, as of September 30, 2004, the following persons owned of record or beneficially 5% or more of the outstanding shares of each of the Pioneer Funds.
---------------------------------------------------------------------------------------------------- Pioneer Fund/Class Shareholder Name and Address Percentage Owned ---------------------------------------------------------------------------------------------------- Pioneer Balanced Fund ---------------------------------------------------------------------------------------------------- Class B Shares MLPFS For The Sole Benefit of its Customers 5.21% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 ---------------------------------------------------------------------------------------------------- Class C Shares MLPFS For The Sole Benefit of its Customers 6.53% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 ---------------------------------------------------------------------------------------------------- Citigroup Global Markets Inc. 7.84% 333 West 34th St., 7th Fl. New York, NY 10001-2402 ---------------------------------------------------------------------------------------------------- Pioneer Fund ---------------------------------------------------------------------------------------------------- Class B Shares MLPFS For The Sole Benefit of its Customers 15.03% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 ---------------------------------------------------------------------------------------------------- Class C Shares MLPFS For The Sole Benefit of its Customers 34.48% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 ---------------------------------------------------------------------------------------------------- Citigroup Global Markets Inc. 8.79% 333 West 34th St., 7th Fl. New York, NY 10001-2402 ---------------------------------------------------------------------------------------------------- Class R Shares ING National Trust, Trustee 43.47% Agreement and Aetna 403(b)(7) Custodial Acct 3/26/97 Trustee for Thomas J. Botticelli DTD 4/22/96 151 Farmington Avenue -- TN41 Hartford, CT 06156-0001 ---------------------------------------------------------------------------------------------------- Aetna Life Insurance & Annuity Co. 19.93% 151 Farmington Avenue -- TN41 Hartford, CT 06156-0001 ---------------------------------------------------------------------------------------------------- MCB Trust Services Cust. FBO Big Boy 401(K) 5.96% Plan & Trust 700 17th St., Ste 300 Denver, CO 80202-3531 ---------------------------------------------------------------------------------------------------- Class Y Shares Pioneer Protected Principal Plus Fund II 12.19% 60 State St. Boston, MA 02109-1800 ---------------------------------------------------------------------------------------------------- NFSC FEBO #U71-000027 12.78% First Command Bank Trust Dept. P.O. Box 901075 Fort Worth, TX 76101-2075 ----------------------------------------------------------------------------------------------------
140
--------------------------------------------------------------------------------------------------- Pioneer Fund/Class Shareholder Name and Address Percentage Owned --------------------------------------------------------------------------------------------------- MLPFS For The Sole Benefit of its Customers 5.51% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 --------------------------------------------------------------------------------------------------- State St. Bank and Trust Trustee 59.51% FBO Pacificorp K Plus Savings Plan Trust DTD 1/9/96 805 Pennsylvania Ave. 5th Fl., Tower 2 Kansas City, MO 64105-1307 --------------------------------------------------------------------------------------------------- State of Florida Public Employees Optional Retirement 6.00% Program 1801 Hermitage Blvd., Ste 100 Tallahassee, FL 32308-7743 --------------------------------------------------------------------------------------------------- Pioneer International Equity Fund --------------------------------------------------------------------------------------------------- Class B Shares MLPFS For The Sole Benefit of its Customers 6.89% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 --------------------------------------------------------------------------------------------------- Class Y Shares FISERV Securities, Inc. 20.10% FAO 58861625 Attn: Mutual Funds One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7084 --------------------------------------------------------------------------------------------------- FISERV Securities, Inc. 24.75% FAO 58861649 Attn: Mutual Funds One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7084 --------------------------------------------------------------------------------------------------- FISERV Securities, Inc. 54.32% FAO 58861654 Attn: Mutual Funds One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7084 --------------------------------------------------------------------------------------------------- Pioneer Growth Shares --------------------------------------------------------------------------------------------------- Class B Shares MLPFS For The Sole Benefit of its Customers 6.85% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 --------------------------------------------------------------------------------------------------- Class C Shares MLPFS For The Sole Benefit of its Customers 11.53% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 ---------------------------------------------------------------------------------------------------
141
---------------------------------------------------------------------------------------------------- Pioneer Fund/Class Shareholder Name and Address Percentage Owned ---------------------------------------------------------------------------------------------------- Class R Shares MLPFS For The Sole Benefit of its Customers 51.38 Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 ---------------------------------------------------------------------------------------------------- Aetna Life Insurance & Annuity Co. 13.09% 151 Farmington Avenue -- TN41 Hartford, CT 06156-0001 ---------------------------------------------------------------------------------------------------- A T Systems Inc. 401K Plan 6.99% Tom Donaldson ETAL 4257 Diplomacy Dr. Columbus, OH 43228-3803 ---------------------------------------------------------------------------------------------------- MCB Trust Services Cust. FBO 21.88% AM-Liner Savings & Retirement 700 17th St., Ste 300 Denver, CO 80202-3531 ---------------------------------------------------------------------------------------------------- Class Y Shares MLPFS For The Sole Benefit of its Customers 85.13% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 ---------------------------------------------------------------------------------------------------- Pioneer Mid Cap Value Fund ---------------------------------------------------------------------------------------------------- Class B Shares MLPFS For The Sole Benefit of its Customers 8.80% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 ---------------------------------------------------------------------------------------------------- Class C Shares MLPFS For The Sole Benefit of its Customers 18.39% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 ---------------------------------------------------------------------------------------------------- Citigroup Global Markets Inc. 9.22% 333 West 34th St., 7th Fl. New York, NY 10001-2402 ---------------------------------------------------------------------------------------------------- Class R Shares MCB Trust Services Cust. FBO 11.38% United International Corp 700 17th St., Ste 300 Denver, CO 80202-3531 ---------------------------------------------------------------------------------------------------- ING National Trust, Trustee 20.50% Agreement and Aetna 403(b)(7) Custodial Acct 3/26/97 Trustee for Thomas J. Botticelli DTD 4/22/96 151 Farmington Avenue -- TN41 Hartford, CT 06156-0001 ---------------------------------------------------------------------------------------------------- MLPFS For The Sole Benefit of its Customers 13.61% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 ---------------------------------------------------------------------------------------------------- Aetna Life Insurance & Annuity Co. 23.70% 151 Farmington Avenue -- TN41 Hartford, CT 06156-0001 ----------------------------------------------------------------------------------------------------
142
----------------------------------------------------------------------------------------------------- Pioneer Fund/Class Shareholder Name and Address Percentage Owned ----------------------------------------------------------------------------------------------------- MCB Trust Services Cust. FBO 5.52% Foxcor, Inc. 700 17th St., Ste 300 Denver, CO 80202-3531 ----------------------------------------------------------------------------------------------------- Class Y Shares John F. Cogan Jr. 8.77% C/O Hale and Dorr 60 State street Boston, MA 02109-1800 ----------------------------------------------------------------------------------------------------- John F. Cogan Jr. & Mary Cornille & Pamela Cogan Riddle 8.88% & Gregory Cogan TTEESO/The Cogan Family Foundation C/O Hale & Dorr Trust Dept. 60 State street Boston, MA 02109-1800 ----------------------------------------------------------------------------------------------------- MLPFS For The Sole Benefit of its Customers 55.07% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 ----------------------------------------------------------------------------------------------------- Pioneer Small Cap Value Fund ----------------------------------------------------------------------------------------------------- Class A Shares MLPFS For The Sole Benefit of its Customers 7.28% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 ----------------------------------------------------------------------------------------------------- Class B Shares MLPFS For The Sole Benefit of its Customers 9.53% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 ----------------------------------------------------------------------------------------------------- Class C Shares MLPFS For The Sole Benefit of its Customers 26.91% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 ----------------------------------------------------------------------------------------------------- Citigroup Global Markets Inc. 10.97% 333 West 34th St., 7th Fl. New York, NY 10001-2402 ----------------------------------------------------------------------------------------------------- Class R Shares MCB Trust Services Cust. FBO 13.45% United International Corp. 700 17th St., Ste 300 Denver, CO 80202-3531 ----------------------------------------------------------------------------------------------------- MLPFS For The Sole Benefit of its Customers 21.91% Mutual Fund Administration 4800 Deer Lake Drive East, 2nd Fl. Jacksonville, FL 32246-6484 ----------------------------------------------------------------------------------------------------- MCB Trust Services Cust. FBO 20.94% Gerken Retirement Savings Plan 700 17th St., Ste 300 Denver, CO 80202-3531 -----------------------------------------------------------------------------------------------------
143
----------------------------------------------------------------------------------------------------- Pioneer Fund/Class Shareholder Name and Address Percentage Owned ----------------------------------------------------------------------------------------------------- MCB Trust Services Cust. FBO 5.60% Telecommunications Asset Management 700 17th St., Ste 300 Denver, CO 80202-3531 ----------------------------------------------------------------------------------------------------- BISYS Retirement Services FBO 9.10% Fong & Chan Architects 401K 700 17th St. Ste 300 Denver, CO 80202-3531 ----------------------------------------------------------------------------------------------------- Class Y Shares FISERV Securities, Inc. 5.21% FAO 58861649 Attn: Mutual Funds One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7084 ----------------------------------------------------------------------------------------------------- FISERV Securities, Inc. 7.02% FAO 58861654 Attn: Mutual Funds One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7084 ----------------------------------------------------------------------------------------------------- John F. Cogan Jr. 34.51% C/O Hale and Dorr 60 State street Boston, MA 02109-1800 ----------------------------------------------------------------------------------------------------- John F. Cogan Jr. & Mary Cornille & Pamela Cogan Riddle 34.83% & Gregory Cogan TTEESO/The Cogan Family Foundation C/O Hale & Dorr Trust Dept. P.O. Box 1711 Boston, MA 02109-1800 ----------------------------------------------------------------------------------------------------- John F. Cogan and William Schmidt 13.93% TTEESO/The John F. Cogan Jr. Family Trust C/O Hale & Dorr Trust Dept. P.O. Box 1711 Boston, MA 02109-1800 ----------------------------------------------------------------------------------------------------- Pioneer Value Fund ----------------------------------------------------------------------------------------------------- Class A Shares Nuernberger Lebensversicherung 5.27% AGKA-Controlling Ostendstr. 100 D-90334 Nuernberg, Mittelfr, Germany ----------------------------------------------------------------------------------------------------- PFPC 20.94% FBO Primerica Shareholder Services 211 S. Gulf Road King of Prussia, PA 19406 ----------------------------------------------------------------------------------------------------- Class R Shares Pioneer Funds Distributor Inc. 6.66% Attn: Carrie Cuscia 60 State Street Boston, MA 02109-1800 -----------------------------------------------------------------------------------------------------
144
----------------------------------------------------------------------------------------------------- Pioneer Fund/Class Shareholder Name and Address Percentage Owned ----------------------------------------------------------------------------------------------------- Athletic Clubs International 401(k) Profit Sharing Plan 92.13% Francis Cassidy, et al 2729 St. Marys Road Ardmore, PA 19003-2026 ----------------------------------------------------------------------------------------------------- Class Y Shares John F. Cogan Jr. 19.58% C/O Hale and Dorr 60 State street Boston, MA 02109-1800 ----------------------------------------------------------------------------------------------------- FISERV Securities, Inc. 6.25% FAO 58861625 Attn: Mutual Funds One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7084 ----------------------------------------------------------------------------------------------------- FISERV Securities, Inc. 10.25% FAO 58861649 Attn: Mutual Funds One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7084 ----------------------------------------------------------------------------------------------------- FISERV Securities, Inc. 18.73% FAO 58861654 Attn: Mutual Funds One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7084 ----------------------------------------------------------------------------------------------------- John F. Cogan Jr. & Mary Cornille & Pamela Cogan Riddle 33.65% & Gregory Cogan TTEESO/The Cogan Family Foundation C/O Hale & Dorr Trust Dept. 60 State street Boston, MA 02109-1800 ----------------------------------------------------------------------------------------------------- John F. Cogan and William Schmidt 8.38% TTEESO/The John F. Cogan Jr. Family Trust C/O Hale & Dorr Trust Dept. 60 State street Boston, MA 02109-1800 -----------------------------------------------------------------------------------------------------
As of December 31, 2003, the trustees and officers of each Pioneer Fund owned less than 1% of the outstanding shares of each Pioneer Fund. 145 EXPERTS Safeco Funds The financial statements and financial highlights of each Safeco Fund incorporated by reference in the respective Safeco Trust's Annual Report for the most recent fiscal year end have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon incorporated by reference into this registration statement. Such financial statements and financial highlights are incorporated herein by reference in reliance on such reports given on the authority of such firm as experts in accounting and auditing. Pioneer Funds The financial statements and financial highlights of each Pioneer Fund incorporated by reference in the respective Pioneer Fund's Annual Report for the most recent fiscal year end (except in the case of Pioneer Value Fund, in which case the Annual Report incorporated by reference is for the fiscal year ended September 30, 2003) have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon incorporated by reference into this registration statement. Such financial statements and financial highlights are incorporated herein by reference in reliance on such reports given the authority of such firm as experts in accounting and auditing. AVAILABLE INFORMATION The Safeco Funds and the Pioneer Funds are subject to the informational requirements of the Securities Exchange Act of 1934 and the Investment Company Act and file reports, proxy statements and other information with the SEC. These reports, proxy statements and other information filed by the Funds can be inspected and copied (for a duplication fee) at the public reference facilities of the SEC at 450 Fifth Street, N.W., Washington, D.C. Copies of these materials can also be obtained by mail from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, copies of these documents may be viewed on-screen or downloaded from the SEC's Internet site at http://www.sec.gov. 146 Exhibit A-1 - Form of Agreement and Plan of Reorganization (C/D Reorganizations) -------------------------------------------------------------------------------- AGREEMENT AND PLAN OF REORGANIZATION THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made this day of __________, 2004, by and between [Pioneer Trust], a [Delaware statutory] [Massachusetts business] trust (the "Acquiring Trust"), on behalf of its series [name of Pioneer Fund] (the "Acquiring Fund"), with its principal place of business at 60 State Street, Boston, Massachusetts 02109, and [Safeco Trust], a Delaware statutory trust (the "Safeco Trust"), on behalf of its series [name of Safeco Fund] (the "Acquired Fund"), with its principal place of business at 5069 154th Place N.E., Redmond, Washington 98052. The Acquiring Fund and the Acquired Fund are sometimes referred to collectively herein as the "Funds" and individually as a "Fund." This Agreement is intended to be and is adopted as a plan of a "reorganization" as defined in Section 368(a)(1)(C/D) of the United States Internal Revenue Code of 1986, as amended (the "Code") and the Treasury Regulations thereunder. The reorganization (the "Reorganization") will consist of (1) the transfer of all of the assets of the Acquired Fund to the Acquiring Fund in exchange solely for (A) the issuance of Investor Class shares of beneficial interest of the Acquiring Fund (collectively, the "Acquiring Fund Shares" and each, an "Acquiring Fund Share") to the Acquired Fund, and (B) the assumption by the Acquiring Fund of the liabilities of the Acquired Fund that are included in the calculation of net asset value ("NAV") on the closing date of the Reorganization (the "Closing Date") (collectively, the "Assumed Liabilities"), and (2) the distribution by the Acquired Fund, on or promptly after the Closing Date as provided herein, of the Acquiring Fund Shares to the shareholders of the Acquired Fund in liquidation and dissolution of the Acquired Fund, all upon the terms and conditions hereinafter set forth in this Agreement. WHEREAS, the Acquiring Trust and the Safeco Trust are each registered investment companies classified as management companies of the open-end type. WHEREAS, the Acquiring Fund is authorized to issue shares of beneficial interest. WHEREAS, the Board of Trustees of the Safeco Trust and the Board of Trustees of the Acquiring Trust have determined that the Reorganization is in the best interests of the Acquired Fund shareholders and the Acquiring Fund shareholders, respectively, and is not dilutive of the interests of those shareholders. NOW, THEREFORE, in consideration of the premises of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows: 1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING FUND SHARES AND ASSUMPTION OF THE ASSUMED LIABILITIES; LIQUIDATION AND TERMINATION OF THE ACQUIRED FUND. 1.1 Subject to the terms and conditions herein set forth and on the basis of the representations and warranties contained herein, the Acquired Fund will transfer all of its assets as set forth in Paragraph 1.2 (the "Acquired Assets") to the Acquiring Fund free and clear of all liens and encumbrances (other than those arising under the Securities Act of 1933, as amended (the "Securities Act"), liens for taxes not yet due and contractual restrictions on the transfer of the Acquired Assets) and the Acquiring Fund agrees in exchange therefor: (i) to issue to the Acquired Fund the number of Acquiring Fund Shares, including fractional Acquiring Fund Shares, with an aggregate NAV equal to the NAV of the Acquired Fund, as determined in the manner set forth in Paragraphs 2.1 and 2.2; and (ii) to assume the Assumed Liabilities. Such transactions shall take place at the Closing (as defined in Paragraph 3.1 below). 1.2(a) The Acquired Assets shall consist of all of the Acquired Fund's property, including, without limitation, all portfolio securities and instruments, dividends and interest receivables, cash, goodwill, contractual rights of the Acquired Fund or the Safeco Trust in respect of the Acquired Fund, all other intangible property owned by the Acquired Fund, originals or copies of all books and records of the Acquired Fund, and all other assets of the Acquired Fund on the Closing Date. The Acquiring Fund shall also be entitled to receive (or, to the extent agreed upon between the Safeco Trust and the Acquiring Trust, be provided access to) copies of all records that the Safeco Trust is required to maintain under the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the rules of the Securities and Exchange Commission (the "Commission") thereunder to the extent such records pertain to the Acquired Fund. (b) The Acquired Fund has provided the Acquiring Fund with a list of all of the Acquired Fund's securities and other assets as of the date of execution of this Agreement, and the Acquiring Fund has provided the Acquired Fund with a copy of the current fundamental investment policies and restrictions and fair value procedures applicable to the Acquiring Fund. The Acquired Fund reserves the right to sell any of such securities or other assets before the Closing Date (except to the extent sales may be limited by representations of the Acquired Fund contained herein and made in connection with the issuance of the tax opinion provided for in Paragraph 8.5 hereof). A-1 1.3 The Acquired Fund will endeavor to discharge all of its known liabilities and obligations that are or will become due prior to the Closing. 1.4 On or as soon after the Closing Date as is conveniently practicable (the "Liquidation Date"), the Safeco Trust shall liquidate the Acquired Fund and distribute pro rata to its shareholders of record, determined as of the close of regular trading on the New York Stock Exchange on the Closing Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by the Acquired Fund pursuant to Paragraph 1.1 hereof. Each Acquired Fund Shareholder shall receive such number of Acquiring Fund Shares that have an aggregate NAV equal to the aggregate NAV of the shares of beneficial interest of the Acquired Fund (the "Acquired Fund Shares") held of record by such Acquired Fund Shareholder on the Closing Date. Such liquidation and distribution will be accomplished by the Safeco Trust instructing the Acquiring Trust to transfer the Acquiring Fund Shares then credited to the account of the Acquired Fund on the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund established and maintained by the Acquiring Fund's transfer agent in the names of the Acquired Fund Shareholders and representing the respective pro rata number of the Acquiring Fund Shares due the Acquired Fund Shareholders. The Safeco Trust shall promptly provide the Acquiring Trust with evidence of such liquidation and distribution. All issued and outstanding Acquired Fund Shares will simultaneously be cancelled on the books of the Acquired Fund, and the Acquired Fund will be dissolved. The Acquiring Fund shall not issue certificates representing the Acquiring Fund Shares in connection with such exchange. 1.5 Ownership of Acquiring Fund Shares will be shown on the books of the Acquiring Fund's transfer agent for its Investor Class shares. Any certificates representing ownership of Acquired Fund Shares that remain outstanding on the Closing Date shall be deemed to be cancelled and shall no longer evidence ownership of Acquired Fund Shares. 1.6 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a name other than the registered holder of the Acquired Fund Shares on the books of the Acquired Fund as of that time shall, as a condition of such issuance and transfer, be paid by the person to whom such Acquiring Fund Shares are to be issued and transferred. 1.7 Any reporting responsibility of the Safeco Trust with respect to the Acquired Fund for taxable periods ending on or before the Closing Date, including, but not limited to, the responsibility for filing of regulatory reports, Tax Returns (as defined in Paragraph 4.1), or other documents with the Commission, any state securities commissions, and any federal, state or local tax authorities or any other relevant regulatory authority, is and shall remain the responsibility of the Safeco Trust. 2. VALUATION 2.1 The NAV of the Acquiring Fund Shares and the NAV of the Acquired Fund shall, in each case, be determined as of the close of business (4:00 p.m., Boston time) on the Closing Date (the "Valuation Time"). The NAV of each Acquiring Fund Share shall be computed by Pioneer Investment Management, Inc. (the "Acquiring Fund Adviser") in the manner set forth in the Acquiring Fund's Declaration of Trust (the "Declaration"), or By-Laws, and the Acquiring Fund's then-current prospectus and statement of additional information. The NAV of the Acquired Fund shall be computed by Safeco Asset Management, Inc. (the "Acquired Fund Administrator") by calculating the value of the Acquired Assets and by subtracting therefrom the amount of the liabilities of the Acquired Fund on the Closing Date included on the Statement of Assets and Liabilities of the Acquired Fund delivered pursuant to Paragraph 5.7 (the "Statement of Assets and Liabilities"), said assets and liabilities to be valued in the manner set forth in the Acquired Fund's then current prospectus and statement of additional information. The Acquiring Fund Adviser shall confirm to the Acquiring Fund the NAV of the Acquired Fund. 2.2 The number of Acquiring Fund Shares to be issued (including fractional shares, if any) in exchange for the Acquired Assets and the assumption of the Assumed Liabilities shall be determined by the Acquiring Fund Adviser by dividing the NAV of the Acquired Fund, as determined in accordance with Paragraph 2.1, by the NAV of each Acquiring Fund Share, as determined in accordance with Paragraph 2.1. 2.3 The Acquiring Fund and the Acquired Fund shall cause the Acquiring Fund Adviser and the Acquired Fund Administrator, respectively, to deliver a copy of its valuation report to the other party at Closing. All computations of value shall be made by the Acquiring Fund Adviser and the Acquired Fund Administrator in accordance with its regular practice as pricing agent for the Acquiring Fund and the Acquired Fund, respectively. 3. CLOSING AND CLOSING DATE 3.1 The Closing Date shall be December 8, 2004, or such later date as the parties may agree to in writing. All acts necessary to consummation the Reorganization (the "Closing") shall be deemed to take place simultaneously as of 5:00 p.m. (Eastern time) on the Closing Date unless otherwise provided. The Closing shall be held at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts, or at such other place as the parties may agree. A-2 3.2 Portfolio securities that are held other than in book-entry form in the name of State Street Bank and Trust Company (the "Acquired Fund Custodian") as record holder for the Acquired Fund shall be presented by the Acquired Fund to Brown Brothers Harriman & Co. (the "Acquiring Fund Custodian") for examination no later than three business days preceding the Closing Date. Such portfolio securities shall be delivered by the Acquired Fund to the Acquiring Fund Custodian for the account of the Acquiring Fund on the Closing Date, duly endorsed in proper form for transfer, in such condition as to constitute good delivery thereof in accordance with the custom of brokers, and shall be accompanied by all necessary federal and state stock transfer stamps or a check for the appropriate purchase price thereof. Portfolio securities held of record by the Acquired Fund Custodian in book-entry form on behalf of the Acquired Fund shall be delivered by the Acquired Fund Custodian through the Depository Trust Company to the Acquiring Fund Custodian and by the Acquiring Fund Custodian recording the beneficial ownership thereof by the Acquiring Fund on the Acquiring Fund Custodian's records. Any cash shall be delivered by the Acquired Fund Custodian transmitting immediately available funds by wire transfer to the Acquiring Fund Custodian the cash balances maintained by the Acquired Fund Custodian and the Acquiring Fund Custodian crediting such amount to the account of the Acquiring Fund. 3.3 The Acquiring Fund Custodian shall deliver within one business day after the Closing a certificate of an authorized officer stating that: (a) the Acquired Assets have been delivered in proper form to the Acquiring Fund on the Closing Date, and (b) all necessary transfer taxes including all applicable federal and state stock transfer stamps, if any, have been paid, or provision for payment has been made in conjunction with the delivery of portfolio securities as part of the Acquired Assets. 3.4 If on the Closing Date (a) the New York Stock Exchange is closed to trading or trading thereon shall be restricted or (b) trading or the reporting of trading on such exchange or elsewhere is disrupted so that accurate appraisal of the NAV of the Acquiring Fund Shares or the Acquired Fund pursuant to Paragraph 2.1 is impracticable, the Closing Date shall be postponed until the first business day after the day when trading shall have been fully resumed and reporting shall have been restored. 3.5 The Acquired Fund shall deliver at the Closing a list of the names, addresses, federal taxpayer identification numbers and backup withholding and nonresident alien withholding status and certificates of the Acquired Fund Shareholders and the number and percentage ownership of outstanding Acquired Fund Shares owned by each Acquired Fund Shareholder as of the Valuation Time, certified by the President or a Secretary of the Safeco Trust and its Treasurer, Secretary or other authorized officer (the "Shareholder List") as being an accurate record of the information (a) provided by the Acquired Fund Shareholders, (b) provided by the Acquired Fund Custodian, or (c) derived from the Safeco Trust's records by such officers or one of the Safeco Trust's service providers. The Acquiring Fund shall issue and deliver to the Acquired Fund a confirmation evidencing the Acquiring Fund Shares to be credited on the Closing Date, or provide evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares have been credited to the Acquired Fund's account on the books of the Acquiring Fund. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, stock certificates, receipts or other documents as such other party or its counsel may reasonably request. 4. REPRESENTATIONS AND WARRANTIES 4.1 Except as set forth on Schedule 4.1 hereto, the Safeco Trust, on behalf of the Acquired Fund, represents, warrants and covenants to the Acquiring Fund, which representations, warranties and covenants will be true and correct on the date hereof and on the Closing Date as though made on and as of the Closing Date, as follows: (a) The Acquired Fund is a series of the Safeco Trust. The Safeco Trust is a statutory trust validly existing and in good standing under the laws of the State of Delaware and has the power to own all of its properties and assets and, subject to approval by the Acquired Fund's shareholders, to perform its obligations under this Agreement. The Acquired Fund is not required to qualify to do business in any jurisdiction in which it is not so qualified or where failure to qualify would subject it to any material liability or disability. Each of the Safeco Trust and the Acquired Fund has all necessary federal, state and local authorizations to own all of its properties and assets and to carry on its business as now being conducted; (b) The Safeco Trust is a registered investment company classified as a management company of the open-end type, and its registration with the Commission as an investment company under the Investment Company Act is in full force and effect; (c) The Safeco Trust is not in violation of, and the execution and delivery of this Agreement and the performance of its obligations under this Agreement in respect of the Acquired Fund will not result in a violation of, any provision of the Safeco Trust's Trust Instrument or By-Laws or any material agreement, indenture, instrument, contract, lease or other undertaking with respect to the Acquired Fund to which the Safeco Trust is a party or by which the Acquired Fund or any of its assets are bound; (d) No litigation or administrative proceeding or investigation of or before any court or governmental body is currently pending or to its knowledge threatened against the Acquired Fund or any of the Acquired Fund's properties or assets. The Acquired Fund knows of no facts which might form the basis for the institution of such proceedings. Neither the Safeco Trust nor the Acquired Fund is A-3 a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially adversely affects the Acquired Fund's business or its ability to consummate the transactions contemplated herein or would be binding upon the Acquiring Fund as the successor to the Acquired Fund; (e) The Acquired Fund has no material contracts or other commitments (other than this Agreement or agreements for the purchase and sale of securities entered into in the ordinary course of business and consistent with its obligations under this Agreement) which will not be terminated at or prior to the Closing Date and no such termination will result in liability to the Acquired Fund (or the Acquiring Fund); (f) The statement of assets and liabilities of the Acquired Fund, and the related statements of income and changes in NAV, as of and for the fiscal year ended December 31, 2003, have been audited by Ernst & Young LLP, independent registered public accounting firm, and are in accordance with generally accepted accounting principles ("GAAP") consistently applied and fairly reflect, in all material respects, the financial condition of the Acquired Fund as of such date and the results of its operations for the period then ended, and all known liabilities, whether actual or contingent, of the Acquired Fund as of the date thereof are disclosed therein. The Statement of Assets and Liabilities will be in accordance with GAAP consistently applied and will fairly reflect, in all material respects, the financial condition of the Acquired Fund as of such date and the results of its operations for the period then ended. Except for the Assumed Liabilities, the Acquired Fund will not have any known or contingent liabilities on the Closing Date. No significant deficiency, material weakness, fraud, significant change or other factor that could significantly affect the internal controls of the Acquired Fund has been disclosed or is required to be disclosed in the Acquired Fund's reports on Form N-CSR to enable the chief executive officer and chief financial officer or other officers of the Acquired Fund to make the certifications required by the Sarbanes-Oxley Act, and no deficiency, weakness, fraud, change, event or other factor exists that will be required to be disclosed in the Acquiring Fund's Form N-CSR after the Closing Date; (g) Since December 31, 2003, except as specifically disclosed in the Acquired Fund's prospectus, its statement of additional information as in effect on the date of this Agreement, or its semi-annual report for the period ended June 30, 2004, there has not been any material adverse change in the Acquired Fund's financial condition, assets, liabilities, business or prospects, or any incurrence by the Acquired Fund of indebtedness, except for normal contractual obligations incurred in the ordinary course of business or in connection with the settlement of purchases and sales of portfolio securities. For the purposes of this subparagraph (g) (but not for any other purpose of this Agreement), a decline in NAV per Acquired Fund Share arising out of its normal investment operations or a decline in market values of securities in the Acquired Fund's portfolio or a decline in net assets of the Acquired Fund as a result of redemptions shall not constitute a material adverse change; (h) (A) For each taxable year of its operation since its inception, the Acquired Fund has met, and for the current taxable year it will meet, the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company. The Acquired Fund will qualify as such as of the Closing Date and will satisfy the diversification requirements of Section 851(b)(3) of the Code without regard to the last sentence of Section 851(d) of the Code. The Acquired Fund has not taken any action, caused any action to be taken or caused any action to fail to be taken which action or failure could cause the Acquired Fund to fail to qualify as a regulated investment company under the Code; (B) Within the times and in the manner prescribed by law, the Acquired Fund has properly filed on a timely basis all Tax Returns (as defined below) that it was required to file, and all such Tax Returns were complete and accurate in all respects. The Acquired Fund has not been informed by any jurisdiction that the jurisdiction believes that the Acquired Fund was required to file any Tax Return that was not filed; and the Acquired Fund does not know of any basis upon which a jurisdiction could assert such a position; (C) The Acquired Fund has timely paid, in the manner prescribed by law, all Taxes (as defined below), which were due and payable or which were claimed to be due; (D) All Tax Returns filed by the Acquired Fund constitute complete and accurate reports of the respective Tax liabilities and all attributes of the Acquired Fund or, in the case of information returns and payee statements, the amounts required to be reported, and accurately set forth all items required to be included or reflected in such returns; (E) The Acquired Fund has not waived or extended any applicable statute of limitations relating to the assessment or collection of Taxes; (F) The Acquired Fund has not been notified that any examinations of the Tax Returns of the Acquired Fund are currently in progress or threatened, and no deficiencies have been asserted or assessed against the Acquired Fund as a result of any audit A-4 by the Internal Revenue Service or any state, local or foreign taxing authority, and, to its knowledge, no such deficiency has been proposed or threatened; (G) The Acquired Fund has no actual or potential liability for any Tax obligation of any taxpayer other than itself. The Acquired Fund is not and has never been a member of a group of corporations with which it has filed (or been required to file) consolidated, combined or unitary Tax Returns. The Acquired Fund is not a party to any Tax allocation, sharing, or indemnification agreement; (H) The unpaid Taxes of the Acquired Fund for tax periods through the Closing Date do not exceed the accruals and reserves for Taxes (excluding accruals and reserves for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Statement of Assets and Liabilities, rather than in any notes thereto (the "Tax Reserves"). All Taxes that the Acquired Fund is or was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been timely paid to the proper governmental agency; (I) The Acquired Fund has delivered to the Acquiring Fund or made available to the Acquiring Fund complete and accurate copies of all Tax Returns of the Acquired Fund, together with all related examination reports and statements of deficiency for all periods not closed under the applicable statutes of limitations and complete and correct copies of all private letter rulings, revenue agent reports, information document requests, notices of proposed deficiencies, deficiency notices, protests, petitions, closing agreements, settlement agreements, pending ruling requests and any similar documents submitted by, received by or agreed to by or on behalf of the Acquired Fund. The Acquired Fund has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code; (J) The Acquired Fund has not undergone, has not agreed to undergo, and is not required to undergo (nor will it be required as a result of the transactions contemplated in this Agreement to undergo) a change in its method of accounting resulting in an adjustment to its taxable income pursuant to Section 481 of the Code. The Acquired Fund will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date under Section 481(c) of the Code (or any corresponding or similar provision of state, local or foreign income Tax law); (ii) "closing agreement" as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (iii) installment sale or open transaction disposition made on or prior to the Closing Date; or (iv) prepaid amount received on or prior to the Closing Date; (K) The Acquired Fund has not taken or agreed to take any action, and is not aware of any agreement, plan or other circumstance, that is inconsistent with the representations set forth in Annex B; (L) There are (and as of immediately following the Closing there will be) no liens on the assets of the Acquired Fund relating to or attributable to Taxes, except for Taxes not yet due and payable; (M) The Tax bases of the assets of the Acquired Fund are accurately reflected on the Acquired Fund's Tax books and records; (N) The Acquired Fund has not incurred (or been allocated) an "overall foreign loss" as defined in Section 904(f)(2) of the Code which has not been previously recaptured in full as provided in Sections 904(f)(2) and/or 904(f)(3) of the Code; (O) The Acquired Fund is not a party to a gain recognition agreement under Section 367 of the Code; (P) The Acquired Fund does not own any interest in an entity that is characterized as a partnership for income tax purposes; (Q) The Acquired Fund's Tax attributes are not limited under the Code (including but not limited to any capital loss carry forward limitations under Sections 382 or 383 of the Code and the Treasury Regulations thereunder) or comparable provisions of state law, except as set forth on Schedule 4.1; and (R) For purposes of this Agreement, "Taxes" or "Tax" shall mean all taxes, charges, fees, levies or other similar assessments or liabilities, including without limitation income, gross receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use, transfer, withholding, employment, unemployment, insurance, social security, business license, business organization, environmental, workers compensation, payroll, profits, license, lease, service, service use, severance, stamp, occupation, windfall profits, customs, duties, franchise and other taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, A-5 and any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof; and "Tax Returns" shall mean all reports, returns, declarations, statements or other information required to be supplied to a governmental or regulatory authority or agency, or to any other person, in connection with Taxes and any associated schedules or work papers produced in connection with such items; (i) All issued and outstanding Acquired Fund Shares are, and at the Closing Date will be, duly and validly issued and outstanding, fully paid and nonassessable by the Acquired Fund. All of the issued and outstanding Acquired Fund Shares will, at the time of Closing, be held of record by the persons and in the amounts set forth in the Shareholder List submitted to the Acquiring Fund pursuant to Paragraph 3.5 hereof. The Acquired Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any Acquired Fund Shares, nor is there outstanding any security convertible into any Acquired Fund Shares; (j) At the Closing Date, the Acquired Fund will have good and marketable title to the Acquired Assets, and full right, power and authority to sell, assign, transfer and deliver the Acquired Assets to the Acquiring Fund, and, upon delivery and payment for the Acquired Assets, the Acquiring Fund will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, except such restrictions as might arise under the Securities Act; (k) The Safeco Trust has the trust power and authority to enter into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Safeco Trust's Board of Trustees, and, subject to the approval of the Acquired Fund's shareholders, assuming due authorization, execution and delivery by the Acquiring Fund, this Agreement will constitute a valid and binding obligation of the Acquired Fund, enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights and to general equity principles; (l)The information to be furnished by the Acquired Fund to the Acquiring Fund for use in applications for orders, registration statements, proxy materials and other documents which may be necessary in connection with the transactions contemplated hereby and any information necessary to compute the total return of the Acquired Fund shall be accurate and complete and shall comply in all material respects with federal securities and other laws and regulations applicable thereto; (m) The information included in the proxy statement (the "Proxy Statement") forming part of the Acquiring Fund's Registration Statement on Form N-14 filed in connection with this Agreement (the "Registration Statement") that has been furnished in writing by the Acquired Fund to the Acquiring Fund for inclusion in the Registration Statement, on the effective date of that Registration Statement and on the Closing Date, will conform in all material respects to the applicable requirements of the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Investment Company Act and the rules and regulations of the Commission thereunder and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (n) Upon the effectiveness of the Registration Statement, no consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Safeco Trust or the Acquired Fund of the transactions contemplated by this Agreement; (o) All of the issued and outstanding Acquired Fund Shares have been offered for sale and sold in conformity with all applicable federal and state securities laws, except as may have been previously disclosed in writing to the Acquiring Fund; (p) The prospectus and statement of additional information of the Acquired Fund and any amendments or supplements thereto, furnished to the Acquiring Fund, did not as of their dates or the dates of their distribution to the public contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which such statements were made, not misleading; (q) The Acquired Fund currently complies in all material respects with, and since its organization has complied in all material respects with, the requirements of, and the rules and regulations under, the Investment Company Act, the Securities Act, the Exchange Act, state "Blue Sky" laws and all other applicable federal and state laws or regulations. The Acquired Fund currently complies in all material respects with, and since its organization has complied in all material respects with, all investment objectives, policies, guidelines and restrictions and any compliance procedures established by the Safeco Trust with respect to the Acquired Fund. All advertising and sales material used by the Acquired Fund complies in all material respects with and has complied in all material respects with the applicable requirements of the Securities Act, the Investment Company Act, the rules and regulations of the Commission, and, to the extent applicable, the Conduct Rules of the National Association of Securities Dealers, Inc. (the "NASD") and any applicable state regulatory authority. All registration statements, prospectuses, reports, proxy materials or other filings required to be made or filed with the Commission, the NASD or any state securities authorities by the Acquired Fund have been duly filed and have been A-6 approved or declared effective, if such approval or declaration of effectiveness is required by law. Such registration statements, prospectuses, reports, proxy materials and other filings under the Securities Act, the Exchange Act and the Investment Company Act (i) are or were in compliance in all material respects with the requirements of all applicable statutes and the rules and regulations thereunder and (ii) do not or did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not false or misleading; (r) Neither the Acquired Fund nor, to the knowledge of the Acquired Fund, any "affiliated person" of the Acquired Fund has been convicted of any felony or misdemeanor, described in Section 9(a)(1) of the Investment Company Act, nor, to the knowledge of the Acquired Fund, has any affiliated person of the Acquired Fund been the subject, or presently is the subject, of any proceeding or investigation with respect to any disqualification that would be a basis for denial, suspension or revocation of registration as an investment adviser under Section 203(e) of the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), or Rule 206(4)-4(b) thereunder or of a broker-dealer under Section 15 of the Exchange Act, or for disqualification as an investment adviser, employee, officer or director of an investment company under Section 9 of the Investment Company Act; and (s) The tax representation certificate to be delivered by Safeco Trust on behalf of the Acquired Fund to the Acquiring Trust and Wilmer Cutler Pickering Hale and Dorr LLP at the Closing pursuant to Paragraph 7.4 (the "Acquired Fund Tax Representation Certificate") will not on the Closing Date contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading. 