Navigating Rising Rates with Active, Multi-Sector Fixed Income Management

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1 Navigating Rising Rates with Active, Multi-Sector Fixed Income Management With bond yields near 6-year lows and expected to rise, U.S. core bond investors are increasingly questioning how to mitigate interest rate risk. Should they take a passive, index-based, less-diversified approach or look to a more active, multi-sector, dynamic strategy? We believe today s bond market and yield environment favors a flexible, actively-managed, value-driven, multisector approach to fixed income investing. This type of approach can invest in a much larger opportunity set within the fixed income universe, including floating rate sectors, municipal bonds, insurance-linked securities, convertible bonds, select non-investment grade securities, and non-u.s. bonds. As a result, it can deliver better risk-adjusted returns than an index-based strategy that is heavily weighted towards government bonds, such as the Barclays U.S. Aggregate Bond Index. While fixed income indices may be appropriate as benchmarks, we believe they are less desirable as investment strategies especially in a rising rate environment. U.S. Treasuries, the most rate-sensitive asset class, represent over % of the market value of the Barclays U.S. Aggregate Bond Index. An additional 8% of the Index is held in agency mortgage-backed securities. With their U.S. government-guarantees, they offer only modest spreads to mitigate rate risk, but are also negatively convex, which hurts performance in rising rate environments. An index-like portfolio may not have sufficient diversification * to avoid losses when interest rates rise. The high rate sensitivity of the component parts of the Index is exacerbated by its higher duration. Over the past year, the Index exhibited its highest duration level, and together with near record-low yields, had the greatest downside exposure to rising interest rates relative to its thirty-year history. Barclays U.S. Aggregate Bond Index: Duration and Yield History Duration (Years) Yield (%) Barclays Aggregate Duration Barclays Aggregate Yield-to-Worst Source: Barclays, Pioneer Investments. Quarterly, last data point 6//. * Diversification does not assure a proft or protect against a loss.

2 The current downside risk of the Barclays U.S. Aggregate Bond Index is depicted below, relative to five and ten years ago. Rising Rates Pose Greater Risk to Investors than in Past Periods Interest Rates Rising % Total Return * Duration (years) Yield (%) One Year One Day -Year // % -4.% -Year // % -4.6% Current 6// % -.6% Source: Barclays and Pioneer Investments as of 6// *Assumes no change in spread, and assumes yield earned equals beginning yield to worst. Returns reflect benefit of roll down. Active multi-sector management can offer higher income and mitigate interest rate risk by investing in fixed income sectors less correlated with interest rates. Unlike indexed managers, active multi-sector managers have the ability to construct portfolios with a view to absolute as well as relative risk. They consider the interactions and correlations of all risk factors, including interest rate, credit, country, sector, industry, and issuer in building portfolios rather than passively accepting the increasingly risky profile of the Index. As the allocation charts below indicate, the Pioneer Opportunistic Core strategy reflects dynamic allocations across a broad range of fixed income asset classes, compared to the less diversified and more static allocation of the Barclays U.S. Aggregate Bond Index. Pioneer Opportunistic Core Strategy: Historical Allocation % 9% 8% 7% 6% % 4% % % % % U.S. High Yield* Emerging Markets Cash Treasury Agency Mortgage- - Backed Securities Jul- Dec- May-4 Oct-4 Mar- Aug- Jan-6 Jun-6 Nov-6 Apr-7 Sep-7 Feb-8 Jul-8 Dec-8 May-9 Oct-9 Mar- Aug- Jan- Jun- Nov- Apr- Municipals Non-Agency Mortgage Backed Securities - Asset-Backed Securities Commercial Mortgage Backed Securities - U.S. Investment Grade Bank Loans International Investment Grade Convertible Securities Sep- Feb- Jul- Dec- May-4 Oct-4 Mar- Jun- % 7% % % % % 7% 4% 6% % 9% % Source: Pioneer Investments as of 6//. The strategy is actively managed; sector allocations will vary over other periods and do not reflect a commitment to an investment policy or sector. The characteristics are of the representative account in the composite. *Includes Event-Linked Bonds (%), International High Yield (%) and Preferred Stock (%).