4.2 Except as set forth on Schedule 4.2 hereto, the Acquiring Trust, on behalf of the Acquiring Fund, represents, warrants and covenants to the Acquired Fund, which representations, warranties and covenants will be true and correct on the date hereof and on the Closing Date as though made on and as of the Closing Date, as follows: (a) The Acquiring Fund is a series of the Acquiring Trust. The Acquiring Trust is a [statutory][business] trust duly organized, validly existing and in good standing under the laws of the [State of Delaware][Commonwealth of Massachusetts]. The Acquiring Trust has the power to own all of its properties and assets and to perform the obligations under this Agreement. The Acquiring Fund is not required to qualify to do business in any jurisdiction in which it is not so qualified or where failure to qualify would subject it to any material liability or disability. Each of the Acquiring Trust and the Acquiring Fund has all necessary federal, state and local authorizations to own all of its properties and assets and to carry on its business as now being conducted; (b) The Acquiring Trust is a registered investment company classified as a management company of the open-end type, and its registration with the Commission as an investment company under the Investment Company Act is in full force and effect; (c) The Acquiring Fund's registration statement on Form N-1A that will be in effect on the Closing Date, and the prospectus and statement of additional information of the Acquiring Fund included therein, will conform in all material respects with the applicable requirements of the Securities Act and the Investment Company Act and the rules and regulations of the Commission thereunder, and did not as of the effective date thereof and will not as of the Closing Date contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; (d) The Registration Statement, the Proxy Statement and statement of additional information with respect to the Acquiring Fund, and any amendments or supplements thereto in effect on or prior to the Closing Date included in the Registration Statement (other than written information furnished by the Acquired Fund for inclusion therein, as covered by the Acquired Fund's warranty in Paragraph 4.1(m) hereof) will conform in all material respects to the applicable requirements of the Securities Act and the Investment Company Act and the rules and regulations of the Commission thereunder. Neither the Registration Statement nor the Proxy Statement (other than written information furnished by the Acquired Fund for inclusion therein, as covered by the Acquired Fund's warranty in Paragraph 4.1(m) hereof) includes or will include any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (e) The Acquiring Trust is not in violation of, and the execution and delivery of this Agreement and performance of its obligations under this Agreement will not result in a violation of, any provisions of the Declaration of Trust or by-laws of the Acquiring Trust or any material agreement, indenture, instrument, contract, lease or other undertaking with respect to the Acquiring Fund to which the Acquiring Trust is a party or by which the Acquiring Fund or any of its assets is bound; (f) No litigation or administrative proceeding or investigation of or before any court or governmental body is currently pending or threatened against the Acquiring Fund or any of the Acquiring Fund's properties or assets. The Acquiring Fund knows of no facts which might form the basis for the institution of such proceedings. Neither the Acquiring Trust nor the Acquiring Fund is a party to A-7 or subject to the provisions of any order, decree or judgment of any court or governmental body which materially adversely affects the Acquiring Fund's business or its ability to consummate the transactions contemplated herein; (g) The statement of assets and liabilities of the Acquiring Fund, and the related statements of income and changes in NAV, as of and for the fiscal year ended [most recent fiscal year end] have been audited by Ernst & Young LLP, independent registered public accounting firm, and are in accordance with GAAP consistently applied and fairly reflect, in all material respects, the financial condition of the Acquiring Fund as of such date and the results of its operations for the period then ended, and all known liabilities, whether actual or contingent, of the Acquiring Fund as of the date thereof are disclosed therein; (h) Since [most recent fiscal year end], except as specifically disclosed in the Acquiring Fund's prospectus, its statement of additional information as in effect on the date of this Agreement, or its semi-annual report for the period ended [ ], there has not been any material adverse change in the Acquiring Fund's financial condition, assets, liabilities, business or prospects, or any incurrence by the Acquiring Fund of indebtedness, except for normal contractual obligations incurred in the ordinary course of business or in connection with the settlement of purchases and sales of portfolio securities. For the purposes of this subparagraph (h) (but not for any other purpose of this Agreement), a decline in NAV per Acquiring Fund Share arising out of its normal investment operations or a decline in market values of securities in the Acquiring Fund's portfolio or a decline in net assets of the Acquiring Fund as a result of redemptions shall not constitute a material adverse change; (i) (A) For each taxable year of its operation since its inception, the Acquiring Fund has met, and for the current taxable year it will meet, the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company and will qualify as such as of the Closing Date and will satisfy the diversification requirements of Section 851(b)(3) of the Code without regard to the last sentence of Section 851(d) of the Code. The Acquiring Fund has not taken any action, caused any action to be taken or caused any action to fail to be taken which action or failure could cause the Acquiring Fund to fail to qualify as a regulated investment company under the Code; (B) Within the times and in the manner prescribed by law, the Acquiring Fund has properly filed on a timely basis all Tax Returns that it was required to file, and all such Tax Returns were complete and accurate in all respects. The Acquiring Fund has not been informed by any jurisdiction that the jurisdiction believes that the Acquiring Fund was required to file any Tax Return that was not filed; and the Acquiring Fund does not know of any basis upon which a jurisdiction could assert such a position; (C) The Acquiring Fund has timely paid, in the manner prescribed by law, all Taxes that were due and payable or that were claimed to be due; (D) All Tax Returns filed by the Acquiring Fund constitute complete and accurate reports of the respective liabilities for Taxes and all attributes of the Acquiring Fund or, in the case of information returns and payee statements, the amounts required to be reported, and accurately set forth all items required to be included or reflected in such returns; (E) The Acquiring Fund has not waived or extended any applicable statute of limitations relating to the assessment or collection of Taxes; (F) The Acquiring Fund has not been notified that any examinations of the Tax Returns of the Acquiring Fund are currently in progress or threatened, and no deficiencies have been asserted or assessed against the Acquiring Fund as a result of any audit by the Internal Revenue Service or any state, local or foreign taxing authority, and, to its knowledge, no such deficiency has been proposed or threatened; (G) The Acquiring Fund has no actual or potential liability for any Tax obligation of any taxpayer other than itself. The Acquiring Fund is not and has never been a member of a group of corporations with which it has filed (or been required to file) consolidated, combined or unitary Tax Returns. The Acquiring Fund is not a party to any Tax allocation, sharing, or indemnification agreement; (H) The Acquiring Trust has delivered to Safeco Trust or made available to Safeco Trust complete and accurate copies of all Tax Returns of the Acquiring Fund, together with all related examination reports and statements of deficiency for all periods not closed under the applicable statutes of limitations and complete and correct copies of all private letter rulings, revenue agent reports, information document requests, notices of proposed deficiencies, deficiency notices, protests, petitions, closing agreements, settlement agreements, pending ruling requests and any similar documents submitted by, received by or agreed to by or on behalf of the Acquiring Fund. The Acquiring Fund has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code; (I) The Acquiring Fund has not undergone, has not agreed to undergo, and is not required to undergo (nor will it be required as a result of the transactions contemplated in this Agreement to undergo) a change in its method of accounting resulting in A-8 an adjustment to its taxable income pursuant to Section 481 of the Code. The Acquiring Fund will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date under Section 481(c) of the Code (or any corresponding or similar provision of state, local or foreign income Tax law); (ii) "closing agreement" as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (iii) installment sale or open transaction disposition made on or prior to the Closing Date; or (iv) prepaid amount received on or prior to the Closing Date; (J) The Acquiring Fund has not taken or agreed to take any action, and is not aware of any agreement, plan or other circumstance, that is inconsistent with the representations set forth in Annex A; (K) The Acquiring Fund has not incurred (or been allocated) an "overall foreign loss" as defined in Section 904(f)(2) of the Code which has not been previously recaptured in full as provided in Sections 904(f)(2) and/or 904(f)(3) of the Code; (L) The Acquiring Fund is not a party to a gain recognition agreement under Section 367 of the Code; (M) The Acquiring Fund's Tax attributes are not limited under the Code (including but not limited to any capital loss carry forward limitations under Sections 382 or 383 of the Code and the Treasury Regulations thereunder) or comparable provisions of state law, except as set forth on Schedule 4.2; (j) The Acquiring Fund currently complies, and at all times since its organization has complied, in all material respects with the requirements of, and the rules and regulations under, the Investment Company Act, the Securities Act, the Exchange Act, state "Blue Sky" laws and all other applicable federal and state laws or regulations. The Acquiring Fund currently complies in all material respects with, and since its organization has complied in all material respects with, all investment objectives, policies, guidelines and restrictions and any compliance procedures established by the Acquiring Trust with respect to the Acquiring Fund. All advertising and sales material used by the Acquiring Fund complies in all material respects with and has complied in all material respects with the applicable requirements of the Securities Act, the Investment Company Act, the rules and regulations of the Commission, and, to the extent applicable, the Conduct Rules of the NASD and any applicable state regulatory authority. All registration statements, prospectuses, reports, proxy materials or other filings required to be made or filed with the Commission, the NASD or any state securities authorities by the Acquiring Fund have been duly filed and have been approved or declared effective, if such approval or declaration of effectiveness is required by law. Such registration statements, prospectuses, reports, proxy materials and other filings under the Securities Act, the Exchange Act and the Investment Company Act (i) are or were in compliance in all material respects with the requirements of all applicable statutes and the rules and regulations thereunder and (ii) do not or did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not false or misleading; (k) The authorized capital of the Acquiring Fund consists of an unlimited number of shares of beneficial interest, no par value per share. As of the Closing Date, the Acquiring Fund will be authorized to issue an unlimited number of shares of beneficial interest, no par value per share. The Acquiring Fund Shares to be issued and delivered to the Acquired Fund for the account of the Acquired Fund Shareholders pursuant to the terms of this Agreement will have been duly authorized on the Closing Date and, when so issued and delivered, will be duly and validly issued, fully paid and non-assessable. The Acquiring Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any Acquiring Fund shares, nor is there outstanding any security convertible into any Acquiring Fund shares; (l) The Acquiring Trust has the trust power and authority to enter into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Acquiring Trust's Board of Trustees, and, assuming due authorization, execution and delivery by the Acquired Fund, this Agreement will constitute a valid and binding obligation of the Acquiring Fund, enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights and to general equity principles; (m) The information to be furnished in writing by the Acquiring Fund or the Acquiring Fund Adviser for use in applications for orders, registration statements, proxy materials and other documents which may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations applicable thereto or the requirements of any form for which its use is intended, and shall not contain any untrue statement of a material fact or omit to state a material fact necessary to make the information provided not misleading; (n) No consent, approval, authorization or order of or filing with any court or governmental authority is required for the execution of this Agreement or the consummation of the transactions contemplated by the Agreement by the Acquiring Fund, except for the registration of the Acquiring Fund Shares under the Securities Act and the Investment Company Act; A-9 (o) All of the issued and outstanding Acquiring Fund Shares have been offered for sale and sold in conformity with all applicable federal and state securities laws, except as may have been previously disclosed in writing to the Acquired Fund; (p) The prospectus and statement of additional information of the Acquiring Fund and any amendments or supplements thereto, furnished to the Acquired Fund, did not as of their dates or the dates of their distribution to the public contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which such statements were made, not misleading; (q) Neither the Acquiring Fund nor, to the knowledge of the Acquiring Fund, any "affiliated person" of the Acquiring Fund has been convicted of any felony or misdemeanor, described in Section 9(a)(1) of the Investment Company Act, nor, to the knowledge of the Acquiring Fund, has any affiliated person of the Acquiring Fund been the subject, or presently is the subject, of any proceeding or investigation with respect to any disqualification that would be a basis for denial, suspension or revocation of registration as an investment adviser under Section 203(e) of the Investment Advisers Act or Rule 206(4)-4(b) thereunder or of a broker-dealer under Section 15 of the Exchange Act, or for disqualification as an investment adviser, employee, officer or director of an investment company under Section 9 of the Investment Company Act; and (r) The tax representation certificate to be delivered by the Acquiring Trust on behalf of the Acquiring Fund to the Safeco Trust and Wilmer Cutler Pickering Hale and Dorr LLP at Closing pursuant to Section 6.3 (the "Acquiring Fund Tax Representation Certificate") will not on the Closing Date contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading. 5. COVENANTS OF THE FUNDS 5.1 The Acquired Fund will operate the Acquired Fund's business in the ordinary course of business between the date hereof and the Closing Date. It is understood that such ordinary course of business will include the declaration and payment of customary dividends and other distributions and any other dividends and other distributions necessary or advisable (except to the extent dividends or other distributions that are not customary may be limited by representations made in connection with the issuance of the tax opinion described in Paragraph 8.5 hereof), in each case payable either in cash or in additional shares. 5.2 The Safeco Trust will call a special meeting of the Acquired Fund's shareholders to consider approval of this Agreement and act upon the matters set forth in the Proxy Statement. 5.3 The Acquiring Fund will prepare the notice of meeting, form of proxy and Proxy Statement (collectively, "Proxy Materials") to be used in connection with such meeting, and will promptly prepare and file with the Commission the Registration Statement. The Safeco Trust will provide the Acquiring Fund with information reasonably requested for the preparation of the Registration Statement in compliance with the Securities Act, the Exchange Act, and the Investment Company Act. 5.4 The Acquired Fund covenants that the Acquiring Fund Shares to be issued hereunder are not being acquired by the Acquired Fund for the purpose of making any distribution thereof other than in accordance with the terms of this Agreement. 5.5 The Acquired Fund will assist the Acquiring Fund in obtaining such information as the Acquiring Fund reasonably requires concerning the beneficial ownership of the Acquired Fund Shares. 5.6 Subject to the provisions of this Agreement, each Fund will take, or cause to be taken, all actions, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate the transactions contemplated by this Agreement. 5.7 The Acquired Fund shall furnish to the Acquiring Fund on the Closing Date a Statement of Assets and Liabilities of the Acquired Fund as of the Closing Date setting forth the NAV (as computed pursuant to Paragraph 2.1) of the Acquired Fund as of the Valuation Time, which statement shall be prepared in accordance with GAAP consistently applied and certified by the Safeco Trust's Treasurer or Assistant Treasurer. As promptly as practicable, but in any case within 30 days after the Closing Date, the Safeco Trust shall furnish to the Acquiring Trust, in such form as is reasonably satisfactory to the Acquiring Trust, a statement of the earnings and profits of the Acquired Fund for federal income tax purposes, and of any capital loss carryovers and other items that will be carried over to the Acquiring Fund under the Code, and which statement will be certified by the Treasurer of the Safeco Trust. 5.8 Neither Fund shall take any action that is inconsistent with the representations set forth in, with respect to the Acquired Fund, the Acquired Fund Tax Representation Certificate and, with respect to the Acquiring Fund, the Acquiring Fund Tax Representation Certificate. 5.9 From and after the date of this Agreement and until the Closing Date, each of the Funds and the Safeco Trust and the Acquiring Trust shall use its commercially reasonable efforts to cause the Reorganization to qualify, and will not knowingly take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken, which action or failure to act could prevent the A-10 Reorganization from qualifying, as a reorganization under the provisions of Section 368(a) of the Code. The parties hereby adopt this Agreement as a "plan of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the income tax regulations promulgated under the Code. Unless otherwise required pursuant to a "determination" within the meaning of Section 1313(a) of the Code, the parties hereto shall treat and report the transactions contemplated hereby as a reorganization within the meaning of Section 368(a)(1)[insert (C) or (D), as applicable] of the Code and shall not take any position inconsistent with such treatment. 5.10 From and after the date of this Agreement and through the time of the Closing, each Fund shall use its commercially reasonable efforts to cause it to qualify, and will not knowingly take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken, which action or failure to act could prevent it from qualifying as a regulated investment company under the provisions of Subchapter M of the Code. 5.11 Each Fund shall prepare, or cause to be prepared, all of its Tax Returns for taxable periods that end on or before the Closing Date and shall timely file, or cause to be timely filed, all such Tax Returns. Each Fund shall make any payments of Taxes required to be made by it with respect to any such Tax Returns. 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND The obligations of the Acquired Fund to complete the transactions provided for herein shall be, at its election, subject to the performance by the Acquiring Fund of all the obligations to be performed by it hereunder on or before the Closing Date, and, in addition thereto, the following further conditions, unless waived by the Acquired Fund in writing: 6.1 All representations and warranties by the Acquiring Trust on behalf of the Acquiring Fund contained in this Agreement shall be true and correct as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date; 6.2 The Acquiring Trust shall have delivered to the Safeco Trust on the Closing Date a certificate of the Acquiring Trust on behalf of the Acquiring Fund executed in its name by its President or Vice President and its Treasurer or Assistant Treasurer, in form and substance satisfactory to the Safeco Trust and dated as of the Closing Date, to the effect that the representations and warranties of the Acquiring Trust made in this Agreement are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, that each of the conditions to Closing in this Article 6 have been met, and as to such other matters as the Safeco Trust shall reasonably request; 6.3 The Acquiring Trust on behalf of the Acquiring Fund shall have delivered to the Safeco Trust and Wilmer Cutler Pickering Hale and Dorr LLP an Acquiring Fund Tax Representation Certificate, satisfactory to the Safeco Trust and Wilmer Cutler Pickering Hale and Dorr LLP, substantially in the form attached to this Agreement as Annex A, concerning certain tax-related matters with respect to the Acquiring Fund; 6.4 With respect to the Acquiring Fund, the Board of Trustees of the Acquiring Trust shall have determined that the Reorganization is in the best interests of the Acquiring Fund and, based upon such determination, shall have approved this Agreement and the transactions contemplated hereby; and 6.5 The Safeco Trust shall have received at the Closing a favorable opinion as to the due authorization of this Agreement by the Acquiring Trust and related matters of Wilmer Cutler Pickering Hale and Dorr LLP, dated as of the Closing Date, in a form reasonably satisfactory to the Safeco Trust. 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND The obligations of the Acquiring Fund to complete the transactions provided for herein shall be, at its election, subject to the performance by the Acquired Fund of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following further conditions, unless waived by the Acquiring Fund in writing: 7.1 All representations and warranties of the Safeco Trust on behalf of the Acquired Fund contained in this Agreement shall be true and correct as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date; 7.2 The Safeco Trust shall have delivered to the Acquiring Fund the Statement of Assets and Liabilities of the Acquired Fund pursuant to Paragraph 5.7, together with a list of its portfolio securities showing the federal income tax bases and holding periods of such securities, as of the Closing Date, certified by the Safeco Trust's Treasurer or Assistant Treasurer; A-11 7.3 The Safeco Trust shall have delivered to the Acquiring Trust on the Closing Date a certificate of the Safeco Trust on behalf of the Acquired Fund executed in its name by its President or Vice President and a Treasurer or Assistant Treasurer, in form and substance reasonably satisfactory to the Acquiring Trust and dated as of the Closing Date, to the effect that the representations and warranties of the Safeco Trust contained in this Agreement are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, that each of the conditions to Closing in this Article 7 have been met, and as to such other matters as the Acquiring Trust shall reasonably request; 7.4 The Safeco Trust on behalf of the Acquired Fund shall have delivered to the Acquiring Trust and Wilmer Cutler Pickering Hale and Dorr LLP an Acquired Fund Tax Representation Certificate, satisfactory to the Acquiring Trust and Wilmer Cutler Pickering Hale and Dorr LLP, substantially in the form attached to this Agreement as Annex B, concerning certain tax-related matters with respect to the Acquired Fund; 7.5 The Acquiring Trust shall have received at the Closing a favorable opinion as to the due authorization of this Agreement by the Safeco Trust and related matters of Kirkpatrick & Lockhart LLP, dated as of the Closing Date, in a form reasonably satisfactory to Acquiring Trust; and 7.6 With respect to the Acquired Fund, the Board of Trustees of the Safeco Trust shall have determined that the Reorganization is in the best interests of the Acquired Fund and, based upon such determination, shall have approved this Agreement and the transactions contemplated hereby. 8. FURTHER CONDITIONS PRECEDENT If any of the conditions set forth below does not exist on or before the Closing Date with respect to either party hereto, the other party to this Agreement shall, at its option, not be required to consummate the transactions contemplated by this Agreement: 8.1 This Agreement and the transactions contemplated herein shall have been approved by the requisite vote of the Acquired Fund's shareholders in accordance with the provisions of the Safeco Trust's Trust Instrument and By-Laws, and certified copies of the resolutions evidencing such approval by the Acquired Fund's shareholders shall have been delivered by the Acquired Fund to the Acquiring Fund. Notwithstanding anything herein to the contrary, neither party hereto may waive the conditions set forth in this Paragraph 8.1; 8.2 On the Closing Date, no action, suit or other proceeding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transactions contemplated herein; 8.3 All consents of other parties and all other consents, orders and permits of federal, state and local regulatory authorities (including those of the Commission and of state Blue Sky and securities authorities) deemed necessary by either party hereto to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order or permit would not involve a risk of a material adverse effect on the assets or properties of either party hereto, provided that either party may waive any such conditions for itself; 8.4 The Acquiring Trust's Registration Statement on Form N-14 shall have become effective under the Securities Act and no stop orders suspending the effectiveness of such Registration Statement shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the Securities Act; 8.5 The parties shall have received an opinion of Wilmer Cutler Pickering Hale and Dorr LLP, satisfactory to the Safeco Trust and the Acquiring Trust and subject to customary assumptions and qualifications, substantially to the effect that for federal income tax purposes the acquisition by the Acquiring Fund of the Acquired Assets solely in exchange for the issuance of Acquiring Fund Shares to the Acquired Fund and the assumption of the Assumed Liabilities by the Acquiring Fund, followed by the distribution by the Acquired Fund, in liquidation of the Acquired Fund, of Acquiring Fund Shares to the Acquired Fund Shareholders in exchange for their Acquired Fund Shares and the termination of the Acquired Fund, will constitute a "reorganization" within the meaning of Section 368(a) of the Code; 8.6 The Acquired Fund shall have distributed to its shareholders, in a distribution or distributions qualifying for the deduction for dividends paid under Section 561 of the Code, all of its investment company taxable income (as defined in Section 852(b)(2) of the Code determined without regard to Section 852(b)(2)(D) of the Code) for its taxable year ending on the Closing Date, all of the excess of (i) its interest income excludable from gross income under Section 103(a) of the Code over (ii) its deductions disallowed under Sections 265 and 171(a)(2) of the Code for its taxable year ending on the Closing Date, and all of its net capital gain (as such term is used in Sections 852(b)(3)(A) and (C) of the Code), after reduction by any available capital loss carryforward, for its taxable year ending on the Closing Date; and A-12 8.7 The Acquiring Trust shall have made a distribution of capital gains to its shareholders in November 2004 in accordance with its normal practices and, unless the Acquiring Fund distributes income monthly, the dividend distribution that the Acquiring Fund normally would make in December of 2004 shall have been made to shareholders of record prior to the Closing. 9. BROKERAGE FEES AND EXPENSES 9.1 Each party hereto represents and warrants to the other party hereto that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein. 9.2 The parties have been informed by Symetra Financial Corporation and the Acquiring Fund Adviser -- and the parties have entered into this Agreement in reliance on such information -- that such non-parties will pay all expenses of the Funds associated with the Reorganization, including, the expenses associated with the preparation, printing and mailing of any and all shareholder notices, communications, proxy statements, and necessary filings with the SEC or any other governmental authority in connection with the transactions contemplated by this Agreement and the legal and Trustees' fees and expenses incurred in connection with the Reorganization. Except for the foregoing, the Acquiring Fund and the Acquired Fund shall each bear its own expenses in connection with the transactions contemplated by this Agreement. 10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES 10.1 The Acquiring Trust and the Safeco Trust each agrees that neither party has made any representation, warranty or covenant not set forth herein or referred to in Paragraphs 4.1 or 4.2 hereof and that this Agreement constitutes the entire agreement between the parties. 10.2 The representations and warranties contained in this Agreement or in any document delivered pursuant hereto or in connection herewith shall not survive the consummation of the transactions contemplated hereunder. 11. TERMINATION 11.1 This Agreement may be terminated by the mutual agreement of the Acquiring Trust and Safeco Trust. In addition, either party may at its option terminate this Agreement at or prior to the Closing Date: (a) because of a material breach by the other of any representation, warranty, covenant or agreement contained herein to be performed at or prior to the Closing Date; (b) because of a condition herein expressed to be precedent to the obligations of the terminating party which has not been met and which reasonably appears will not or cannot be met; (c) by resolution of the Acquiring Trust's Board of Trustees if circumstances should develop that, in the good faith opinion of such Board, make proceeding with the Agreement not in the best interests of the Acquiring Fund's shareholders; (d) by resolution of the Safeco Trust's Board of Trustees if circumstances should develop that, in the good faith opinion of such Board, make proceeding with the Agreement not in the best interests of the Acquired Fund's shareholders; or (e) if the transactions contemplated by this Agreement shall not have occurred on or prior to December 31, 2004 or such other date as the parties may mutually agree upon in writing. 11.2 In the event of any such termination, there shall be no liability for damages on the part of the Acquiring Fund, the Acquiring Trust, the Safeco Trust or the Acquired Fund, or the trustees or officers of the Safeco Trust, or the Acquiring Trust, but, subject to Paragraph 9.2, each party shall bear the expenses incurred by it incidental to the preparation and carrying out of this Agreement. 12. AMENDMENTS This Agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by the authorized officers of the Safeco Trust and the Acquiring Trust; provided, however, that following the meeting of the Acquired Fund's shareholders called by the Safeco Trust pursuant to Paragraph 5.2 of this Agreement, no such amendment may have the effect of changing the provisions regarding the method for determining the number of Acquiring Fund Shares to be received by the Acquired Fund Shareholders under this Agreement to their detriment without their further approval; provided that nothing contained in this Section 12 shall be construed to prohibit the parties from amending this Agreement to change the Closing Date. 13. NOTICES Any notice, report, statement or demand required or permitted by any provisions of this Agreement shall be in writing and shall be given by prepaid telegraph, telecopy or certified mail addressed to the Acquired Fund, c/o Symetra Financial Corporation, 5069 154th Place, A-13 N.E., Seattle, Washington 98052, Attention: Roger F. Harbin, with copies to R. Darrell Mounts, Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second Floor, Washington, DC 20036-1221, and to the Acquiring Fund, c/o Pioneer Investment Management, Inc., 60 State Street, Boston, Massachusetts 02109, Attention: Dorothy E. Bourassa, Esq., with copies to Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, Attention: David C. Phelan. 14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT 14.1 The article and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 14.2 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 14.3 This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to conflict of laws principles (other than Delaware Code Title 6 [sec] 2708); provided that, in the case of any conflict between those laws and the federal securities laws, the latter shall govern. 14.4 This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by either party without the prior written consent of the other party hereto. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, or other entity, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement. 14.5 It is expressly agreed that the obligations of the Acquiring Trust and the Safeco Trust shall not be binding upon any of their respective trustees, shareholders, nominees, officers, agents or employees personally, but bind only to the property of the Acquiring Fund or the Acquired Fund, as the case may be, as provided in the trust instruments of the Acquiring Trust and the Instrument of Trust of the Safeco Trust, respectively. The execution and delivery of this Agreement have been authorized by the trustees of the Acquiring Trust and of the Safeco Trust and this Agreement has been executed by authorized officers of the Acquiring Trust and the Safeco Trust, acting as such, and neither such authorization by such trustees nor such execution and delivery by such officers shall be deemed to have been made by any of them individually or to imposed any liability on any of them personally, but shall bind only the property of the Acquiring Fund and the Acquired Fund, as the case may be, as provided in the trust instruments of the Acquiring Trust and the Instrument of Trust of the Safeco Trust, respectively. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first set forth above by its President or Vice President and attested by its Secretary or Assistant Secretary. Attest: [SAFECO TRUST] on behalf of [SAFECO FUND] By: __________________________________ By: __________________________________ Name: Name: Title: Secretary Title: President Attest: [PIONEER TRUST] on behalf of [PIONEER FUND] By: __________________________________ By: __________________________________ Name: Name: Title: Secretary Title: A-14 Annex A TAX REPRESENTATION CERTIFICATE OF [PIONEER TRUST] ON BEHALF OF [PIONEER FUND] This certificate is being delivered in connection with the transactions to be effected pursuant to the Agreement and Plan of Reorganization made as of _____________ , 2004 between [Pioneer Trust], a [Delaware statutory] [Massachusetts business] trust ("Acquiring Trust"), on behalf of its series [Pioneer Fund] ("Acquiring Fund"), and [Safeco Trust], a Delaware statutory trust, on behalf of its series [Safeco Fund] ("Acquired Fund") (the "Agreement"). Pursuant to the Agreement, Acquiring Fund will acquire all of the assets of Acquired Fund in exchange solely for (i) the assumption by Acquiring Fund of the Assumed Liabilities of Acquired Fund and (ii) the issuance of Investor Class shares of beneficial interest of Acquiring Fund (the "Acquiring Fund Shares") to Acquired Fund, followed by the distribution by Acquired Fund, in liquidation of Acquired Fund, of the Acquiring Fund Shares to the shareholders of Acquired Fund and the termination of Acquired Fund (the foregoing together constituting the "transaction"). The undersigned officer of Acquiring Trust, after consulting with its counsel, auditors and tax advisers regarding the meaning of and factual support for the following representations on behalf of Acquiring Fund, hereby certifies and represents that the following statements are true, complete and correct and will be true, complete and correct on the date of the transaction and thereafter as relevant. Unless otherwise indicated, all capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement. 1. Acquiring Fund is a series of Acquiring Trust, [a statutory] [business] trust organized under the laws of the [State of Delaware] [Commonwealth of Massachusetts], and Acquiring Fund is, and has been at all times, treated as a separate corporation for federal tax purposes. 2. Neither Acquiring Fund nor any person "related" to Acquiring Fund (as defined in Treasury Regulation Section 1.368-1(e)(3)), nor any partnership of which Acquiring Fund or any such related person is a partner, has any plan or intention to redeem or otherwise acquire any of the Acquiring Fund Shares received by shareholders of Acquired Fund in the transaction except in the ordinary course of Acquiring Fund's business in connection with its legal obligation under Section 22(e) of the Investment Company Act of 1940, as amended (the "1940 Act"), as a series of a registered open-end investment company to redeem its own shares. 3. After the transaction, Acquiring Fund will continue the historic business (as defined in Treasury Regulation Section 1.368-1(d)(2)) of Acquired Fund or will use a significant portion of the historic business assets (as defined in Treasury Regulation Section 1.368-1(d)(3)) acquired from Acquired Fund in a business. 4. Acquiring Fund has no plan or intention to sell or otherwise dispose of any assets of Acquired Fund acquired in the transaction, except for dispositions made in the ordinary course of its business or to maintain its qualification as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). 5. Any expenses of Acquired Fund incurred in connection with the transaction which are paid or assumed by Acquiring Fund will be expenses of Acquired Fund solely and directly related to the transaction in accordance with Rev. Rul. 73-54, 1973-1 C.B. 187. Acquiring Fund will not pay or assume the expenses, if any, incurred by any Acquired Fund Shareholders in connection with the transaction. 6. There is no, and never has been any, indebtedness between Acquiring Fund and Acquired Fund. 7. Acquiring Fund has properly elected to be a regulated investment company under Subchapter M of the Code, has qualified for the special tax treatment afforded regulated investment companies under the Code for each taxable year since inception and qualifies for such treatment as of the time of the Closing. 8. Acquiring Fund meets the requirements of an "investment company" in Section 368(a)(2)(F) of the Code. 9. Acquiring Fund is not under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code. 10. Acquiring Fund does not now own and has never owned, directly or indirectly, any shares of Acquired Fund. 11. As of the date of the transaction, the fair market value of the Acquiring Fund Shares issued to Acquired Fund will be approximately equal to the fair market value of the Acquired Assets minus the Assumed Liabilities. Acquiring Fund will not furnish any consideration in connection with the acquisition of the Acquired Assets other than the assumption of the Assumed Liabilities and the issuance of such Acquiring Fund Shares. A-15 12. Acquired Fund Shareholders [will/will not] be in control (within the meaning of Sections 368(a)(2)(H)(i) and 304(c)(1) of the Code) of Acquiring Fund after the transaction. 13. The transaction is being undertaken for valid and substantial business purposes, including facilitating Acquired Fund's becoming a member of the Pioneer family of mutual funds, which, in the long term, is intended to result in lower expenses and increased assets. 14. No Acquired Fund shareholder is acting as agent for Acquiring Fund in connection with the transaction or approval thereof. Acquiring Fund will not reimburse any Acquired Fund shareholder for Acquired Fund Shares such shareholder may have purchased or for other obligations such shareholder may have incurred. 15. Acquiring Fund has no outstanding warrants, options, convertible securities or any other type of right pursuant to which any person could acquire stock in Acquiring Fund. * * * * * A-16 The undersigned officer of Acquiring Trust is authorized to make all of the representations set forth herein, and the undersigned is authorized to execute this certificate on behalf of Acquiring Fund. The undersigned recognizes that Wilmer Cutler Pickering Hale and Dorr LLP will rely upon the foregoing representations in evaluating the United States federal income tax consequences of the transaction and rendering its opinion pursuant to Section 8.5 of the Agreement. If, prior to the date of the transaction, any of the representations set forth herein ceases to be accurate, the undersigned agrees to deliver immediately to Wilmer Cutler Pickering Hale and Dorr LLP a written notice to that effect. [PIONEER TRUST] on behalf of [Pioneer Fund] By: __________________________________ Name: _____________________________ Title: ____________________________ Dated: ______________, 2004 A-17 Annex B TAX REPRESENTATION CERTIFICATE OF [SAFECO TRUST] ON BEHALF OF [SAFECO FUND] This certificate is being delivered in connection with the transactions to be effected pursuant to the Agreement and Plan of Reorganization made as of , 2004 between [Pioneer Trust], a [Delaware statutory] [Massachusetts business] trust, on behalf of its series [Pioneer Fund] ("Acquiring Fund"), and [Safeco Trust], a Delaware statutory trust ("Safeco Trust"), on behalf of its series [Safeco Fund] ("Acquired Fund") (the "Agreement"). Pursuant to the Agreement, Acquiring Fund will acquire all of the assets of Acquired Fund in exchange solely for (i) the assumption by Acquiring Fund of the Assumed Liabilities of Acquired Fund and (ii) the issuance of Investor Class shares of beneficial interest of Acquiring Fund (the "Acquiring Fund Shares") to Acquired Fund, followed by the distribution by Acquired Fund, in liquidation of Acquired Fund, of the Acquiring Fund Shares to the shareholders of Acquired Fund and the termination of Acquired Fund (the foregoing together constituting the "transaction"). The undersigned officer of Safeco Trust, after consulting with its counsel, auditors and tax advisers regarding the meaning of and factual support for the following representations, on behalf of Acquired Fund, hereby certifies and represents that the following statements are true, complete and correct and will be true, complete and correct on the date of the transaction and thereafter as relevant. Unless otherwise indicated, all capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement. 1. Acquired Fund is a series of Safeco Trust, a statutory trust organized under the laws of the State of Delaware, and Acquired Fund is, and has been at all times, treated as a separate corporation for federal tax purposes. 2. As of the date of the transaction, the fair market value of the Acquiring Fund Shares received by each shareholder that holds shares of Acquired Fund (the "Acquired Fund Shares") will be approximately equal to the fair market value of the Acquired Fund Shares with respect to which such Acquiring Fund Shares are received, and the aggregate consideration received by Acquired Fund shareholders in exchange for their Acquired Fund Shares will be approximately equal to the fair market value of all of the outstanding Acquired Fund Shares immediately prior to the transaction. No property other than Acquiring Fund Shares will be distributed to shareholders of Acquired Fund in exchange for their Acquired Fund Shares, nor will any such shareholder receive cash or other property as part of the transaction. 3. Neither Acquired Fund nor any person "related" to Acquired Fund (as defined in Treasury Regulation Section 1.368-1(e)(3)), nor any partnership in which Acquired Fund or any such related person is a partner, has redeemed, acquired or otherwise made any distributions with respect to any shares of Acquired Fund as part of the transaction, or otherwise pursuant to a plan of which the transaction is a part, other than redemptions and distributions made in the ordinary course of Acquired Fund's business as a series of an open-end investment company. To the best knowledge of management of Acquired Fund, there is no plan or intention on the part of the shareholders of Acquired Fund to engage in any transaction with Acquired Fund, Acquiring Fund, or any person treated as related to Acquired Fund or Acquiring Fund under Treasury Regulation Section 1.368-1(e)(3) or any partnership in which Acquired Fund, Acquiring Fund, or any person treated as related to Acquired Fund or Acquiring Fund under Treasury Regulation Section 1.368-1(e)(3) is a partner involving the sale, redemption or exchange of any of the Acquired Fund Shares or any of the Acquiring Fund Shares to be received in the transaction, as the case may be, other than in the ordinary course of Acquired Fund's business as a series of an open-end investment company. 4. Pursuant to the transaction, Acquired Fund will transfer to Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the fair market value of the net assets, and at least 70% of the fair market value of the gross assets, Acquired Fund held immediately before the transaction. For the purposes of the foregoing, any amounts Acquired Fund uses to pay its transaction expenses and to make redemptions and distributions immediately before the transaction (except (a) redemptions in the ordinary course of its business required by section 22(e) of the Investment Company Act and (b) regular, normal dividend distributions made to conform to its policy of distributing all or substantially all of its income and gains to avoid the obligation to pay federal income tax and/or the excise tax under Section 4982 of the Code) will be included as assets it held immediately before the transaction. 5. As of the date of the transaction, the fair market value of the Acquiring Fund Shares issued to Acquired Fund will be approximately equal to the fair market value of the Acquired Assets minus the Assumed Liabilities. Acquired Fund will not receive any consideration from Acquiring Fund in connection with the acquisition of the Acquired Assets other than the assumption of the Assumed Liabilities and the issuance of such Acquiring Fund Shares. 6. The Assumed Liabilities assumed by Acquiring Fund plus the Assumed Liabilities, if any, to which the transferred assets are subject were incurred by Acquired Fund in the ordinary course of its business. Acquired Fund is not aware of any liabilities of any kind other than the Assumed Liabilities. A-18 7. As of the Closing Date, the adjusted basis and fair market value of the Acquired Assets will equal or exceed the Assumed Liabilities for purposes of Section 357(d) of the Code. 8. Acquired Fund currently conducts its historic business within the meaning of Treasury Regulation Section 1.368-1(d)(2), which provides that, in general, a corporation's historic business is the business it has conducted most recently, but does not include a business that the corporation enters into as part of a plan of reorganization. All of the assets held by Acquired Fund as of the opening of business on August 2, 2004 (the date the Acquiring Fund Adviser became investment adviser to Acquired Fund) were Acquired Fund's historic business assets within the meaning of Treasury Regulation Section 1.368-1(d)(3) (which provides that a corporation's historic business assets are the assets used in its historic business). 9. Acquired Fund will distribute to its shareholders the Acquiring Fund Shares it receives pursuant to the transaction, and its other properties, if any, and will be liquidated promptly thereafter. 10. The expenses of Acquired Fund incurred by it in connection with the transaction will be only such expenses that are solely and directly related to the transaction in accordance with Rev. Rul. 73-54, 1973-1 C.B. 187. Acquired Fund will not pay any expenses incurred by its shareholders in connection with the transaction. 11. There is no, and never has been any, indebtedness between Acquiring Fund and Acquired Fund. 12. Acquired Fund has properly elected to be a regulated investment company under Subchapter M of the Code, has qualified for the special tax treatment afforded regulated investment companies under Subchapter M of the Code for each taxable year since inception, and qualifies for such treatment as of the time of the Closing. 13. Acquired Fund meets the requirements of an "investment company" in Section 368(a)(2)(F) of the Code. 14. Acquired Fund is not under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code. 15. Acquired Fund does not pay compensation to any shareholder-employee. 16. Acquired Fund shareholders will not have dissenters' or appraisal rights in the transaction. 17. The transaction is being undertaken for valid and substantial business purposes, including facilitating Acquired Fund's becoming a member of the Pioneer family of material funds, which, in the long term, is intended to result in lower expenses and increased assets. 18. Acquired Fund has no outstanding warrants, options, convertible securities or any other type of right pursuant to which any person could acquire stock in Acquired Fund. * * * * * A-19 The undersigned officer of Safeco Trust is authorized to make all of the representations set forth herein, and the undersigned is authorized to execute this certificate on behalf of Acquired Fund. The undersigned recognizes that Wilmer Cutler Pickering Hale and Dorr LLP will rely upon the foregoing representations in evaluating the United States federal income tax consequences of the transaction and rendering its opinion pursuant to Section 8.5 of the Agreement. If, prior to the date of the transaction, any of the representations set forth herein ceases to be accurate, the undersigned agrees to deliver immediately to Wilmer Cutler Pickering Hale and Dorr LLP a written notice to that effect. SAFECO TRUST, on behalf of SAFECO FUND By: ____________________________________ Name: ______________________________ Title: _____________________________ A-20 Exhibit A-2 -- Form of Agreement and Plan of Reorganization (F Reorganization) ------------------------------------------------------------------------------ AGREEMENT AND PLAN OF REORGANIZATION THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made this day of ______________, 2004, by and between [Pioneer Trust], a [Delaware statutory][Massachusetts business] trust (the "Acquiring Trust"), on behalf of its series [name of Pioneer Fund] (the "Acquiring Fund"), with its principal place of business at 60 State Street, Boston, Massachusetts 02109, and [Safeco Trust], a Delaware statutory trust (the "Safeco Trust"), on behalf of its series [name of Safeco Fund] (the "Acquired Fund"), with its principal place of business at 5069 154th Place N.E., Redmond, Washington 98052. The Acquiring Fund and the Acquired Fund are sometimes referred to collectively herein as the "Funds" and individually as a "Fund." This Agreement is intended to be and is adopted as a plan of a "reorganization" as defined in Section 368(a)(1)(F) of the United States Internal Revenue Code of 1986, as amended (the "Code") and the Treasury Regulations thereunder. The reorganization (the "Reorganization") will consist of (1) the transfer of all of the assets of the Acquired Fund to the Acquiring Fund in exchange solely for (A) the issuance of Investor Class shares of beneficial interest of the Acquiring Fund (collectively, the "Acquiring Fund Shares" and each, an "Acquiring Fund Share") to the Acquired Fund, and (B) the assumption by the Acquiring Fund of the liabilities of the Acquired Fund (collectively, the "Assumed Liabilities"), and (2) the distribution by the Acquired Fund, on or promptly after the closing date of the Reorganization (the "Closing Date") as provided herein, of the Acquiring Fund Shares to the shareholders of the Acquired Fund in liquidation and dissolution of the Acquired Fund, all upon the terms and conditions hereinafter set forth in this Agreement. WHEREAS, the Acquiring Trust and the Safeco Trust are each registered investment companies classified as management companies of the open-end type. WHEREAS, the Acquiring Fund is authorized to issue shares of beneficial interest. WHEREAS, the Board of Trustees of the Safeco Trust has determined that the Reorganization is in the best interests of the Acquired Fund shareholders and is not dilutive of the interests of those shareholders. NOW, THEREFORE, in consideration of the premises of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows: 1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING FUND SHARES AND ASSUMPTION OF THE ASSUMED LIABILITIES; LIQUIDATION AND TERMINATION OF THE ACQUIRED FUND. 1.1 Subject to the terms and conditions herein set forth and on the basis of the representations and warranties contained herein, the Acquired Fund will transfer all of its assets as set forth in Paragraph 1.2 (the "Acquired Assets") to the Acquiring Fund free and clear of all liens and encumbrances (other than those arising under the Securities Act of 1933, as amended (the "Securities Act"), liens for taxes not yet due and contractual restrictions on the transfer of the Acquired Assets) and the Acquiring Fund agrees in exchange therefor: (i) to issue to the Acquired Fund the number of Acquiring Fund Shares, including fractional Acquiring Fund Shares, with an aggregate net asset value ("NAV") equal to the NAV of the Acquired Fund, as determined in the manner set forth in Paragraphs 2.1 and 2.2; and (ii) to assume the Assumed Liabilities. Such transactions shall take place at the Closing (as defined in Paragraph 3.1 below). 1.2 (a) The Acquired Assets shall consist of all of the Acquired Fund's property, including, without limitation, all portfolio securities and instruments, dividends and interest receivables, cash, goodwill, contractual rights of the Acquired Fund or the Safeco Trust in respect of the Acquired Fund, all other intangible property owned by the Acquired Fund, originals or copies of all books and records of the Acquired Fund, and all other assets of the Acquired Fund on the Closing Date. The Acquiring Fund shall also be entitled to receive (or, to the extent agreed upon between the Safeco Trust and the Acquiring Trust, be provided access to) copies of all records that the Safeco Trust is required to maintain under the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the rules of the Securities and Exchange Commission (the "Commission") thereunder to the extent such records pertain to the Acquired Fund. (b) The Acquired Fund has provided the Acquiring Fund with a list of all of the Acquired Fund's securities and other assets as of the date of execution of this Agreement, and the Acquiring Fund has provided the Acquired Fund with a copy of the current fundamental investment policies and restrictions and fair value procedures applicable to the Acquiring Fund. The Acquired Fund reserves the right to sell any of such securities or other assets before the Closing Date (except to the extent sales may be limited by representations of the Acquired Fund contained herein and made in connection with the issuance of the tax opinion provided for in Paragraph 8.5 hereof). 1.3 The Acquired Fund will endeavor to discharge all of its known liabilities and obligations that are or will become due prior to the Closing. A-21 1.4 On or as soon after the Closing Date as is conveniently practicable (the "Liquidation Date"), the Safeco Trust shall liquidate the Acquired Fund and distribute pro rata to its shareholders of record, determined as of the close of regular trading on the New York Stock Exchange on the Closing Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by the Acquired Fund pursuant to Paragraph 1.1 hereof. Each Acquired Fund Shareholder shall receive the number of Acquiring Fund Shares that have an aggregate NAV equal to the aggregate NAV of the shares of beneficial interest of the Acquired Fund ("Acquired Fund Shares") held of record by such Acquired Fund Shareholder on the Closing Date. Such liquidation and distribution will be accomplished by the Safeco Trust instructing the Acquiring Trust to transfer the Acquiring Fund Shares then credited to the account of the Acquired Fund on the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund established and maintained by the Acquiring Fund's transfer agent in the names of the Acquired Fund Shareholders and representing the respective pro rata number of the Acquiring Fund Shares due the Acquired Fund Shareholders. The Safeco Trust shall promptly provide the Acquiring Trust with evidence of such liquidation and distribution. All issued and outstanding Acquired Fund Shares will simultaneously be cancelled on the books of the Acquired Fund, and the Acquired Fund will be dissolved. The Acquiring Fund shall not issue certificates representing the Acquiring Fund Shares in connection with such exchange. 1.5 Ownership of Acquiring Fund Shares will be shown on the books of the Acquiring Fund's transfer agent for its Investor Class shares. Any certificates representing ownership of Acquired Fund Shares that remain outstanding on the Closing Date shall be deemed to be cancelled and shall no longer evidence ownership of Acquired Fund Shares. 1.6 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a name other than the registered holder of the Acquired Fund Shares on the books of the Acquired Fund as of that time shall, as a condition of such issuance and transfer, be paid by the person to whom such Acquiring Fund Shares are to be issued and transferred. 1.7 Any reporting responsibility of the Safeco Trust with respect to the Acquired Fund for taxable periods ending on or before the Closing Date, including, but not limited to, the responsibility for filing of regulatory reports, Tax Returns (as defined in Paragraph 4.1), or other documents with the Commission, any state securities commissions, and any federal, state or local tax authorities or any other relevant regulatory authority, is and shall remain the responsibility of the Safeco Trust. 2. VALUATION 2.1 The NAV of the Acquiring Fund Shares and the NAV of the Acquired Fund shall, in each case, be determined as of the close of business (4:00 p.m., Boston time) on the Closing Date (the "Valuation Time"). The NAV of each Acquiring Fund Share shall be computed by Pioneer Investment Management, Inc. (the "Acquiring Fund Adviser") in the manner set forth in the Acquiring Fund's Declaration of Trust (the "Declaration"), or By-Laws, and the Acquiring Fund's then-current prospectus and statement of additional information. The NAV of the Acquired Fund and of each Institutional Class shares thereof shall be computed by Safeco Asset Management, Inc. (the "Acquired Fund Administrator") by calculating the value of the Acquired Assets and by subtracting therefrom the amount of the liabilities of the Acquired Fund on the Closing Date included on the Statement of Assets and Liabilities of the Acquired Fund delivered pursuant to Paragraph 5.7 (the "Statement of Assets and Liabilities"), said assets and liabilities to be valued in the manner set forth in the Acquired Fund's then current prospectus and statement of additional information. Pioneer Investment Management, Inc. (the "Acquiring Fund Adviser") shall confirm to the Acquiring Fund the NAV of the Acquired Fund. 2.2 The number of Acquiring Fund Shares to be issued (including fractional shares, if any) in exchange for the Acquired Assets and the assumption of the Assumed Liabilities shall be determined by Pioneer Investment Management, Inc. (the "Acquiring Fund Adviser") by dividing the NAV of the Acquired Fund, as determined in accordance with Paragraph 2.1, by the NAV of each Acquiring Fund Share, as determined in accordance with Paragraph 2.1. 2.3 The Acquired Fund shall cause the Acquired Fund Administrator to deliver a copy of its valuation report to the Acquiring Fund at Closing. All computations of value shall be made by the Acquired Fund Administrator in accordance with its regular practice as pricing agent for the Acquired Fund. 3. CLOSING AND CLOSING DATE 3.1 The Closing Date shall be December 8, 2004, or such later date as the parties may agree to in writing. All acts necessary to consummation the Reorganization (the "Closing") shall be deemed to take place simultaneously as of 5:00 p.m. (Eastern time) on the Closing Date unless otherwise provided. The Closing shall be held at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts, or at such other place as the parties may agree. 3.2 Portfolio securities that are held other than in book-entry form in the name of State Street Bank and Trust Company (the "Acquired Fund Custodian") as record holder for the Acquired Fund shall be presented by the Acquired Fund to Brown Brothers Harriman & Co. A-22 (the "Acquiring Fund Custodian") for examination no later than three business days preceding the Closing Date. Such portfolio securities shall be delivered by the Acquired Fund to the Acquiring Fund Custodian for the account of the Acquiring Fund on the Closing Date, duly endorsed in proper form for transfer, in such condition as to constitute good delivery thereof in accordance with the custom of brokers, and shall be accompanied by all necessary federal and state stock transfer stamps or a check for the appropriate purchase price thereof. Portfolio securities held of record by the Acquired Fund Custodian in book-entry form on behalf of the Acquired Fund shall be delivered by the Acquired Fund Custodian through the Depository Trust Company to the Acquiring Fund Custodian and by the Acquiring Fund Custodian recording the beneficial ownership thereof by the Acquiring Fund on the Acquiring Fund Custodian's records. Any cash shall be delivered by the Acquired Fund Custodian transmitting immediately available funds by wire transfer to the Acquiring Fund Custodian the cash balances maintained by the Acquired Fund Custodian and the Acquiring Fund Custodian crediting such amount to the account of the Acquiring Fund. 3.3 The Acquiring Fund Custodian shall deliver within one business day after the Closing a certificate of an authorized officer stating that: (a) the Acquired Assets have been delivered in proper form to the Acquiring Fund on the Closing Date, and (b) all necessary transfer taxes including all applicable federal and state stock transfer stamps, if any, have been paid, or provision for payment has been made in conjunction with the delivery of portfolio securities as part of the Acquired Assets. 3.4 If on the Closing Date (a) the New York Stock Exchange is closed to trading or trading thereon shall be restricted or (b) trading or the reporting of trading on such exchange or elsewhere is disrupted so that accurate appraisal of the NAV of the Acquired Fund pursuant to Paragraph 2.1 is impracticable, the Closing Date shall be postponed until the first business day after the day when trading shall have been fully resumed and reporting shall have been restored. 3.5 The Acquired Fund shall deliver at the Closing a list of the names, addresses, federal taxpayer identification numbers and backup withholding and nonresident alien withholding status and certificates of the Acquired Fund Shareholders and the number and percentage ownership of outstanding Acquired Fund Shares owned by each Acquired Fund Shareholder as of the Valuation Time, certified by the President or a Secretary of the Safeco Trust and its Treasurer, Secretary or other authorized officer (the "Shareholder List") as being an accurate record of the information (a) provided by the Acquired Fund Shareholders, (b) provided by the Acquired Fund Custodian, or (c) derived from the Safeco Trust's records by such officers or one of the Safeco Trust's service providers. The Acquiring Fund shall issue and deliver to the Acquired Fund a confirmation evidencing the Acquiring Fund Shares to be credited on the Closing Date, or provide evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares have been credited to the Acquired Fund's account on the books of the Acquiring Fund. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, stock certificates, receipts or other documents as such other party or its counsel may reasonably request. 4. REPRESENTATIONS AND WARRANTIES 4.1 Except as set forth on Schedule 4.1 hereto, the Safeco Trust, on behalf of the Acquired Fund, represents, warrants and covenants to the Acquiring Fund, which representations, warranties and covenants will be true and correct on the date hereof and on the Closing Date as though made on and as of the Closing Date, as follows: (a) The Acquired Fund is a series of the Safeco Trust. The Safeco Trust is a statutory trust validly existing and in good standing under the laws of the State of Delaware and has the power to own all of its properties and assets and, subject to approval by the Acquired Fund's shareholders, to perform its obligations under this Agreement. The Acquired Fund is not required to qualify to do business in any jurisdiction in which it is not so qualified or where failure to qualify would subject it to any material liability or disability. Each of the Safeco Trust and the Acquired Fund has all necessary federal, state and local authorizations to own all of its properties and assets and to carry on its business as now being conducted; (b) The Safeco Trust is a registered investment company classified as a management company of the open-end type, and its registration with the Commission as an investment company under the Investment Company Act is in full force and effect; (c) The Safeco Trust is not in violation of, and the execution and delivery of this Agreement and the performance of its obligations under this Agreement in respect of the Acquired Fund will not result in a violation of, any provision of the Safeco Trust's Trust Instrument or By-Laws or any material agreement, indenture, instrument, contract, lease or other undertaking with respect to the Acquired Fund to which the Safeco Trust is a party or by which the Acquired Fund or any of its assets are bound; (d) No litigation or administrative proceeding or investigation of or before any court or governmental body is currently pending or to its knowledge threatened against the Acquired Fund or any of the Acquired Fund's properties or assets. The Acquired Fund knows of no facts which might form the basis for the institution of such proceedings. Neither the Safeco Trust nor the Acquired Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially adversely affects the Acquired Fund's business or its ability to consummate the transactions contemplated herein or would be binding upon the Acquiring Fund as the successor to the Acquired Fund; A-23 (e) The Acquired Fund has no material contracts or other commitments (other than this Agreement or agreements for the purchase and sale of securities entered into in the ordinary course of business and consistent with its obligations under this Agreement) which will not be terminated at or prior to the Closing Date and no such termination will result in liability to the Acquired Fund (or the Acquiring Fund); (f) The statement of assets and liabilities of the Acquired Fund, and the related statements of income and changes in NAV, as of and for the fiscal year ended December 31, 2003 have been audited by Ernst & Young LLP, independent registered public accounting firm, and are in accordance with generally accepted accounting principles ("GAAP") consistently applied and fairly reflect, in all material respects, the financial condition of the Acquired Fund as of such date and the results of its operations for the period then ended, and all known liabilities, whether actual or contingent, of the Acquired Fund as of the date thereof are disclosed therein. The Statement of Assets and Liabilities will be in accordance with GAAP consistently applied and will fairly reflect, in all material respects, the financial condition of the Acquired Fund as of such date and the results of its operations for the period then ended. Except for the Assumed Liabilities, the Acquired Fund will not have any known or contingent liabilities on the Closing Date. No significant deficiency, material weakness, fraud, significant change or other factor that could significantly affect the internal controls of the Acquired Fund has been disclosed or is required to be disclosed in the Acquired Fund's reports on Form N-CSR to enable the chief executive officer and chief financial officer or other officers of the Acquired Fund to make the certifications required by the Sarbanes-Oxley Act, and no deficiency, weakness, fraud, change, event or other factor exists that will be required to be disclosed in the Acquiring Fund's Form N-CSR after the Closing Date; (g) Since December 31, 2003, except as specifically disclosed in the Acquired Fund's prospectus, its statement of additional information as in effect on the date of this Agreement, or its semi-annual report for the period ended June 30, 2004, there has not been any material adverse change in the Acquired Fund's financial condition, assets, liabilities, business or prospects, or any incurrence by the Acquired Fund of indebtedness, except for normal contractual obligations incurred in the ordinary course of business or in connection with the settlement of purchases and sales of portfolio securities. For the purposes of this subparagraph (g) (but not for any other purpose of this Agreement), a decline in NAV per Acquired Fund Share arising out of its normal investment operations or a decline in market values of securities in the Acquired Fund's portfolio or a decline in net assets of the Acquired Fund as a result of redemptions shall not constitute a material adverse change; (h) (A) For each taxable year of its operation since its inception, the Acquired Fund has met, and for the current taxable year it will meet, the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company and will qualify as such as of the Closing Date and will satisfy the diversification requirements of Section 851(b)(3) of the Code without regard to the last sentence of Section 851(d) of the Code. The Acquired Fund has not taken any action, caused any action to be taken or caused any action to fail to be taken which action or failure could cause the Acquired Fund to fail to qualify as a regulated investment company under the Code; (B) Within the times and in the manner prescribed by law, the Acquired Fund has properly filed on a timely basis all Tax Returns (as defined below) that it was required to file, and all such Tax Returns were complete and accurate in all respects. The Acquired Fund has not been informed by any jurisdiction that the jurisdiction believes that the Acquired Fund was required to file any Tax Return that was not filed; and the Acquired Fund does not know of any basis upon which a jurisdiction could assert such a position; (C) The Acquired Fund has timely paid, in the manner prescribed by law, all Taxes (as defined below), which were due and payable or which were claimed to be due; (D) All Tax Returns filed by the Acquired Fund constitute complete and accurate reports of the respective Tax liabilities and all attributes of the Acquired Fund or, in the case of information returns and payee statements, the amounts required to be reported, and accurately set forth all items required to be included or reflected in such returns; (E) The Acquired Fund has not waived or extended any applicable statute of limitations relating to the assessment or collection of Taxes; (F) The Acquired Fund has not been notified that any examinations of the Tax Returns of the Acquired Fund are currently in progress or threatened, and no deficiencies have been asserted or assessed against the Acquired Fund as a result of any audit by the Internal Revenue Service or any state, local or foreign taxing authority, and, to its knowledge, no such deficiency has been proposed or threatened; (G) The Acquired Fund has no actual or potential liability for any Tax obligation of any taxpayer other than itself. The Acquired Fund is not and has never been a member of a group of corporations with which it has filed (or been required to file) consolidated, combined or unitary Tax Returns. The Acquired Fund is not a party to any Tax allocation, sharing, or indemnification agreement; A-24 (H) The unpaid Taxes of the Acquired Fund for tax periods through the Closing Date do not exceed the accruals and reserves for Taxes (excluding accruals and reserves for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Statement of Assets and Liabilities, rather than in any notes thereto (the "Tax Reserves"). All Taxes that the Acquired Fund is or was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been timely paid to the proper governmental agency; (I) The Acquired Fund has delivered to the Acquiring Fund or made available to the Acquiring Fund complete and accurate copies of all Tax Returns of the Acquired Fund, together with all related examination reports and statements of deficiency for all periods not closed under the applicable statutes of limitations and complete and correct copies of all private letter rulings, revenue agent reports, information document requests, notices of proposed deficiencies, deficiency notices, protests, petitions, closing agreements, settlement agreements, pending ruling requests and any similar documents submitted by, received by or agreed to by or on behalf of the Acquired Fund. The Acquired Fund has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code; (J) The Acquired Fund has not undergone, has not agreed to undergo, and is not required to undergo (nor will it be required as a result of the transactions contemplated in this Agreement to undergo) a change in its method of accounting resulting in an adjustment to its taxable income pursuant to Section 481 of the Code. The Acquired Fund will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date under Section 481(c) of the Code (or any corresponding or similar provision of state, local or foreign income Tax law); (ii) "closing agreement" as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (iii) installment sale or open transaction disposition made on or prior to the Closing Date; or (iv) prepaid amount received on or prior to the Closing Date; (K) The Acquired Fund has not taken or agreed to take any action, and is not aware of any agreement, plan or other circumstance, that is inconsistent with the representations set forth in Annex B; (L) There are (and as of immediately following the Closing there will be) no liens on the assets of the Acquired Fund relating to or attributable to Taxes, except for Taxes not yet due and payable; (M) The Tax bases of the assets of the Acquired Fund are accurately reflected on the Acquired Fund's Tax books and records; (N) The Acquired Fund has not incurred (or been allocated) an "overall foreign loss" as defined in Section 904(f)(2) of the Code which has not been previously recaptured in full as provided in Sections 904(f)(2) and/or 904(f)(3) of the Code; (O) The Acquired Fund is not a party to a gain recognition agreement under Section 367 of the Code; (P) The Acquired Fund does not own any interest in an entity that is characterized as a partnership for income tax purposes; (Q) The Acquired Fund's Tax attributes are not limited under the Code (including but not limited to any capital loss carry forward limitations under Sections 382 or 383 of the Code and the Treasury Regulations thereunder) or comparable provisions of state law, except as set forth on Schedule 4.1; and (R) For purposes of this Agreement, "Taxes" or "Tax" shall mean all taxes, charges, fees, levies or other similar assessments or liabilities, including without limitation income, gross receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use, transfer, withholding, employment, unemployment, insurance, social security, business license, business organization, environmental, workers compensation, payroll, profits, license, lease, service, service use, severance, stamp, occupation, windfall profits, customs, duties, franchise and other taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof; and "Tax Returns" shall mean all reports, returns, declarations, statements or other information required to be supplied to a governmental or regulatory authority or agency, or to any other person, in connection with Taxes and any associated schedules or work papers produced in connection with such items; (i) All issued and outstanding Acquired Fund Shares are, and at the Closing Date will be, duly and validly issued and outstanding, fully paid and nonassessable by the Acquired Fund. All of the issued and outstanding Acquired Fund Shares will, at the time of Closing, be held of record by the persons and in the amounts set forth in the Shareholder List submitted to the Acquiring Fund pursuant to A-25 Paragraph 3.5 hereof. The Acquired Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any Acquired Fund Shares, nor is there outstanding any security convertible into any Acquired Fund Shares; (j) At the Closing Date, the Acquired Fund will have good and marketable title to the Acquired Assets, and full right, power and authority to sell, assign, transfer and deliver the Acquired Assets to the Acquiring Fund, and, upon delivery and payment for the Acquired Assets, the Acquiring Fund will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, except such restrictions as might arise under the Securities Act; (k) The Safeco Trust has the trust power and authority to enter into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Safeco Trust's Board of Trustees, and, subject to the approval of the Acquired Fund's shareholders, assuming due authorization, execution and delivery by the Acquiring Fund, this Agreement will constitute a valid and binding obligation of the Acquired Fund, enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights and to general equity principles; (l) The information to be furnished by the Acquired Fund to the Acquiring Fund for use in applications for orders, registration statements, proxy materials and other documents which may be necessary in connection with the transactions contemplated hereby and any information necessary to compute the total return of the Acquired Fund shall be accurate and complete and shall comply in all material respects with federal securities and other laws and regulations applicable thereto; (m) The information included in the proxy statement (the "Proxy Statement") forming part of the Acquiring Fund's Registration Statement on Form N-14 filed in connection with this Agreement (the "Registration Statement") that has been furnished in writing by the Acquired Fund to the Acquiring Fund for inclusion in the Registration Statement, on the effective date of that Registration Statement and on the Closing Date, will conform in all material respects to the applicable requirements of the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Investment Company Act and the rules and regulations of the Commission thereunder and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (n) Upon the effectiveness of the Registration Statement, no consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Safeco Trust or the Acquired Fund of the transactions contemplated by this Agreement; (o) All of the issued and outstanding Acquired Fund Shares have been offered for sale and sold in conformity with all applicable federal and state securities laws, except as may have been previously disclosed in writing to the Acquiring Fund; (p) The prospectus and statement of additional information of the Acquired Fund, and any amendments or supplements thereto, furnished to the Acquiring Fund, did not as of their dates or the dates of their distribution to the public contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which such statements were made, not misleading; (q) The Acquired Fund currently complies in all material respects with, and since its organization has complied in all material respects with, the requirements of, and the rules and regulations under, the Investment Company Act, the Securities Act, the Exchange Act, state "Blue Sky" laws and all other applicable federal and state laws or regulations. The Acquired Fund currently complies in all material respects with, and since its organization has complied in all material respects with, all investment objectives, policies, guidelines and restrictions and any compliance procedures established by the Safeco Trust with respect to the Acquired Fund. All advertising and sales material used by the Acquired Fund complies in all material respects with and has complied in all material respects with the applicable requirements of the Securities Act, the Investment Company Act, the rules and regulations of the Commission, and, to the extent applicable, the Conduct Rules of the National Association of Securities Dealers, Inc. (the "NASD") and any applicable state regulatory authority. All registration statements, prospectuses, reports, proxy materials or other filings required to be made or filed with the Commission, the NASD or any state securities authorities by the Acquired Fund have been duly filed and have been approved or declared effective, if such approval or declaration of effectiveness is required by law. Such registration statements, prospectuses, reports, proxy materials and other filings under the Securities Act, the Exchange Act and the Investment Company Act (i) are or were in compliance in all material respects with the requirements of all applicable statutes and the rules and regulations thereunder and (ii) do not or did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not false or misleading; (r) The Acquired Fund has previously provided to the Acquiring Fund (and at the Closing will provide an update through the Closing Date of such information) data which supports a calculation of the Acquired Fund's total return for all periods since the A-26 organization of the Acquired Fund. Such data has been prepared in accordance in all material respects with the requirements of the Investment Company Act and the regulations thereunder and the rules of the NASD; (s) Neither the Acquired Fund nor, to the knowledge of the Acquired Fund, any "affiliated person" of the Acquired Fund has been convicted of any felony or misdemeanor, described in Section 9(a)(1) of the Investment Company Act, nor, to the knowledge of the Acquired Fund, has any affiliated person of the Acquired Fund been the subject, or presently is the subject, of any proceeding or investigation with respect to any disqualification that would be a basis for denial, suspension or revocation of registration as an investment adviser under Section 203(e) of the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), or Rule 206(4)-4(b) thereunder or of a broker-dealer under Section 15 of the Exchange Act, or for disqualification as an investment adviser, employee, officer or director of an investment company under Section 9 of the Investment Company Act; and (t) The tax representation certificate to be delivered by Safeco Trust on behalf of the Acquired Fund to the Acquiring Trust and Wilmer Cutler Pickering Hale and Dorr LLP at the Closing pursuant to Paragraph 7.4 (the "Acquired Fund Tax Representation Certificate") will not on the Closing Date contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading. 4.2 Except as set forth on Schedule 4.2 hereto, the Acquiring Trust, on behalf of the Acquiring Fund, represents, warrants and covenants to the Acquired Fund, which representations, warranties and covenants will be true and correct on the date hereof and on the Closing Date as though made on and as of the Closing Date, as follows: (a) The Acquiring Fund is a series of the Acquiring Trust. The Acquiring Fund has not commenced operations and will not do so until the Closing. The Acquiring Trust is a [statutory][business] trust duly organized, validly existing and in good standing under the laws of the [State of Delaware][Commonwealth of Massachusetts]. The Acquiring Trust has the power to own all of its properties and assets and to perform the obligations under this Agreement. The Acquiring Fund is not required to qualify to do business in any jurisdiction in which it is not so qualified or where failure to qualify would subject it to any material liability or disability. Each of the Acquiring Trust and the Acquiring Fund has all necessary federal, state and local authorizations to own all of its properties and assets and to carry on its business as now being conducted; (b) The Acquiring Trust is a registered investment company classified as a management company of the open-end type, and its registration with the Commission as an investment company under the Investment Company Act is in full force and effect; (c) The Acquiring Fund's registration statement on Form N-1A that will be in effect on the Closing Date, and the prospectus and statement of additional information of the Acquiring Fund included therein, will conform in all material respects with the applicable requirements of the Securities Act and the Investment Company Act and the rules and regulations of the Commission thereunder, and did not as of the effective date thereof and will not as of the Closing Date contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; (d) The Registration Statement, the Proxy Statement and statement of additional information with respect to the Acquiring Fund, each dated [ ], 2004, and any amendments or supplements thereto in effect on or prior to the Closing Date included in the Registration Statement (other than written information furnished by the Acquired Fund for inclusion therein, as covered by the Acquired Fund's warranty in Paragraph 4.1(m) hereof) will conform in all material respects to the applicable requirements of the Securities Act and the Investment Company Act and the rules and regulations of the Commission thereunder. Neither the Registration Statement nor the Proxy Statement (other than written information furnished by the Acquired Fund for inclusion therein, as covered by the Acquired Fund's warranty in Paragraph 4.1(m) hereof) includes or will include any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (e) The Acquiring Trust is not in violation of, and the execution and delivery of this Agreement and performance of its obligations under this Agreement will not result in a violation of, any provisions of the Declaration of Trust or by-laws of the Acquiring Trust or any material agreement, indenture, instrument, contract, lease or other undertaking with respect to the Acquiring Fund to which the Acquiring Trust is a party or by which the Acquiring Fund or any of its assets is bound; (f) No litigation or administrative proceeding or investigation of or before any court or governmental body is currently pending or threatened against the Acquiring Fund or any of the Acquiring Fund's properties or assets. The Acquiring Fund knows of no facts which might form the basis for the institution of such proceedings. Neither the Acquiring Trust nor the Acquiring Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially adversely affects the Acquiring Fund's business or its ability to consummate the transactions contemplated herein; A-27 (g) The Acquiring Fund has no actual or potential liability for any Tax obligation of any taxpayer other than itself. Acquiring Fund is not and has never been a member of a group of corporations with which it has filed (or been required to file) consolidated, combined or unitary Tax Returns. The Acquiring Fund is not a party to any Tax allocation, sharing, or indemnification agreement; (h) The Acquiring Fund has not taken or agreed to take any action, and is not aware of any agreement, plan or other circumstance, that is inconsistent with the representations set forth in Annex A; (i) The Acquiring Fund currently complies, and at all times since its organization has complied, in all material respects with the requirements of, and the rules and regulations under, the Investment Company Act, the Securities Act, the Exchange Act, state "Blue Sky" laws and all other applicable federal and state laws or regulations. The Acquiring Fund currently complies in all material respects with, and since its organization has complied in all material respects with, all investment objectives, policies, guidelines and restrictions and any compliance procedures established by the Acquiring Trust with respect to the Acquiring Fund. All advertising and sales material used by the Acquiring Fund complies in all material respects with and has complied in all material respects with the applicable requirements of the Securities Act, the Investment Company Act, the rules and regulations of the Commission, and, to the extent applicable, the Conduct Rules of the NASD and any applicable state regulatory authority. All registration statements, prospectuses, reports, proxy materials or other filings required to be made or filed with the Commission, the NASD or any state securities authorities by the Acquiring Fund have been duly filed and have been approved or declared effective, if such approval or declaration of effectiveness is required by law. Such registration statements, prospectuses, reports, proxy materials and other filings under the Securities Act, the Exchange Act and the Investment Company Act (i) are or were in compliance in all material respects with the requirements of all applicable statutes and the rules and regulations thereunder and (ii) do not or did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not false or misleading; (j) The authorized capital of the Acquiring Fund consists of an unlimited number of shares of beneficial interest, no par value per share. As of the Closing Date, the Acquiring Fund will be authorized to issue an unlimited number of shares of beneficial interest, no par value per share. The Acquiring Fund Shares to be issued and delivered to the Acquired Fund for the account of the Acquired Fund Shareholders pursuant to the terms of this Agreement will have been duly authorized on the Closing Date and, when so issued and delivered, will be duly and validly issued, fully paid and non-assessable. The Acquiring Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any Acquiring Fund shares, nor is there outstanding any security convertible into any Acquiring Fund shares, nor will the Acquiring Fund have any issued or outstanding shares on or before the Closing Date other than those issued to Acquiring Fund Adviser or one of its affiliates, which shares shall be redeemed, for an amount equal to the price paid therefor, at or before the Closing; (k) The Acquiring Trust has the trust power and authority to enter into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Acquiring Trust's Board of Trustees, and, assuming due authorization, execution and delivery by the Acquired Fund, this Agreement will constitute a valid and binding obligation of the Acquiring Fund, enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights and to general equity principles; (l) The information to be furnished in writing by the Acquiring Fund or the Acquiring Fund Adviser for use in applications for orders, registration statements, proxy materials and other documents which may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations applicable thereto or the requirements of any form for which its use is intended, and shall not contain any untrue statement of a material fact or omit to state a material fact necessary to make the information provided not misleading; (m) No consent, approval, authorization or order of or filing with any court or governmental authority is required for the execution of this Agreement or the consummation of the transactions contemplated by the Agreement by the Acquiring Fund, except for the registration of the Acquiring Fund Shares under the Securities Act and the Investment Company Act; (n) The prospectus and statement of additional information of the Acquiring Fund, and any amendments or supplements thereto, furnished to the Acquired Fund, did not as of their dates or the dates of their distribution to the public contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which such statements were made, not misleading; (o) Neither the Acquiring Fund nor, to the knowledge of the Acquiring Fund, any "affiliated person" of the Acquiring Fund has been convicted of any felony or misdemeanor, described in Section 9(a)(1) of the Investment Company Act, nor, to the knowledge A-28 of the Acquiring Fund, has any affiliated person of the Acquiring Fund been the subject, or presently is the subject, of any proceeding or investigation with respect to any disqualification that would be a basis for denial, suspension or revocation of registration as an investment adviser under Section 203(e) of the Investment Advisers Act or Rule 206(4)-4(b) thereunder or of a broker-dealer under Section 15 of the Exchange Act, or for disqualification as an investment adviser, employee, officer or director of an investment company under Section 9 of the Investment Company Act; and (p) The tax representation certificate to be delivered by the Acquiring Trust on behalf of the Acquiring Fund to the Safeco Trust and Wilmer Cutler Pickering Hale and Dorr LLP at Closing pursuant to Section 6.3 (the "Acquiring Fund Tax Representation Certificate") will not on the Closing Date contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading. 5. COVENANTS OF THE FUNDS 5.1 The Acquired Fund will operate the Acquired Fund's business in the ordinary course of business between the date hereof and the Closing Date. It is understood that such ordinary course of business will include the declaration and payment of customary dividends and other distributions and any other dividends and other distributions necessary or advisable (except to the extent dividends or other distributions that are not customary may be limited by representations made in connection with the issuance of the tax opinion described in Paragraph 8.5 hereof), in each case payable either in cash or in additional shares. 5.2 The Safeco Trust will call a special meeting of the Acquired Fund's shareholders to consider approval of this Agreement and act upon the matters set forth in the Proxy Statement. 5.3 The Acquiring Fund will prepare the notice of meeting, form of proxy and Proxy Statement (collectively, "Proxy Materials") to be used in connection with such meeting, and will promptly prepare and file with the Commission the Registration Statement. The Safeco Trust will provide the Acquiring Fund with information reasonably requested for the preparation of the Registration Statement in compliance with the Securities Act, the Exchange Act, and the Investment Company Act. 5.4 The Acquired Fund covenants that the Acquiring Fund Shares to be issued hereunder are not being acquired by the Acquired Fund for the purpose of making any distribution thereof other than in accordance with the terms of this Agreement. 5.5 The Acquired Fund will assist the Acquiring Fund in obtaining such information as the Acquiring Fund reasonably requires concerning the beneficial ownership of the Acquired Fund Shares. 5.6 Subject to the provisions of this Agreement, each Fund will take, or cause to be taken, all actions, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate the transactions contemplated by this Agreement. 5.7 The Acquired Fund shall furnish to the Acquiring Fund on the Closing Date a Statement of Assets and Liabilities of the Acquired Fund as of the Closing Date setting forth the NAV of the Acquired Fund as of the Valuation Time, which statement shall be prepared in accordance with GAAP consistently applied and certified by the Safeco Trust's Treasurer or Assistant Treasurer. As promptly as practicable, but in any case within 30 days after the Closing Date, the Safeco Trust shall furnish to the Acquiring Trust, in such form as is reasonably satisfactory to the Acquiring Trust, a statement of the earnings and profits of the Acquired Fund for federal income tax purposes, and of any capital loss carryovers and other items that will be carried over to the Acquiring Fund under the Code, and which statement will be certified by the Treasurer of the Safeco Trust. 5.8 Neither Fund shall take any action that is inconsistent with the representations set forth in, with respect to the Acquired Fund, the Acquired Fund Tax Representation Certificate and, with respect to the Acquiring Fund, the Acquiring Fund Tax Representation Certificate. 5.9 From and after the date of this Agreement and until the Closing Date, each of the Funds and the Safeco Trust and the Acquiring Trust shall use its commercially reasonable efforts to cause the Reorganization to qualify, and will not knowingly take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken, which action or failure to act could prevent the Reorganization from qualifying, as a reorganization under the provisions of Section 368(a) of the Code. The parties hereby adopt this Agreement as a "plan of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the income tax regulations promulgated under the Code. Unless otherwise required pursuant to a "determination" within the meaning of Section 1313(a) of the Code, the parties hereto shall treat and report the transactions contemplated hereby as a reorganization within the meaning of Section 368(a)(1)(F) of the Code and shall not take any position inconsistent with such treatment. 5.10 From and after the date of this Agreement and through the time of the Closing, each Fund shall use its commercially reasonable efforts to cause it to qualify, and will not knowingly take any action, cause any action to be taken, fail to take any action or cause any action A-29 to fail to be taken, which action or failure to act could prevent it from qualifying, as a regulated investment company under the provisions of Subchapter M of the Code. 5.11 The Acquired Fund shall prepare, or cause to be prepared, all Tax Returns of the Acquired Fund for taxable periods that end on or before the Closing Date and shall timely file, or cause to be timely filed, all such Tax Returns. The Acquired Fund shall make any payments of Taxes required to be made by such Fund with respect to any such Tax Returns. 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND The obligations of the Acquired Fund to complete the transactions provided for herein shall be, at its election, subject to the performance by the Acquiring Fund of all the obligations to be performed by it hereunder on or before the Closing Date, and, in addition thereto, the following further conditions, unless waived by the Acquired Fund in writing: 6.1 All representations and warranties by the Acquiring Trust on behalf of the Acquiring Fund contained in this Agreement shall be true and correct as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date; 6.2 The Acquiring Trust shall have delivered to the Safeco Trust on the Closing Date a certificate of the Acquiring Trust on behalf of the Acquiring Fund executed in its name by its President or Vice President and its Treasurer or Assistant Treasurer, in form and substance satisfactory to the Safeco Trust and dated as of the Closing Date, to the effect that the representations and warranties of the Acquiring Trust made in this Agreement are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, that each of the conditions to Closing in this Article 6 have been met, and as to such other matters as the Safeco Trust shall reasonably request; 6.3 The Acquiring Trust on behalf of the Acquiring Fund shall have delivered to the Safeco Trust and Wilmer Cutler Pickering Hale and Dorr LLP an Acquiring Fund Tax Representation Certificate, satisfactory to the Safeco Trust and Wilmer Cutler Pickering Hale and Dorr LLP, substantially in the form attached to this Agreement as Annex A, concerning certain tax-related matters with respect to the Acquiring Fund; 6.4 With respect to the Acquiring Fund, the Board of Trustees of the Acquiring Trust shall have determined that the Reorganization is in the best interests of the Acquiring Fund and, based upon such determination, shall have approved this Agreement and the transactions contemplated hereby; and 6.5 The Safeco Trust shall have received at the Closing a favorable opinion as to the due authorization of this Agreement by the Acquiring Trust and related matters of Wilmer Cutler Pickering Hale and Dorr LLP, dated as of the Closing Date, in a form reasonably satisfactory to the Safeco Trust. 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND The obligations of the Acquiring Fund to complete the transactions provided for herein shall be, at its election, subject to the performance by the Acquired Fund of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following further conditions, unless waived by the Acquiring Fund in writing: 7.1 All representations and warranties of the Safeco Trust on behalf of the Acquired Fund contained in this Agreement shall be true and correct as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date; 7.2 The Safeco Trust shall have delivered to the Acquiring Fund the Statement of Assets and Liabilities of the Acquired Fund pursuant to Paragraph 5.7, together with a list of its portfolio securities showing the federal income tax bases and holding periods of such securities, as of the Closing Date, certified by the Safeco Trust's Treasurer or Assistant Treasurer; 7.3 The Safeco Trust shall have delivered to the Acquiring Trust on the Closing Date a certificate of the Safeco Trust on behalf of the Acquired Fund executed in its name by its President or Vice President and a Treasurer or Assistant Treasurer, in form and substance reasonably satisfactory to the Acquiring Trust and dated as of the Closing Date, to the effect that the representations and warranties of the Safeco Trust contained in this Agreement are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, that each of the conditions to closing in this Article 7 have been met, and as to such other matters as the Acquiring Trust shall reasonably request; 7.4 The Safeco Trust on behalf of the Acquired Fund shall have delivered to the Acquiring Trust and Wilmer Cutler Pickering Hale and Dorr LLP an Acquired Fund Tax Representation Certificate, satisfactory to the Acquiring Trust and Wilmer Cutler Pickering Hale and A-30 Dorr LLP, substantially in the form attached to this Agreement as Annex B, concerning certain tax-related matters with respect to the Acquired Fund; 7.5 The Acquiring Trust shall have received at the Closing a favorable opinion as to the due authorization of this Agreement by the Safeco Trust and related matters of Kirkpatrick & Lockhart LLP, dated as of the Closing Date, in a form reasonably satisfactory to the Acquiring Trust; and 7.6 With respect to the Acquired Fund, the Board of Trustees of the Safeco Trust shall have determined that the Reorganization is in the best interests of the Acquired Fund and, based upon such determination, shall have approved this Agreement and the transactions contemplated hereby. 8. FURTHER CONDITIONS PRECEDENT If any of the conditions set forth below does not exist on or before the Closing Date with respect to either party hereto, the other party to this Agreement shall, at its option, not be required to consummate the transactions contemplated by this Agreement: 8.1 This Agreement and the transactions contemplated herein shall have been approved by the requisite vote of the Acquired Fund's shareholders in accordance with the provisions of the Safeco Trust's Trust Instrument and By-Laws, and certified copies of the resolutions evidencing such approval by the Acquired Fund's shareholders shall have been delivered by the Acquired Fund to the Acquiring Fund. Notwithstanding anything herein to the contrary, neither party hereto may waive the conditions set forth in this Paragraph 8.1; 8.2 On the Closing Date, no action, suit or other proceeding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transactions contemplated herein; 8.3 All consents of other parties and all other consents, orders and permits of federal, state and local regulatory authorities (including those of the Commission and of state Blue Sky and securities authorities) deemed necessary by either party hereto to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order or permit would not involve a risk of a material adverse effect on the assets or properties of either party hereto, provided that either party may waive any such conditions for itself; 8.4 The Acquiring Trust's Registration Statement on Form N-14 shall have become effective under the Securities Act and no stop orders suspending the effectiveness of such Registration Statement shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the Securities Act; and 8.5 The parties shall have received an opinion of Wilmer Cutler Pickering Hale and Dorr LLP, satisfactory to the Safeco Trust and the Acquiring Trust and subject to customary assumptions and qualifications, substantially to the effect that for federal income tax purposes the acquisition by the Acquiring Fund of the Acquired Assets solely in exchange for the issuance of Acquiring Fund Shares to the Acquired Fund and the assumption of the Assumed Liabilities by the Acquiring Fund, followed by the distribution by the Acquired Fund, in liquidation of the Acquired Fund, of Acquiring Fund Shares to the Acquired Fund Shareholders in exchange for their Acquired Fund Shares and the termination of the Acquired Fund, will constitute a "reorganization" within the meaning of Section 368(a) of the Code 9. BROKERAGE FEES AND EXPENSES 9.1 Each party hereto represents and warrants to the other party hereto that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein. 9.2 The parties have been informed by Symetra Financial Corporation and the Acquiring Fund Adviser -- and the parties have entered into this Agreement in reliance on such information -- that such non-parties will pay all expenses of the Funds associated with the Reorganization, including the expenses associated with the preparation, printing and mailing of any and all shareholder notices, communications, proxy statements, and necessary filings with the SEC or any other governmental authority in connection with the transactions contemplated by this Agreement and the legal and Trustees' fees and expenses incurred in connection with the Reorganization. Except for the foregoing, the Acquiring Fund and the Acquired Fund shall each bear its own expenses in connection with the transactions contemplated by this Agreement. 10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES 10.1 The Acquiring Trust and the Safeco Trust each agree that neither party has made any representation, warranty or covenant not set forth herein or referred to in Paragraphs 4.1 or 4.2 hereof and that this Agreement constitutes the entire agreement between the parties. A-31 10.2 The representations and warranties contained in this Agreement or in any document delivered pursuant hereto or in connection herewith shall not survive the consummation of the transactions contemplated hereunder. 11. TERMINATION 11.1 This Agreement may be terminated by the mutual agreement of the Acquiring Trust and the Safeco Trust. In addition, either party may at its option terminate this Agreement at or prior to the Closing Date: (a) because of a material breach by the other of any representation, warranty, covenant or agreement contained herein to be performed at or prior to the Closing Date; (b) because of a condition herein expressed to be precedent to the obligations of the terminating party which has not been met and which reasonably appears will not or cannot be met; (c) by resolution of the Acquiring Trust's Board of Trustees if circumstances should develop that, in the good faith opinion of such Board, make proceeding with the Agreement not in the best interests of the Acquiring Fund's shareholders; (d) by resolution of the Safeco Trust's Board of Trustees if circumstances should develop that, in the good faith opinion of such Board, make proceeding with the Agreement not in the best interests of the Acquired Fund's shareholders; or (e) if the transactions contemplated by this Agreement shall not have occurred on or prior to December 31, 2004 or such other date as the parties may mutually agree upon in writing. 11.2 In the event of any such termination, there shall be no liability for damages on the part of the Acquiring Fund, the Acquiring Trust, the Safeco Trust or the Acquired Fund, or the trustees or officers of the Safeco Trust, or the Acquiring Trust, but, subject to Paragraph 9.2, each party shall bear the expenses incurred by it incidental to the preparation and carrying out of this Agreement. 12. AMENDMENTS This Agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by the authorized officers of the Safeco Trust and the Acquiring Trust; provided, however, that following the meeting of the Acquired Fund's shareholders called by the Safeco Trust pursuant to Paragraph 5.2 of this Agreement, no such amendment may have the effect of changing the provisions regarding the method for determining the number of Acquiring Fund Shares to be received by the Acquired Fund Shareholders under this Agreement to their detriment without their further approval; provided that nothing contained in this Section 12 shall be construed to prohibit the parties from amending this Agreement to change the Closing Date. 13. NOTICES Any notice, report, statement or demand required or permitted by any provisions of this Agreement shall be in writing and shall be given by prepaid telegraph, telecopy or certified mail addressed to the Acquired Fund, c/o Symetra Financial Corporation, 5069 154th Place, N.E., Seattle, Washington 98052, Attention: Roger F. Harbin, with copies to R. Darrell Mounts, Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second Floor, Washington, DC 20036-1221, and to the Acquiring Fund, c/o Pioneer Investment Management, Inc., 60 State Street, Boston, Massachusetts 02109, Attention: Dorothy E. Bourassa, Esq., with copies to Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, Attention: David C. Phelan. 14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT 14.1 The article and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 14.2 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 14.3 This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to conflict of laws principles (other than Delaware Code Title 6 [sec] 2708); provided that, in the case of any conflict between those laws and the federal securities laws, the latter shall govern. 14.4 This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by either party without the prior written consent of the other party hereto. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, or other entity, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement. A-32 14.5 It is expressly agreed that the obligations of the Acquiring Trust and the Safeco Trust shall not be binding upon any of their respective trustees, shareholders, nominees, officers, agents or employees personally, but bind only to the property of the Acquiring Fund or the Acquired Fund, as the case may be, as provided in the trust instruments of the Acquiring Trust and the Instrument of Trust of the Safeco Trust, respectively. The execution and delivery of this Agreement have been authorized by the trustees of the Acquiring Trust and of the Safeco Trust and this Agreement has been executed by authorized officers of the Acquiring Trust and the Safeco Trust, acting as such, and neither such authorization by such trustees nor such execution and delivery by such officers shall be deemed to have been made by any of them individually or to imposed any liability on any of them personally, but shall bind only the property of the Acquiring Fund and the Acquired Fund, as the case may be, as provided in the trust instruments of the Acquiring Trust and the Instrument of Trust of the Safeco Trust, respectively. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first set forth above by its President or Vice President and attested by its Secretary or Assistant Secretary. Attest: [SAFECO TRUST] on behalf of [SAFECO FUND] By: ___________________________________ By: ___________________________________ Name: Name: Title: Secretary Title: President Attest: [PIONEER TRUST] on behalf of [PIONEER FUND] By: ___________________________________ By: ___________________________________ Name: Name: Title: Title: A-33 Annex A TAX REPRESENTATION CERTIFICATE OF [PIONEER TRUST ON BEHALF OF PIONEER FUND] This certificate is being delivered in connection with the transactions to be effected pursuant to the Agreement and Plan of Reorganization made as of __________ , 2004 between [Pioneer Trust], a [Delaware statutory][Massachusetts business] trust (the "Acquiring Trust"), on behalf of its series [Pioneer Fund] ("Acquiring Fund"), and [Safeco Trust], a Delaware statutory trust, on behalf of its series [Safeco Fund] ("Acquired Fund") (the "Agreement"). Pursuant to the Agreement, Acquiring Fund will acquire all of the assets of Acquired Fund in exchange solely for (i) the assumption by Acquiring Fund of the Assumed Liabilities of Acquired Fund, and (ii) the issuance of Investor Class shares of beneficial interest of Acquiring Fund (the "Acquiring Fund Shares") to Acquired Fund, followed by the distribution by Acquired Fund, in liquidation of Acquired Fund, of the Acquiring Fund Shares to the shareholders of Acquired Fund and the termination of Acquired Fund (the foregoing together constituting the "transaction"). The undersigned officer of Acquiring Trust, after consulting with its counsel, auditors and tax advisers regarding the meaning of and factual support for the following representations, on behalf of Acquiring Fund, hereby certifies and represents that the following statements are true, complete and correct and will be true, complete and correct on the date of the transaction and thereafter as relevant. Unless otherwise indicated, all capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement. 1. Acquiring Fund is a series of Acquiring Trust, a [statutory][business] trust established under the laws of the [State of Delaware][Commonwealth of Massachusetts], and Acquiring Fund will be treated after the Closing as a separate corporation for federal tax purposes. Acquiring Fund was newly organized solely for the purpose of effecting the transaction and continuing thereafter to operate as a regulated investment company. Prior to the transaction, Acquiring Fund did not and will not engage in any business activities. There shall be no shares of Acquiring Fund issued and outstanding prior to the Closing Date other than those issued to Pioneer Investment Management, Inc. or one of its affiliates in connection with the creation of Acquiring Fund, which shares shall be redeemed, for an amount equal to the price paid therefor, at or before the Closing. 2. Neither Acquiring Fund nor any person "related" to Acquiring Fund (as defined in Treasury Regulation Section 1.368-1(e)(3)), nor any partnership of which Acquiring Fund or any such related person is a partner, has any plan or intention to redeem or otherwise acquire any of the Acquiring Fund Shares received by shareholders of Acquired Fund in the transaction except in the ordinary course of Acquiring Fund's business in connection with its legal obligation under Section 22(e) of the Investment Company Act of 1940, as amended (the "1940 Act"), as a series of a registered open-end investment company to redeem its own shares. 3. After the transaction, Acquiring Fund will continue the historic business (as defined in Treasury Regulation Section 1.368-1(d)(2)) of Acquired Fund or will use a significant portion of the historic business assets (as defined in Treasury Regulation Section 1.368-1(d)(3)) of Acquired Fund in a business. 4. Acquiring Fund has no plan or intention to sell or otherwise dispose of any assets of Acquired Fund acquired in the transaction, except for dispositions made in the ordinary course of its business or to maintain its qualification as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). 5. Any expenses of Acquired Fund incurred in connection with the transaction which are paid or assumed by Acquiring Fund will be expenses of Acquired Fund solely and directly related to the transaction in accordance with Rev. Rul. 73 54, 1973 1 C.B. 187. Acquiring Fund will not pay or assume the expenses, if any, incurred by any Acquired Fund Shareholders in connection with the transaction. 6. There is no, and never has been any, indebtedness between Acquiring Fund and Acquired Fund. 7. Acquiring Fund will qualify for the special tax treatment afforded regulated investment companies under Subchapter M of the Code for all taxable years ending after the date of the transaction. 8. Acquiring Fund meets the requirements of an "investment company" in Section 368(a)(2)(F) of the Code. 9. Acquiring Fund is not under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code. 10. Acquiring Fund does not now own and has never owned, directly or indirectly, any shares of Acquired Fund. 11. As of the date of the transaction, the fair market value of the Acquiring Fund Shares issued to Acquired Fund will be approximately equal to the fair market value of the Acquired Assets minus the Assumed Liabilities. Acquiring Fund will not furnish any consideration A-34 in connection with the acquisition of the Acquired Assets other than the assumption of the Assumed Liabilities and the issuance of such Acquiring Fund Shares. 12. Immediately following the transaction, the Acquired Fund Shareholders will own all of the outstanding Acquiring Fund Shares and will own such shares solely by reason of their ownership of the Acquired Fund Shares immediately prior to the transaction. Acquiring Fund has no plan or intention to issue as part of the transaction any shares of Acquiring Fund other than the Acquiring Fund Shares issued in exchange for the Acquired Assets. 13. The transaction is being undertaken for valid and substantial business purposes, including facilitating Acquired Fund's becoming a member of the Pioneer family of mutual funds, which, in the long term, is intended to result in lower expenses and increased assets. 14. No Acquired Fund shareholder is acting as agent for Acquiring Fund in connection with the transaction or approval thereof. Acquiring Fund will not reimburse any Acquired Fund shareholder for Acquired Fund Shares such shareholder may have purchased or for other obligations such shareholder may have incurred. 15. Acquiring Fund has no outstanding warrants, options, convertible securities or any other type of right pursuant to which any person could acquire stock in Acquiring Fund. * * * * * The undersigned officer of Acquiring Trust is authorized to make all of the representations set forth herein, and the undersigned is authorized to execute this certificate on behalf of Acquiring Fund. The undersigned recognizes that Wilmer Cutler Pickering Hale and Dorr LLP will rely upon the foregoing representations in evaluating the United States federal income tax consequences of the transaction and rendering its opinion pursuant to Section 8.5 of the Agreement. If, prior to the date of the transaction, any of the representations set forth herein ceases to be accurate, the undersigned agrees to deliver immediately to Wilmer Cutler Pickering Hale and Dorr LLP a written notice to that effect. [PIONEER TRUST], on behalf of [Pioneer Fund] By: ___________________________________ Name: _____________________________ Title: ____________________________ Dated: ______________, 2004 A-35 Annex B TAX REPRESENTATION CERTIFICATE OF [SAFECO TRUST] ON BEHALF OF [SAFECO FUND] This certificate is being delivered in connection with the transactions to be effected pursuant to the Agreement and Plan of Reorganization made as of ______________, 2004 between [Pioneer Trust], a [Delaware statutory] [Massachusetts business] trust, on behalf of its series [Pioneer Fund] ("Acquiring Fund"), and [Safeco Trust], a Delaware statutory trust ("Safeco Trust"), on behalf of its series [Safeco Fund] ("Acquired Fund") (the "Agreement"). Pursuant to the Agreement, Acquiring Fund will acquire all of the assets of Acquired Fund in exchange solely for (i) the assumption by Acquiring Fund of the Assumed Liabilities of Acquired Fund and (ii) the issuance of Investor Class shares of beneficial interest of Acquiring Fund (the "Acquiring Fund Shares") to Acquired Fund, followed by the distribution by Acquired Fund, in liquidation of Acquired Fund, of the Acquiring Fund Shares to the shareholders of Acquired Fund and the termination of Acquired Fund (the foregoing together constituting the "transaction"). The undersigned officer of Safeco Trust, after consulting with its counsel, auditors and tax advisers regarding the meaning of and factual support for the following representations, on behalf of Acquired Fund, hereby certifies and represents that the following statements are true, complete and correct and will be true, complete and correct on the date of the transaction and thereafter as relevant. Unless otherwise indicated, all capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement. 1. Acquired Fund is a series of Safeco Trust, a statutory trust organized under the laws of the State of Delaware, and Acquired Fund is, and has been at all times, treated as a separate corporation for federal tax purposes. 2. As of the date of the transaction, the fair market value of the Acquiring Fund Shares received by each shareholder that holds shares of Acquired Fund (the "Acquired Fund Shares") will be approximately equal to the fair market value of the Acquired Fund Shares with respect to which such Acquiring Fund Shares are received, and the aggregate consideration received by Acquired Fund shareholders in exchange for their Acquired Fund Shares will be approximately equal to the fair market value of all of the outstanding Acquired Fund Shares immediately prior to the transaction. No property other than Acquiring Fund Shares will be distributed to shareholders of Acquired Fund in exchange for their Acquired Fund Shares, nor will any such shareholder receive cash or other property as part of the transaction. 3. Neither Acquired Fund nor any person "related" to Acquired Fund (as defined in Treasury Regulation Section 1.368-1(e)(3)), nor any partnership in which Acquired Fund or any such related person is a partner, has redeemed, acquired or otherwise made any distributions with respect to any shares of Acquired Fund as part of the transaction, or otherwise pursuant to a plan of which the transaction is a part, other than redemptions and distributions made in the ordinary course of Acquired Fund's business as a series of an open-end investment company. To the best knowledge of management of Acquired Fund, there is no plan or intention on the part of the shareholders of Acquired Fund to engage in any transaction with Acquired Fund, Acquiring Fund, or any person treated as related to Acquired Fund or Acquiring Fund under Treasury Regulation Section 1.368-1(e)(3) or any partnership in which Acquired Fund, Acquiring Fund, or any person treated as related to Acquired Fund or Acquiring Fund under Treasury Regulation Section 1.368-1(e)(3) is a partner involving the sale, redemption or exchange of any of the Acquired Fund Shares or any of the Acquiring Fund Shares to be received in the transaction, as the case may be, other than in the ordinary course of Acquired Fund's business as a series of an open-end investment company. 4. In the transaction, Acquired Fund will transfer its assets to Acquiring Fund, which will assume the Assumed Liabilities, such that immediately following the transfer, Acquiring Fund will possess all of the same assets and liabilities as were possessed by Acquired Fund immediately prior to the transaction, except for assets used to pay expenses incurred in connection with the transaction and assets distributed to shareholders in redemption of their shares immediately preceding, or in contemplation of, the transaction (other than redemptions and distributions made in the ordinary course of Acquired Fund's business as an open-end investment company) which assets constitute less than 1% of the net assets of Acquired Fund. 5. As of the date of the transaction, the fair market value of the Acquiring Fund Shares issued to Acquired Fund will be approximately equal to the fair market value of the Acquired Assets minus the Assumed Liabilities. Acquired Fund will not receive any consideration from Acquiring Fund in connection with the acquisition of the Acquired Assets other than the assumption of the Assumed Liabilities and the issuance of such Acquiring Fund Shares. A-36 6. The Assumed Liabilities assumed by Acquiring Fund plus the Assumed Liabilities, if any, to which the transferred assets are subject were incurred by Acquired Fund in the ordinary course of its business. Acquired Fund is not aware of any liabilities of any kind other than the Assumed Liabilities. 7. As of the Closing Date, the adjusted basis and the fair market value of the Acquired Assets will equal or exceed the Assumed Liabilities for purposes of Section 357(d) of the Code. 8. Acquired Fund currently conducts its historic business within the meaning of Treasury Regulation Section 1.368-1(d)(2), which provides that, in general, a corporation's historic business is the business it has conducted most recently, but does not include a business that the corporation enters into as part of a plan of reorganization. All of the assets of the Acquired Fund held by Acquiring Fund as of the opening of business on August 2, 2004 (the date the Acquiring Fund Adviser became the investment adviser to Acquired Fund) were Acquired Fund's historic business assets within the meaning of Treasury Regulation Section 1.368-1(d)(3) (which provides that a corporation's historic business assets are the assets used in its historic business). 9. Acquired Fund will distribute to its shareholders the Acquiring Fund Shares it receives pursuant to the transaction, and its other properties, if any, and will be liquidated promptly thereafter. 10. The expenses of Acquired Fund incurred by it in connection with the transaction, if any, will be only such expenses that are solely and directly related to the transaction in accordance with Rev. Rul. 73-54, 1973-1 C.B. 187. Acquired Fund will not pay any expenses incurred by its shareholders in connection with the transaction. 11. There is no, and never has been any, indebtedness between Acquiring Fund and Acquired Fund. 12. Acquired Fund has properly elected to be a regulated investment company under Subchapter M of the Code, has qualified for the special tax treatment afforded regulated investment companies under Subchapter M of the Code for each taxable year since inception, and qualifies for such treatment as of the time of the Closing. 13. Acquired Fund meets the requirements of an "investment company" in Section 368(a)(2)(F) of the Code. 14. Acquired Fund is not under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code. 15. Acquired Fund does not pay compensation to any shareholder-employee. 16. Immediately following the transaction, the Acquired Fund Shareholders will own all of the outstanding Acquiring Fund Shares and will own such shares solely by reason of their ownership of the Acquired Fund Shares immediately prior to the transaction. 17. Acquired Fund shareholders will not have dissenters' or appraisal rights in the transaction. 18. The transaction is being undertaken for valid and substantial business purposes, including facilitating Acquired Fund's becoming a member of the Pioneer family of mutual funds, which, in the long term, is intended to result in lower expenses and increased assets. 19. Acquired Fund has no outstanding warrants, options, convertible securities or any other type of right pursuant to which any person could acquire stock in Acquired Fund. * * * * * A-37 The undersigned officer of the Safeco Trust is authorized to make all of the representations set forth herein, and the undersigned is authorized to execute this certificate on behalf of Acquired Fund. The undersigned recognizes that Wilmer Cutler Pickering Hale and Dorr LLP will rely upon the foregoing representations in evaluating the United States federal income tax consequences of the transaction and rendering its opinion pursuant to Section 8.5 of the Agreement. If, prior to the date of the transaction, any of the representations set forth herein ceases to be accurate, the undersigned agrees to deliver immediately to Wilmer Cutler Pickering Hale and Dorr LLP a written notice to that effect. [SAFECO TRUST], on behalf of [SAFECO FUND] By: _____________________________________ Name: _______________________________ Title: ______________________________ A-38 Exhibit B -- Form of Interim Advisory Agreement AGREEMENT dated as of August 2, 2004, between Pioneer Investment Management, Inc. ("Pioneer"), a Delaware corporation and a member of the UniCreditio Italiano Banking Group, Register of Banking Groups, and [SAFECO TRUST], a Delaware statutory trust (the "Trust"), on behalf of its series [SAFECO FUNDS] (the "Fund"). Whereas, Safeco Asset Management Company has acted as investment adviser to the Fund pursuant to an Investment Advisory Agreement dated (the "Prior Agreement"). Whereas, the Prior Agreement has been approved by the Board of Trustees of the Trust and the shareholders of the Fund. Whereas, the Prior Agreement is being terminated as a result of assignment. Whereas, the Board of Trustees has determined to appoint Pioneer as investment adviser to the Fund. Whereas, this Agreement is being entered into in reliance upon Rule 15a-4 under the Investment Company Act of 1940, as amended (the "Investment Company Act"). Now therefore the Trust and Pioneer agree as follow: Section 1. The Trust appoints Pioneer as investment adviser of the Funds for the period and on the terms set forth herein. Pioneer accepts such appointment. Section 2. Pioneer and the Trust, on behalf of the Fund, hereby agree that the provisions of the Prior Agreement (other than as to the term of the Prior Agreement, the identity of the Adviser and the use of the "Safeco" name) are incorporated herein by reference and made a part hereof as if references to the Adviser were to Pioneer. Without limiting the forgoing, Pioneer shall be entitled to the fee for its services provided for in the Prior Agreement from (but exclusive of) the date hereof until the termination of this Agreement, except as provided in Section 3 below. Section 3. In the event that this Agreement is not approved by a majority of the Trust's outstanding voting securities (as such term is used in the Investment Company Act), Pioneer shall be entitled to a fee equal to the cost to Pioneer of performing its services under this Agreement in lieu of the fee provided for in Section 2. For purposes of this Agreement, Pioneer's costs in providing the services under this Agreement shall be equal to the pro rata portion of Pioneer's expenses for the term of this Agreement attributable to its investment company advisory business, calculated as follows: Pioneer cost in providing investment advisory services to its investment companies of the same type (i.e., domestic equity, international, fixed income, money market) multiplied by a fraction the numerator of which shall be the average daily net assets of the Fund during the term of this Agreement and the denominator of which shall be the average month end net assets under Pioneer's management of all of its investment company clients. Section 4. The compensation earned by Pioneer under Section 2 of this Agreement shall be held in an interest bearing escrow account with the Fund's custodian. If a majority of the outstanding voting securities approves this Agreement prior to the end of its term, the amount in the escrow account (including any interest earned) shall be paid to Pioneer. If a majority of the outstanding voting securities do not approve this Agreement prior to the end of its term, Pioneer shall be entitled to be paid, out of the escrow account the lesser of (i) the amount in the escrow account (including any interest earned on that amount while in escrow) and (ii) the fee provided for in Section 3 (plus any interest on that amount while in escrow), with any remaining amount in the escrow account being returned to the Fund. Section 5. This Agreement shall become effective on August 2, 2004. Unless terminated as provided below, this Agreement shall remain in full force and effect until the earliest of (i) the closing of the reorganization of the Fund into [name of Pioneer Fund], (ii) approval of a Management Contract between the Fund and Pioneer and (iii) a date that is the later of 150 days after the date of the termination of the Prior Agreement or such later date as may be consistent with a rule or interpretive position (formal or informal) of the staff of the Securities and Exchange Commission. This Agreement may be terminated at any time without payment of penalty by vote of the Trustees of the Trust or by vote of a majority of the outstanding voting securities of the Fund. Pioneer may terminate this Agreement at any time without payment of any penalty on not less than 60 days written notice to the Fund. This Agreement shall automatically terminate upon its assignment as defined in the Investment Company Act. B-1 In witness whereof, the parties hereto have executed this Agreement as the 2nd day of August 2004. [SAFECO TRUST] By: ____________________________________ Its: ___________________________________ PIONEER INVESTMENT MANAGEMENT, INC. By: ____________________________________ Its: ___________________________________ B-2 Exhibit C -- Additional Information Pertaining to Pioneer PORTFOLIO TRANSACTION POLICIES All orders for the purchase or sale of portfolio securities are placed on behalf of each fund by Pioneer pursuant to authority contained in the fund's management contract. Pioneer seeks to obtain the best execution on portfolio trades. The price of securities and any commission rate paid are always factors, but frequently not the only factors, in judging best execution. In selecting brokers or dealers, Pioneer considers various relevant factors, including, but not limited to, the size and type of the transaction; the nature and character of the markets for the security to be purchased or sold; the execution efficiency, settlement capability and financial condition of the dealer; the dealer's execution services rendered on a continuing basis; and the reasonableness of any dealer spreads. Transactions in non-U.S. equity securities are executed by broker-dealers in non-U.S. countries in which commission rates may not be negotiable (as such rates are in the U.S.). Pioneer may select broker-dealers that provide brokerage and/or research services to a fund and/or other investment companies or other accounts managed by Pioneer. In addition, consistent with Section 28(e) of the Exchange Act, if Pioneer determines in good faith that the amount of commissions charged by a broker-dealer is reasonable in relation to the value of the brokerage and research services provided by such broker, the fund may pay commissions to such broker-dealer in an amount greater than the amount another firm may charge. Such services may include advice concerning the value of securities; the advisability of investing in, purchasing or selling securities; the availability of securities or the purchasers or sellers of securities; providing stock quotation services, credit rating service information and comparative fund statistics; furnishing analyses, electronic information services, manuals and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and performance of accounts and particular investment decisions; and effecting securities transactions and performing functions incidental thereto (such as clearance and settlement). Pioneer maintains a listing of broker-dealers who provide such services on a regular basis. However, because many transactions on behalf of a fund and other investment companies or accounts managed by Pioneer are placed with broker-dealers (including broker-dealers on the listing) without regard to the furnishing of such services, it is not possible to estimate the proportion of such transactions directed to such dealers solely because such services were provided. Pioneer believes that no exact dollar value can be calculated for such services. The research received from broker-dealers may be useful to Pioneer in rendering investment management services to any of the funds as well as other investment companies or other accounts managed by Pioneer, although not all such research may be useful to any of the funds. Conversely, such information provided by brokers or dealers who have executed transaction orders on behalf of such other accounts may be useful to Pioneer in carrying out its obligations to any of the funds. The receipt of such research has not reduced Pioneer's normal independent research activities; however, it enables Pioneer to avoid the additional expenses which might otherwise be incurred if it were to attempt to develop comparable information through its own staff. In circumstances where two or more broker-dealers offer comparable prices and executions, preference may be given to a broker-dealer which has sold shares of a fund as well as shares of other investment companies managed by Pioneer. This policy does not imply a commitment to execute all portfolio transactions through all broker-dealers that sell shares of the fund. None of the funds used any brokers affiliated with Pioneer during its most recently completed fiscal year in connection with its portfolio transactions. SIMILAR FUNDS Pioneer serves as the investment adviser to each fund in the Pioneer Family of Funds. The following table identifies other funds in the Pioneer Family of Funds that have similar investment objectives to the Funds described in this Proxy Statement/Prospectus and provides other information regarding the similar funds.
----------------------------------------------------------------------------------------------------------------- Net assets of Fund Management fee rate Fund (as of September 30, 2004) (as a percentage of average daily net assets) ----------------------------------------------------------------------------------------------------------------- Pioneer Balanced Fund $ 44,418,013 0.65% of the Funds average net assets up to $1 billion, 0.60% of the next $4 billion; and 0.55% of the excess over $5 billion. ----------------------------------------------------------------------------------------------------------------- Pioneer Emerging Markets Fund $268,254,326 1.15% ----------------------------------------------------------------------------------------------------------------- Pioneer Equity Income Fund $874,304,393 0.60 of the funds average net assets up to $10 billion and 0.575% on the assets over $10 billion. -----------------------------------------------------------------------------------------------------------------
C-1
---------------------------------------------------------------------------------------------------------------------- Net assets of Fund Management fee rate Fund (as of September 30, 2004) (as a percentage of average daily net assets) ---------------------------------------------------------------------------------------------------------------------- Pioneer Europe Fund $ 171,301,516 1.00% of the Funds average net assets up to $300 million, 0.85% of the next $200 million and 0.75% of the excess over $500 million. ---------------------------------------------------------------------------------------------------------------------- Pioneer Europe Select Fund $ 6,725,644 1.00% of the Funds average net assets up to $300 million, 0.85% of the next $200 million and 0.75% of the excess over $500 million. ---------------------------------------------------------------------------------------------------------------------- Pioneer Fund $6,131,707,342 0.60% +/- 10% depending on performance vs. S&P 500 Index. ---------------------------------------------------------------------------------------------------------------------- Pioneer Growth Shares $ 663,767,737 0.70% of the Funds average net assets up to $500 million, 0.65% of the next $500 million and 0.625% of the excess over $1 billion. +/- 10% depending on performance vs. Russell 1000 Index. ---------------------------------------------------------------------------------------------------------------------- Pioneer International Equity Fund $ 36,478,202 1.00% of the Funds average net assets up to $300 million, 0.85% of the next $200 million and 0.75% of the excess over $500 million. ---------------------------------------------------------------------------------------------------------------------- Pioneer International Value Fund $ 130,773,125 1.00% of the Funds average net assets up to $300 million, 0.85% of the next $200 million and 0.75% of the excess over $500 million. ---------------------------------------------------------------------------------------------------------------------- Pioneer Large Cap Growth Fund $ 1,694,987 0.75% ---------------------------------------------------------------------------------------------------------------------- Pioneer Mid Cap Growth Fund $ 559,334,106 0.625% +/- .20% depending on performance vs. S&P Mid Cap 400 Index. ---------------------------------------------------------------------------------------------------------------------- Pioneer Mid Cap Value Fund $1,842,494,003 0.70% of the Funds average net assets up to $500 million, 0.65% of the next $500 million and 0.625% of the excess over $1 billion. +/- .10% depending on performance vs. Russell Mid Cap Value Index. ---------------------------------------------------------------------------------------------------------------------- Pioneer Oak Ridge Large Cap $ 39,073,966 0.75% of the next $1 billion and 0.70% of the Growth Fund excess over $1 billion. ---------------------------------------------------------------------------------------------------------------------- Pioneer Oak Ridge Small Cap $ 47,438,259 0.85% of the next $1 billion and 0.80% of the Growth Fund excess over $1 billion. ---------------------------------------------------------------------------------------------------------------------- Pioneer Papp America-Pacific $ 20,219,066 0.75% of the next $1 billion and 0.70% of the Rim Fund excess over $1 billion. ---------------------------------------------------------------------------------------------------------------------- Pioneer Papp Small and Mid Cap $ 40,835,919 0.85% of the next $1 billion and 0.80% of the Growth Fund excess over $1 billion. ---------------------------------------------------------------------------------------------------------------------- Pioneer Papp Stock Fund $ 43,972,353 0.75% of the next $1 billion and 0.70% of the excess over $1 billion. ---------------------------------------------------------------------------------------------------------------------- Pioneer Papp Strategic Growth Fund $ 43,117,493 0.75% of the next $1 billion and 0.70% of the excess over $1 billion. ---------------------------------------------------------------------------------------------------------------------- Pioneer Research Fund $ 18,315,138 0.75% of the next $1 billion and 0.70% of the excess over $1 billion. ---------------------------------------------------------------------------------------------------------------------- Pioneer Select Equity Fund $ 496,845 0.75% ---------------------------------------------------------------------------------------------------------------------- Pioneer Small Cap Value Fund $ 517,033,022 0.85% ----------------------------------------------------------------------------------------------------------------------
C-2
-------------------------------------------------------------------------------------------------------------------- Net assets of Fund Management fee rate Fund (as of September 30, 2004) (as a percentage of average daily net assets) -------------------------------------------------------------------------------------------------------------------- Pioneer Small Company Fund $ 186,036,475 0.85% -------------------------------------------------------------------------------------------------------------------- Pioneer Value Fund $3,788,405,005 0.60% +/- .10% depending on performance vs. Lipper Growth and Income Fund Index. -------------------------------------------------------------------------------------------------------------------- Pioneer Variable Contracts Trust -------------------------------------------------------------------------------------------------------------------- Pioneer Balanced VCT Portfolio $ 44,699,291 0.65% -------------------------------------------------------------------------------------------------------------------- Pioneer Equity Income VCT Portfolio $ 874,304,393 0.65% -------------------------------------------------------------------------------------------------------------------- Pioneer Emerging Markets VCT $ 33,358,556 1.15% Portfolio -------------------------------------------------------------------------------------------------------------------- Pioneer Europe VCT Portfolio $ 14,946,105 1.00% -------------------------------------------------------------------------------------------------------------------- Pioneer Fund VCT Portfolio $ 265,027,924 0.65% -------------------------------------------------------------------------------------------------------------------- Pioneer Growth Shares VCT Portfolio $ 36,316,518 0.70% -------------------------------------------------------------------------------------------------------------------- Pioneer International Value VCT $ 23,107,772 1.00% Portfolio -------------------------------------------------------------------------------------------------------------------- Pioneer Mid Cap Value VCT Portfolio $ 660,212,326 0.65% -------------------------------------------------------------------------------------------------------------------- Pioneer Oak Ridge Large Cap $ 2,528,521 0.75% of the next $1 billion and 0.70% of the Growth VCT Portfolio excess over $1 billion. -------------------------------------------------------------------------------------------------------------------- Pioneer Papp America-Pacific Rim $ 909,585 0.75% of the next $1 billion and 0.70% of the VCT Portfolio excess over $1 billion. -------------------------------------------------------------------------------------------------------------------- Pioneer Papp Small and Mid Cap $ 1,525,336 0.75% of the next $1 billion and 0.70% of the Growth VCT Portfolio excess over $1 billion. -------------------------------------------------------------------------------------------------------------------- Pioneer Small Cap Value VCT $ 22,800,093 0.75% Portfolio -------------------------------------------------------------------------------------------------------------------- Pioneer Small Company VCT $ 12,241,934 0.75% Portfolio -------------------------------------------------------------------------------------------------------------------- Pioneer Value VCT Portfolio $ 7,738,878 0.75% --------------------------------------------------------------------------------------------------------------------
C-3 Exhibit D -- Portfolio Manager's Discussion of Performance Report From the Fund Managers Safeco Balanced Fund As of June 30, 2004 How did the Fund perform? The Safeco Balanced Fund underperformed its benchmark -- a 60/40 mix of the Russell 1000 Value and Lehman Aggregate Bond indices, for the six-month period ending June 30, 2004. What factors impacted the Fund's performance? The two dominant factors effecting performance over the past six months were the rise in interest rates in the second quarter, and the dramatic outperformance of smaller, lower-quality stocks in the first quarter. Higher interest rates caused a decline in fixed-income assets over the past three months, resulting in an essentially flat bond market over the six-month period. Rising interest rates also had a negative impact on financial stocks, our largest equity sector. Asset allocation had a favorable impact, as 64.9% of the assets were invested in equities, which had a somewhat higher return than fixed income assets year-to-date. This allocation is toward the upper end of our allowable range of 50% to 70% equity exposure. Year-to-date both stocks and bonds lagged their respective indices. Most of the underperformance in equities occurred early in the year, when lower quality stocks performed exceptionally well. For the year-to-date, the Fund's best-performing sector was energy, which returned around 10%. Performance here was led by Conoco-Philips, up nearly 20%, and British Petroleum, up around 10%. This sector was up primarily due to the rise in oil prices, and the resulting improved outlook for earnings. Consumer discretionary stocks were our next best group, returning around 8%. Materials and consumer staples were our third and fourth best-performing sectors. On the negative side, our worst sectors were technology and health care, both of which declined by around 2%. Technology was hurt primarily by a large decline in both Nokia and Texas Instruments. Nokia has been losing market share in the cell phone market, and Texas Instruments is one of their suppliers. Finance stocks, the largest sector in both our index and the Fund, were held back by the negative impact that rising interest rates are expected to have on earnings. This essentially led to flat performance for the six-month period. The bond portion of the Fund benefited from a relatively short duration of 4.48 compared to the 4.7 duration of the Lehman Aggregate Index. This is because longer duration bonds declined more than shorter ones after rates began rising. The Fund also benefited from being underweight in Treasury securities, as Treasuries were the worst-performing sector of the bond market for the six-month period. We were hurt in the fixed-income portion of the portfolio by being underweight in mortgages, which were the bond market's best-performing sector. Being overweight in corporate debt also negatively impacted performance, even though we were mostly overweight in A-rated bonds, which performed better than lower-quality bonds. What changes did you make to the Fund and why? During the past six months, we made several changes to the equity portion of the Fund. As always, the changes were designed to own the stocks we find most attractive and to adjust sector weightings to what we believe are appropriate levels. Stocks added to the portfolio included PMI Group, Weyerhaeuser, and Polaris Industries. PMI Group, a mortgage insurer, was added because it's a rarity among financial stocks in that rising rates should actually help earnings as the pace of refinancing slows. Weyerhaeuser, a stock we have wanted to own for some time in order to gain exposure to forest products, finally reached what we believe to be an attractive valuation. Polaris Industries is a maker of all-terrain vehicles, a market we expect will continue to experience good growth, especially as the economy improves and the outlook for jobs gets better. We also initiated positions in Allstate Insurance, Coca Cola and Illinois Tool Works, all of which we believe were selling at attractive valuations. We eliminated holdings of Disney, which rose after receiving an unsolicited takeover offer. We also sold Eli Lilly, Anheuser-Busch and Hubbell based on valuation, as they had appreciated to levels that were very near our target prices. We reduced our position in the finance sector, mainly to reduce our exposure during what we expect to be a period of rising interest rates. We are currently marginally underweight in finance relative to the Russell 1000 value Index. We also reduced our exposure to producer durables due to these stocks having performed very well. We do however remain overweighted in this sector by just over 2% as we expect these stocks to continue to perform well as the economy improves. We are overweight in the materials sector for the same reason, and D-1 have added to our position in this sector, primarily by buying Weyerhaeuser as discussed earlier. We also added to our exposure to what Russell calls "other" (primarily includes multi-industry companies, such as GE), as this sector went from 1.6% to 6.6% of the index at the June re-configuration. In the fixed income portion of the Fund, over the past six months we increased our holdings in corporate debt, where we are overweight. We also added to our holdings in government debt, while decreasing the portion of the assets invested in mortgages. We also reduced the duration of the bonds, and currently have a lower duration than the index. Rex Bentley, CFA -- Portfolio Manager/Equity Analyst Lynette Sagvold, CFA -- Portfolio Manager/Equity Analyst Lesley Fox -- Portfolio Manager Gregory Card, CFA -- Portfolio Manager Tim Hokari -- Portfolio Manager Nancy McFadden, CFA -- Portfolio Manager D-2 Performance Overview & Highlights Safeco Balanced Fund (Unaudited) INVESTOR CLASS
-------------------------------------------------------------------------------------------------- Average Annual Total Return Since for the periods ended June 30, 2004 Six Month* 1 Year 5 Year Inception** -------------------------------------------------------------------------------------------------- Safeco Balanced Fund 1.05% 9.97% 1.78% 6.28% 60% Russell 1000 Value/40% Lehman Brothers Aggregate Bond Index 2.42% 12.81% 3.90% 8.90% S&P 500 Index 3.46% 19.13% (2.20)% 8.90% Lipper, Inc. (Balanced Funds) 1.79% 11.65% 1.67% N/A * Not annualized. ** Graph and average annual return comparison begins January 31, 1996, inception date of the Fund. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. --------------------------------------------------------------------------------------------------
[Plot Points To Come for Line Chart] The performance graph compares a hypothetical $10,000 investment in the Investor Class to a hypothetical investment in a relevant market index. The index is unmanaged and includes no operating expenses or transaction costs. Past performance is not predictive of future results. Principal value may fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Percent of TOP FIVE INDUSTRIES (Common Stocks) Net Assets ------------------------------------------------------ Diversified Banks 7.6% Integrated Oil & Gas 6.7 Integrated Telecommunications Services 3.9 Multi-Line Insurance 3.8 Electric Utilities 2.3
Percent of TOP TEN COMMON STOCK HOLDINGS Net Assets ------------------------------------------------------------------------------ ChevronTexaco Corp. (Integrated Oil & Gas) 2.3% Exxon Mobil Corp. (Integrated Oil & Gas) 2.3 Citigroup, Inc. (Other Diversified Financial Services) 2.2 U.S. Bancorp (Diversified Banks) 1.8 Hartford Financial Services Group, Inc. (Multi-Line Insurance) 1.7 General Electric Co. (Industrial Conglomerates) 1.6 Wells Fargo & Co. (Diversified Banks) 1.5 Bank of America Corp. (Diversified Banks) 1.4 Kimberly-Clark Corp. (Household Products) 1.3 American International Group, Inc. (Multi-Line Insurance) 1.3
TOP FIVE PURCHASES (Common Stocks) For the Period Ended June 30, 2004 Cost (000's) ---------------------------------------------------- MBNA Corp. $210 Mellon Financial Corp. 172 Air Products and Chemicals, Inc. 168 Allstate Corp. 157 General Electric Co. 144
TOP FIVE SALES (Common Stocks) Proceeds For the Period Ended June 30, 2004 (000's) --------------------------------------------------------- Travelers Property Casualty Corp. (Class B) $172 Kroger Co. 133 American Express Co. 131 United Parcel Service, Inc. (Class B) 129 Costco Wholesale Corp. 117
WEIGHTINGS AS A PERCENT OF NET ASSETS -------------------------------------------------------------------------------- [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT] Large - Common Stocks: 62.3% ($4 Bil. and above) Medium - Common Stocks: 2.1% ($1.5 Bil. - $4 Bil.) Small - Common Stocks: 0.7% (Less than $1.5 Bil.) Corporate Bonds: 10.2% Asset Backed Securities: 0.5% Collateralized Mortgage Obligations: 1.4% U.S. Government Agency - Mortgage Backed Securities: 7.6% U.S. Government & Agency Obligations: 12.0% Municipal Bonds: 0.4% Cash & Other: 2.8% D-3 Report From the Fund Managers Safeco Core Equity Fund As of June 30, 2004 How did the Fund perform? The Safeco Core Equity Fund underperformed its benchmark Index, the S&P 500, for the six-month period ending June 30, 2004. What factors impacted the Fund's performance? Trends that hurt the Fund in the fourth quarter of 2003 continued. Cyclical stocks, companies without earnings, and lower-quality companies continued to perform better than the stocks in the Fund's benchmark. During the first half of this year, virtually every sector had stocks that performed well. Some of these stocks, such as Ball Corp., Illinois Tool Works and Leggett & Platt performed well as the economy strengthened. Others like Hartford Financial and Schlumberger performed well because trends in the insurance and energy industries remained positive. Finally, others like Estee Lauder, Harley Davidson and PepsiCo are simply solid companies that continue to do well. The Fund had several poor performing stocks in the first half, including some in the health care sector. In this sector, patent expirations (Abbott), legal issues (Wyeth) and concerns regarding future growth rates (Amgen) weighed on the stocks. The technology sector had several losers. Nokia is suffering from newer entrants and its own product cycle. Texas Instruments and Applied Materials remain volatile due to concerns regarding the strength and length of the cycle in their end markets. What changes did you make to the Fund and why? Diversification is increasing -- we added two utilities stocks. The largest position sizes are decreasing: positions over 3% at year-end 2003 are down to zero at mid-year. The percentage of the funds in its top-10 holdings is decreasing (28.2% at year-end 2003 versus 24% now) and the average market capitalization is decreasing, achieved by reducing positions in Citigroup and Pfizer. The intent of these moves is to improve the relative performance of the Fund. At the same time we were undertaking the activities outlined above, we continued to look for the correct buy and hold stocks for the Fund. This included such moves as adding to existing positions in Illinois Tool Works and Cardinal Health and initiating new positions, such as in SunGard Data Systems and Best Buy. We eliminated our position in Altria when it reached our price objective, as well as our position in PeopleSoft, because we found a better alternative. Rich Meagley, CFA -- Portfolio Manager/Equity Analyst Darcy MacLaren, CFA -- Portfolio Manager D-4 Performance Overview & Highlights Safeco Core Equity Fund (Unaudited) INVESTOR CLASS
--------------------------------------------------------------------------------------------------- Average Annual Total Return Since for the periods ended June 30, 2004 Six Month* 1 Year 5 Year Inception** --------------------------------------------------------------------------------------------------- Safeco Core Equity Fund 1.76% 14.16% (5.70)% 7.99% S&P 500 Index 3.46% 19.13% (2.20)% 11.82% Lipper, Inc. (Large-Cap Core Funds) 2.03% 16.13% (3.17)% 9.79% * Not annualized. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. ---------------------------------------------------------------------------------------------------
[Plot Points To Come for Line Chart] The performance graph compares a hypothetical $10,000 investment in the Investor Class to a hypothetical investment in a relevant market index. The index is unmanaged and includes no operating expenses or transaction costs. Past performance is not predictive of future results. Principal value may fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
TOP FIVE INDUSTRIES Percent of (Common Stocks) Net Assets ------------------------------------ Pharmaceuticals 8.7% Diversified Banks 4.9 Integrated Oil & Gas 4.3 Industrial Machinery 4.2 Multi-Line Insurance 3.3
Percent of TOP TEN COMMON STOCK HOLDINGS Net Assets --------------------------------------------------------- General Electric Co. 2.8% (Industrial Conglomerates) Microsoft Corp. 2.7 (Systems Software) Citigroup, Inc. 2.5 (Other Diversified Financial Services) Pfizer, Inc. 2.5 (Pharmaceuticals) Wells Fargo & Co. 2.4 (Diversified Banks) Exxon Mobil Corp. 2.4 (Integrated Oil & Gas) United Technologies Corp. 2.3 (Aerospace & Defense) American International Group, Inc. 2.2 (Multi-Line Insurance) Cisco Systems, Inc. 2.1 (Communication Equipment) Procter & Gamble Co. 2.1 (Household Products)
TOP FIVE PURCHASES Cost For the Period Ended June 30, 2004 (000's) ----------------------------------------------- SunGard Data Systems, Inc. $7,637 Apache Corp. 7,522 Ball Corp. 7,448 FirstEnergy Corp. 7,125 Exelon Corp. 6,711
TOP FIVE SALES Proceeds For the Period Ended June 30, 2004 (000's) ------------------------------------------------ American International Group, Inc. $8,284 Pfizer, Inc. 8,091 PepsiCo, Inc. 7,374 Citigroup, Inc. 6,750 Oracle Corp. 6,412
WEIGHTINGS AS A PERCENT OF NET ASSETS -------------------------------------------------------------------------------- [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT] Large - Common Stocks: 97.8% ($4 Bil. and above) Medium - Common Stocks: 0.8% ($1.5 Bil. - $4 Bil.) Cash & Other: 1.4% D-5 Report From the Fund Managers Safeco Growth Opportunities Fund As of June 30, 2004 How did the Fund perform? The Safeco Growth Opportunities Fund outperformed its benchmark index, the Russell 2000 Index[RegTM], for the six-month period ending June 30, 2004. What factors impacted the Fund's performance? The biggest factor affecting the Fund's strong performance has been from stock selection. We have many stable, liquid and less volatile small-cap holdings. Our view continues to be that earnings growth comparisons for many companies will moderate as the economy continues to recover, thus we have positioned the portfolio toward companies with sustainable growth in earnings. Some of the Fund's outperformance was a result of 46% of the Fund having a market capitalization of greater than $1 billion currently. This is the segment of the market-cap spectrum that we added to during late 2003. Year-to date, the Russell 2000 Index[RegTM] sectors that contributed the most were producer durables, consumer discretionary and healthcare -- all overweighted sectors in the Fund. Our underweight in technology helped as well. What changes did you make to the Fund and why? The turnover in the Fund remains quite low for a small-cap fund, as compared to the turnover of other funds of its type. What this symbolizes is a management team with a long-term view of the investments made in the portfolio. We continue to upgrade the quality of the portfolio to more stable, more liquid and thereby less volatile stocks. We seek high quality companies that have consistent growth in profits, strong return on investor capital (or increasing), an ability to fund growth internally, and a seasoned management team. Jeffrey Schwartz, CFA -- Portfolio Manager/Equity Analyst Bill Whitlow, CFA -- Portfolio Manager/Equity Analyst D-6 Performance Overview & Highlights Safeco Growth Opportunities Fund (Unaudited) INVESTOR CLASS
--------------------------------------------------------------------------------------------- Average Annual Total Return for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year --------------------------------------------------------------------------------------------- Safeco Growth Opportunities Fund 8.40% 32.82% 4.75% 11.92% Russell 2000 Index 6.76% 33.37% 6.63% 10.93% Lipper, Inc. (Small-Cap Core Funds) 7.14% 33.47% 10.61% 12.54% * Not annualized. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. ---------------------------------------------------------------------------------------------
[Plot Points To Come for Line Chart] The performance graph compares a hypothetical $10,000 investment in the Investor Class to a hypothetical investment in a relevant market index. The index is unmanaged and includes no operating expenses or transaction costs. Past performance is not predictive of future results. Principal value may fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Percent of TOP FIVE INDUSTRIES Net Assets ------------------------------------------ Specialty Stores 5.6% Thrifts & Mortgage Finance 5.2 Homebuilding 4.1 Casinos & Gaming 4.0 Health Care Services 3.9
Percent of TOP TEN COMMON STOCK HOLDINGS Net Assets -------------------------------------------------------- MICROS Systems, Inc. 2.9% (Application Software) Nu Skin Enterprises, Inc. (Class A) 2.6 (Personal Products) PolyMedica Corp. 2.6 (Health Care Supplies) Rent-A-Center, Inc. 2.6 (Specialty Stores) Iron Mountain, Inc. 2.5 (Data Processing & Outsourced Services) Websense, Inc. 2.5 (Internet Software & Services) American Healthways, Inc. 2.4 (Health Care Services) Station Casinos, Inc. 2.3 (Casinos & Gaming) Textronix, Inc. 2.1 (Electronic Equipment Manufacturers) W Holding Co., Inc. 2.1 (Thrifts & Mortgage Finance)
TOP FIVE PURCHASES Cost For the Period Ended June 30, 2004 (000's) ----------------------------------------------- Florida Rock Industries, Inc. $9,506 Scientific Games Corp. 8,266 Timberland Co. (Class A) 8,074 W Holding Co., Inc. 7,938 Scotts Co. (Class A) 5,966
TOP FIVE SALES Cost For the Period Ended June 30, 2004 (000's) ------------------------------------------------- Conceptus, Inc. $9,279 NCO Group, Inc. 9,264 Nastech Pharmaceutical Co., Inc. 7,681 Matria Healthcare, Inc. 6,791 iShare Russell 2000 Value Index Fund 6,615
WEIGHTINGS AS A PERCENT OF NET ASSETS -------------------------------------------------------------------------------- [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT] Small - Common Stocks: 52.5% (Less than $1.5 Bil.) Indexed Securities: 6.4% Warrants: 0.4% Cash & Other: 2.4% Large - Common Stocks: 3.1% ($4 Bil. and above) Medium - Common Stocks: 35.2% ($1.5 Bil. - $4 Bil.) D-7 Report From the Fund Manager Safeco International Stock Fund As of June 30, 2004 How did the Fund perform? The Safeco International Fund underperformed its benchmark index, the MSCI EAFE Net Index, for the six-month period ending June 30, 2004. What factors impacted the Fund's performance? Against a backdrop of improved economic conditions, global equity markets posted moderate gains in most instances for the first six months of 2004. However, concern about the future sustainability of the economic improvement, peaking of the corporate profit cycle, rising interest rates, persistent geopolitical strains and the ascent in the crude oil price counteracted some of the gains in stocks. The American and Japanese economies -- the world's largest and second largest -- and China, produced much of the economic vigor. These economies also provided the tonic for the rest of the world that buoyed corporate earnings' prospects and underpinned the equity markets' advance. Performance of the Fund was mixed over the first half of the year. Some of the factors that weighed on performance during 2003 persisted while others dissipated. Smaller companies continued to outperform their larger peers during the first half of 2004. This continues to negatively impact the Fund as our focus is large-cap companies. However, encouragingly, we have begun to see a broadening out of performance in the markets. Many of the low quality, "recovery play" stocks which led the markets last year have begun to lag and high quality companies which generate consistent earnings growth have begun to come back into favor. Lastly, the Fund was held back somewhat by its underexposure to the strongly performing Japanese market, however, as evidenced by the Fund's increased weighting in Japan and greater Asia, we are encouraged by developments in the region. What changes did you make to the Fund and why? There was considerable activity in the Fund during the first half of the year, with much of the activity occurring in the Asia region. The Fund's exposure to a particular country or sector is strictly a residual of the stock selection process; however we have identified a number of attractive investment opportunities in Japan and Asia in general. Several Japanese financial services companies were added to the Fund including, Sumitomo Mitsui Financial Group NPV, Millea Holdings Incorporated NPV and Mitsui Sumitomo Insurance Company. The recovery in the Japanese economy continues to gain momentum and, more importantly the underlying causes appear to be more structural rather than cyclical and therefore more sustainable. Financial services companies should be among the beneficiaries of this recovery. Similarly Hong Kong banking group Hang Seng Bank was added to the fund. Hang Seng Bank is one of the largest financial services companies in Hong Kong and is well placed to benefit from the recovery in the Hong Kong economy as well as the strong growth in mainland China where it is the largest foreign investor in any Chinese bank. During the second quarter, Japan Tobacco and Taiwan Semiconductor (TSMC) were added to the Fund. Japan Tobacco is the dominate tobacco company in Japan and owns the international rights to three of the top six global cigarette brands. There is potential for re-rating of the stock as management pursues a number of restructuring initiatives. TSMC is a global leader in the design and manufacture of integrated circuit chips. The company is well positioned to benefit from the growth in outsourcing of chip manufacturing yet trades on an attractive multiple relative to its peers and historical growth record. Positions disposed of during the period include Lloyds TSB, Shell T&T and China Life. Shell's announcement that it has overstated proven reserves by 20% raised a credibility issue about the management and we felt better opportunities were available elsewhere. We participated in the IPO of China Life in December of 2003. Shares in the company soared shortly thereafter making the stock look expensive in our view. Although Lloyds TSB is the highest yielding of the U.K. banks, we had concerns regarding the sustainability of the dividend given the potential need for capital support for its insurance subsidiary, Scottish Widows. Further, we believe that other financial companies, in particular Royal Bank of Scotland and BNP Paribas (also purchased during the period) are more attractive at this time. Bank of Ireland Asset Management (U.S.) Limited D-8 Performance Overview & Highlights Safeco International Stock Fund (Unaudited) INVESTOR CLASS
------------------------------------------------------------------------------------------ Average Annual Total Return Since for the periods ended June 30, 2004 Six Month* 1 Year 5 Year Inception** ------------------------------------------------------------------------------------------ Safeco International Stock Fund 2.35% 23.29% (2.72)% 2.74% MCSI EAFE Index 4.56% 32.37% 0.06% 3.59% Lipper, Inc. (International Funds) 2.49% 25.48% (1.31)% N/A * Not annualized. ** Graph and average annual return comparison begins January 31, 1996, inception date of the Fund. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. ------------------------------------------------------------------------------------------
[Plot Points To Come for Line Chart] The performance graph compares a hypothetical $10,000 investment in the Investor Class to a hypothetical investment in a relevant market index. The index is unmanaged and includes no operating expenses or transaction costs. Past performance is not predictive of future results. Principal value may fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
TOP FIVE COUNTRIES Percent of (Common Stocks) Net Assets ---------------------------------- United Kingdom 23.5% Japan 17.4 Switzerland 12.2 France 9.7 Netherlands 8.3
TOP TEN COMMON STOCK HOLDINGS Percent of (Common Stocks) Net Assets ----------------------------------------------------------- Nestle SA 3.6% (Food Retail) Total SA 3.4 (Integrated Oil & Gas) Canon, Inc. 3.1 (Office Electronics) UBS AG 2.9 (Investment Banking & Brokerage) E.On AG 2.4 (Electric Utilities) ING Groep NV 2.4 (Other Diversified Financial Services) Nippon Telegraph & Telephone Corp. 2.2 (Integrated Telecommunications Services) Samsung Electronics Co., Ltd. 2.2 (Electronic Equipment Manufacturers) HSBC Holdings, plc 2.2 (Diversified Banks) Novartis AG 2.2 (Pharmaceuticals)
TOP FIVE PURCHASES For the Period Ended June 30, 2004 Cost (000's) ------------------------------------------------------- Royal Bank of Scotland Group, plc $539 BNP Paribas SA 528 Sumitomo Mitsui Financial Group, Inc. 341 HSBC Holdings, plc 325 Japan Tobacco, Inc. 299
TOP FIVE SALES Proceeds For the Period Ended June 30, 2004 (000's) ------------------------------------------------ Lloyds TSB Group, plc $585 Shell Transport & Trading Co., plc 548 Aventis SA 169 Barclays, plc 160 Acom Co., Ltd. 149
D-9 Report From the Fund Managers Safeco Large-Cap Growth Fund As of June 30, 2004 How did the Fund perform? For the six-month period ending June 30, 2004, the Safeco Large-Cap Growth Fund underperformed its benchmark, the Russell 1000 Growth Index. The Fund's performance since inception in late 2001 also trails its benchmark, although the majority of the Fund's underperformance since inception occurred in calendar year 2003, when smaller stocks with no earnings and speculative characteristics significantly outperformed the overall market. Conversely, stocks with better fundamentals such as high levels of profitability and balance sheet strength underperformed in 2003. This provided a major headwind to our quality investment style. While volatile conditions may persist near term, we believe that we are in the midst of a transitional phase, into an environment in which investors again return to high quality large cap stocks with sustainable growth characteristics. What factors impacted the Fund's performance? Many companies have been demonstrating very strong fundamentals and exceptional earnings growth. Returns have been muted, however, due in part to investor anxieties regarding inflation, rising interest rates, slowing growth in China, the Iraqi Government transition, terrorism, near record oil prices and the upcoming presidential election. Returns were helped most by internet software and services holdings, while the largest detractors from returns came from software. Individual stocks that had a major impact on performance included: o Yahoo! Inc. appreciated by 62% over the half-year, helped by increases in paid search activity and online advertising, along with a growing user base. o Avon Products was also a top performer, benefiting from growth in developing markets such as central/eastern Europe, Latin America, and China. o Software storage firm Veritas lost 25% over the period, and recently announced that revenues and earnings would come in below investor expectations. We trimmed our holding in the stock and are monitoring developments closely. What changes did you make to the Fund and why? The relatively flat first half returns masked an erratic period in which market leadership shifted frequently between cyclical and defensive areas of the market. Since the beginning of the year, we reduced our holdings of technology stocks, and the Fund is now slightly underweight in technology. We also took profits in some areas of health care, notably in health care equipment and supplies. Some proceeds were re-deployed into biotechnology. The Fund's largest position remained with the global, research-based pharmaceutical firm, Pfizer Inc. Energy was one of the best performing segments in the Fund, appreciating by over 25%. We continue to like the operating environment for several energy and oil services companies, which are indirectly benefiting from high oil and gas prices, limited supply growth and increasing demand associated with the global economic recovery. Accordingly, we added to this sector over the period, and hold an overweight position here. RCM Capital Management LLC, formerly Dresdner RCM Global Investors LLC acts as an investment sub-advisor to the Safeco Large-Cap Growth Fund. Peter Goetz, MBA, CFA -- Portfolio Manager Seth A. Reicher, CFA -- Portfolio Manager D-10 Performance Overview & Highlights Safeco Large-Cap Growth Fund (Unaudited) INVESTOR CLASS
------------------------------------------------------------------------------------------ Average Annual Total Return Since for the periods ended June 30, 2004 Six Month* 1 Year Inception** ------------------------------------------------------------------------------------------ Safeco Large-Cap Growth Fund 0.65% 10.77% (2.30)% Russell 1000 Growth Index 2.74% 17.88% 1.91% Lipper, Inc. (Large-Cap Growth Funds) 2.35% 15.56% N/A * Not annualized. ** Total return comparison begins October 31, 2001, inception date of the Fund. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. ------------------------------------------------------------------------------------------
[Plot Points To Come for Line Chart] The performance graph compares a hypothetical $10,000 investment in the Investor Class to a hypothetical investment in a relevant market index. The index is unmanaged and includes no operating expenses or transaction costs. Past performance is not predictive of future results. Principal value may fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Percent of TOP FIVE INDUSTRIES Net Assets -------------------------------------------- Pharmaceuticals 12.4% Industrial Conglomerates 6.3 Systems Software 6.3 Communication Equipment 5.1 Internet Software & Services 4.5
Percent of TOP TEN COMMON STOCK HOLDINGS Net Assets ---------------------------------------------------- Pfizer, Inc. 5.4% (Pharmaceuticals) Intel Corp. 3.4 (Semiconductors) Cisco Systems, Inc. 3.3 (Communications Equipment) Minnesota Mining & Manufacturing Co. 3.3 (Industrial Conglomerates) Yahoo, Inc. 3.3 (Internet Software and Services) General Electric Co. 3.0 (Industrial Conglomerates) Wal-Mart Stores 2.6 (General Merchandise Stores) Dell, Inc. 2.6 (Computer Hardware) Procter & Gamble 2.4 (Household Products) Microsoft Corp. 2.2 (Systems Software)
TOP FIVE PURCHASES Cost For the Period Ended June 30, 2004 (000's) ------------------------------------------------ Paychex, Inc. $123 Guidant Corp. 122 International Game Technology, Inc. 115 Coca-Cola Co. 114 Agilent Technologies, Inc. 104
TOP FIVE SALES Proceeds For the Period Ended June 30, 2004 (000's) ------------------------------------------------ St. Jude Medical, Inc. $117 Lowe's Companies, Inc. 113 General Electric Co. 93 Agilent Technologies, Inc. 76 Microsoft Corp. 75
WEIGHTINGS AS A PERCENT OF NET ASSETS -------------------------------------------------------------------------------- [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT] Large - Common Stocks: 97.0% ($4 Bil. and above) Mid-Cap - Common Stocks: 0.4% ($1.5 Bil. - $4 Bil.) Cash & Other: 2.6% D-11 Report From the Fund Managers Safeco Large-Cap Value Fund As of June 30, 2004 How did the Fund perform? The Safeco Large-Cap Value Fund underperformed its benchmark, the Russell 1000 Value[RegTM] Index, for the six-month period ending June 30, 2004. What factors impacted the Fund's performance? The Fund's performance was primarily due to stock selection and aided by a one-time settlement of a class action lawsuit regarding a former holding. As usual, there were multiple factors affecting performance. One factor that has helped so far this year, after hurting last year, was the relative outperformance of large companies over smaller ones. This helped the Fund's relative performance as we own mostly larger companies. It also helped that higher quality companies tended to perform better than lower quality ones. This too is a change from recent periods. For the year-to-date, the Fund's best performing sector was energy, which returned around 10%. Performance here was led by Conoco-Philips, up nearly 20%, and British Petroleum, up around 10%. This sector was up primarily due to the rise in oil prices, and the resulting improved outlook for earnings. Consumer discretionary stocks were our next best group, returning around 8%. Materials and consumer staples were our third and fourth best performing sectors. On the negative side, our worst sectors were technology and health care, both of which declined by around 2%. Technology was hurt primarily by a large decline in both Nokia and Texas Instruments. Nokia has been losing market share in the cell phone market, and Texas Instruments is one of their suppliers. Finance stocks, the largest sector in both our Index and the Fund, were held back by rising interest rates and the negative impact this is expected to have on earnings. Finance stocks were essentially flat for the past six months. What changes did you make to the Fund and why? During the past six months, we made several changes to the Fund. As always, the changes were designed to own the stocks we find most attractive and to adjust sector weightings to what we believe are appropriate levels. Some recent sector weighting adjustments were due to the annual Russell Value Index re-configuration which occurred at the end of June. Stocks added to the portfolio included PMI Group, Weyerhaeuser, and Polaris Industries. PMI Group, a mortgage insurer, was added because it's a rarity among financial stocks in that rising rates should actually help earnings as the pace of refinancing slows. Weyerhaeuser, a stock we have wanted to own for some time in order to gain exposure to forest products, finally reached what we believe to be an attractive valuation. Polaris Industries is a maker of all-terrain vehicles, a market we expect will continue to experience good growth, especially as the economy improves and the outlook for jobs gets better. We also initiated positions in Allstate Insurance, Coca Cola and Illinois Tool Works, all of which we believe were selling at attractive valuations. We eliminated holdings of Disney, which rose after receiving an unsolicited takeover offer. We also sold Eli Lilly, Anheuser-Busch and Hubbell based on valuation, as they had appreciated to levels that were very near our target prices. We reduced our position in the finance sector by 2.1%, mainly to lessen our exposure during what we expect to be a period of rising interest rates. We are currently 1.7% underweight in finance relative to the Russell 1000 Value Index. We reduced our exposure to stocks in the producer durables sector, which performed very well. We do, however, remain overweighted in this sector by 2.0% as we expect these stocks to continue to perform well as the economy improves. We are overweighted in the materials sector for the same reason, and have added to our position, primarily by buying Weyerhaeuser as discussed earlier. We also added to our exposure to what Russell calls "other" (primarily includes multi-industry companies, such as GE), as this sector went from 1.6% to 6.6% of the Index at the June re-configuration. Rex Bentley, CFA -- Portfolio Manager/Equity Analyst Lynette Sagvold, CFA -- Portfolio Manager/Equity Analyst D-12 Performance Overview & Highlights Safeco Large-Cap Value Fund (Unaudited) INVESTOR CLASS
----------------------------------------------------------------------------------------------- Average Annual Total Return for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year ----------------------------------------------------------------------------------------------- Safeco Large-Cap Value Fund 3.37% 18.91% (1.71)% 7.52% Russell 1000 Value Index 3.94% 21.13% 1.87% 12.64% Lipper, Inc. (Equity-Income Funds) 3.24% 19.19% 0.67% 10.41% * Not annualized. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. -----------------------------------------------------------------------------------------------
[Plot Points To Come for Line Chart] The performance graph compares a hypothetical $10,000 investment in the Investor Class to a hypothetical investment in a relevant market index. The index is unmanaged and includes no operating expenses or transaction costs. Past performance is not predictive of future results. Principal value may fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Percent of TOP FIVE INDUSTRIES Net Assets ------------------------------------------------------ Diversified Banks 11.2% Integrated Oil & Gas 10.2 Multi-Line Insurance 5.8 Integrated Telecommunications Services 5.7 Pharmaceuticals 3.5
Percent of TOP TEN COMMON STOCK HOLDINGS Net Assets ------------------------------------------------------- Chevron Texaco Corp. 3.7% (Integrated Oil & Gas) Citigroup, Inc. 3.3 (Other Diversified Financial Services) Exxon Mobil Corp. 2.9 (Integrated Oil & Gas) Hartford Financial Services Group, Inc. 2.7 (Multi-Line Insurance) U.S. Bancorp 2.6 (Diversified Banks) General Electric Co. 2.6 (Industrial Conglomerates) Wells Fargo & Co. 2.3 (Diversified Banks) Bank of America Corp. 2.1 (Diversified Banks) Kimberly-Clark Corp. 2.0 (Household Products) American International Group, Inc. 1.9 (Multi-Line Insurance)
TOP FIVE PURCHASES Cost For the Period Ended June 30, 2004 (000's) ----------------------------------------------- MBNA Corp. $2,441 Mellon Financial Corp. 2,013 General Electric Co. 1,958 Allstate Corp. 1,828 Praxair, Inc. 1,755
TOP FIVE SALES Proceeds For the Period Ended June 30, 2004 (000's) ------------------------------------------------ Travelers Property Casualty Corp. $2,048 (Class B) American Express Co. 1,619 Northrop Grumman Corp. 1,585 Nokia Oyj (ADR) 1,579 Kroger Co. 1,512
WEIGHTINGS AS A PERCENT OF NET ASSETS -------------------------------------------------------------------------------- [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT] Large - Common Stocks: 94.0% ($4 Bil. and above) Medium - Common Stocks: 3.1% ($1.5 Bil. - $4 Bil.) Small - Common Stocks: 0.8% (Less than $1.5 Bil.) Cash & Other 2.1% D-13 Report From the Fund Managers Safeco Multi-Cap Core Fund As of June 30, 2004 How did the Fund perform? The Safeco Multi-Cap Core Fund outperformed its benchmark Index, the Russell 3000[RegTM] Index, for the six-month period ending June 30, 2004. What factors impacted the Fund's performance? The market posted a modest gain during the first half of the year as the improving economy and strong corporate earnings outweighed investors' concerns about rising rates, the conflict in Iraq and higher oil prices. During the period, small- and mid-cap stocks outperformed large-cap stocks. In the first half of this year, the Russell 2000[RegTM] Index of small-cap stocks advanced 6.76% and the Russell Mid-Cap Index advanced 6.67% versus a 3.3% rise in the Russell 1000[RegTM] Index of large-cap issues. We attribute our better performance in the period to the Fund's high exposure to mid- and small-cap stocks relative to the benchmark. What changes did you make to the Fund and why? During the first half we continued our strategy of increasing diversification to improve the risk/reward trade-off in the Fund. We added 17 new positions, and deleted six, bringing our total number of names to 73. The additions were mostly economically sensitive companies in the mid-cap size range. The deletions were all small-cap companies which had not been performing well. We continue to seek a better balance among market capitalizations as we modestly reduce our exposure to small-caps relative to our benchmark. Four of the five top performers for the period -- Coldwater Creek, Starbucks, Expeditors International and Nordstrom -- are cyclical companies. Our poor performers were either companies that had company-specific problems, like Performance Food Group, Intuit and Penwest Pharmaceutical, or stocks that retreated after a good run, like Primus Knowledge. Bill Whitlow, CFA -- Portfolio Manager/Equity Analyst Brian Clancy, CFA -- Portfolio Manager/Equity Analyst D-14 Performance Overview & Highlights Safeco Multi-Cap Core Fund (Unaudited) INVESTOR CLASS
----------------------------------------------------------------------------------------------- Average Annual Total Return for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year ----------------------------------------------------------------------------------------------- Safeco Multi-Cap Core Fund 4.86% 25.78% 2.32% 9.53% Russell 3000 Index 3.59% 20.46% (1.07)% 11.66% S&P 500 Index 3.46% 19.13% (2.20)% 11.82% Lipper, Inc. (Multi-Cap Core Funds) 3.34% 19.72% 1.66% 11.38% * Not annualized. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. -----------------------------------------------------------------------------------------------
[Plot Points To Come for Line Chart] The performance graph compares a hypothetical $10,000 investment in the Investor Class to a hypothetical investment in a relevant market indexes. The indexes are unmanaged and include no operating expenses or transaction costs. Past performance is not predictive of future results. Principal value may fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Percent of TOP FIVE INDUSTRIES Net Assets -------------------------------------------------- Diversified Banks 5.6% Pharmaceuticals 5.2 Semiconductors 4.0 Oil & Gas Exploration & Production 3.7 Electronic Equipment Manufacturers 3.6
Percent of TOP TEN COMMON STOCK HOLDINGS Net Assets ------------------------------------------------------------ StanCorp Financial Group, Inc. 2.5% (Life & Health Insurance) Tektronix, Inc. 2.5 (Electronic Equipment Manufacturers) Starbucks Corp. 2.4 (Restaurants) Expeditors International of Washington, Inc. 2.3 (Air Freight & Logistics) Nordstrom, Inc. 2.3 (Department Stores) Kroger Co. 2.2 (Food Retail) Costco Wholesale Corp. 2.2 (Hypermarkets & Super Centers) Pfizer, Inc. 2.1 (Pharmaceuticals) Microsoft Corp. 2.1 (Systems Software) U.S. Bancorp 2.0 (Diversified Banks)
TOP FIVE PURCHASES Cost For the Period Ended June 30, 2004 (000's) ----------------------------------------------- Performance Food Group Co. $1,388 A.G. Edwards, Inc. 1,354 Investors Financial Services Corp. 1,274 Accredo Health, Inc. 1,098 American Healthways, Inc. 1,043
TOP FIVE SALES Proceeds For the Period Ended June 30, 2004 (000's) ------------------------------------------------ Coldwater Creek, Inc. $2,028 Monaco Coach Corp. 1,267 Starbucks Corp. 1,169 Penford Corp. 1,020 Tektronix, Inc. 978
WEIGHTINGS AS A PERCENT OF NET ASSETS -------------------------------------------------------------------------------- [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT] Large - Common Stocks: 58.2% ($4 Bil. and above) Medium - Common Stocks: 17.6% ($1.5 Bil. - $4 Bil.) Small - Common Stocks: 23.0% (Less than $1.5 Bil.) Cash & Other: 1.2% D-15 Report From the Fund Manager Safeco Small-Cap Value Fund As of June 30, 2004 How did the Fund perform? Overall the Fund essentially matched the performance of our benchmark Russell 2000 Value index for the six-month period ending June 30, 2004. All the positive contributions took place in the first quarter, and then the small-cap market seesawed down and up from April through June. In retrospect, the first few months were a continuation of the "take off" phase of the market cycle that began last March. The April/May timeframe saw the first significant correction since that rally began. What factors impacted the Fund's performance? Market leadership by higher quality stocks has continued, following a trend that began in the fourth quarter of last year. I define high quality as companies with stock prices above $5 per share, with positive earnings, low P/E ratios versus the universe, and market capitalization above $250 million. This trend helped the Fund, since it owns stocks all across the small-cap-size spectrum and the weighted average tends towards the middle of the small-cap-size range. Also, the Fund has less of its assets invested in companies that are not currently more profitable than the index, and we didn't have much exposure to under-$5 price stocks. In early April, one single government report of job growth was all it took to crystallize the market's worry that the Federal Reserve would start raising short-term interest rates. This precipitated a fast and steep correction in the Fund's most interest-rate-sensitive stocks. Those stocks have made a partial recovery since then. What changes did you make to the Fund and why? I added new stocks, which I believed were not discounting their full potential or had not participated in the "lift off" phase of the early market cycle. From the March 2003 bottom, the entire market experienced a "rising tide" effect. That effect has run its course, and so I've tried to find stocks that represent value opportunities in the traditional sense of the word. For example, Pacer International was bought on price weakness after I had multiple meetings with management to cement an understanding of their business. Pacer arranges for the transportation of ocean freight containers by reselling space on the railroads in a service called the Stack Train. They produce significant free cash flow, but their service offering is aligned with the Union Pacific and CSX railroads, and those companies are experiencing a period of poor service quality that has temporarily hurt Pacer. In time this will change. However, Pacer's stock was down based on the current view of conditions, not what they'll be in the future. The future is where I see the stock's opportunity. I also exited positions that I believe have run their course, or have taken a turn for the worse. Examples of the former include the last of the utility preferred stocks in the Fund. An example of the latter would be the company Osteotech, which abandoned one of its product lines in January, calling into doubt its growth prospects and valuation. I was fortunate to exit the stock before the worst of the damage was done. I continue to believe stocks with traditional "value" characteristics, in terms of their overall valuation and free cash flow generation, are a successful strategy to own for the long term. I am a believer in owning stocks that are priced cheaper than the overall market, and that have sustainable businesses and cash flows. I think the Fund is currently positioned this way. Greg Eisen, CFA -- Portfolio Manager/Equity Analyst D-16 Performance Overview & Highlights Safeco Small-Cap Value Fund (Unaudited) INVESTOR CLASS
-------------------------------------------------------------------------------------------------- Average Annual Total Return Since for the periods ended June 30, 2004 Six Month* 1 Year 5 Year Inception** -------------------------------------------------------------------------------------------------- Safeco Small-Cap Value Fund 7.82% 31.58% 14.80% 10.05% Russell 2000 Value Index 7.83% 35.17% 12.82% 13.26% Lipper, Inc. (Small-Cap Value Funds) 8.15% 34.14% 13.08% N/A * Not annualized. ** Graph and average annual return comparison begins January 31, 1996, inception date of the Fund. Performance does not reflect the deduction for taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. --------------------------------------------------------------------------------------------------
[Plot Points To Come for Line Chart] The performance graph compares a hypothetical $10,000 investment in the Investor Class to a hypothetical investment in a relevant market index. The index is unmanaged and includes no operating expenses or transaction costs. Past performance is not predictive of future results. Principal value may fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Percent of TOP FIVE INDUSTRIES Net Assets -------------------------------------------- Real Estate Investment Trust 6.7% Specialty Stores 6.4 Regional Banks 5.9 Trucking 5.3 Consumer Finance 4.8
Percent of TOP TEN COMMON STOCK HOLDINGS Net Assets --------------------------------------------------- World Fuel Services Corp. 3.3% (Integrated Oil & Gas) Lone Star Technologies, Inc. 2.9 (Oil & Gas Equipment & Services) Cash America International, Inc. 2.5 (Consumer Finance) Imation Corp. 2.5 (Computer Storage & Peripherals) Foot Locker, Inc. 2.4 (Specialty Stores) Champion Enterprises, Inc. 2.4 (Homebuilding) AmeriCredit Corp. 2.3 (Consumer Finance) Precision Castparts Corp. 2.3 (Diversified Metals & Mining) Hollywood Entertainment Corp. 2.3 (Specialty Stores) Insight Enterprises, Inc. 2.2 (Catalog Retail)
TOP FIVE PURCHASES Cost For the Period Ended June 30, 2004 (000's) ----------------------------------------------- Champion Enterprises, Inc. $1,534 Pacer International, Inc. 1,371 Apollo Investment Corp. 1,188 Hanger Orthopedic Group, Inc. 1,149 Impac Mortgage Holdings, Inc. 1,134
TOP FIVE SALES Proceeds For the Period Ended June 30, 2004 (000's) --------------------------------------------------- Pacific Crest Capital, Inc. $1,310 Nordic American Tanker Shipping, Ltd. 1,003 Isle of Capri Casinos, Inc. 731 Furniture Branks International, Inc. 721 SonoSite, Inc. 680
WEIGHTINGS AS A PERCENT OF NET ASSETS -------------------------------------------------------------------------------- [DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT] Indexed Securities: 3.6% Cash & Other: 3.0% Mid-Cap - Common Stocks: 22.8% ($1.5 Bil. - $4 Bil.) Small Cap - Common Stocks Under ($1.5 Bil.) a) Large (Over $750 Mil.): 40.2% b) Medium ($250 Mil. - $750 Mil.): 25.8% c) Small (Under $250 Mil.): 4.6% D-17 PIONEER BALANCED FUND Performance Update 6/30/04 Class A Shares Share Prices and Distributions
6/30/04 12/31/03 Net Asset Value per Share $9.57 $9.47 Distributions per Share Net Short-Term Long-Term (1/1/04 - 6/30/04) Investment Capital Gains Capital Gains Income $0.0500 $ $
Investment Returns The mountain chart shows the change in value of a $10,000 investment made in Pioneer Balanced Fund at public offering price, compared to that of the Standard & Poor's 500 Index and the Lehman Brothers Aggregate Bond Index. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT] Value of $10,000 Investment Lehman Pioneer Brothers Standard & Balanaced Aggregate Poor's 500 Fund* Bond Index Index 6/94 9550 10000 10000 9573 10099 10486 11679 11965 14420 12/96 12834 12398 17725 14621 13597 23635 12/98 14788 14776 30394 15253 14652 36787 12/00 16074 16356 33444 15612 17737 29480 12/02 13863 19557 22966 16080 20360 29550 6/04 16335 20391 30567 Average Annual Total Returns (As of June 30, 2004)
Period Net Asset Value Public Offering Price * --------------------------------------------------------- 10 Years 5.51% 5.03% 5 Years 1.34 0.40 1 Year 8.51 3.64
* Reflects deduction of the maximum 4.5% sales charge at the beginning of the period and assumes reinvestment of distributions at net asset value. Performance data shown represents past performance. Past performance does not guarantee future results. Assumes reinvestment of all distributions at net asset value. Investment return and principal value fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance shown. For performance data that is current to the most recent month-end, please call 1-800-225-6292 or visit our web site www.pioneerfunds.com. The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The Fund adopted its current name and investment objective on February 3, 1997. Prior to that date, the Fund's name was Pioneer Income Fund and its objective was income from a portfolio of income-producing bonds and stocks. The Standard & Poor's (S&P) 500 Index is an unmanaged measure of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and the over-the-counter market. The Lehman Brothers Aggregate Bond Index is a widely recognized market value-weighted index composed of the Lehman Brothers Government/Credit, Mortgage-backed, Asset-Backed and Commercial Mortgage-Based Securities indices. Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any Index. D-18 Portfolio Manager's Discussion 6/30/04 While the economy grew and corporate profits rose during the first half of 2004, stock market returns were muted by worries about rising interest rates as well as geopolitical issues around the world. In the fixed income markets, the jump in interest rates midway through the six months sent many bond prices lower, resulting in weak returns in most sectors. In the following interview, Timothy Mulrenan, who is responsible for the equity portfolio of Pioneer Balanced Fund, and Richard Schlanger, who is responsible for the Fund's fixed income portfolio, discuss the markets and their investment strategies during the six months ended June 30, 2004. Q: How did the Fund perform during the first six months of 2004? A: Pioneer Balanced Fund's Class A shares had a total return of 1.59% during the six months ended June 30, 2004, while Class B and Class C shares returned, respectively, 1.18% and 1.06%, all at net asset value. During the same six months, the average return of the funds in Lipper's Balanced Fund category was 1.79%. Q: What were the factors that affected performance? A: The domestic equity market produced generally positive returns for the six months, but those returns masked the underlying volatility and tensions between conflicting influences. Supporting equity valuations were an expanding economy and robust corporate profits. Reported earnings tended to be 25% higher than in the comparable period of 2003. The competing negative factors included the spike in market interest rates midway through the six months, as well as uncertainty brought on by concerns over issues such as energy prices, stability in Iraq and presidential election-year politics. In the fixed income markets, interest rates tended to rise, with shorter-maturity rates rising farther than longer-term rates. The price losses brought on by the higher rates as well as the flattening of the yield curve -- or difference between short-term and long-term yields -- resulted in volatility in the bond market. The key factor was the widely anticipated announcement by the Federal Reserve Board on the final day of the period to begin tightening monetary policy by starting to raise the influential overnight lending rate -- the Fed Funds rate. The initial hike was from 1.00% to 1.25%, but the expectation was that the Fed would raise rates further in the months to come in an effort to guard against inflationary pressures. Q: What were the principal strategies during the period? A: We kept the allocation between equities and bonds consistent during the six months. On June 30, about 64% of assets were invested in stocks -- about the same percentage as at the start of the period. The remaining assets were invested in fixed income assets, including corporate bonds, government securities, and mortgage-backed securities, with a small allocation in foreign bonds and less than 2% in cash. There also were no major changes in the equity portfolio, although we did trim our energy position to take profits and to reduce our vulnerability to the area during a time when we expected increased price volatility. We remained over weighted in energy stocks, however, and remain positive about the sector's longer-term fundamentals. We modestly increased the Fund's health care holdings, adding medical device company Guidant and pharmaceutical company Eli Lilly. We thought Guidant's stock price had become compellingly attractive after it fell because of an announcement about a delay in a new product introduction. We like Lilly because it has well-developed research and development activities that should produce a flow of new products. In addition, we initiated a position in Liz Claiborne, the apparel company. We think it is attractive because of its strong distribution during a time when the industry is beginning to gain greater control over pricing. We substantially reduced our holdings in two stocks that had performed very well -- software company Symantec and auto insurance company Progressive. We also eliminated our position in Devon Energy, an exploration and production company, because of our concerns about its internal cost structure. In the fixed income portfolio, we raised overall quality of the portfolio, with average credit quality moving from A+ to AA-. Interestrate sensitivity -- as measured by duration -- was about even with that of the benchmark Lehman Brothers Aggregate Bond Index, although it declined slightly during the six months from 4.52 years to 4.34 years. We increased our exposure to mortgage-backed securities -- the best-performing part of the investment-grade sector -- from 43.6% of fixed income assets to 47.7%. Mortgages tend to be less vulnerable to declining prices than Treasuries and other government securities in a rising interest-rate environment. We reduced our exposure to corporates, taking profits when their yield advantage over Treasuries began to narrow. At the end of the period, 25.9% of the fixed income portfolio was invested in industrial and utility bonds, compared to 31.4% at the start of the period. At the same time, we also reduced our banking and financial services bond holdings from 10.7% to 9.0% of fixed income assets. When we invest in corporates, we tend to favor new issues, which have a greater yield advantage over Treasuries than existing issues available on the secondary market. When invested in Treasury bonds, we tended to hold TIPS, or inflation-protected Treasuries, although we sold them near the end of the period when the Federal Reserve made it clear it intended to control inflationary pressures. D-19 Q: What types of investments had the greatest influence on performance? A: In our equity portfolio, our emphasis on consumer staples companies helped considerably as stock investors began to recognize the value of higher-quality, stable growth companies that had been overlooked in the rally of 2003. Holdings such as Gillette, PepsiCo and Wrigley performed very well. Our technology positions also did well, led by Symantec, whose share price went up 27% during the six months. Detracting from performance, however, was security selection in the consumer discretionary sector. Family Dollar Stores had disappointing earnings, which may have been caused by higher gasoline prices, but we still favor the company and continue to hold it at the end of the period. Newmont Mining, which had been a strong contributor to Fund performance prior to the period, fell 20% during the period in response to slumping gold prices. However, we still believe the company is attractive and continue to hold a position in it on June 30. In the fixed income portfolio, our overweight position in mortgages helped substantially, as did our exposure to corporate bonds -- both high yield and investment-grade. Performance was held back, however, by our concentration in intermediate-term securities, as short- and intermediate-term interest rates rose more than the rates on long-term bonds during the six months. Q: What is your investment outlook? A: We believe the June 30 announcement by the U.S. Federal Reserve that it was starting to raise short-term rates is the start of a long process of interest-rate hikes that is likely to continue at least through the end of 2005. We anticipate moving to a barbelled strategy over time with respect to maturity allocations, concentrating on both short-term securities and long-term bonds while de-emphasizing intermediate-term bonds that we think are most vulnerable in the present environment. We believe the equity market will continue to be choppy, with no major trends either up or down in stock price averages. The outlooks for gross domestic product (GDP) and for corporate earnings both are favorable, although the rate of corporate profit growth may slow somewhat. The big question hanging over investors' minds will be what happens to interest rates. In addition, uncertainty about geopolitical events and the outcome of the presidential election will influence investor psychology. We think the most likely scenario is that the major stock averages will show moderate growth over the next several months. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. D-20 PIONEER FUND Performance Update 6/30/04 Class A Shares Share Prices and Distributions
6/30/04 12/31/03 $38.64 $38.00 Distributions per Share Net Short-Term Long-Term (1/1/04 - 6/30/04) Investment Capital Gains Capital Gains Income $0.1300 $ $
Investment Returns The mountain chart on the right shows the change in value of a $10,000 investment made in Pioneer Fund at public offering price, compared to that of the Standard & Poor's (S&P) 500 Index. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT] Value of $10,000 Investment Pioneer S&P 500 Fund* Index 6/94 9425 10000 9618 10486 12180 14420 12/96 14580 17725 20189 23635 12/98 26044 30394 30112 36787 12/00 30147 33444 26793 29480 12/02 21364 22966 26615 29550 6/04 27155 30567 Average Annual Total Returns (As of June 30, 2004)
Period Net Asset Value Public Offering Price * --------------------------------------------------------- 10 Years 11.16% 10.51% 5 Years -1.14 -2.31 1 Year 18.13 1.34
* Reflects deduction of the maximum 5.75% sales charge at the beginning of the period and assumes reinvestment of distributions at net asset value. Performance data shown represents past performance. Past performance does not guarantee future results. Assumes reinvestment of all distributions at net asset value. Investment return and principal value fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance shown. For performance data that is current to the most recent month-end, please call 1-800-225-6292 or visit our web site www.pioneerfunds.com. The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The S&P 500 Index is an unmanaged measure of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and the over-the-counter market. Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any Index. D-21 Portfolio Manager's Discussion 6/30/04 In the following discussion, portfolio manager John Carey, reviews the investment environment and the performance of Pioneer Fund over the six months ended June 30, 2004. Q: How did the portfolio perform over the first six months of 2004? A: Pioneer Fund recorded a positive total return of 2.03% at net asset value on Class A shares in the six months ended June 30, 2004. Class B, C, R and Y shares returned 1.59%, 1.63%, 2.03% and 2.27% at net asset value. That exactly matched the return of the average fund in the Lipper Large-Cap Core group, which was also up 2.03%. Both Pioneer Fund and the Lipper average lagged the Standard & Poor's 500 Index, which showed a total return of 3.44% over the same period. While the mild returns might suggest a calm market, the reality was a market of sharp contrasts. With reference to performance of the respective sectors in the S&P 500, information technology, the darling of investors in 2003, barely moved, with a gain of 0.44% for the period, while energy, industrials and consumer staples advanced, respectively, 12.97%, 7.42%, and 6.12%. Investors appeared to be "rotating" out of more highly priced stocks and into shares more moderately priced, with dividends and steadier earnings outlooks. Q: Please discuss the Fund's performance versus the S&P 500 Index. A: Our underperformance versus the S&P 500 was attributable mainly to our stock holdings in four sectors: information technology, materials, industrials and telecommunications services. Our strongest positive contributors were our investments in consumer discretionary, consumer staples and health care. Taking first the negative contributors, our technology holdings showed an overall decline of 1.59% versus the S&P 500 sector gain of 0.44%. The main culprits were our positions in Texas Instruments, Novellus Systems, Synopsys and Nokia. After analyzing the different situations, we retained shares in Texas Instruments and Nokia, but liquidated our positions in Novellus and Synopsys. With regard to materials, where again we showed a negative return (3.80%) versus a slight positive return (0.71%) for the S&P 500 sector, the largest factor was our position in Rio Tinto. In the case of materials, we believe that the fundamentals are strong for the group looking out at least over the next couple of years and that it was mainly "profit taking" behind the weak share prices. Perhaps, too, there was some concern about a potential slow-down in the Chinese economy, which has been a prime user of many raw materials as that country rapidly industrializes. Following our evaluation of the pros and cons, we retained Rio Tinto, a prominent worldwide mining company, as well as our shares of other companies in the sector. Industrials presented a mixed picture, with our investments rising 5.13% versus an increase for the sector of 7.42%. We had very good performance from our railroad holding Norfolk Southern, but our capital-goods stocks were more sluggish. Finally, in telecommunication services, we did not own AT&T Wireless, which received a premium take-over bid, but instead owned BellSouth and SBC Communications, the companies in the joint venture Cingular, that made the bid. BellSouth and SBC both declined as investors worried that they "overpaid." On the bright side, we had some nice gains from stocks in consumer discretionary, consumer staples and health care. They were, respectively, John Wiley & Sons, publisher of scientific and technical books and journals and also owner of the "For Dummies" imprint; Colgate-Palmolive, major brand in toothpaste; and Becton Dickinson, provider of medical supplies including disposable syringes. Q: What changes have you made to the portfolio so far this year? A: We were fairly active during the six months, adding 18 positions and eliminating 18. The combined effect of securities transactions and market fluctuations produced overall increases for our weightings in the energy, consumer discretionary, consumer staples, health care and financials sectors; overall decreases for our weightings in industrials and information technology; and no meaningful change for our weightings in materials, telecommunications services and utilities. In energy, we initiated positions in Apache, British Petroleum, Pioneer Natural Resources and Occidental Petroleum and sold positions in Transocean, Royal Dutch Petroleum, and Shell Transport & Trading. We believed that Transocean was fairly valued, and in the cases of Royal Dutch and the allied Shell Transport we had developed reservations about management in the wake of significant downward revisions in oil and gas reserves estimates. On the other hand, we thought that prospects were positive for the companies we added and that the larger number of holdings would provide the portfolio with more diversification. In consumer discretionary we invested in three companies we thought were poised to do better with the stronger economy, Ford Motor, Liz Claiborne, and Walt Disney, and sold two stocks that had been longer-term disappointments, Dow Jones and Eastman Kodak. We also added Clorox, formulator of bleaches and other household cleansers, and Estee Lauder, cosmetics manufacturer, in consumer staples. Our health care additions were among our most significant and included equipment makers Guidant and St. Jude Medical, distributor Cardinal Health, and generic-drug companies Barr Pharmaceuticals and Mylan Laboratories. One of our purchases in financials proved to be particularly well timed, as South Trust, a regional bank headquartered in Birmingham, Alabama, received a generous acquisition offer from another bank, Wachovia, not long after we had bought it. Another entry we made to the portfolio was U.S. Bancorp, based in Minneapolis, Minnesota. In other sectors, we bought, in materials, Ecolab, supplier of industrial and institutional cleaning chemicals, and, in information technology, Apple Computer, survivor, against all odds, in the personal- D-22 computer business as well as innovative producer of the very hot iPod digital-music player. Along with the seven names already mentioned in energy and consumer discretionary and (above) in information technology, we deleted the following: Boeing, Lockheed Martin, Robert Half, Union Pacific, Medco Health Solutions, Bank of America, Electronics Data Systems, BMC Software, Cisco Systems, QUALCOMM and Altera. As always, we had a variety of reasons, in some instances recognizing difficulties for the companies that appeared beyond a reasonable time horizon in their resolution, in other instances seeing a fully valued stock relative to identifiable earnings power, and in still other cases just thinking we had more attractive alternatives. Q: What is your outlook on the stock market and economy for the remainder of 2004? A: At the midpoint of 2004, the market appears in disarray. Truth be told, interest rates have not really moved very much at all, but there appears great anxiety about greater moves to come. Inflation is not a current problem, yet the high oil and raw-materials prices, as well as the prospect of rising wages with growth in employment, provide the worriers a reason to focus on the risk of inflation. Corporate earnings are generally very strong and also strongly up from last year, but the expressed concern is with respect to slowing of the impressive comparisons. And so it is as well when it comes to discussion of international events and corporate-governance issues and much else: every glass on the counter seems to be half empty, none are thought to be half full, as the common expression goes. From our point of view, a half glass of water is just that, and the market to us remains attractive, even if more moderately attractive than it was in early 2003 then prices were much lower and the economy was still just poised for its rebound rather than underway with the rebound as it is currently. We see especially good values, however, among the good companies with good long-term records in which we like to invest on your behalf and which were relatively neglected by investors up until recently. Betting which way the market might go on a short-term basis has never seemed to us like a particularly fruitful endeavor. For one thing, what is to be gained from that activity unless one is just speculating, for example, in market-index futures, an activity we would not recommend to any but the real gamblers. For in the actual day-to-day world, one makes or loses money on individual stocks bought and sold, embraced or avoided. One never makes a dime guessing which way the market will go; it is the actual investments one does or does not make that determine your results. So our intention is, as always, to stay invested over the coming months, and years, and to stay invested in the solid kinds of companies we always aim to own in your portfolio. Thank you for your support. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. D-23 PIONEER INTERNATIONAL EQUITY FUND Performance Update 3/31/04 Class A Shares Share Prices and Distributions
3/31/04 3/31/03 $17.55 $11.64 Distributions per Share Net Short-Term Long-Term (4/1/03 - 3/31/04) Investment Capital Gains Capital Gains Income $ $ $
Investment Returns The mountain chart on the right shows the change in value of a $10,000 investment made in Pioneer International Equity Fund at public offering price, compared to that of the Morgan Stanley Capital International (MSCI) EAFE Index. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT] Value of $10,000 Investment Pioneer MSCI International EAFE Equity Fund Index 10/96 9425 10000 3/97 10488 10103 12728 11982 3/99 11797 12705 17542 15895 3/01 11410 11785 10841 10833 3/03 7917 8279 11936 13040 9/04 12413 13036 Average Annual Total Returns (As of March 31, 2004)
Period Net Asset Value Public Offering Price* -------------------------------------------------------------- Life-of-Class (10/31/96) 3.24% 2.41% 5 Years 0.22 -0.95 1 Year 50.77 42.11
* Reflects deduction of the maximum 5.75% sales charge at the beginning of the period and assumes reinvestment of distributions at net asset value. The Fund's investment advisor, Pioneer Investment Management, Inc., reduced its management fee and subsidized other Fund expenses; otherwise, returns would have been lower. The MSCI EAFE (Europe, Australasia, Far East) Index is an unmanaged, capitalization weighted measure of 21 international stock markets. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. Performance data shown represents past performance. Past performance does not guarantee future results. Assumes reinvestment of all distributions at net asset value. Investment return and principal value fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance shown. For performance data that is current to the most recent month-end, please call 1-800-225-6292 or visit our website www.pioneerfunds.com. The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. D-24 Portfolio Manager's Discussion 3/31/04 Investor optimism lifted international markets during the 12 months ended March 31, 2004. The upbeat mood was supported by a resurging Japanese economy and stronger-than-expected job growth in the United States, both of which are expected to be positive for the European economy. As Stefano Pregnolato, the Fund's lead portfolio manager, mentions in the following interview, the rally was broad based -- led by cyclical stocks and lesser quality companies that had underperformed in the multi-year correction in equity markets. Q: How did the Fund perform during the rally? A: The positive trends that we witnessed in the first half of Pioneer International Equity Fund's fiscal year continued into the second half. However, the momentum for global economic growth shifted to Asia in the first quarter of 2004. Investors are looking more favorably upon Japan and its economy, which is showing signs of resurgence. For the 12 months ended March 31, 2004, the Fund's Class A, B and C shares posted gains of 50.77%, 49.32% and 48.85% at net asset value, respectively. In comparison, the Morgan Stanley Capital International (MSCI) EAFE Index grew 57.54% for the same period. We believe the Fund's relative underperformance to this benchmark is the result of two factors. First, Japanese stocks appreciated strongly during the first quarter of 2004. The Fund's investments in Japanese stocks, although significant at 21.5% of total assets on March 31, remained below that of the benchmark throughout the fiscal year -- thereby limiting the degree of its relative performance. While we think the economic recovery in Japan is a welcome development, we believe it's too early to know if Japan has turned the corner. We may consider increasing the Fund's exposure there, once we're convinced that Japan is solidly on the road to recovery. Secondly, the rally in international markets has benefited cyclical stocks, that is, companies whose fate is closely linked with the strength of economic growth, as well as lower-quality investments. Your Fund has a considerable exposure to cyclical stocks, which was very beneficial during the fiscal year. However, we refuse to be tempted by short-term trends or invest in lower-quality companies just because they are selling at steep discounts today. Rather, we invest for the long term, selecting the highest-quality, financially sound companies that meet our strict investment criteria. Q: What is contributing to the rise of Japanese stocks? A: After a multi-year recession, the outlook for Japan is improving. Japanese consumers are increasing their spending, businesses are buying more equipment, and trade with other Asian countries experiencing good growth is strong. All these factors are attracting foreign investors and driving Japanese stock prices higher. Midway through the fiscal year, Japanese investments represented 9.4% of total assets. By the close of the fiscal year on March 31, Japanese holdings had climbed to 21.5% of assets through price appreciation and addition to existing holdings, while we trimmed the overall number of Japanese holdings in the portfolio. Q: Were you adding domestic or export-oriented stocks in Japan? A: We've been adding to positions in both domestic and export oriented stocks. Domestic-demand stocks are benefiting from increased consumer spending, which is partially supported by the secular trend of a declining savings rate. One of the Fund's best performing stocks, Fast Retailing, which sells high-end apparel and accessories, was a major contributor to performance for the second half of the fiscal year. The stock's dramatic price appreciation left the stock overvalued in our estimation, and we sold the entire position in January. Food retailer Ajinomoto is a high-quality consumer staple holding with defensive qualities that did well leading up to the recovery. It has also done well in the rally, but not nearly to the degree of Fast Retailing. Generally speaking, prices of consumer discretionary stocks, such as Fast Retailing, posted some of the greatest gains during the rally -- bolstered by rising consumer confidence and spending. Q: Are the Fund's Pacific Rim investments outside Japan also doing well? A: Yes. Strong fundamentals, robust intra-regional growth and exports combined with strong global demand for cyclical investments are supporting our decision to overweight investments in the Pacific Rim outside Japan. In many sectors, we believe stocks offer better value than in Europe -- including semiconductor manufacturer Samsung Electronics (South Korea) and telecommunications services provider SK Telecom (South Korea). Q: Europe still represents the majority of the Fund's holdings. How are these investments faring? A: All of the global markets rose sharply during the fiscal year, and European stocks -- including those held by your Fund -- were no exception. This performance is illustrated by the fact that the MSCI Europe Index, a commonly used benchmark for the region, rose 53.96% for the 12 months ended March 31, 2004. With nearly 70% of the Fund's assets invested in the developed markets of Europe, we are maintaining a slightly overweight position in European equities relative to the benchmark. We think stock price valuations are D-25 fair and are supported by strong dividend yields. Growth across Europe is more moderate than outside the region, and this fact is discounted in stock prices. The appreciation of the euro continues to be a risk for European exporters, and we will be closely following the monetary policy of the Bank of England and the European Central Bank (ECB) on that front. (Just following the close of the fiscal year, the ECB decided to leave rates unchanged.) Q: Could you name some of the companies that exemplify your strategy? A: Much like other world markets, European cyclical stocks posted some of the most dramatic gains, including those in the materials, industrial, automobile and consumer discretionary sectors. Porsche (Germany) exceeded our expectations, as did software producer Indira Systems (Spain). On the other hand, capital goods producer Sandvik (Sweden) performed well, but not as strongly as the sector in general. Pharmaceutical Schering is another stock that underperformed its sector for the year, when news of a product patent expiration last summer left the stock trailing many of its peers. Q: What is your outlook for the upcoming fiscal year? A: During fiscal 2004, we saw a change in market psychology, with investors demonstrating a greater appetite for risk. Not only did investors move assets from relatively more stable fixed-income investments into equities, but within the equity markets from higher-quality companies to more leveraged, lower-quality companies. Companies that were considered to be in severe financial distress were reclassified as recovery stocks. This paradigm shift benefited many stocks, particularly in the technology sector, but left other sectors, such as consumer staples and health care underperforming. As history has proven, this is to be expected in the early stages of a recovery, when economic fundamentals improve and the relatively low stock prices begin to look very attractive. Our outlook for 2004 is quite optimistic. The recovery appears to be well on its way, business confidence is high and the cash flow of companies has been substantially improved, thanks to successful restructuring and de-leveraging enacted over the last two years. We'll endeavor to position the Fund in response to this improving economic picture. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. D-26 PIONEER GROWTH SHARES Performance Update 6/30/04 Class A Shares Share Prices and Distributions
6/30/04 12/31/03 $11.27 $11.42 Distributions per Share Net Short-Term Long-Term (1/1/04 - 6/30/04) Investment Capital Gains Capital Gains Income $ $ $
Investment Returns The mountain chart on the right shows the change in value of a $10,000 investment made in Pioneer Growth Shares at public offering price, compared to that of the Russell 1000 Growth Index. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT] Value of $10,000 Investment Pioneer Russell Growth 1000 Growth Shares* Index 6/94 9425 10000 11247 10849 14600 14884 12/96 18536 18324 26651 23909 12/98 35591 33163 38225 44158 12/00 34569 34255 27920 27261 12/02 18178 19658 22939 25508 6/04 22637 26205 Average Annual Total Returns (As of June 30, 2004)
Period Net Asset Value Public Offering Price* -------------------------------------------------------- 10 Years 9.16% 8.51% 5 Years -10.46 -11.52 1 Year 9.31 3.02
* Reflects deduction of the maximum 5.75% sales charge at the beginning of the period and assumes reinvestment of distributions at net asset value. Performance data shown represents past performance. Past performance does not guarantee future results. Assumes reinvestment of all distributions at net asset value. Investment return and principal value fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance shown. For performance data that is current to the most recent month-end, please call 1-800-225-6292 or visit our web site www.pioneerfunds.com. The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The Fund adopted its current name and investment adviser (Pioneer Investment Management, Inc.) on December 1, 1993. Prior to that date, the Fund's name was Mutual of Omaha Growth Fund, Inc., and its investment adviser was Mutual of Omaha Fund Management Company. The Russell 1000 Growth Index contains those Russell 1000 securities with greater-than-average growth orientation. Companies in this index tend to exhibit higher price-to-book and price-to-earnings ratios, lower dividend yields and higher forecasted growth values than the value universe. Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. D-27 Portfolio Manager's Discussion 6/30/04 The economy continued to grow during the first half of 2004, but the general investment environment for equities began turning slightly negative as rising corporate profit trends began to weaken, consumer spending was not as strong as expected, and markets started anticipating a tighter monetary policy from the Federal Reserve. In the following interview, Christopher Galizio discusses the factors that affected the performance of Pioneer Growth Shares during the six month period ended June 30, 2004. Mr. Galizio is a member of the Fund's management team. Q: How did the Fund perform during the first half of 2004? A: For the six-month period ended June 30, 2004, the Fund's Class A shares returned -1.31%, while Class B and Class C shares had returns of -1.80% and -1.78%, respectively, all at net asset value. For the same period, the Russell 1000 Growth Index returned 2.74%, while the average return was 2.35% for the 639 funds in the Large-Cap Growth Funds category tracked by Lipper Inc. (Lipper is an independent firm that measures mutual fund performance.) The Fund lagged the benchmark Russell 1000 Growth Index as well as the Lipper peer group, principally because of the comparatively larger position in technology, especially semiconductor companies, early in the six-month period. Q: What was the general investment environment like during the period? A: The overall market sentiment appeared to be turning negative late in the six-month period. The stock market surge that had begun in March 2003 appeared to lose some energy. Several major corporations, including ones in the retail and semiconductor industries, began to report earnings disappointments, and we saw some weakening in profit trends, notably in the consumer and technology sectors. Consumer spending trends, in particular, appeared weak as over-extended consumers finally began to retrench from their high-spending patterns. As stock market investors anticipated the June 30 announcement by the Federal Reserve Board that it would begin to tighten monetary policy by raising short-term interest rates, the share prices of some consumer-oriented financial institutions began to fade. Industrial stocks, however, tended to outperform the overall market. Q: What were your principal strategies during the period? A: We restructured the portfolio during the period, focusing on large cap companies that we believed offered long-term value, above average revenue growth, strong returns on capital and reasonable valuations in relation to their earnings potential. This strategy led to a reduced emphasis on the semiconductor industry and increased weightings in the software, consumer discretionary and financial services areas. We reduced our semi-conductor holdings, eliminating positions in Applied Materials, Cypress Semiconductor, Texas Instruments and Maxim Technology. We did add Taiwan Semiconductor, a major manufacturer with an attractive stock valuation. Overall, however, semiconductor stocks went from an overweight to an underweight position, relative to the benchmark S&P 500. The reduced weightings in technology tended to support performance. Conversely, we increased the portfolio's emphasis on software companies, adding companies such as Macrovision, which has developed a technology to protect DVDs, CDs and other disc based products from piracy, as well as Take-Two Interactive, the developer of video games, including Grand Theft Auto -- the most successful game in history, with a new version soon to be introduced. We also added Fair Isaac, which has developed software to help credit card companies analyze the credit-worthiness of applicants. Fair Isaac tended to detract from performance late in the six-month period as it reported disappointing earnings, but we continued to hold it because of its attractive valuation. We moved from an underweight to an overweight in the consumer discretionary sector, taking advantage of attractive valuations of Disney, whose media and theme park properties have improved earnings outlooks, and Viacom, the owner of the CBS and MTV television networks among other properties. Among retailers, we sold our Wal-Mart position before the stock fell hard, investing in Target, Kohl's and Ross Stores. In addition, we increased the emphasis on financial services stocks, focusing on insurance companies with excellent valuations that were not as vulnerable to interest-rate increases as banks and other lenders. We continued to de-emphasize consumer staples, although we added Altria (the former Philip Morris), which offered a high dividend yield and an attractive stock price that we believed was the result of overly pessimistic market evaluations of the company's tobacco liability. In addition, we invested in First Data, the leader in processing of credit card transactions and owner of the Western Union system, and Accenture, an information-technology services consulting firm. Q: What were some of the investments that influenced performance? A: Among newer holdings, Macrovision rose significantly during the period as its revenue grew faster than had been expected. Sepracor, a pharmaceutical company and a new holding, also advanced on positive news of a drug under development. Zimmer Holdings, a world leader in orthopedic products, including hip and knee replacements, was another health-care position that did very well. The timely sale of Wal-Mart Stores also supported performance. The overweight position in the semiconductor industry early in the six-month D-28 period held back performance, as valuations in that group fell hard. Corinthian Colleges, operator of adult vocational educational colleges and programs, was another detractor, as the SEC began an investigation of its financial records. However, we took advantage of the price decline to add to the position in Corinthian because of its good long-term fundamentals. Lexar and Sandisk, two manufacturers of flash memories for cameras and cell phones, also fell on disappointing sales. Freeport-McMoRan, a leader in the copper mining industry and a strong support for performance in 2003, also declined both because of problems at one of its mines and because of fears of an economic slowdown in China, an important importer of copper. We increased our investment in the company because of its attractive price. We also believed it experienced some short-term production problems that would be resolved. Q: What is your investment outlook? A: We are cautious about the near-term opportunities in the domestic stock market, as stock valuations appear relatively expensive and the Federal Reserve Board has moved to a less accommodating monetary policy. The home refinancing boom of the past two years may hurt the future earnings of banks, while the technology industry faces a number of challenges, from pricing pressure on its products to calls to change the way many companies have treated stock options in their accounting. Health care stocks, however, appear to be more reasonably valued. Given this outlook, we are paying very strict attention to our analysis and selection of individual companies. We also have somewhat reduced our exposure to the domestic stock market with investments in Europe and the emerging markets. We have, for example, increased our position in Vodafone, the world's largest wireless communications service company, and we have added small holdings from Korea, Taiwan and Israel. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. D-29 PIONEER VALUE FUND Performance Update 3/31/04 Class A Shares Share Prices and Distributions
3/31/04 9/30/03 $18.72 $16.25 Distributions per Share Net Short-Term Long-Term (10/1/03 - 3/31/04) Investment Capital Gains Capital Gains Income $0.0783 $ - $0.0404
Investment Returns The mountain chart on the right shows the change in value of a $10,000 investment made in Pioneer Value Fund at public offering price, compared to that of the Russell 1000 Value Index. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT] Value of $10,000 Investment Pioneer Russell Value 1000 Value Fund* Index 3/94 9425 10000 9/94 10095 10321 12105 13181 9/96 13580 15546 19820 22124 9/98 15069 22921 16857 27213 9/00 19604 29369 17864 26998 9/02 14867 22422 18277 27884 3/04 21198 32805 Average Annual Total Returns (As of March 31, 2004)
Period Net Asset Value Public Offering Price* -------------------------------------------------------- 10 Years 8.44% 7.80% 5 Years 4.80 3.56 1 Year 37.69 29.75
All returns reflect investment of distributions at net asset value. * Reflects deduction of the maximum 5.75% sales charge at the beginning of the period. The Russell 1000 Value Index is a measure of the performance of the value-oriented stocks in the Russell 1000 Index. Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in any index. Data shown represents past performance. Past performance does not guarantee future results. Assumes reinvestment of all distributions at net asset value. Investment return and principal value fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance shown. For performance data that is current to the most recent month-end, please call 1-800-225-6292 or visit our web site www.pioneerfunds.com. D-30 Portfolio Management's Discussion 3/31/04 The stock market continued to rise through the final quarter of 2003 and into this year, then took a modest breather late in this year's first quarter. The period favored the Fund's value discipline, as value stocks in general outperformed their growth counterparts. In the following discussion, portfolio manager Rod Wright describes those events and the decisions that affected Pioneer Value Fund's performance over the last six months. Q: Please describe the investment background over the last six months. A: As the economic recovery gathered strength, investors were encouraged by the increase being reported in corporate profits. Fueling the recovery in large measure were the lowest short-term interest rates in over 40 years and broad federal income tax cuts that put added cash into the hands of individuals and businesses. However, the markets stalled in March, as unemployment remained stubbornly high despite the continued economic expansion. Renewed geopolitical concerns and a dip in consumer confidence added to market uncertainty. Consumers account for more than half of US economic activity, and any pullback in their spending is taken as a negative sign. Q: How did Pioneer Value Fund perform against that background? A: For the six months ended March 31, 2004, Pioneer Value Fund's Class A, B, C and R shares had total returns at net asset value of 15.98%, 15.30%, 15.27% and 15.82%, respectively. In comparison, the Russell 1000 Value Index, the Fund's benchmark, returned 17.65% for the same period. The Fund's Lipper Large-Cap Value peers returned 15.94% for the six months ended March 31, 2004. Q: Which of your decisions or strategies had the most impact on performance? A: Stock selection was generally favorable over this period, but sector emphasis hurt results, accounting for the Fund's relative underperformance versus the benchmark. In particular, we were underweight compared to our benchmark in financial stocks, a decision based on our expectation that interest rates would begin to rise and put pressure on the earnings of financial companies. But rates stayed low, and financials were one of the market's better-performing sectors over this period. A number of mergers within the industry also pushed up prices. In addition, the stronger economy had a positive impact on credit quality, favoring lending institutions. Countrywide Financial, a mortgage lender, was the Fund's biggest gainer among financial issues. Countrywide rose on news of surprisingly strong earnings as mortgage rates remained low and home refinancings continued. Citigroup, the Fund's largest holding, also rose during the period. Q: What other decisions or strategies had an impact on performance? A: Our overweight commitment to energy stocks aided results, as rising oil prices boosted their profit outlook. Successful stock selection added to the Fund's strong performance in this sector. Suncor Energy, which extracts oil from oil-bearing sands by means of a costly process, benefited when oil prices reached levels that allowed for profitable operations. Transocean Inc., a leading offshore drilling company, also saw increased activity as oil prices moved higher. Utilities companies generally added to Fund results, but Dominion Resources underperformed. Results benefited from good stock selection in the telecommunications sector, an area in which we maintained a neutral weighting compared to the benchmark. AT&T Wireless was a standout performer, rising sharply when news broke of its pending acquisition by Cingular. In technology, Motorola rose when operating results improved for the first time in three years. Strategic steps by Motorola's new management, including sale of the company's semiconductor unit, also benefited results. Tyco International, a diversified industrial company, rose as disciplined new management distanced the company from earlier problems, eliminated some non-essential business units and strengthened the firm's balance sheet by cutting outstanding debt. Another industrial company, Waste Management, rose on the basis of a successful turnaround. Management cut costs and upgraded systems while successfully integrating a number of acquisitions. The growing economy also boosted results, as waste volumes are tied to the level of business activity. In healthcare, Wellpoint Health Networks, a leading managed-care company, rose on the basis of earnings increases, increased market share and the imposition of higher premiums. Wellpoint has also agreed to merge with Anthem, another major health benefits company. In a related area, our overweight position in Merck hurt results; large pharmaceutical companies were laggards over the period. Q: Which of the Fund's other holdings held back results? A: Shares of Freddie Mac (The Federal Home Loan Mortgage Corporation), an issuer of mortgage-backed securities, declined. Shares weakened when questions arose about its method of calculating earnings, raising the possibility of more stringent regulation and greater government involvement with its operations. Among industrial issues, the rising price of oil pulled down the Fund's transportation stocks. D-31 In addition, Southwest Airlines was hurt by an unresolved contract dispute with flight attendants. Donaldson Co., which manufactures filtration systems, declined following a disappointing earnings report. Q: What is your outlook for the economy and for value stocks? A: We believe the economy will continue expanding in the months ahead. However, some of the good economic news we anticipate may already be reflected in stock prices. In addition, if the expansion begins to generate inflationary forces in the economy, the Federal Reserve Board is likely to raise interest rates, a move that would dampen investor enthusiasm. Nevertheless, we are still finding good values, and with corporate fundamentals strong and improving, we expect good returns on equities for the balance of this year. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. D-32 PIONEER MID CAP VALUE FUND Performance Update 4/30/04 Class A Shares Share Prices and Distributions
4/30/04 10/31/03 $23.77 $22.25 Distributions per Share Net Short-Term Long-Term (11/1/03 - 4/30/04) Investment Capital Gains Capital Gains Income $0.0306 $0.1778 $0.3145
Investment Returns The mountain chart on the right shows the change in value of a $10,000 investment made in Pioneer Mid Cap Value Fund at public offering price, compared to that of the Russell Midcap Value Index. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT] Value of $10,000 Investment Pioneer Russell Mid Cap Midcap Value Value Fund* Index 4/94 9425 10000 10544 10260 10/95 12581 12563 14231 15222 10/97 17457 20163 15932 21323 10/99 17529 22538 21036 25211 10/01 21425 24866 20141 24126 26470 32199 4/04 28950 34870 Average Annual Total Returns (As of April 30, 2004)
Period Net Asset Value Public Offering Price* -------------------------------------------------------- 10 Years 11.87% 11.22% 5 Years 9.65 8.37 1 Year 36.78 28.89
All returns reflect reinvestment of distributions at net asset value. * Reflects deduction of the maximum 5.75% sales charge at the beginning of the period. Data shown represents past performance. Past performance does not guarantee future results. Assumes reinvestment of all distributions at net asset value. Investment return and principal value fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance shown. For performance data that is current to the most recent month-end, please call 1-800-225-6292 or visit our web site www.pioneerfunds.com. The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The Russell Midcap Value Index measures the performance of those Russell Midcap companies with lower price-to-book and lower forecasted growth values. Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees, expenses or sales charges. You cannot invest directly in the Index. D-33 Portfolio Management Discussion 4/30/04 Stock prices continued to climb during the six months ended April 30, 2004, although new worries about the direction of interest rate moves, and concerns about instability in Iraq, added to the volatility of the market. In the following discussion, Rod Wright, leader of the team that manages Pioneer Mid Cap Value Fund, provides an update on the Fund, its investment strategies and the economic environment during the six-month period. Q: How did the Fund perform? A: The Fund did very well during a period of changing sentiment in the market. The Fund's Class A shares had a total return of 9.37% for the six months ended April 30, 2004, while Class B and Class C shares returned 8.89% and 8.85%, respectively, all at net asset value. During the same period, the Standard & Poor's 500 Index, a benchmark for large-cap stocks, rose by 6.27%, while the Russell Midcap Value Index gained 8.30%. Q: How would you characterize the market during the six months? A: It was a period of volatility and shifting trends. During the first two months of the period -- the final two months of 2003 -- we saw a continuation of the pattern that had characterized much of the year. As optimism grew that the economy was finally emerging from its slump and that corporate profits would continue to increase, stock prices rose, led by lower quality companies with weaker balance sheets. Technology stocks typically were among the performance leaders. That pattern began to change and the market became more volatile in the early weeks of 2004, amid worries that interest rates were beginning to rise and that the situation in Iraq was more troublesome than earlier believed. Interest rates did rise substantially from the middle of March through the end of April, which undermined the valuations of many technology companies, as well as the stocks in sectors particularly sensitive to changes in interest rates, such as financial services and utilities. Fortunately, the Fund was well positioned for this change in the direction of interest rates. Our underweight positions among financial and utility companies helped performance, as did our de-emphasis of technology companies. Q: What types of investments tended to help performance? A: Our strategy emphasizes fundamental analysis of companies and individual stock-picking, rather than major sector decisions based on macroeconomic trends. We seek good companies at attractive valuations, irrespective of their industry. The biggest single contributor to performance was sports retailer Foot Locker, a major holding, which posted strong earnings gains during the period. But we also enjoyed excellent results from our selections in the healthcare and energy sectors. In the health-care sector, top performers included medical-supply company Becton, Dickinson, and dental-supply company Apogent Technologies, which received a takeover offer during the period. Our investment in Wellpoint Health Networks, an HMO, also appreciated sharply as it merged with Anthem. In the energy sector, top performers included Transocean, a deepwater drilling company, and Occidental Petroleum, a fully integrated energy corporation. While the stock prices of many technology companies discouraged us from investing, we did have some excellent results in the sector, including NCR, a hardware and systems company, and Autodesk, a software firm. We also enjoyed excellent results from ConAgra, an agricultural products and food-processing firm, and Republic Services, a waste-disposal corporation. Q: What types of investments were disappointing during the period? A: Basic materials companies, which had supported the Fund's performance during 2003, tended to detract from results as interest rates began to rise. A good example was mining company Freeport-McMoRan, which we have eliminated from the portfolio. Securities transaction processor Investment Technology Group declined when its trading volumes declined, while toy maker Mattel fell when analysts began doubting the continued strength of the Barbie line. Q: What is your investment outlook? A: We continue to be encouraged by the strong economy and the inexpensive dollar, which helps domestic companies compete globally. While interest rates have started to increase and the Federal Reserve is expected to raise short-term rates this year, rates are likely to remain relatively low when compared to historical standards. However, the stock market has enjoyed an extraordinary rally since March 2003, and many companies already are selling at high valuations based on anticipations of strong future earnings growth. As a result, while we are optimistic about the economy, we are more guarded about opportunities in the overall market, and we will continue to emphasize strong companies with attractive stock valuations. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. D-34 PIONEER SMALL CAP VALUE FUND Performance Update 5/31/04 Class A Shares Share Prices and Distributions
5/31/04 11/30/03 $29.70 $27.10 Distributions per Share Net Short-Term Long-Term (12/1/03 - 5/31/04) Investment Capital Gains Capital Gains Income $ - $ - $ -
Investment Returns The mountain chart on the right shows the change in value of a $10,000 investment in Pioneer Small Cap Value Fund, at public offering price, compared to that of the Russell 2000 Value Index. [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT] Value of $10,000 Investment Russell Pioneer 2000 Small Cap Value Value Index Fund* 2/97 10000 9425 12436 11206 11/98 11665 9282 11499 11661 11/00 13142 13674 15637 15851 11/02 15355 15192 20714 19227 5/04 22024 21071 Average Annual Total Returns (As of May 31, 2004)
Period Net Asset Value Public Offering Price* -------------------------------------------------------------- Life-of-Class (2/28/97) 11.72% 10.81% 5 Years 14.37 13.02 1 Year 29.55 22.08
All returns reflect reinvestment of distributions at net asset value. * Reflects the deduction of the maximum 5.75% sales charge at the beginning of the period. Performance data shown represents past performance. Past performance does not guarantee future results. Assumes reinvestment of all distributions at net asset value. Investment return and principal value fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance shown. For performance data that is current to the most recent month-end, please call 1-800-225-6292 or visit our web site www.pioneerfunds.com. The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The Russell 2000 Value Index is a measure of the performance of the value-oriented stocks in the Russell 2000 Index. You cannot invest directly in any index. Small-cap stocks may be subject to greater short-term price fluctuations than securities of larger companies. D-35 Portfolio Management's Discussion 5/31/04 A shift by investors away from speculative issues into higher quality, small-capitalization stocks helped Pioneer Small Cap Value Fund outperform its benchmark index over the past six months. In the following discussion, portfolio manager David Adams and assistant portfolio manager Jack McPherson review their investment strategies and the factors that led to these favorable results. Q: What were market conditions like over this period and how did you respond? A. Strong growth in the last quarter of 2003 extended into this year as a broad-based economic recovery continued to take shape. At the same time, increased global demand pushed up prices for most commodities, triggering inflation concerns and increasing the possibility that the Federal Reserve Board will raise interest rates over the summer. We were rewarded over this period for staying with our long established investment discipline. Late in 2003, the Fund's results, although positive, nevertheless lagged the benchmark because we do not invest in the kinds of high-risk issues that were market leaders at the time. More recently, better quality issues that fit our criteria for valuation, financial strength and earnings potential have attracted the market's attention. By the end of the period, Fund performance had swung from trailing the benchmark because of stocks we did not own, to outperforming our benchmark thanks to successful stock selection. Q: Given that background, how did the Fund perform? A. For the six-month period ended May 31, 2004, Pioneer Small Cap Value Fund's Class A, B, C and R shares returned 9.59%, 9.13% 9.09% and 9.59% respectively, all at net asset value. These results outdistanced the 6.32% return of the Russell 2000 Value Index, the Fund's benchmark, for the same period. Q: Which of your decisions aided Fund performance? A. In our bottom-up process, our stock choices produce the portfolio's sector weightings. A shortage of attractive values and the possibility of higher interest rates left the portfolio underweighted in financial services companies compared to the benchmark. That stance helped performance, as many financial issues were poor performers. Also beneficial was our decision to downplay companies that are most vulnerable to higher rates -- thrifts that rely heavily on mortgage financing, and real estate investment trusts. Instead, we emphasized commercial banks that can gain earning power as economic activity pushes rates higher just when businesses are increasing their borrowing. We took profits in Irwin Financial, which has a large mortgage lending subsidiary. Texas Capital Bancshares and Virginia-based Cardinal Financial both are expected to benefit from the fallout of the merger activity taking place among the larger national banking companies, as well as the improving business environment for their small- and mid-size business customers. Overweighting and successful selection of energy stocks aided results as investors took notice of attractive valuations. Coal producer Massey Energy was the Fund's most successful holding over this period. Global energy demand drove up the price of Appalachian coal. In addition, as the US dollar weakened, the price of US coal fell in terms of foreign currencies, making the price of our coal competitive in world markets for the first time in years. Southwestern Energy, Penn Virginia and Swift Energy also moved higher. Q: What other sectors or stocks had an impact, for better or worse? A. Our slightly overweight position in transportation stocks led to positive results that ran contrary to the industrials sector's trend. Stelmar Shipping, based in Greece, continues to benefit as available tanker capacity lags behind the demands of a growing world economy and not enough new ships are being built. In addition, a high percentage of Stelmar's fleet already meets the mandate for double-hulled ships, allowing it to charge premium rates. Genesee & Wyoming, which acquires and operates short line railroads in North America and Australia, saw a pickup in demand for hauling iron ore and coal as well as large harvests of grain in Australia. Genesee also has lower labor costs than some large railroads. We bought Wabtec, which makes components parts for railcars, at a low point in its business cycle. Shares moved higher when industrial growth began to absorb the oversupply of railcars and orders for new cars came in. Pediatrix Medical Group, which runs specialized neonatology practices in hospitals, continued to deliver good results, as did Pacificare Health Systems, a leading Medicare HMO. Chattem, marketer of Gold Bond, Icy Hot and other consumer healthcare brands, rebounded sharply after resolving pending litigation. In commercial services, our patience with Central Parking was rewarded as the better economic environment and the return of the company founder in the role of CEO has begun to have a positive impact on their business. But PRG Schultz, which provides specialized auditing services, continued to wrestle with merger related problems. Technology, where our relatively small exposure hurt results, was also a disappointment. Remec, a maker of microwave and other wireless transmission equipment, ran afoul of internal problems and is undergoing a management shakeup. We believe Remec's core business is solid and that a new management team enhances its outlook. Shares of software maker SPSS fell back, while Borland Software continued to D-36 tread water. Insight Enterprises, a distributor of computers and peripherals to mid-sized businesses, slipped back slightly following a very strong run late last year and into the beginning of this year. We think Insight remains an attractive way to capitalize on possible increases in corporate technology spending. Insituform's sewer maintenance business continued to feel the constraints of tight municipal budgets. Our performance among insurance stocks trailed the benchmark. Q: What is your outlook for the next several months? A. The economic recovery has by now benefited most sectors of the market. But it is not yet clear whether the expansion is merely satisfying pent-up demand or we are at the beginning of a sustained period of growth. High prices for industrial and other commodities give pause, as inflation remains a threat to the recovery. The upcoming presidential election and geopolitical tensions may also have unforeseeable market impacts. Nevertheless, we continue to find good companies that seem mispriced in the marketplace, given their potential for earnings expansion over the next two or three years. Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund's historical or future performance are statements of the opinion of Fund management as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that market forecasts discussed will be realized. D-37 PIONEER FUND STATEMENT OF ADDITIONAL INFORMATION October 25, 2004 This Statement of Additional Information is not a Prospectus. It should be read in conjunction with the related combined Proxy Statement and Prospectus (also dated October 25, 2004) which covers Investor Class shares of Pioneer Fund to be issued in exchange for shares of Safeco Core Equity Fund, a series of Safeco Common Stock Trust. Please retain this Statement of Additional Information for further reference. The Prospectus is available to you free of charge (please call 1-800-407-7298).
INTRODUCTION...................................................................2 EXHIBITS.......................................................................2 ADDITIONAL INFORMATION ABOUT PIONEER FUND......................................2 FUND HISTORY..........................................................2 DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS......................2 MANAGEMENT OF THE FUND................................................3 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...................3 INVESTMENT ADVISORY AND OTHER SERVICES................................3 BROKERAGE ALLOCATION AND OTHER PRACTICES..............................3 CAPITAL STOCK AND OTHER SECURITIES....................................3 PURCHASE, REDEMPTION AND PRICING OF SHARES............................3 TAXATION OF THE FUND..................................................3 UNDERWRITERS..........................................................3 CALCULATION OF PERFORMANCE DATA.......................................3 FINANCIAL STATEMENTS..................................................3
INTRODUCTION This Statement of Additional Information is intended to supplement the information provided in a combined Proxy Statement and Prospectus dated October 25, 2004 (the "Proxy Statement and Prospectus") relating to the proposed reorganization of Safeco Core Equity Fund, a series of Safeco Common Stock Trust, into Pioneer Fund and in connection with the solicitation by the management of Safeco Common Stock Trust of proxies to be voted at the Meeting of Shareholders of Safeco Core Equity Fund to be held on December 8, 2004. EXHIBITS AND DOCUMENTS INCORPORATED BY REFERENCE The following documents are incorporated herein by reference, unless otherwise indicated. Shareholders will receive a copy of each document that is incorporated by reference upon any request to receive a copy of this Statement of Additional Information. 1. Pioneer Fund's statement of additional information for Class A, B, C, Y and R shares, dated April 30, 2004 (the "SAI") (File No. 2-25980), as filed with the Securities and Exchange Commission on May 3, 2004 (Accession No. 0001016964-04-000134) and on April 8, 2004 (Post-effective amendment no. 75) (Accession No. 0001016964-04-000094) are incorporated herein by reference. 2. Pioneer Fund's Annual Report for the fiscal year ended December 31, 2003 (File No. 811-01466), as filed with the Securities and Exchange Commission on March 5, 2004 (Accession No. 0000812195-04-000012) is incorporated herein by reference. 3. Pioneer Fund's Semi-Annual Report for the period ended June 30, 2004 (File No. 811-01466), as filed with the Securities and Exchange Commission on August 31, 2004 (Accession No. 0001143607-04-000005) is incorporated by reference. 4. Safeco Common Stock Trust's statement of additional information, dated April 30, 2004 (File No. 33-36700), as filed with the Securities and Exchange Commission on April 29, 2004 (Accession No. 0001193125-04-072454) is incorporated herein by reference. 5. Safeco Core Equity Fund's Annual Report for the fiscal year ended December 31, 2003 (File No. 811-06167), as filed with the Securities and Exchange Commission on February 26, 2004 (Accession No. 0001193125-04-030270) is incorporated herein by reference. 6. Safeco Core Equity Fund's Semi-Annual Report for the period ended June 30, 2004] (File No. 811-06167), as filed with the Securities and Exchange Commission on August 26, 2004 (Accession No. 0001193125-04-147286) is incorporated by reference. ADDITIONAL INFORMATION ABOUT PIONEER FUND FUND HISTORY For additional information about Pioneer Fund generally and its history, see "Fund History" in the SAI. DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS For additional information about Pioneer Fund's investment objective, policies, risks and restrictions, see "Investment Policies, Risks and Restrictions" in the SAI. -2- MANAGEMENT OF THE FUND For additional information about Pioneer Fund's Board of Trustees and officers, see "Trustees and Officers" in the SAI. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES For additional information, see "Annual Fee, Expense and Other Information - Share ownership." INVESTMENT ADVISORY AND OTHER SERVICES For additional information, see "Investment Adviser," "Shareholder Servicing/Transfer Agent," "Custodian" and "Independent Auditors" in Pioneer Fund's SAI. BROKERAGE ALLOCATION AND OTHER PRACTICES For additional information about the Pioneer Fund's brokerage allocation practices, see "Portfolio Transactions" in the SAI. CAPITAL STOCK AND OTHER SECURITIES For additional information about the voting rights and other characteristics of shares of beneficial interest of Pioneer Fund, see "Description of Shares" in the SAI. PURCHASE, REDEMPTION AND PRICING OF SHARES For additional information about purchase, redemption and pricing of shares of Pioneer Fund, see "Sales Charges," "Redeeming Shares," "Telephone and Online Transactions" and "Pricing of Shares" in the SAI. TAXATION OF THE FUND For additional information about tax matters related to an investment in Pioneer Fund, see "Tax Status" in the SAI. UNDERWRITERS For additional information about the Pioneer Fund's principal underwriter and distribution plans, see "Principal Underwriter and Distribution Plans" and "Sales Charges" in the SAI. CALCULATION OF PERFORMANCE DATA For additional information about the investment performance of Pioneer Fund, see "Investment Results" in the SAI. FINANCIAL STATEMENTS For additional information, see "Financial Statements" in Pioneer Fund's SAI. -3- PIONEER FUND PRO FORMA Schedule of Investments (a) December 31, 2003 (Unaudited)
Pro Forma Safeco Pioneer Safeco Combined Pioneer Core-Equity Pro Forma % of Fund Core-Equity Market Fund Fund Combined Net Market Market Value Shares Shares Shares Assets Value (000's) Value (000's) (000's) ------ ------ ------ ------ ------------- ------------- ------- Common Stocks 99.3% Energy 7.6% Integrated Oil & Gas 6.7% 660,044 660,044 ConocoPhillips $ 43,279 $ $ 43,279 2,270,500 165,000 2,435,500 ChevronTexaco Corp. 196,148 14,254 210,402 900,000 900,000 Royal Dutch Petroleum Co. 47,151 47,151 700,000 700,000 Shell Transport & Trading Co. (A.D.R.) 31,521 31,521 3,006,986 500,000 3,506,986 Exxon Mobil Corp. 123,286 20,500 143,786 ---------------------------------------- $ 441,386 $ 34,754 $ 476,140 ---------------------------------------- Oil & Gas Drilling 0.8% 451,252 451,252 Transocean Offshore Inc. * $ 10,835 $ $ 10,835 1,140,200 1,140,200 Smith International, Inc. * 47,341 47,341 ---------------------------------------- $ 58,176 $ $ 58,176 ---------------------------------------- Oil & Gas Equipment & Services 0.1% 175,000 175,000 Schlumberger, Ltd. $ $ 9,576 $ 9,576 ---------------------------------------- Total Energy $ 499,562 $ 44,330 $ 543,892 ---------------------------------------- Materials 5.3% Aluminum 0.9% 1,626,000 1,626,000 Alcoa, Inc. $ 61,788 $ $ 61,788 ---------------------------------------- Commodity Chemicals 1.0% 500,000 500,000 Air Products & Chemicals, Inc. $ 26,415 $ $ 26,415 916,896 916,896 E.I. du Pont de Nemours and Co. 42,076 42,076 ---------------------------------------- $ 68,491 $ $ 68,491 ---------------------------------------- Diversified Chemicals 0.4%
-4- PIONEER FUND PRO FORMA Schedule of Investments (a) December 31, 2003 (Unaudited)
Pro Forma Safeco Pioneer Safeco Combined Pioneer Core-Equity Pro Forma % of Fund Core-Equity Market Fund Fund Combined Net Market Market Value Shares Shares Shares Assets Value (000's) Value (000's) (000's) ------ ------ ------ ------ ------------- ------------- ------- 400,000 400,000 PPG Industries, Inc. $ 25,608 $ $ 25,608 ---------------------------------------- Diversified Metals & Mining 2.4% 797,900 797,900 Phelps Dodge Corp. * $ 60,712 $ $ 60,712 4,000,000 4,000,000 Rio Tinto Plc 109,878 109,878 ---------------------------------------- $ 170,590 $ $ 170,590 ---------------------------------------- Industrial Gases 0.1% 200,000 200,000 Praxair, Inc. $ $ 7,640 $ 7,640 ---------------------------------------- Paper Products 0.5% 1,080,000 1,080,000 Meadwestvaco Corp. $ 32,130 $ $ 32,130 ---------------------------------------- Total Materials $ 358,607 $ 7,640 $ 366,248 ---------------------------------------- Capital Goods 8.6% Aerospace & Defense 2.3% 600,000 600,000 Boeing Co. $ 25,284 $ $ 25,284 1,012,300 1,012,300 General Dynamics Corp. 91,502 91,502 800,000 800,000 Lockheed Martin Corp. 41,120 41,120 75,000 75,000 Northrop Grumman Corp. 7,170 7,170 ---------------------------------------- $ 157,906 $ 7,170 $ 165,076 ---------------------------------------- Electrical Component & Equipment 0.9% 445,800 105,000 550,800 Emerson Electric Co. $ 28,866 $ 6,799 $ 35,665 315,500 650,000 965,500 General Electric Co. 9,774 20,137 29,911 ---------------------------------------- $ 38,640 $ 26,936 $ 65,576 ---------------------------------------- Industrial Conglomerates 2.8%
-5- PIONEER FUND PRO FORMA Schedule of Investments (a) December 31, 2003 (Unaudited)
Pro Forma Safeco Pioneer Safeco Combined Pioneer Core-Equity Pro Forma % of Fund Core-Equity Market Fund Fund Combined Net Market Market Value Shares Shares Shares Assets Value (000's) Value (000's) (000's) ------ ------ ------ ------ ------------- ------------- ------- 480,800 480,800 Illinois Tool Works, Inc. $ 40,344 $ $ 40,344 563,300 563,300 Johnson Controls Inc. 65,410 65,410 750,000 200,000 950,000 United Technologies Corp. 71,078 18,954 90,032 ----------------------------------------- $ 176,832 $ 18,954 $ 195,786 ----------------------------------------- Industrial Machinery 2.6% 900,000 900,000 Caterpillar, Inc. $ 74,718 $ $ 74,718 100,000 100,000 Danaher Corp. 9,175 9,175 1,300,000 1,300,000 Deere & Co. 84,565 84,565 110,000 110,000 Illinois Tool Works, Inc. 9,230 9,230 90,000 90,000 Ingersoll-Rand Co. (Class A) 6,109 6,109 ----------------------------------------- $ 159,283 $ 24,514 $ 183,797 ----------------------------------------- Total Capital Goods $ 532,660 $ 77,574 $ 610,234 ----------------------------------------- Commercial Services & Supplies 1.5% Employment Services 0.7% 2,133,800 2,133,800 Robert Half International, Inc. * $ 49,803 $ $ 49,803 ----------------------------------------- Office Services & Supplies 0.8% 1,243,900 1,243,900 Canon, Inc. (A.D.R.) $ 59,259 $ $ 59,259 ----------------------------------------- Total Commercial Services & Supplies $ 109,062 $ $ 109,062 ----------------------------------------- Transportation 3.4% Airlines 0.8% 3,538,600 3,538,600 Southwest Airlines Co. $ 57,113 $ $ 57,113 -----------------------------------------
-6- PIONEER FUND PRO FORMA Schedule of Investments (a) December 31, 2003 (Unaudited)
Pro Forma Safeco Pioneer Safeco Combined Pioneer Core-Equity Pro Forma % of Fund Core-Equity Market Fund Fund Combined Net Market Market Value Shares Shares Shares Assets Value (000's) Value (000's) (000's) ------ ------ ------ ------ ------------- ------------- ------- Railroads 2.1% 1,054,200 1,054,200 Burlington Northern, Inc. $ 34,103 $ $ 34,103 3,730,100 3,730,100 Norfolk Southern Corp. 88,217 88,217 375,000 375,000 Philadelphia Suburban Corp. 8,288 8,288 320,800 320,800 Union Pacific Corp. 22,289 22,289 ----------------------------------------- $ 152,897 $ $ 152,897 ----------------------------------------- Trucking 0.5% 450,000 450,000 United Parcel Service $ 33,548 $ $ 33,548 ----------------------------------------- Total Transportation $ 243,557 $ $ 243,557 ----------------------------------------- Automobiles & Components 1.3% Automobile Manufacturers 1.1% 825,000 85,000 910,000 Paccar, Inc. $ 70,224 $ 7,235 $ 77,459 ----------------------------------------- Auto Parts & Equipment 0.1% 90,000 90,000 Johnson Controls, Inc. $ $ 10,451 $ 10,451 ----------------------------------------- Motorcycle Manufacturers 0.1% 170,000 170,000 Harley-Davidson, Inc. $ $ 8,080 $ 8,080 ----------------------------------------- Total Automobiles & Components $ 70,224 $ 25,766 $ 95,990 ----------------------------------------- Consumer Durables & Apparel 0.3% Housewares & Specialties 0.2% 160,000 160,000 Fortune Brands, Inc. $ $ 11,438 $ 11,438 -----------------------------------------
-7- PIONEER FUND PRO FORMA Schedule of Investments (a) December 31, 2003 (Unaudited)
Pro Forma Safeco Pioneer Safeco Combined Pioneer Core-Equity Pro Forma % of Fund Core-Equity Market Fund Fund Combined Net Market Market Value Shares Shares Shares Assets Value (000's) Value (000's) (000's) ------ ------ ------ ------ ------------- ------------- ------- Home Furnishings 0.0% 215,000 215,000 Leggett & Platt, Inc. $ $ 4,651 $ 4,651 ----------------------------------------- Photographic Products 0.1% 250,100 250,100 Eastman Kodak Co. $ 6,420 $ $ 6,420 ----------------------------------------- Total Consumer Durables & Apparel $ 6,420 $ 16,089 $ 22,509 ----------------------------------------- Media 5.9% Advertising 1.1% 890,200 890,200 Omnicom Group $ 77,741 $ $ 77,741 ----------------------------------------- Publishing 4.6% 443,000 443,000 Dow Jones & Company, Inc. $ 22,084 $ $ 22,084 1,000,000 160,000 1,160,000 Gannett Co. 89,160 14,266 103,426 3,494,400 3,494,400 John Wiley & Sons, Inc. + 90,959 90,959 1,606,000 1,606,000 McGraw-Hill Co., Inc. 112,292 112,292 ----------------------------------------- $ 314,494 $ 14,266 $ 328,761 ----------------------------------------- Movies & Entertainment 0.2% 475,000 475,000 Time Warner, Inc. * $ $ 8,545 $ 8,545 165,000 165,000 Walt Disney Co. 3,849 3,849 ----------------------------------------- $ $ 12,394 $ 12,394 ----------------------------------------- Total Media $ 392,235 $ 26,660 $ 418,896 ----------------------------------------- Retailing 3.7% Department Stores 0.6%
-8- PIONEER FUND PRO FORMA Schedule of Investments (a) December 31, 2003 (Unaudited)
Pro Forma Safeco Pioneer Safeco Combined Pioneer Core-Equity Pro Forma % of Fund Core-Equity Market Fund Fund Combined Net Market Market Value Shares Shares Shares Assets Value (000's) Value (000's) (000's) ------ ------ ------ ------ ------------- ------------- ------- 1,234,800 1,234,800 May Department Stores Co. $ 35,896 $ $ 35,896 154,000 154,000 Kohl's Corp. * 6,921 6,921 ----------------------------------------- $ 35,896 $ 6,921 $ 42,817 ----------------------------------------- General Merchandise Stores 2.0% 700,000 700,000 Family Dollar Stores, Inc. $ 25,116 $ $ 25,116 2,760,000 300,000 3,060,000 Target Corp. 105,984 11,520 117,504 ----------------------------------------- $ 131,100 $ 11,520 $ 142,620 ----------------------------------------- Home Improvement Retail 1.0% 400,000 400,000 Home Depot, Inc. 14,196 14,196 1,000,000 1,000,000 Lowe's Companies, Inc. $ 55,390 $ $ 55,390 ----------------------------------------- $ 55,390 $ 14,196 $ 69,586 ----------------------------------------- Specialty Stores 0.1% 305,700 305,700 Barnes & Noble, Inc. * $ 10,042 $ $ 10,042 ----------------------------------------- Total Retailing $ 232,428 $ 32,637 $ 265,065 ----------------------------------------- Food & Drug Retailing 3.4% Drug Retail 1.5% 2,851,200 2,851,200 Walgreen Co. $ 103,727 $ $ 103,727 ----------------------------------------- Food Distributors 0.9% 1,732,400 1,732,400 Sysco Corp. $ 64,497 $ $ 64,497 ----------------------------------------- Food Retail 0.1% 400,000 400,000 Kroger Co. * $ $ 7,404 $ 7,404 -----------------------------------------
-9- PIONEER FUND PRO FORMA Schedule of Investments (a) December 31, 2003 (Unaudited)
Pro Forma Safeco Pioneer Safeco Combined Pioneer Core-Equity Pro Forma % of Fund Core-Equity Market Fund Fund Combined Net Market Market Value Shares Shares Shares Assets Value (000's) Value (000's) (000's) ------ ------ ------ ------ ------------- ------------- ------- Hypermarkets & Supercenters 0.9% 1,052,000 218,000 1,270,000 Wal-Mart Stores, Inc. $ 55,809 $ 11,565 $ 67,374 ----------------------------------------- Total Food & Drug Retailing $ 224,033 $ 18,969 $ 243,002 ----------------------------------------- Food, Beverage & Tobacco 4.8% Brewers 0.1% 200,000 200,000 Anheuser-Busch Companies, Inc. $ $ 10,536 $ 10,536 ----------------------------------------- Tobacco 0.1% 110,000 110,000 Altria Group, Inc. $ $ 5,986 $ 5,986 ----------------------------------------- Packaged Foods & Meats 3.4% 1,766,000 1,766,000 Campbell Soup Co. $ 47,329 $ $ 47,329 960,600 960,600 General Mills, Inc. 43,515 43,515 1,496,150 1,496,150 H.J. Heinz Co., Inc. 54,505 54,505 550,000 550,000 Hershey Foods Corp. 42,344 42,344 2,558,900 2,558,900 Sara Lee Corp. 55,554 55,554 ----------------------------------------- $ 243,247 $ $ 243,246 ----------------------------------------- Soft Drinks 1.2% 1,357,900 400,000 1,757,900 PepsiCo, Inc. $ 63,305 $ 18,648 $ 81,953 ----------------------------------------- Total Food, Beverage & Tobacco $ 306,552 $ 35,170 $ 341,722 ----------------------------------------- Household & Personal Products 2.6% Household Products 2.5% 1,358,600 1,358,600 Colgate-Palmolive Co. $ 67,998 $ $ 67,998
-10- PIONEER FUND PRO FORMA Schedule of Investments (a) December 31, 2003 (Unaudited)
Pro Forma Safeco Pioneer Safeco Combined Pioneer Core-Equity Pro Forma % of Fund Core-Equity Market Fund Fund Combined Net Market Market Value Shares Shares Shares Assets Value (000's) Value (000's) (000's) ------ ------ ------ ------ ------------- ------------- ------- 125,000 125,000 Kimberly-Clark Corp. 7,386 7,386 900,000 160,000 1,060,000 Procter & Gamble Co. 89,892 15,981 105,873 ----------------------------------------- $ 157,890 $ 23,367 $ 181,257 ----------------------------------------- Personal Products 0.1% 125,000 125,000 Estee Lauder Cos., Inc. (Class A) $ $ 4,908 $ 4,908 ----------------------------------------- Total Household & Personal Products $ 157,890 $ 28,275 $ 186,165 ----------------------------------------- Health Care Equipment & Services 4.5% Health Care Distributors 2.4% 1,233,300 1,233,300 Abbott Laboratories $ 57,472 $ $ 57,472 120,000 120,000 Cardinal Health, Inc. 7,339 7,339 1,900,000 1,900,000 Johnson & Johnson Co. 98,154 98,154 240,000 240,000 McKesson Corp. 7,718 7,718 ----------------------------------------- $ 155,626 $ 15,057 $ 170,683 ----------------------------------------- Health Care Equipment 1.5% 1,532,800 1,532,800 Becton, Dickinson & Co. $ 63,059 $ $ 63,059 900,000 900,000 Biomet, Inc. 32,769 32,769 200,000 200,000 Medtronic, Inc. 9,722 9,722 ----------------------------------------- $ 95,828 $ 9,722 $ 105,550 ----------------------------------------- Health Care Services 0.1% 168,912 168,912 Medco Health Solutions, Inc. * $ 5,741 $ $ 5,741 ----------------------------------------- Managed Health Care 0.5% 320,000 320,000 United Healthcare Group, Inc. $ 18,618 $ $ 18,618 170,000 170,000 Wellpoint Health Networks Inc. * 16,488 16,488 -----------------------------------------
-11- PIONEER FUND PRO FORMA Schedule of Investments (a) December 31, 2003 (Unaudited)
Pro Forma Safeco Pioneer Safeco Combined Pioneer Core-Equity Pro Forma % of Fund Core-Equity Market Fund Fund Combined Net Market Market Value Shares Shares Shares Assets Value (000's) Value (000's) (000's) ------ ------ ------ ------ ------------- ------------- ------- $ 35,106 $ $ 35,106 ----------------------------------------- Total Health Care Equipment & Services $ 292,301 $ 24,779 $ 317,080 ----------------------------------------- Pharmaceuticals & Biotechnology 6.3% Biotechnology 0.1% 150,000 150,000 Amgen, Inc. * $ $ 9,270 $ 9,270 ----------------------------------------- Pharmaceuticals 6.2% 375,000 375,000 Abbott Laboratories $ $ 17,475 $ 17,475 949,000 100,000 1,049,000 Eli Lilly & Co. 66,743 7,033 73,776 225,000 225,000 Johnson & Johnson 11,624 11,624 1,400,600 1,400,600 Merck & Co., Inc. 64,708 64,708 1,200,000 1,200,000 Novartis AG (A.D.R.) 55,068 55,068 1,600,000 725,000 2,325,000 Pfizer, Inc. 56,528 25,614 82,142 389,800 389,800 Roche Holdings AG 39,257 39,257 4,792,800 4,792,800 Schering-Plough Corp. 83,347 83,347 300,000 300,000 Wyeth 12,735 12,735 ----------------------------------------- $ 365,651 $ 74,481 $ 440,132 ----------------------------------------- Total Pharmaceuticals & Biotechnology $ 365,651 $ 83,751 $ 449,402 ----------------------------------------- Banks 6.8% Diversified Banks 2.1% 550,000 550,000 Bank of America Corp. $ 44,237 $ $ 44,237 225,000 225,000 Hibernia Corp. (Class A) 5,290 5,290 272,700 272,700 Charter One Financial, Inc. 9,422 9,422
-12- PIONEER FUND PRO FORMA Schedule of Investments (a) December 31, 2003 (Unaudited)
Pro Forma Safeco Pioneer Safeco Combined Pioneer Core-Equity Pro Forma % of Fund Core-Equity Market Fund Fund Combined Net Market Market Value Shares Shares Shares Assets Value (000's) Value (000's) (000's) ------ ------ ------ ------ ------------- ------------- ------- 500,000 500,000 U.S. Bancorp 14,890 14,890 900,000 330,000 1,230,000 Wells Fargo & Co. 53,001 19,434 72,435 ----------------------------------------- $ 106,659 $ 39,614 $ 146,273 ----------------------------------------- Regional Banks 3.6% 140,000 140,000 Fifth Third Bancorp $ $ 8,274 $ 8,274 755,700 160,000 915,700 First Tennessee National Corp. 33,326 7,056 40,382 2,864,648 2,864,648 National City Corp. 97,226 97,226 1,150,000 1,150,000 SunTrust Banks, Inc. 82,225 82,225 439,200 439,200 Zions Bancorporation 26,936 26,936 ----------------------------------------- $ 239,714 $ 15,330 $ 255,044 ----------------------------------------- Thrifts & Mortgage Finance 1.1% 150,000 150,000 Federal National Mortgage Association $ $ 11,259 $ 11,259 1,340,760 325,000 1,665,760 Washington Mutual, Inc. 53,791 13,039 66,830 ----------------------------------------- 53,791$ 24,298 $ 78,089 ----------------------------------------- Total Banks $ 400,164 $ 79,242 $ 479,406 ----------------------------------------- Diversified Financials 6.3% Asset Management & Custody Banks 4.1% 2,246,800 2,246,800 The Bank of New York Co., Inc. $ 74,414 $ $ 74,414 1,015,500 1,015,500 Federated Investors Inc. 29,815 29,815 1,613,600 1,613,600 State Street Corp. 84,036 84,036 2,100,000 2,100,000 T. Rowe Price Associates, Inc. 99,561 99,561 ----------------------------------------- $ 287,826 $ $ 287,826 ----------------------------------------- Consumer Finance 0.9% 900,000 250,000 1,150,000 American Express Co. $ 43,407 $ 12,058 $ 55,465
-13- PIONEER FUND PRO FORMA Schedule of Investments (a) December 31, 2003 (Unaudited)
Pro Forma Safeco Pioneer Safeco Combined Pioneer Core-Equity Pro Forma % of Fund Core-Equity Market Fund Fund Combined Net Market Market Value Shares Shares Shares Assets Value (000's) Value (000's) (000's) ------ ------ ------ ------ ------------- ------------- ------- 360,000 360,000 MBNA Corp. 8,946 8,946 ----------------------------------------- $ 43,407 $ 21,004 $ 64,411 ----------------------------------------- Diversified Financial Services 0.3% 510,000 510,000 Citigroup, Inc. $ $ 24,755 $ 24,755 ----------------------------------------- Investment Banking & Brokerage 1.0% 1,242,000 1,242,000 Merrill Lynch & Co., Inc. $ 72,843 $ $ 72,843 ----------------------------------------- Total Diversified Financials $ 404,077 $ 45,759 $ 449,836 ----------------------------------------- Insurance 3.7% Multi-Line Insurance 1.3% 962,218 330,000 1,292,218 American International Group, Inc. $ 63,776 $ 21,872 $ 85,648 100,000 100,000 Hartford Financial Services Group, Inc. 5,903 5,903 ----------------------------------------- $ 63,776 $ 27,775 $ 91,551 ----------------------------------------- Property & Casualty Insurance 2.4% 1,174,200 1,174,200 Chubb Corp. $ 79,963 $ $ 79,963 760,400 760,400 Safeco Corp. 29,602 29,602 1,366,300 1,366,300 St. Paul Companies, Inc. 54,174 54,174 575,000 575,000 Travelers Property Casualty Corp. * (Class A) 9,649 9,649 ----------------------------------------- $ 163,739 $ 9,649 $ 173,388 ----------------------------------------- Total Insurance $ 227,515 $ 37,424 $ 264,939 ----------------------------------------- Software & Services 6.2% Application Software 3.6% 916,000 916,000 Adobe Systems, Inc. $ 35,999 $ $ 35,999
-14- PIONEER FUND PRO FORMA Schedule of Investments (a) December 31, 2003 (Unaudited)
Pro Forma Safeco Pioneer Safeco Combined Pioneer Core-Equity Pro Forma % of Fund Core-Equity Market Fund Fund Combined Net Market Market Value Shares Shares Shares Assets Value (000's) Value (000's) (000's) ------ ------ ------ ------ ------------- ------------- ------- 909,600 909,600 BMC Software, Inc. * 16,964 16,964 80,000 80,000 Intuit, Inc. * 4,233 4,233 3,080,000 800,000 3,880,000 Microsoft Corp. 84,823 22,032 106,855 481,000 481,000 Oracle Corp. * 6,349 6,349 2,000,000 2,000,000 Synopsys, Inc. * 67,520 67,520 600,000 600,000 Symantec Corp. * 20,790 20,790 ----------------------------------------- $ 226,096 $ 32,614 $ 258,710 ----------------------------------------- Data Processing & Outsourced Services 2.6% 1,014,200 175,000 1,189,200 Automatic Data Processing, Inc. $ 40,172 $ 6,932 $ 47,104 1,183,100 1,183,100 Computer Sciences Corp. * 52,329 52,329 552,800 552,800 DST Systems, Inc. * 23,085 23,085 1,000,000 1,000,000 Electronic Data Systems Corp. 24,540 24,540 551,250 551,250 Fiserv, Inc. * 21,780 21,780 140,000 140,000 First Data Corp. 5,753 5,753 400,000 400,000 SunGard Data Systems, Inc. * 11,084 11,084 ----------------------------------------- $ 172,990 $ 12,685 $ 185,675 ----------------------------------------- Total Software & Services $ 399,086 $ 45,299 $ 444,385 ----------------------------------------- Technology Hardware & Equipment 7.0% Communications Equipment 2.6% 1,000,000 650,000 1,650,000 Cisco Systems, Inc. * $ 24,290 $ 15,789 $ 40,079 4,408,261 4,408,261 Motorola, Inc. 62,024 62,024 3,100,000 200,000 3,300,000 Nokia Corp (A.D.R.) 52,700 3,400 56,100 500,000 500,000 Qualcomm, Inc. 26,965 26,965 ----------------------------------------- $ 165,979 $ 19,189 $ 185,168 ----------------------------------------- Computer Hardware 4.3%
-15- PIONEER FUND PRO FORMA Schedule of Investments (a) December 31, 2003 (Unaudited)
Pro Forma Safeco Pioneer Safeco Combined Pioneer Core-Equity Pro Forma % of Fund Core-Equity Market Fund Fund Combined Net Market Market Value Shares Shares Shares Assets Value (000's) Value (000's) (000's) ------ ------ ------ ------ ------------- ------------- ------- 541,100 541,100 Diebold, Inc. $ 29,149 $ $ 29,149 1,625,000 300,000 1,925,000 Dell, Inc. * 55,185 10,188 65,373 500,000 500,000 Hewlett-Packard Co. 11,485 11,485 1,624,000 149,000 1,773,000 IBM Corp. 150,512 13,809 164,321 8,300,000 8,300,000 Sun Microsystems, Inc. * 37,267 37,267 ----------------------------------------- $ 283,598 $ 23,997 $ 307,595 ----------------------------------------- Computer Storage & Peripherals 0.1% 490,000 490,000 EMC Corp. * $ $ 6,331 $ 6,331 ----------------------------------------- Total Technology Hardware & Equipment $ 449,578 $ 49,517 $ 499,095 ----------------------------------------- Semiconductors 4.9% Semiconductor Equipment 1.7% 3,074,000 325,000 3,399,000 Applied Materials, Inc. * $ 69,011 $ 7,296 $ 76,307 977,000 977,000 Novellus Systems, Inc. * 41,083 41,083 ----------------------------------------- $ 110,094 $ 7,296 $ 117,390 ----------------------------------------- Semiconductors 3.2% 458,300 458,300 Altera Corp. * $ 10,403 $ $ 10,403 3,240,000 540,000 3,780,000 Intel Corp. 104,328 17,388 121,716 2,868,000 330,000 3,198,000 Texas Instruments, Inc. 84,262 9,695 93,957 ----------------------------------------- $ 198,993 $ 27,083 $ 226,076 ----------------------------------------- Total Semiconductors $ 309,087 $ 34,379 $ 343,466 ----------------------------------------- Telecommunication Services 3.5% Integrated Telecommunication Services 3.5% 505,448 505,448 Alltel Corp. $ 23,544 $ $ 23,544
-16- PIONEER FUND PRO FORMA Schedule of Investments (a) December 31, 2003 (Unaudited)
Pro Forma Safeco Pioneer Safeco Combined Pioneer Core-Equity Pro Forma % of Fund Core-Equity Market Fund Fund Combined Net Market Market Value Shares Shares Shares Assets Value (000's) Value (000's) (000's) ------ ------ ------ ------ ------------- ------------- ------- 3,059,600 3,059,600 BellSouth Corp. 86,587 86,587 200,000 200,000 CenturyTel, Inc. 6,524 6,524 4,495,637 4,495,637 SBC Communications, Inc. 117,201 117,201 340,000 340,000 Verizon Communications 11,927 11,927 ------------------------------------------ Total Telecommunication Services $ 227,332 $ 18,451 $ 245,782 ------------------------------------------ Utilities 1.7% Electric Utilities 1.1% 710,000 710,000 American Electric Power Co., Inc. $ 21,662 $ $ 21,662 750,000 750,000 Consolidated Edison, Inc. 32,258 32,258 700,000 700,000 Southern Co. 21,175 21,175 ------------------------------------------ $ 75,095 $ $ 75,095 ------------------------------------------ Gas Utilities 0.6% 558,600 558,600 KeySpan Energy Corp. $ 20,556 $ $ 20,556 767,533 767,533 Vectren Corp. 18,920 18,920 ------------------------------------------ $ 39,476 $ $ 39,476 ------------------------------------------ Total Utilities $ 114,571 $ $ 114,571 ------------------------------------------ TOTAL COMMON STOCKS $ 6,322,592 $ 731,711 $7,054,304 ------------------------------------------ COMMON STOCKS (AT COST) $ 4,062,490 $ 508,841 $4,571,331 ------------------------------------------ Principal Principal Principal Amount Amount Amount Temporary Cash Investments 2.5% Repurchase Agreement 0.7% $50,300,000 $50,300,000 UBS Warburg, Inc., 0.73%, Dated 12/31/03,
-17- PIONEER FUND PRO FORMA Schedule of Investments (a) December 31, 2003 (Unaudited)
Pro Forma Safeco Pioneer Safeco Combined Pioneer Core-Equity Pro Forma % of Fund Core-Equity Market Fund Fund Combined Net Market Market Value Shares Shares Shares Assets Value (000's) Value (000's) (000's) ------ ------ ------ ------ ------------- ------------- ------- repurchase price of $50,300.00 plus accrued interest on 1/2/04 collateralized by $39,5219,000 U.S. Treasury Bill, 6.75%, 6/30/04 and $11,093,000 U.S. Treasury Bill, 7.25%, 5/15/04 $ 50,300 $ $ 50,300 ---------------------------------------- Shares Shares Shares Investment Companies 0.3% 11,557,253 11,557,253 AIM Short-Term Investments Co. Liquid Assets Money Market Portfolio (Institutional Shares) $ $ 11,557 $ 11,557 10,572,910 10,572,910 State Street Navigator Securities Lending Prime Portfolio $ $ 10,573 $ 10,573 ------------------------------------------ $ $ 22,130 $ 22,130 ------------------------------------------ Security Lending Collateral 1.5% ------------------------------------------ 103,833,758 103,833,758 Securities Lending Investment Fund, 1.02 $ 103,834 $ $ 103,834 ------------------------------------------ TOTAL TEMPORARY CASH INVESTMENTS $ 154,134 $ 22,130 $ 176,264 ------------------------------------------ TEMPORARY CASH INVESTMENTS (AT COST) $ 154,134 $ 22,130 $ 176,264 ------------------------------------------ TOTAL INVESTMENT IN SECURITIES 101.8% $ 6,476,726 $ 753,841 $7,230,567 ------------------------------------------ OTHER ASSETS AND LIABILITIES (1.8)% $ (115,377) $ (10,740) $(126,117) ------------------------------------------
-18- PIONEER FUND PRO FORMA Schedule of Investments (a) December 31, 2003 (Unaudited)
Pro Forma Safeco Pioneer Safeco Combined Pioneer Core-Equity Pro Forma % of Fund Core-Equity Market Fund Fund Combined Net Market Market Value Shares Shares Shares Assets Value (000's) Value (000's) (000's) ------ ------ ------ ------ ------------- ------------- ------- TOTAL NET ASSETS 100.0% $ 6,361,349 $ 743,101 $7,104,450 ========================================== Total Investments at Cost $ 4,216,624 $ 530,971 $4,747,595 ========================================== Securities out on loan, at Market Value $ 100,954 $ 10,368 $ 111,322 ==========================================
(A.D.R.) American Depositary Receipt * Non-income producing security. (a) No adjustments are shown to the unaudited pro forma combined schedule of investments due to the fact that upon consummation of the merger, no securities would need to be sold in order for Pioneer Fund to comply with its prospectus restrictions. The foregoing sentence shall not restrict in any way the ability + Investment held by the Pioneer Fund representing 5% or more of the outstanding voting stock of such company. The accompanying notes are an integral part of these pro forma financial statements. -19- Pioneer Fund Pro Forma Statement of Assets and Liabilities December 31, 2003 (Unaudited) (Amounts in Thousands, except for per share data)
Safeco Core Pro Forma Pro Forma Pioneer Fund Equity Fund Adjustments Combined ------------ ----------- ----------- ------------ ASSETS: Investment in securities of unaffiliated issuers, at value (cost $4,208,876 and $530,971, respectively) $ 6,385,767 $ 753,841 $ 7,139,608 Investment in securities of affiliated issuers, at value (cost $7,748 and $0, respectively) 90,959 - 90,959 ------------ ----------- ------------ Total Investments in Securities at value $ 6,476,726 $ 753,841 $ 7,230,567 ------------ ----------- ------------ Cash 58 - 58 Receivables - Investment securities sold - - - Fund shares sold 4,533 305 4,838 Forward foreign currency settlement hedge contracts - net - - - Dividends, interest and foreign taxes withheld 8,173 1,077 9,250 Receivable from Advisor - 32 32 Other 47 41 88 ------------ ----------- ------------ Total assets $ 6,489,537 $ 755,296 $ 7,244,833 ------------ ----------- ------------ LIABILITIES: Payables - Investment securities purchased $ 12,299 $ - $ 12,299 Fund shares repurchased 4,939 851 5,790 Upon return of securities loaned 103,834 10,573 114,407 Dividends - 79 79 Due to affiliates 6,644 415 7,059 Accrued expenses 472 277 749 ------------ ----------- ------------ Total liabilities $ 128,188 $ 12,195 $ 140,383 ------------ ----------- ------------ NET ASSETS: Paid-in capital $ 4,569,595 $ 585,805 $ 5,155,400 Accumulated undistributed net investment income 619 - 619
-20- Pioneer Fund Pro Forma Statement of Assets and Liabilities December 31, 2003 (Unaudited) (Amounts in Thousands, except for per share data)
Safeco Core Pro Forma Pro Forma Pioneer Fund Equity Fund Adjustments Combined ------------ ----------- ----------- ------------ Accumulated net realized loss on investments and - foreign currency transactions (468,988) (65,574) (534,562) Net unrealized gain on investments and foreign - currencies transactions 2,260,102 222,870 2,482,972 Net unrealized gain on assets and liabilities denominated in - foreign currencies 21 - 21 ------------ ----------- ------------ Total net assets $ 6,361,349 $ 743,101 $ 7,104,450 ------------ ----------- ------------ OUTSTANDING SHARES: No par value, (Unlimited number of shares authorized) Class A 141,350 960 (960)(a) 141,350 ============ =========== ============ Class B 14,945 653 (653)(a) 14,945 ============ =========== ============ Class C 7,941 11 (11)(a) 7,941 ============ =========== ============ Class R 80 - - 80 ============ =========== ============ Class Y 3,655 - - 3,655 ============ =========== ============ Investor Class - 42,735 (23,180)(a) 19,555 ============ =========== ============ NET ASSET VALUE PER SHARE: Class A $ 38.00 $ 16.78 $ 38.00 ============ =========== ============ Class B $ 37.18 $ 16.38 $ 37.18 ============ =========== ============ Class C $ 36.84 $ 16.39 $ 36.84 ============ =========== ============ Class R $ 38.06 $ - $ 38.06 ============ =========== ============ Class Y $ 38.09 $ - $ 38.09 ============ =========== ============ Investor Class $ - $ 16.76 $ 38.00 ============ =========== ============
-21- Pioneer Fund Pro Forma Statement of Assets and Liabilities December 31, 2003 (Unaudited) (Amounts in Thousands, except for per share data)
Safeco Core Pro Forma Pro Forma Pioneer Fund Equity Fund Adjustments Combined ------------ ----------- ----------- ------------ MAXIMUM OFFERING PRICE: Class A $ 40.32 $ 17.80 $ 40.32 ============ =========== ============ Class C $ 37.21 $ - $ 37.21 ============ =========== ============
(a) Class A, Class B, Class C, and Investor Class shares of Safeco Core Equity Fund are exchanged for new Investor Class shares of Pioneer Fund, to be established upon consummation of the merger. Initial per share values of Investor Class shares are presumed to equal that of Class A shares. The accompanying notes are an integral part of these financial statements -22- Pioneer Fund Pro Forma Statement of Operations For the Year Ended December 31, 2003 (Unaudited)
Safeco Pro Forma Pioneer Core Equity Adjustments Pro Forma Fund (000's) Fund (000's) (000's) Combined (000's) ------------ ------------ ----------- ---------------- INVESTMENT INCOME: Dividends from unaffiliated issuers $ 107,852 $ 12,152 $ 120,004 Dividends from affiliated issuers 856 - 856 Interest 267 201 468 Income from securities loaned, net 171 62 233 ------------ ------------ ---------------- Total investment income $ 109,146 $ 12,415 $ 121,561 EXPENSES: Management fees Basic Fee $ 33,625 $ 4,663 $ (462)(b) $ 37,826 Performance Adjustment (5,349) - (700)(b) (6,049) Transfer agent fees Investor Class - 1,872 298(c) 2,170 Class A 15,184 317 (317)(c) 15,184 Class B 2,253 57 (57)(c) 2,253 Class C 859 1 (1)(c) 859 Class Y 65 - - 65 Shareholder Servicing Class A - 38 (38)(d) - Class B - 26 (26)(d) - Distribution fees Class A 10,962 - 10,962 Class B 4,913 80 (80)(e) 4,913
-23- Pioneer Fund Pro Forma Statement of Operations For the Year Ended December 31, 2003 (Unaudited)
Safeco Pro Forma Pioneer Core Equity Adjustments Pro Forma Fund (000's) Fund (000's) (000's) Combined (000's) ------------ ------------ ----------- ---------------- Class C 2,434 1 (1)(e) 2,434 Class R 1 - 1 Administrative fees 848 279 (83)(f) 1,044 Custodian fees 322 48 370 Registration fees 164 48 212 Professional fees 183 65 (65)(a) 183 Printing 239 289 528 Fees and expenses of nonaffiliated trustees 192 15 (15)(a) 192 Miscellaneous 138 51 189 ------------ ------------ ----------- ---------------- Total expenses $ 67,033 $ 7,850 $(1,547) $ 73,336 Less management fees waived and/or expenses reimbursed by adviser - (353) 353(b) - Less fees paid indirectly (171) - (171) ------------ ------------ ----------- ---------------- Net expenses $ 66,862 $ 7,497 $ (1,194) $ 73,165 ------------ ------------ ----------- ---------------- Net investment income $ 42,284 $ 4,918 $ 1,194 $ 48,396 ------------ ------------ ----------- ---------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss on: Investments $ (53,265) $ (17,919) $ (71,184) Other assets and liabilities denominated in - foreign currencies (26) - (26) - Change in net unrealized gain (loss) on: - Investments 1,269,899 167,641 1,437,540
-24- Pioneer Fund Pro Forma Statement of Operations For the Year Ended December 31, 2003 (Unaudited)
Safeco Pro Forma Pioneer Core Equity Adjustments Pro Forma Fund (000's) Fund (000's) (000's) Combined (000's) ------------ ------------ ----------- ---------------- Other assets and liabilities denominated in - - foreign currencies (19) - (19) ------------ ------------ ---------------- Net gain on investments and foreign currency transactions $ 1,216,589 $ 149,722 $ 1,366,311 ------------ ------------ ---------------- Net increase in net assets resulting from operations $ 1,258,873 $ 154,640 $ 1,414,707 ============ ============ ================
(a) Reflects reduction in expenses due to elimination of duplicate services. (b) Management fees conformed to Pioneer Fund's management contract. (c) Reclass Transfer Agent Expenses to Investor class and change in fee structure. (d) Eliminate Shareholder Servicing Expense. (e) Eliminate Distribution Expense of Safeco Core Equity Fund. (f) Reflects decrease due to a change in fee rates. The accompanying notes are an integral part of these financial statements. -25- Pioneer Fund NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS 12/31/03 (Unaudited) 1. General The accompanying pro forma combined financial statements are presented to show the effect of the proposed acquisition (the "acquisition") of Safeco Core Equity Fund by Pioneer Fund. Under the terms of an Agreement and Plan of Reorganization between the Funds, the combination of Pioneer Fund and Safeco Core Equity Fund will be treated as a tax-free business combination and accordingly will be accounted for by a method of accounting for tax-free mergers of investment companies. The acquisition will be accomplished by an acquisition of the net assets of Safeco Core Equity Fund in exchange for a new "Investor Class" of shares of Pioneer Fund at net asset value, which will be established upon consummation of the merger. The accompanying schedules of investments, statements of assets and liabilities and the related statements of operations of Pioneer Fund and Safeco Core Equity Fund have been combined as of and for their most recent fiscal year ended December 31, 2003. Adjustments have been made to expenses for duplicate services that would not have been incurred if the merger took place on January 1, 2003. Following the acquisition, the Pioneer Fund will be the accounting survivor. All related acquisition costs will be borne by the Advisors. These pro forma financial statements and related notes should be read in conjunction with the financial statements of Pioneer Fund and Safeco Core Equity Fund included in their respective annual reports to shareowners dated December 31, 2003. 2. Organization and Significant Accounting Policies Pioneer Fund (the Fund) is a Delaware statutory trust registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The investment objectives of the Fund are reasonable income and growth of capital. After the merger, the Fund will consist of six classes of shares - Class A, Class B, Class C, Class R, Class Y, and Investor Class shares. Class R shares were first publicly offered on April 1, 2003. Investor Class shares are being offered as part of the acquisition. Each class of shares represents an interest in the same portfolio of investments of the Fund and has equal rights to voting, redemptions, dividends and liquidation, except that each class of shares can bear different transfer agent and distribution fees and have exclusive voting rights with respect to the distribution plans that have been adopted by Class A, Class B, Class C and Class R share-owners, respectively. There is no distribution plan for Class Y or Investor Class shares. Each Fund's management has prepared their respective financial information using estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the pro forma financial statements, and the reported amounts of income, expenses and gains and losses on investments during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund, which are in conformity with those generally accepted in the investment company industry: -26- A. Security Valuation Security transactions are recorded as of trade date. The net asset value is computed once daily, on each day the New York Stock Exchange is open, as of the close of regular trading on the Exchange. In computing the net asset value, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Fund's Board of Trustees. At December 31, 2003, there were no securities fair valued. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Fund becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income is recorded on the accrual basis. Dividend and interest income are reported net of unrecoverable foreign taxes withheld at the applicable country rates. Temporary cash investments are valued at amortized cost. Gains and losses on sales of investments are calculated on the identified cost method for both financial reporting and federal income tax purposes. B. Foreign Currency Translation The books and records of the Fund are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, among other things, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies and the difference between the amount of income accrued and the U.S. dollars actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price on those securities but are included with the net realized and unrealized gain or loss on investments. C. Federal Income Taxes Each fund has previously elected to be taxed as a "regulated investment company" under the Internal Revenue Code. After the acquisition, it will be the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. The combined capital loss carryforward of $530,989,000 includes a net capital loss carryforward of $65,574,000 from the merger with Safeco Core Equity Fund, the full use of which may be limited. D. Fund Shares The Fund records sales and repurchases of its shares as of trade date. Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Fund and a wholly owned indirect subsidiary of UniCredito Italiano S.P.A. (UniCredito Italiano), earned $1,213,008 in underwriting commissions on the sale of Fund shares during the year ended December 31, 2003. E. Class Allocations -27- Distribution fees are calculated based on the average daily net asset value attributable to Class A, Class B, Class C, and Class R shares of the Fund, respectively. Class Y and Investor class shares are not subject to a distribution plan. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 5). Income, common expenses and realized and unrealized gains and losses are calculated at the Fund level and allocated daily to each class of shares based on the respective percentage of adjusted net assets at the beginning of the day. Distributions to shareowners are recorded as of the ex-dividend date. Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, except that Class A, Class B, Class C, and Class R, Class Y and Investor Class shares can bear different transfer agent and distribution fees. F. Securities Lending The Fund lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Fund's custodian acting as the lending agent. When entering into a loan, the Fund receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Fund also continues to receive interest or dividends on the securities loaned. Gain or loss on the fair value of the loaned securities that may occur during the term of the loan will be for the account of the Fund. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The amount of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Fund has the right under the lending agreements to recover the securities from the borrower on demand. The Fund invests cash collateral in temporary cash investments. G. Repurchase Agreements With respect to repurchase agreements entered into by the Fund, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Fund's custodian, or subcustodians. The Fund's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 3. Capital Shares The pro forma net asset value per share assumes the issuance of shares of the Fund that would have been issued at December 31, 2003, in connection with the proposed acquisition. The number of shares assumed to be issued is equal to the net asset value of Safeco Core Equity Fund, as of December 31, 2003, divided by the net asset value per share of the Investor Class shares of the Fund as of December 31, 2003. The pro forma number of shares outstanding (in thousands), by class, for the combined fund consist of the following at December 31, 2003:
Shares of Additional Shares Total Outstanding the Fund Assumed Issued Shares Class of Shares Pre-Combination In Reorganization Post-Combination --------------------------------- --------------- ----------------- ----------------- Class A 141,350 141,350 Class B 14,945 14,945 Class C 7,941 7,941 Class R 80 80
-28-
Class Y 3,655 3,655 Investor Class - 19,555 19,555
4. Management Agreement PIM manages the Fund's portfolio and is a wholly owned indirect subsidiary of UniCredito Italiano. PIM receives a basic fee that is calculated at the annual rate of 0.60% of the Fund's average daily net assets. The basic fee is subject to a performance adjustment up to a maximum of +/- 0.10% based on the Fund's investment performance as compared with the Standard and Poor's 500 Index. Pursuant to a shareowners vote on April 17, 2003, the benchmark was changed from the Lipper Growth & Income Funds Index effective May 1, 2003; however, the Lipper Index will be used for monthly periods prior to May 1, 2003 until it is eventually phased out. The performance comparison is made for a rolling 36-month period. For the year ended December 31, 2003, the aggregate pro-forma performance adjustment resulted in a decrease to the basic fee of $6,049,000. For the year ended December 31, 2003, the net management fee was equivalent to 0.50% of average daily net assets. In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Fund. At December 31, 2003, $3,538,000 was payable to PIM related to management fees, administrative fees and certain other services and is included in due to affiliates. 5. Transfer Agent PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides substantially all transfer agent and shareowner services to the Fund at negotiated rates. Included in due to affiliates is $1,582,000 in transfer agent fees payable to PIMSS at December 31, 2003. 6. Distribution and Service Plans The Fund adopted a Plan of Distribution with respect to Class A, Class B, Class C and Class R shares (Class A Plan, Class B Plan, Class C Plan, and Class R Plan) in accordance with Rule 12b-1 of the Investment Company Act of 1940. Pursuant to the Class A Plan, the Fund pays PFD a service fee of up to 0.25% of the average daily net assets attributable to Class A shares in reimbursement of its actual expenditures to finance activities primarily intended to result in the sale of Class A shares. On qualifying investments made prior to August 19, 1991, the Class A Plan provides for reimbursement of such expenditures in an amount not to exceed 0.15% of average daily net assets. Pursuant to the Class B Plan and the Class C Plan, the Fund pays PFD 1.00% of the average daily net assets attributable to each class of shares. The fee consists of a 0.25% service fee and a 0.75% distribution fee paid as compensation for personal services and/or account maintenance services or distribution services with regard to Class B and Class C shares. Pursuant to the Class R Plan, the Fund pays PFD 0.50% of the average daily net assets attributable to Class R shares for distribution services. Included in due to affiliates is $1,939,000 in distribution fees payable to PFD at December 31, 2003. The Fund also has adopted a separate service plan for Class R shares (Service Plan). The Service Plan authorizes the Fund to pay securities dealers, plan administrators or other service organizations that agree to provide certain services to retirement plans or plan participants holding shares of the Fund a service fee of up to 0.25% of the Fund's average daily net assets attributable to Class R shares held by such plans. In addition, redemptions of each class of shares (except Class Y and Investor Class shares) may be subject to a contingent deferred sales charge (CDSC). A CDSC of 1.00% may be imposed on redemptions of certain net asset value purchases of Class A shares within one year of purchase. Class B shares that are redeemed within six years of purchase are subject to a CDSC at declining rates beginning at 4.00%, based on the lower of cost or market value of shares being redeemed. Redemptions of Class C shares within one year of purchase are subject to a CDSC of 1.00%. Class R shares redeemed within 18 months of purchase -29- are subject to a CDSC of 1.00%. Proceeds from the CDSCs are paid to PFD. For the year ended December 31, 2003, CDSCs in the amount of $1,186,608 were paid to PFD. Investor Class shares will not be subject to Shareholder Servicing or Distribution fees. Investor Class shares will be converted to Class A shares 24 months after the date on which the acquisition is completed. 7. Expense Offset Arrangements The Fund has entered into certain expense offset arrangements with PIMSS resulting in a reduction in the Fund's total expenses due to interest earned on cash held by PIMSS. For the year ended December 31, 2003, the Fund's expenses were reduced by $171,000 under such arrangements. 8. Line of Credit The Fund, along with certain other funds in the Pioneer Family of Funds (the Funds), collectively participate in a $50 million committed, unsecured revolving line of credit facility. Borrowings are used solely for temporary or emergency purposes. The Fund may borrow up to the lesser of $50 million or the limits set by its prospectus for borrowings. Interest on collective borrowings is payable at the Federal Funds Rate plus 1/2% on an annualized basis. The Funds pay an annual commitment fee for this facility. The commitment fee is allocated among such Funds based on their respective borrowing limits. For the year ended December 31, 2003, the Fund had no borrowings under this agreement. 9. Affiliated Companies The Fund's investments in certain companies may exceed 5% of the outstanding voting stock. Such companies are deemed affiliates of the Fund under the Investment Company Act of 1940. The following summarizes transactions with affiliates of the Fund for the year ended December 31, 2003:
Beginning Ending Balance Purchases Sales Dividend Balance Affiliates (shares) (shares) (shares) Income (shares) Value John Wiley & Sons, Inc. 3,494,400 - - $856,128 3,494,400 $90,959,232
-30- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- COMMON STOCKS 99.8% Energy 8.1% Integrated Oil & Gas 5.9% 400,000 400,000 BP Amoco Plc (A.D.R.) $ 21,428 $ $ 21,428 1,470,500 138,000 1,608,500 ChevronTexaco Corp. 138,389 12,987 151,376 660,044 660,044 ConocoPhillips (c) 50,355 50,355 3,006,986 375,000 3,381,986 Exxon Mobil Corp. 133,540 16,654 150,194 888,500 888,500 Occidental Petroleum Corp. 43,012 43,012 ------------------------------------------------- $386,724 $29,641 $416,365 ------------------------------------------------- Oil & Gas Equipment & 0.1% Services 115,000 115,000 Schlumberger, Ltd. $ $ 7,304 $ 7,304 ------------------------------------------------- Oil & Gas Drilling 0.9% 1,140,200 1,140,200 Smith International, Inc.* $ 63,578 $ $ 63,578 ------------------------------------------------- Oil & Gas Exploration & 1.1% Production 475,000 190,000 665,000 Apache Corp. $ 20,686 $ 8,275 $ 28,961 1,401,900 1,401,900 Pioneer Natural Resources Co. 49,179 49,179 ------------------------------------------------- $ 69,865 $ 8,275 $ 78,140 ------------------------------------------------- Total Energy $520,166 $45,219 $565,386 ------------------------------------------------- Materials 5.1% Aluminum 0.5% 1,126,000 1,126,000 Alcoa, Inc. $ 37,192 $ $ 37,192 -------------------------------------------------
-31- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- Commodity Chemicals 1.0% 500,000 500,000 Air Products & Chemicals, $ 26,225 $ $ 26,225 Inc. 916,896 916,896 E.I. du Pont de Nemours and Co. 40,729 40,729 ------------------------------------------------- $ 66,954 $ $ 66,954 ------------------------------------------------- Diversified Chemical 0.4% 400,000 400,000 PPG Industries, Inc. $ 24,996 $ $ 24,996 ------------------------------------------------- Diversified Metals & 2.2% Mining 794,000 794,000 Phelps Dodge Corp. * $ 61,543 $ $ 61,543 4,000,000 4,000,000 Rio Tinto Plc 96,268 96,268 ------------------------------------------------- $157,811 $ $157,811 ------------------------------------------------- Industrial Gases 0.1% 200,000 200,000 Praxair, Inc. $ $ 7,982 $ 7,982 ------------------------------------------------- Metal & Glass Containers 0.1% 115,000 115,000 Ball Corp. $ $ 8,286 $ 8,286 ------------------------------------------------- Paper Products 0.5% 1,080,000 1,080,000 Meadwestvaco Corp. $ 31,741 $ $ 31,741 ------------------------------------------------- Specialty Chemicals 0.4% 787,300 787,300 Ecolab, Inc. $ 24,957 $ $ 24,957 -------------------------------------------------
-32- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- Total Materials $343,651 $16,268 $359,919 ------------------------------------------------- Capital Goods 8.0% Aerospace & Defense 1.8% 1,012,300 1,012,300 General Dynamics Corp. $100,521 $ $100,521 130,000 130,000 Northrop Grumman Corp. 6,981 6,981 ------------------------------------------------- $100,521 $ 6,981 $107,502 ------------------------------------------------- Electrical Components & 0.8% Equipment 445,800 105,000 550,800 Emerson Electric Co. $ 28,331 $ 6,673 $ 35,003 636,500 590,000 1,226,500 General Electric Co. 20,623 19,116 39,739 ------------------------------------------------- $ 48,953 $25,789 $ 74,742 ------------------------------------------------- Industrial Conglomerates 2.8% 480,800 480,800 Illinois Tool Works, Inc. $ 46,104 $ $ 46,104 1,126,600 1,126,600 Johnson Controls, Inc. 60,138 60,138 750,000 174,000 924,000 United Technologies 68,610 15,918 84,528 ------------------------------------------------- $174,852 $15,918 $190,770 ------------------------------------------------- Industrial Machinery 2.7% 900,000 900,000 Caterpillar, Inc. (c) $ 71,496 $ $ 71,496 200,000 200,000 Danaher Corp. 10,370 10,370 1,300,000 1,300,000 Deere & Co. 91,182 91,182 130,000 130,000 Illinois Tool Works, Inc. 12,466 12,466 90,000 90,000 Ingersoll-Rand Co. (Class 6,148 6,148 A) $162,678 $28,984 $191,662 ------------------------------------------------- Total Capital Goods $487,004 $77,671 $564,675 -------------------------------------------------
-33- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- Commercial Services & 0.9% Supplies Office Services & Supplies 0.9% 1,243,900 1,243,900 Canon, Inc. (A.D.R.) $ 66,424 $ $ 66,424 ------------------------------------------------- Total Commercial Services & Supplies $ 66,424 $ $ 66,424 ------------------------------------------------- Transportation 3.3% Airlines 0.8% 3,538,600 3,538,600 Southwest Airlines Co. $ 59,342 $ $ 59,342 ------------------------------------------------- Railroads 1.9% 1,054,200 1,054,200 Burlington Northern, $ 36,971 $ $ 36,971 Inc. 3,730,100 3,730,100 Norfolk Southern Corp. 98,922 98,922 ------------------------------------------------- $135,893 $ $135,893 ------------------------------------------------- Trucking 0.5% 450,000 450,000 United Parcel Service $ 33,827 $ $ 33,827 Total Transportation $229,062 $ $229,062 Automobiles & Components 2.2% Automobile Manufacturers 2.2% 5,000,000 5,000,000 Ford Motor Corp. $ 78,250 $ $ 78,250 1,237,500 127,500 1,365,000 PACCAR, Inc. 71,763 7,394 79,156 ------------------------------------------------- Total Automobiles & Components $150,013 $7,394 $157,406 -------------------------------------------------
-34- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- Media 6.0% Advertising 1.0% 890,200 890,200 Omnicom Group $ 67,557 $ $ 67,557 ------------------------------------------------- Movies & Entertainment 0.4% 837,300 837,300 The Walt Disney Co. $ 21,343 $ $ 21,343 345,000 345,000 Time Warner, Inc. * 6,065 6,065 ------------------------------------------------- $ 21,343 $ 6,065 $ 27,408 ------------------------------------------------- Publishing 4.7% 1,000,000 98,000 1,098,000 Gannett Co. $ 84,850 $ 8,315 $ 93,165 3,494,400 3,494,400 John Wiley & Sons, Inc. + 111,821 111,821 1,606,000 1,606,000 McGraw-Hill Co., Inc. 122,971 122,971 ------------------------------------------------- $319,642 $ 8,315 $327,958 ------------------------------------------------- Total Media $408,542 $14,380 $422,923 ------------------------------------------------- Retailing 4.2% Apparel Retail 0.2% 500,000 500,000 Liz Claiborne, Inc. $ 17,990 $ $ 17,990 ------------------------------------------------- Computer & Electronics 0.1% Retail 132,000 132,000 Best Buy Co., Inc. $ $ 6,698 $ 6,698 ------------------------------------------------- Department Stores 0.6% 170,000 170,000 Kohl's Corp. * $ $ 7,188 $ 7,188 1,234,800 1,234,800 May Department Stores Co. 33,945 33,945
-35- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- $ 33,945 $ 7,188 $ 41,132 ------------------------------------------------- General Merchandise Stores 2.1% 700,000 700,000 Family Dollar Stores, Inc. $ 21,294 $ $ 21,294 2,760,000 240,000 3,000,000 Target Corp. 117,217 10,193 127,410 ------------------------------------------------- $138,511 $10,193 $148,704 ------------------------------------------------- Home Improvement Retail 0.9% 240,000 240,000 Home Depot, Inc. $ $ 8,448 $ 8,448 1,000,000 1,000,000 Lowe's Companies, Inc. 52,550 52,550 ------------------------------------------------- $ 52,550 $ 8,448 $ 60,998 ------------------------------------------------- Specialty Stores 0.3% 600,300 600,300 Barnes & Noble, Inc. * $ 20,398 $ $ 20,398 ------------------------------------------------- Total Retailing $263,394 $44,028 $295,920 ------------------------------------------------- Food & Drug Retailing 3.5% Drug Retail 1.5% 2,851,200 2,851,200 Walgreen Co. $103,242 $ $103,242 ------------------------------------------------- Food Retail 0.1% 400,000 400,000 Kroger Co. * $ $ 7,280 $ 7,280 ------------------------------------------------- Food Distributors 1.2% 300,100 300,100 Cardinal Health, Inc. $ 21,022 $ $ 21,022 1,732,400 1,732,400 Sysco Corp. 62,141 62,141 ------------------------------------------------- $ 83,163 $ $ 83,163 ------------------------------------------------- Hypermarkets & Supercenters 0.7%
-36- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- 752,000 218,000 970,000 Wal-Mart Stores, Inc. $ 39,676 $11,502 $ 51,178 ------------------------------------------------- Total Food & Drug $226,081 $ 7,280 $244,863 ------------------------------------------------- Retailing Food, Beverage & Tobacco 4.8% Brewers 0.2% 200,000 200,000 Anheuser-Busch Companies, $ Inc. $10,800 $ 10,800 ------------------------------------------------- Packaged Foods & Meats 3.4% 1,766,000 1,766,000 Campbell Soup Co. $ 47,470 $ $ 47,470 960,600 960,600 General Mills, Inc. 45,657 45,657 1,496,150 1,496,150 H.J. Heinz Co., Inc. 58,649 58,649 1,100,000 1,100,000 Hershey Foods Corp. 50,897 50,897 1,558,900 1,558,900 Sara Lee Corp. 35,839 35,839 ------------------------------------------------- $238,513 $ $238,513 ------------------------------------------------- Soft Drinks 1.2% 1,357,900 260,000 1,617,900 PepsiCo, Inc. $ 73,164 $14,009 $ 87,172 ------------------------------------------------- Total Food, Beverage & $311,676 $24,809 $336,485 ------------------------------------------------- Tobacco Household & Personal 3.5% Products Household Products 3.5% 1,358,600 1,358,600 Colgate-Palmolive Co. $ 79,410 $ $ 79,410 300,000 300,000 Clorox Co. $ 16,134 16,134
-37- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- 456,300 456,300 Estee Lauder Co. 22,258 22,258 125,000 125,000 Estee Lauder Cos., Inc. 6,098 6,098 (Class A) 125,000 125,000 Kimberly-Clark Corp. 8,235 8,235 1,800,000 262,000 2,062,000 Procter & Gamble Co. 97,992 14,263 112,255 ------------------------------------------------- Total Household & Personal $215,794 $28,596 $244,390 ------------------------------------------------- Products Health Care Equipment & 5.8% Services Health Care Distributors 2.5% 1,233,300 1,233,300 Abbott Laboratories $ 50,269 $ $ 50,269 140,000 140,000 Cardinal Health, Inc. 9,807 9,807 1,900,000 1,900,000 Johnson & Johnson 105,830 105,830 185,000 185,000 McKesson Corp. 6,351 6,351 ------------------------------------------------- $156,099 $16,158 $172,257 ------------------------------------------------- Health Care Equipment 2.7% 1,532,800 1,532,800 Becton, Dickinson & Co. $ 79,399 $ $ 79,399 900,000 900,000 Biomet, Inc. 39,996 39,996 632,800 632,800 Guidant Corp. 35,361 35,361 200,000 200,000 Medtronic, Inc. 9,744 9,744 318,700 318,700 St. Jude Medical, Inc. * 24,110 24,110 ------------------------------------------------- $178,866 $ 9,744 $188,610 ------------------------------------------------- Managed Health Care 0.7% 482,300 482,300 United Healthcare Group, $ 30,023 $ $ 30,023 Inc. 170,000 170,000 Wellpoint Health Networks, Inc. * 19,042 19,042
-38- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- $ 49,065 $ $ 49,065 ------------------------------------------------- Total Health Care $384,030 $25,902 $409,932 ------------------------------------------------- Equipment & Services Pharmaceuticals & 6.8% Biotechnology Biotechnology 0.1% 150,000 150,000 Amgen, Inc. * $ $ 8,185 $ 8,185 ------------------------------------------------- Pharmaceuticals 6.7% 327,000 327,000 Abbott Laboratories $ $13,329 $ 13,329 803,000 803,000 Barr Laboratorie, Inc. * 27,061 27,061 949,000 100,000 1,049,000 Eli Lilly & Co. 66,345 6,991 73,336 180,000 180,000 Johnson & Johnson 10,026 10,026 1,400,600 1,400,600 Merck & Co., Inc. 66,529 66,529 1,607,700 1,607,700 Mylan Laboratories, 32,556 32,556 Inc. 1,200,000 1,200,000 Novartis AG (A.D.R.) 53,400 53,400 1,600,000 505,000 2,105,000 Pfizer, Inc. 54,848 17,311 72,159 389,800 389,800 Roche Holdings AG 38,668 38,668 3,792,800 3,792,800 Schering-Plough Corp. 70,091 70,091 345,000 345,000 Wyeth 12,475 12,475 ------------------------------------------------- $409,497 $60,132 $469,629 ------------------------------------------------- Total Pharmaceuticals & $409,497 $68,318 $477,815 ------------------------------------------------- Biotechnology Banks 7.7% Diversified Banks 2.5% 800,000 800,000 Charter One Financial, $ 35,352 $ $ 35,352 Inc.
-39- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- 225,000 225,000 Hibernia Corp. (Class A) 5,468 5,468 2,048,000 420,000 2,468,000 U.S. Bancorp 56,443 11,575 68,018 900,000 293,000 1,193,000 Wells Fargo & Co. 51,507 16,768 68,275 ------------------------------------------------- $143,302 $33,811 $177,113 ------------------------------------------------- Regional Banks 4.1% 140,000 140,000 Fifth Third Bancorp $ $ 7,529 $ 7,529 755,700 160,000 915,700 First Horizon National 34,362 7,275 41,637 Corp. 2,864,648 2,864,648 National City Corp. 100,291 100,291 919,500 919,500 SouthTrust Corp. 35,686 35,686 1,150,000 1,150,000 SunTrust Banks, Inc. 74,739 74,739 439,200 439,200 Zions Bancorporation 26,989 26,989 ------------------------------------------------- $272,066 $14,804 $286,871 ------------------------------------------------- Thrifts & Mortgage Finance 1.1% 100,000 100,000 Federal National Mortgage $ $ 7,136 $ 7,136 Association 1,530,760 223,000 1,753,760 Washington Mutual, Inc. 59,149 8,617 67,765 ------------------------------------------------- $ 59,149 $15,753 $ 74,901 ------------------------------------------------- Total Banks $474,517 $64,368 $538,885 ------------------------------------------------- Diversified Financials 5.8% Asset Management & Custody 3.6% Banks 1,246,800 120,000 1,366,800 The Bank of New York Co., $ 36,756 $ 3,538 $ 40,293 Inc. 932,500 932,500 Federated Investors, 28,292 28,292 Inc. 1,613,600 1,613,600 State Street Corp. 79,131 79,131
-40- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- 2,100,000 2,100,000 T. Rowe Price Associates, Inc. 105,840 105,840 ------------------------------------------------- $250,019 $ 3,538 $253,556 ------------------------------------------------- Consumer Finance 1.0% 900,000 235,000 1,135,000 American Express Co. $ 46,242 $12,074 $ 58,316 375,000 375,000 MBNA Corp. 9,671 9,671 ------------------------------------------------- $ 46,242 $21,746 $ 67,988 ------------------------------------------------- Diversified Financial 0.2% Services 375,000 375,000 Citigroup, Inc. $ $17,437 $ 17,437 ------------------------------------------------- Investment Banking & Brokerage 1.0% 1,242,000 1,242,000 Merrill Lynch & Co., Inc. $ 67,043 $ $ 67,043 ------------------------------------------------- Total Diversified Financials $363,304 $42,721 $406,024 ------------------------------------------------- Insurance 3.9% Multi-Line Insurance 1.3% 962,218 215,000 1,177,218 American International $ 68,587 $15,325 $ 83,912 Group, Inc. 115,000 115,000 Hartford Financial 7,905 7,905 Services Group, Inc. ------------------------------------------------- $ 68,587 $23,230 $ 91,817 ------------------------------------------------- Property & Casualty 2.6% Insurance 1,174,200 1,174,200 Chubb Corp. $ 80,057 $ $ 80,057 760,400 760,400 Safeco Corp. 33,458 33,458
-41- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- 1,366,300 249,205 1,615,505 The St. Paul Travelers Companies, Inc. 55,390 10,103 65,493 ------------------------------------------------- $168,904 $10,103 $179,007 ------------------------------------------------- Total Insurance $237,491 $33,333 $270,824 ------------------------------------------------- Software & Services 5.0% Application Software 2.6% 916,000 916,000 Adobe Systems, Inc. $ 42,594 $ $ 42,594 80,000 80,000 Intuit, Inc. * 3,086 3,086 3,080,000 665,000 3,745,000 Microsoft Corp. 87,965 18,992 106,957 600,000 600,000 Symantec Corp. * 26,268 26,268 ------------------------------------------------- $156,827 $22,079 $178,906 ------------------------------------------------- Data Processing & 2.4% Outsourced Services 1,014,200 145,000 1,159,200 Automatic Data Processing, $ 42,475 $ 6,073 $ 48,547 Inc. 783,100 783,100 Computer Sciences Corp. * 36,359 36,359 552,800 552,800 DST Systems, Inc. (c)* 26,584 26,584 551,250 551,250 Fiserv, Inc. * 21,438 21,438 185,000 185,000 First Data Corp. 8,236 8,236 763,800 288,000 1,051,800 SunGard Data Systems, Inc. * 19,859 7,488 27,347 ------------------------------------------------- $146,715 $21,797 $168,512 ------------------------------------------------- Total Software & Services $303,542 $43,876 $347,417 ------------------------------------------------- Technology Hardware & Equipment 5.7%
-42- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- Communications Equipment 2.1% 615,000 615,000 Cisco Systems, Inc. * $ $14,575 $ 14,575 4,408,261 4,408,261 Motorola, Inc. 80,451 80,451 3,100,000 300,000 3,400,000 Nokia Corp. (A.D.R.) 45,074 4,362 49,436 ------------------------------------------------- $125,525 $18,937 $144,462 ------------------------------------------------- Computer Hardware 3.6% 422,600 422,600 Apple Computer, Inc. * $ 13,751 $ $ 13,751 541,100 541,100 Diebold, Inc. 28,608 28,608 1,625,000 300,000 1,925,000 Dell, Inc. * 58,208 10,746 68,954 1,745,400 1,745,400 Hewlett-Packard Co. 36,828 36,828 624,000 119,000 743,000 IBM Corp. * 55,006 10,490 65,495 8,300,000 8,300,000 Sun Microsystems, Inc. * 36,022 36,022 ------------------------------------------------- $228,422 $21,236 $249,658 ------------------------------------------------- Computer Storage & 0.1% Peripherals 365,000 365,000 EMC Corp. * $ $ 4,161 $ 4,161 ------------------------------------------------- Total Technology Hardware & Equipment $353,947 $44,334 $398,281 ------------------------------------------------- Semiconductors 3.6% Semiconductor Equipment 1.0% 3,074,000 395,000 3,469,000 Applied Materials, Inc. * $ 60,312 $ 7,750 $ 68,062 ------------------------------------------------- Semiconductors 2.6% 3,240,000 490,000 3,730,000 Intel Corp. $ 89,424 $13,524 $102,948
-43- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- 2,868,000 380,000 3,248,000 Texas Instruments, Inc. 69,348 9,188 78,537 ------------------------------------------------- $158,772 $ 22,712 $181,485 ------------------------------------------------- Total Semiconductors $219,084 $ 30,462 $249,546 ------------------------------------------------- Telecommunication Services 3.3% Integrated 3.3% Telecommunication Services 505,448 505,448 Alltel Corp. $ 25,586 $ $ 25,586 3,059,600 3,059,600 BellSouth Corp. 80,223 80,223 200,000 200,000 CenturyTel, Inc. 6,008 6,008 4,495,637 4,495,637 SBC Communications, 109,019 109,019 Inc. 340,000 340,000 Verizon Communications, Inc. 12,305 12,305 ------------------------------------------------- Total Telecommunication $214,828 $ 18,313 $233,140 ------------------------------------------------- Services Utilities 2.1% Electric Utilities 1.4% 710,000 710,000 American Electric Power Co., Inc. (c) $ 22,720 $ $ 22,720 750,000 750,000 Consolidated Edison, Inc. (c) 29,820 29,820 200,000 200,000 Exelon Corp. 6,658 6,658 184,000 184,000 FirstEnergy Corp. 6,883 6,883
-44- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- 1,200,000 1,200,000 Southern Co. (c) 34,980 34,980 ------------------------------------------------- $ 87,520 $13,541 $101,061 ------------------------------------------------- Gas Utilities 0.6% 558,600 558,600 KeySpan Energy Corp. $ 20,501 $ $ 20,501 767,533 767,533 Vectren Corp. 19,257 19,257 ------------------------------------------------- $ 39,758 $ $ 39,758 ------------------------------------------------- Water Utilities 0.1% 375,000 375,000 Aqua America, Inc. $ 7,519 $ $ 7,519 ------------------------------------------------- Total Utilities $134,797 $13,541 $148,338 ------------------------------------------------- Consumer Durables & 0.2% Apparel Home Furnishings 0.1% 185,000 185,000 Leggett & Platt, Inc. $ $ 4,941 $ 4,941 ------------------------------------------------- Housewares & Specialties 0.1% 138,000 138,000 Fortune Brands, Inc. $ $10,409 $ 10,409 ------------------------------------------------- Total Consumer Durables & $ $15,351 $ 15,351 ------------------------------------------------- Apparel Automobiles & Components 0.3% Auto Parts & Equipment 0.1% 153,000 153,000 Johnson Controls, Inc. $ $ 8,167 $ 8,167 ------------------------------------------------- Motorcycle Manufacturers 0.2%
-45- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- 170,000 170,000 Harley-Davidson, Inc. $ $ 10,530 $ 10,530 ------------------------------------------------- Total Automobiles & $ $ 18,697 $ 18,697 ------------------------------------------------- Components TOTAL COMMON STOCKS $6,316,845 $684,860 $7,001,705 ------------------------------------------------- COMMON STOCKS (AT COST) $4,101,955 $482,425 $4,584,380 ------------------------------------------------- TEMPORARY CASH INVESTMENTS 0.9% Investment Companies 0.2% 10,640,317 10,640,317 AIM Short-Term Investments Co. Liquid Assets Money Market $ Portfolio (Institutional Shares) $ 10,640 $ 10,640 Shares Shares Shares ------ ------ ------ 1,871,906 1,871,906 State Street Navigator Securities Lending Prime Portfolio ** 1,872 1,872 ------------------------------------------------- $ $ 12,512 $ 12,512 Repurchase Agreement 0.1% Principal Principal Principal Amount Amount Amount
-46- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- ------------- $5,300,000 $5,300,000 UBS Warburg, Inc., 1.25%, $ 5,300 $ $ 5,300 dated 6/30/04, repurchase price of $5,300,000 plus accrued interest on 7/1/04 collateralized by $4,859,000 U.S. Treasury Bill, 7.0%, 7/15/06 Shares Shares Security Lending 0.6% Collateral 43,375,400 43,375,400 Securities Lending Investment Fund, 1.29% $ 43,375 $ $ 43,375 ----------------------------------------------- TOTAL TEMPORARY CASH $ 48,675 $ 12,512 $ 61,187 ----------------------------------------------- INVESTMENTS TEMPORARY CASH INVESTMENTS $ 48,675 $ 12,512 $ 61,187 ----------------------------------------------- (AT COST) TOTAL INVESTMENT IN 100.7% $6,365,520 $697,372 $7,062,892 ----------------------------------------------- SECURITIES OTHER ASSETS AND LIABILITIES -0.7% $ (44,439) $(2,802) $ (47,241) ----------------------------------------------- TOTAL NET ASSETS 100.0% $6,321,081 $694,570 $7,015,651 ----------------------------------------------- Investments at Cost $4,150,630 $494,937 $4,645,567 Securities out on loan, at $ 42,240 $ 1,829 $ 44,069 Market Value
-47- PIONEER FUND PRO FORMA Schedule of Investments (a) June 30, 2004 (Unaudited)
Safeco Core Safeco Pioneer Equity Pro Forma Pioneer Core Equity Pro Forma % of Fund Fund Combined Fund Fund Combined Net Market Market Market Shares Shares Shares Assets Value (000's) Value (000's) Value (000's) ------- ----------- --------- ------ ------------- ------------- -------------
* Non-income producing security. (A.D.R.) American Depositary Receipt (a) No adjustments are shown to the unaudited pro forma combined schedule of investments due to the fact that upon consummation of the merger, no securities would need to be sold in order for Pioneer Fund to comply with its prospectus restrictions. The foregoing sentence shall not restrict in any way the ability of the investment adviser of either of the funds from buying or selling securities in the normal course of such fund's business and operations. + Investment held by Pioneer Fund representing 5% or more of the outstanding voting stock of such company. At June 30, 2004, the following securities were out on loan:
(c) Shares Description Market Value ------ ----------- ------------ 31,900 American Electric Power Co., Inc. $1,020,800 1,500 Caterpillar, Inc. 119,160 7,200 ConocoPhillips 549,288 156,700 Consolidated Edison, Inc. 6,230,392 226,800 DST Systems, Inc.* 10,906,812 803,200 Southern Co. 23,413,280 ------------ Total $42,239,732 ------------
The accompanying notes are an integral part of these financial statements. -48- Pioneer Fund Pro Forma Statement of Assets and Liabilities June 30, 2004 (Unaudited) (Amounts in Thousands, except for per share data)
Safeco Core Pro Forma Pioneer Fund Equity Fund Adjustments Pro Forma Combined ------------ ----------- ----------- ------------------ ASSETS: Investment in securities of unaffiliated issuers, at value (cost $4,142,882 and $494,937, respectively) $6,253,699 $697,372 $6,951,071 Investment in securities of affiliated issuers, at value (cost $7,748 and 0, respectively) 111,821 111,821 ------------ ----------- ----------- ------------------ Total Investments in Securities at value 6,365,520 697,372 7,062,892 Cash 26 - 26 Receivables - - Investment securities sold - - - Fund shares sold 4,600 1 4,601 From advisor - 7 7 Dividends, interest and foreign taxes withheld 6,790 649 7,439 Other 4 - 4 ------------ ----------- ----------- ------------------ Total assets $6,376,940 $698,029 $7,074,969 ------------ ----------- ----------- ------------------ LIABILITIES: Payables - Investment securities purchased - - - Fund Shares repurchased $4,821 $ 28 $4,849 Upon return of securities loaned 43,375 1,872 45,247 Dividends - 886 886 Due to affiliates 7,195 382 7,577 Accrued expenses 468 291 759 ------------ ----------- ----------- ------------------ Total liabilities $55,859 $3,459 - $59,318 ------------ ----------- ----------- ------------------ NET ASSETS: Paid-in capital $4,423,669 $526,235 $4,949,904 Accumulated undistributed net investment income 1,009 - 1,009 Accumulated net realized loss on investments (318,507) (34,100) (352,607) Net unrealized gain on investments 2,214,890 202,435 2,417,325 Net unrealized gain (loss) on assets and liabilities denominated in foreign currencies 20 - 20 ------------ ----------- ----------- ------------------ Total net assets $6,321,081 $694,570 - $7,015,651 ------------ ----------- ----------- ------------------ OUTSTANDING SHARES: (Unlimited number of shares authorized) Investor Class - 39,269 (21,294) (a) 17,975 ------------ ----------- ----------- ------------------ Class A 137,918 1,023 (1,023) (a) 137,918 ------------ ----------- ----------- ------------------ Class B 14,255 533 (533) (a) 14,255 ------------ ----------- ----------- ------------------
-49- Pioneer Fund Pro Forma Statement of Assets and Liabilities June 30, 2004 (Unaudited) (Amounts in Thousands, except for per share data)
Safeco Core Pro Forma Pioneer Fund Equity Fund Adjustments Pro Forma Combined ------------ ----------- ----------- ------------------ Class C 7,890 12 (12) (a) 7,890 ------------ ----------- ----------- ------------------ Class R 288 - - 288 ------------ ----------- ----------- ------------------ Class Y 3,812 - - 3,812 ------------ ----------- ----------- ------------------ NET ASSET VALUE PER SHARE: Investor Class - $17.01 $38.64 ------------ ----------- ----------- ------------------ Class A $38.64 $17.04 $38.64 ------------ ----------- ----------- ------------------ Class B $37.77 $16.58 $37.77 ------------ ----------- ----------- ------------------ Class C $37.44 $16.60 $37.44 ------------ ----------- ----------- ------------------ Class R $38.69 - $38.69 ------------ ----------- ----------- ------------------ Class Y $38.73 - $38.73 ------------ ----------- ----------- ------------------ MAXIMUM OFFERING PRICE: Class A $41.00 $18.08 $41.00 ------------ ----------- ----------- ------------------ Class C $37.82 - $37.82 ------------ ----------- ----------- ------------------
(a) Class A, Class B, Class C, and Investor Class shares of Safeco Core Equity Fund are exchanged for new Investor Class shares of Pioneer Fund, to be established upon consummation of the merger. Initial per share values of Investor Class shares are presumed to be equal that of Class A shares. The accompanying notes are an integral part of these financial statements. -50- Pioneer Fund Pro Forma Statement of Operations For the Period Ended June 30, 2004 (Unaudited) (Amounts in Thousands)
Safeco Core Pro Forma Pioneer Fund Equity Fund Adjustments Pro Forma Combined ------------ ----------- ----------- ------------------ INVESTMENT INCOME: Dividends from unaffiliated issuers $108,917 $11,617 $121,443 Dividends from affiliated issuers 909 - - 909 Interest 232 132 364 Income from securities loaned, net 239 51 290 ------------ ----------- ----------- ------------------ Total investment income $110,297 $11,800 $122,097 EXPENSES: Management Fees $36,823 $4,834 $(515) (b) $41,142 Performance fees (5,458) - (576) (b) (6,034) Transfer agent fees Investor Class - 1,759 472 e 2,231 Class A 15,487 190 (190) e 15,487 Class B 2,243 53 (53) e 2,243 Class C 950 1 (1) e 950 Class Y 56 - - 56 Shareholder Servicing fees Class A - 41 (41) (d) - Class B - 25 (25) (d) - Distribution fees Class A 11,932 - 11,932 Class B 5,319 78 (78) (e) 5,319 Class C 2,805 - 2,805 Class R 18 - 18 Administrative fees 1,114 285 (83) (f) 1,316 Custodian fees 313 49 362 Registration fees 259 54 313 Professional fees 140 69 (69) (a) 140 Printing 92 275 367 Fees and expense of nonaffiliated trustees 148 16 (16) (a) 148 Miscellaneous 51 79 130 ------------ ----------- ----------- ------------------ Total expenses $72,292 $7,808 $(1,175) $78,925 Less management fees waived and/or expenses reimbursed by Advisor - (192) 192 (b) - Less fees paid indirectly (161) - (161) ------------ ----------- ----------- ------------------ Net expenses $72,131 $7,616 $(983) $78,764 ------------ ----------- ----------- ------------------ Net investment income $38,166 $4,184 $983 $43,333 ------------ ----------- ----------- ------------------ REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on: Investments $177,146 $42,192 $219,388 Forward foreign currency contracts and other assets and liabilities denominated in foreign currencies 3 - 3 Change in net unrealized gain on:
-51- Pioneer Fund Pro Forma Statement of Operations For the Period Ended June 30, 2004 (Unaudited) (Amounts in Thousands)
Safeco Core Pro Forma Pioneer Fund Equity Fund Adjustments Pro Forma Combined ------------ ----------- ----------- ------------------ Investments 780,592 49,860 830,452 Other assets and liabilities denominated in foreign currencies 6 - - 6 ------------ ----------- ----------- ------------------ Net gain on investments and foreign currency transactions $957,747 $92,052 - $1,049,799 ------------ ----------- ----------- ------------------ Net increase in net assets resulting from operations $995,913 $96,236 $983 $1,093,132 ------------ ----------- ----------- ------------------
(a) Reflects reduction in expenses due to elimination of duplicate services. (b) Management fees conformed to Pioneer Fund's management contract. (c) Reclass Transfer Agent Expenses to Investor class and change in fee structure. (d) Eliminate Shareholder Servicing Expense of Safeco Core Equity Fund. (e) Eliminate Distribution Expense. (f) Reflects decrease due to a change in fee rates. The accompanying notes are an integral part of these financial statements. -52- Pioneer Fund NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS 06/30/04 (Unaudited) 1. General The accompanying pro forma combined financial statements are presented to show the effect of the proposed acquisition (the "acquisition") of Safeco Core Equity Fund by Pioneer Fund. Under the terms of an Agreement and Plan of Reorganization between the Funds, the combination of Pioneer Fund and Safeco Core Equity Fund will be treated as a tax-free business combination and accordingly will be accounted for by a method of accounting for tax-free mergers of investment companies. The acquisition will be accomplished by an acquisition of the net assets of Safeco Core Equity Fund in exchange for a new "Investor Class" of shares of Pioneer Fund at net asset value, which will be established upon consummation of the merger. The accompanying schedules of investments, statements of assets and liabilities and the related statements of operations of Pioneer Fund and Safeco Core Equity Fund have been combined as of and for their most recent 12 months ended June 30, 2004. Adjustments have been made to expenses for duplicate services that would not have been incurred if the merger took place on July 1, 2003. Following the acquisition, the Pioneer Fund will be the accounting survivor. All related acquisition costs will be borne by the Advisors. These pro forma financial statements and related notes should be read in conjunction with the financial statements of Pioneer Fund and Safeco Core Equity Fund included in their respective semiannual reports to shareowners dated June 30, 2004. 2. Organization and Significant Accounting Policies Pioneer Fund (the Fund) is a Delaware statutory trust registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The investment objectives of the Fund are reasonable income and growth of capital. After the merger, the Fund will consist of six classes of shares - Class A, Class B, Class C, Class R, Class Y, and Investor Class shares. Class R shares were first publicly offered on April 1, 2003. Investor Class shares are being offered as part of the acquisition. Each class of shares represents an interest in the same portfolio of investments of the Fund and has equal rights to voting, redemptions, dividends and liquidation, except that each class of shares can bear different transfer agent and distribution fees and have exclusive voting rights with respect to the distribution plans that have been adopted by Class A, Class B, Class C and Class R share-owners, respectively. There is no distribution plan for Class Y or Investor Class shares. Each Fund's management has prepared their respective financial information using estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the pro forma financial statements, and the reported amounts of income, expenses and gains and losses on investments during the reporting periods. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund, which are in conformity with those generally accepted in the investment company industry: A. Security Valuation Security transactions are recorded as of trade date. The net asset value is computed once daily, on each day the New York Stock Exchange is open, as of the close of regular trading on the Exchange. In computing the net asset value, securities are valued at the last sale price on the principal exchange where they are traded. Securities that have not traded on the date of valuation, or securities for which sale prices are not generally reported, are valued at the mean between the last bid and asked prices. Securities for which market -53- quotations are not readily available are valued at their fair values as determined by, or under the direction of, the Fund's Board of Trustees. At June 30, 2004, there were no securities fair valued. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as the Fund becomes aware of the ex-dividend data in the exercise of reasonable diligence. Interest income is recorded on the accrual basis. Dividend and interest income are reported net of unrecoverable foreign taxes withheld at the applicable country rates. Temporary cash investments are valued at amortized cost. Gains and losses on sales of investments are calculated on the identified cost method for both financial reporting and federal income tax purposes. B. Foreign Currency Translation The books and records of the Fund are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates. Net realized gains and losses on foreign currency transactions represent, among other things, the net realized gains and losses on foreign currency contracts, disposition of foreign currencies and the difference between the amount of income accrued and the U.S. dollars actually received. Further, the effects of changes in foreign currency exchange rates on investments are not segregated in the statement of operations from the effects of changes in market price on those securities but are included with the net realized and unrealized gain or loss on investments. C. Federal Income Taxes Each Fund has previously elected to be taxed as a "regulated investment company" under the Internal Revenue Code. After the acquisition, it will be the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net realized capital gains, if any, to its shareowners. Therefore, no federal income tax provision is required. At December 31, 2003, the combined capital loss carryforward of $530,989,000 includes a net capital loss carryforward of $65,574,000 from the merger with Safeco Core Equity Fund, the full use of which may be limited. D. Fund Shares The Fund records sales and repurchases of its shares as of trade date. Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Fund and a wholly owned indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), earned $1,299,944 in underwriting commissions on the sale of Fund shares during the 12 months ended June 30, 2004. E. Class Allocations Distribution fees are calculated based on the average daily net asset value attributable to Class A, Class B, Class C, and Class R shares of the Fund, respectively. Class Y and Investor Class shares are not subject to a distribution plan. Shareowners of each class share all expenses and fees paid to the transfer agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS), for its services, which are allocated based on the number of accounts in each class and the ratable allocation of related out-of-pocket expenses (see Note 5). Income, common expenses and realized and unrealized gains and losses are calculated at the Fund level and allocated daily to each class of shares based on the respective percentage of adjusted net assets at the beginning of the day. Distributions to shareowners are recorded as of the ex-dividend date. Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time, and in the same amount, -54- except that Class A, Class B, Class C, Class R, Class Y and Investor Class shares can bear different transfer agent and distribution fees. F. Securities Lending The Fund lends securities in its portfolio to certain broker-dealers or other institutional investors, with the Fund's custodian acting as the lending agent. When entering into a loan, the Fund receives collateral which is maintained by the custodian and earns income in the form of negotiated lenders' fees. The Fund also continues to receive interest or dividends on the securities loaned. Gain or loss on the fair value of the loaned securities that may occur during the term of the loan will be for the account of the Fund. The loans are secured by collateral of at least 102%, at all times, of the fair value of the securities loaned. The amount of the collateral will be adjusted daily to reflect any price fluctuation in the value of the loaned securities. The Fund has the right under the lending agreements to recover the securities from the borrower on demand. The Fund invests cash collateral in temporary cash investments. G. Repurchase Agreements With respect to repurchase agreements entered into by the Fund, the value of the underlying securities (collateral), including accrued interest received from counterparties, is required to be at least equal to or in excess of the value of the repurchase agreement at the time of purchase. The collateral for all repurchase agreements is held in safekeeping in the customer-only account of the Fund's custodian, or subcustodians. The Fund's investment adviser, Pioneer Investment Management, Inc. (PIM), is responsible for determining that the value of the collateral remains at least equal to the repurchase price. 3. Capital Shares The pro forma net asset value per share assumes the issuance of shares of the Fund that would have been issued at June 30, 2004, in connection with the proposed acquisition. The number of the shares assumed to be issued is equal to the net asset value of Safeco Core Equity Fund, as of June 30, 2004, divided by the net asset value per share of the Investor Class shares of the Fund as of June 30, 2004. The pro forma number of shares outstanding (in thousands), by class, for the combined fund consist of the following at June 30, 2004:
Additional Shares Shares of The Fund Assumed Issued In Total Outstanding Shares Class of Shares Pre-Combination Reorganization Post-Combination ---------------------- ------------------ ------------------ ------------------------ Class A 137,918 137,918 Class B 14,255 14,255 Class C 7,890 7,890 Class R 288 288 Class Y 3,812 3,812 Investor Class - 17,975 17,975
4. Management Agreement PIM manages the Fund's portfolio and is a wholly owned indirect subsidiary of UniCredito Italiano. PIM receives a basic fee that is calculated at the annual rate of 0.60% of the Fund's average daily net assets. The basic fee is subject to a performance adjustment up to a maximum of +/- 0.10% based on the Fund's investment performance as compared with the Standard and Poor's 500 Index. Pursuant to a shareowners vote on April 17, 2003, the benchmark was changed from the Lipper Growth & Income Funds Index effective May 1, 2003; however, the Lipper Index will be used for monthly periods prior to May 1, 2003 until it is eventually phased out. The performance comparison is made for a rolling 36-month period. For the 12 months ended June 30, 2004, the aggregate performance adjustment resulted in a decrease to the basic fee of $6,034,000. For the 12 months ended June 30, 2004, the net management fee was equivalent to 0.52% of average daily net assets. -55- In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Fund. At June 30, 2004, $3,554,890 was payable to PIM related to management fees, administrative fees and certain other services and is included in due to affiliates. 5. Transfer Agent PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides substantially all transfer agent and shareowner services to the Fund at negotiated rates. Included in due to affiliates is $2,109,805 in transfer agent fees payable to PIMSS at June 30, 2004. 6. Distribution and Service Plans The Fund adopted a Plan of Distribution with respect to Class A, Class B, Class C and Class R shares (Class A Plan, Class B Plan, Class C Plan, and Class R Plan) in accordance with Rule 12b-1 of the Investment Company Act of 1940. Pursuant to the Class A Plan, the Fund pays PFD a service fee of up to 0.25% of the average daily net assets attributable to Class A shares in reimbursement of its actual expenditures to finance activities primarily intended to result in the sale of Class A shares. On qualifying investments made prior to August 19, 1991, the Class A Plan provides for reimbursement of such expenditures in an amount not to exceed 0.15% of average daily net assets. Pursuant to the Class B Plan and the Class C Plan, the Fund pays PFD 1.00% of the average daily net assets attributable to each class of shares. The fee consists of a 0.25% service fee and a 0.75% distribution fee paid as compensation for personal services and/or account maintenance services or distribution services with regard to Class B and Class C shares. Pursuant to the Class R Plan, the Fund pays PFD 0.50% of the average daily net assets attributable to Class R shares for distribution services. Included in due to affiliates is $1,911,937 in distribution fees payable to PFD at June 30, 2004. The Fund also has adopted a separate service plan for Class R shares (Service Plan). The Service Plan authorizes the Fund to pay securities dealers, plan administrators or other service organizations that agree to provide certain services to retirement plans or plan participants holding shares of the Fund a service fee of up to 0.25% of the Fund's average daily net assets attributable to Class R shares held by such plans. In addition, redemptions of each class of shares (except Class Y shares) may be subject to a contingent deferred sales charge (CDSC). A CDSC of 1.00% may be imposed on redemptions of certain net asset value purchases of Class A shares within one year of purchase. Class B shares that are redeemed within six years of purchase are subject to a CDSC at declining rates beginning at 4.00%, based on the lower of cost or market value of shares being redeemed. Redemptions of Class C shares within one year of purchase are subject to a CDSC of 1.00%. Class R shares redeemed within 18 months of purchase are subject to a CDSC of 1%. Proceeds from the CDSCs are paid to PFD. For the 12 months ended June 30, 2004, CDSCs in the amount of $1,169,894 were paid to PFD. Investor Class shares will not be subject to shareholder servicing or distribution fees. Investor Class shares will convert to Class A shares 24 months after the date on which the acquisition is completed. 7. Expense Offset Arrangements The Fund has entered into certain expense offset arrangements with PIMSS resulting in a reduction in the Fund's total expenses due to interest earned on cash held by PIMSS. For the 12 months ended June 30, 2004, the Fund's expenses were reduced by $161,000 under such arrangements. 8. Line of Credit The Fund, along with certain other funds in the Pioneer Family of Funds (the Funds), collectively participate in a $50 million committed, unsecured revolving line of credit facility. Borrowings are used solely for temporary or emergency purposes. The Fund may borrow up to the lesser of $50 million or the limits set by its prospectus for borrowings. Interest on collective borrowings is payable at the Federal Funds Rate plus 1/2% on an annualized basis. The Funds pay an annual commitment fee for this facility. The commitment fee is allocated among such Funds -56- based on their respective borrowing limits. For the 12 months ended June 30, 2004, the Fund had no borrowings under this agreement. 9. Affiliated Companies The Fund's investments in certain companies may exceed 5% of the outstanding voting stock. Such companies are deemed affiliates of the Fund for financial reporting purposes. The following summarizes transactions with affiliates of the Fund for the 12 months ended June 30, 2004:
Beginning Balance Purchases Ending Balance Affiliates (shares) (shares) Sales (shares) Dividend Income (shares) Value John Wiley & 3,494,400 - - $908,544 3,494,400 $111,820,800 Sons, Inc.
-57- PART C OTHER INFORMATION PIONEER FUND ITEM 15. INDEMNIFICATION No change from the information set forth in Item 25 of the most recently filed Registration Statement of Pioneer Balanced Fund (the "Registrant") on Form N-1A under the Securities Act of 1933 and the Investment Company Act of 1940 (File Nos. 2-25980 and 811-01466) as filed with the Securities and Exchange Commission on April 8, 2004 (Accession No. 0001016964-04-000094), which information is incorporated herein by reference. (1)(a) Agreement and Declaration of Trust (1) (1)(b) Amendment to Agreement and Declaration of Trust to establish (7) Investor Class Shares (2) By-Laws (2) (3) Not applicable (4) Form of Agreement and Plan of Reorganization (6) (5) Reference is made to Exhibits (1) and (2) hereof (6)(a) Management Contract (5) (6)(b) Expense Limitation Agreement (7) (7) Underwriting Agreement with Pioneer Funds Distributor, Inc. (3) (8) Not applicable (9) Custodian Agreement with Brown Brothers Harriman & Co. (3) (10) Multiple Class Plan Pursuant to Rule 18f-3 (7) (11) Opinion of Counsel (legality of securities being offered) (*) (12) Form of opinion as to tax matters and consent (7) (13)(a) Investment Company Service Agreement with Pioneering (5) Services Corporation (13)(b) Administration Agreement with Pioneer Investment (4) Management, Inc. (14) Consents of Independent Registered Public Accounting Firm (*) (15) Not applicable (16) Powers of Attorney (5) (17)(a) Code of Ethics (5) (17)(b) Form of Proxy Card (*) (1) Previously filed. Incorporated herein by reference from the exhibits filed with Post-Effective Amendment No. 62 to the Registrant's Registration Statement on Form N-1A (File Nos. 2-25980; 811-01466), as filed with the Securities and Exchange Commission on April 30, 1996 (Accession no. 0000078713-96-000012). (2) Previously filed. Incorporated herein by reference from the exhibits filed with Post-Effective Amendment No. 70 to the Registrant's Registration Statement on Form N-1A (File Nos. 2-25980; 811-01466), as filed with the Securities and Exchange Commission on April 30, 2001 (Accession no. 0001016964-01-500009). (3) Previously filed. Incorporated herein by reference from the exhibits filed with Post-Effective Amendment No. 72 to the Registrant's Registration Statement on Form N-1A (File Nos. 2-25980; 811-01466), as filed with the Securities and Exchange Commission on April 30, 2002 (Accession No. 0001016964-02-000101). (4) Previously filed. Incorporated herein by reference from the exhibits filed with Post-Effective Amendment No. 73 to the Registrant's Registration Statement on Form N-1A (File Nos. 2-25980; 811-01466), as filed with the Securities and Exchange Commission on February 11, 2003 (Accession No. 0001016964-03-000038). (5) Previously filed. Incorporated herein by reference from the exhibits filed with Post-Effective Amendment No. 75 to the Registrant's Registration Statement on Form N-1A (File Nos. 2-25980; 811-01466), as filed with the Securities and Exchange Commission on April 8, 2004 (Accession No. 0001016964-04-000094). (6) Filed herewith as Exhibit A to the Proxy Statement and Prospectus included as Part A of this Registration Statement. (7) Previously filed. Incorporated herein by reference from the exhibits filed with Registrant's Initial Registration Statement on Form N-14 (File No. 333-118447), as filed with the Securities and Exchange Commission on August 23, 2004 (Accession No. 0001145443-04-001279). (*) Filed herewith. ITEM 17. UNDERTAKINGS. (1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is part of this Registration Statement by any person or party which is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the reoffering prospectus will contain the information called for by the applicable registration form for the reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as part of an amendment to the Registration Statement and will not be used until the amendment is effective, and that, in determining any liability under the Securities Act of 1933, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement on Form N-14 has been signed on behalf of the Registrant, in the City of Boston and the Commonwealth of Massachusetts, on the 25th day of October, 2004. Pioneer Fund By: /s/ Osbert M. Hood ------------------------------------ Osbert M. Hood Executive Vice President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date * Chairman of the Board, October 25, 2004 --------------------------- Trustee, and President John F. Cogan, Jr. * Chief Financial Officer and October 25, 2004 --------------------------- Treasurer Vincent Nave * --------------------------- Mary K. Bush Trustee * --------------------------- Richard H. Egdahl Trustee * --------------------------- Margaret B.W. Graham Trustee /s/ Osbert M. Hood --------------------------- Osbert M. Hood Trustee * --------------------------- Marguerite A. Piret Trustee * --------------------------- Steven K. West Trustee * --------------------------- John Winthrop Trustee * By: /s/ Osbert M. Hood October 25, 2004 ----------------------------------- Osbert M. Hood, Attorney-in-Fact EXHIBIT INDEX The following exhibits are filed as part of this Registration Statement: Exhibit No. Description (11) Opinion of Counsel (legality of securities being offered) (14) Consents of Independent Registered Public Accounting Firm (17)(b) Form of Proxy Card