3 Barclays U.S. Aggregate Bond Index: Historical Allocation % 9% 8% Treasuries 6.% 7% 6% Agencies 4.9% % 4% % Agency MBS 8.% % 9.8% Investment Grade Corporate % Yankees 9.% % ABS/CMBS.9% 6 9 Source: Barclays. As of 6//. In rising interest rate environments, Pioneer uses a number of levers to mitigate rate risk, and is positioned as follows, as of June, : Higher yield:.% gross yield-to-maturity is higher than the Barclays U.S. Aggregate Bond Index of.9%. Yield can help offset principal loss from rising rates. Pioneer seeks to achieve this higher yield by having greater exposure to spread sectors and underweighting government sectors. Underweight to most rate-sensitive assets: U.S. Treasuries comprise 7% of the Pioneer Opportunistic Core portfolio vs. 6% in the Barclays U.S. Aggregate Bond Index. Floating rate exposure: Approximately 7%, includes allocations to Bank Loans, Non-Agency Asset-backed Securities (Home Equity Loans), and Event-Linked (Catastrophe) Bonds. Overweight to credit: Up to % (currently %) diversified non-investment grade exposure. High yield has averaged.% interest rate sensitivity over time, compared to U.S. Treasuries. Interest rate factor positioning: Duration of 4.4 years vs..6 years for the Index, barbelled yield curve positioning, and up to % non-u.s. exposure (currently %) should reduce exposure to rising rates in the U.S. Investors, particularly those with short time horizons and a low tolerance for risk, have the choice in a rising rate environment to simply invest in cash at almost zero yields. Large institutional investors may even have to pay for that privilege. They could invest in cash or in a short duration product. But does it make sense, with a - year yield curve steep relative to long term averages, to forego yield by going short, particularly given the increased probability for a more gradual rise in rates? We believe an attractive solution for fixed income investors in a rising rate environment, but just as importantly over the longer term, is to invest in an intermediate strategy that can add value through dynamic allocation and security selection. This strategy can diversify risk across a broad range of fixed income asset classes when the market compensates for those risks, and can reduce risk exposure when the market does not pay for those risks.

4 As illustrated below, the Pioneer Opportunistic Core strategy has a proven record of outperformance in rising interest rate environments, relative to both the Index and to the median manager. Pioneer Opportunistic Core in a Rising Rate Environment Federal Reserve raised rates by 4.% over two years Annualized Returns May, 4 June, 6 : The -Year Treasury rose from.7% to.% January December Barclays U.S. Aggregate Median U.S. Core Bond Manager Pioneer Opportunistic Core Barclays U.S. Aggregate Median U.S. Core Bond Manager Pioneer Opportunistic Core Rank: 7% % % - Rank: 8% % % Source: Pioneer Investments, Bloomberg and evestment, based on gross composite returns. The evestment U.S. Core Fixed Income universe is comprised of 46 and 9 managers for the May, 4-June, 6 and January -December time periods, respectively. Performance shown is past performance, which is no guarantee of future results. Outperforming When Rates Fall Even if rates do not rise, but fall, the Pioneer Opportunistic Core strategy demonstrated in 4 that its diversified investment approach can still deliver outperformance of its Index and peers, despite holding a relative short duration position. The strategy returned 6.7% in 4 compared to the Index return of.97%, ranking it in the top % of its peers. Indeed, the strategy has demonstrated long-term outperformance of the Index and of its universe over different interest rate, economic, and credit environments, using its dynamic and diversified approach. 4

5 As the following tables demonstrate, the Pioneer Opportunistic Core strategy has achieved attractive returns versus its peers and the Barclays U.S. Aggregate Bond Index. Core Universe Annualized Returns/Rank (%) -year return Rank -year return Rank -year return Rank Pioneer Opportunistic Core Composite Barclays U.S. Aggregate Bond Index Universe Median Core Plus Universe Annualized Returns/Rank (%) -year return Rank -year return Rank -year return Rank Pioneer Opportunistic Core Composite Barclays U.S. Aggregate Bond Index Universe Median The Pioneer Opportunistic Core strategy has achieved these returns with generally lower volatility than its peers and with volatility similar to the Barclays U.S. Aggregate Bond Index. This focus on risk and return has enabled the Pioneer Opportunistic Core strategy to deliver top decile Sharpe ratios over all annualized time periods relative to its peers. Core Universe Standard Deviation Sharpe Ratio -year -year -year -year -year -year Pioneer Opportunistic Core Composite Barclays U.S. Aggregate Bond Index Universe Median Pioneer Opportunistic Core % Rank Core Plus Universe Standard Deviation Sharpe Ratio -year -year -year -year -year -year Pioneer Opportunistic Core Composite Barclays U.S. Aggregate Bond Index Universe Median Pioneer Opportunistic Core % Rank Source: evestment, June,. Based on composite gross returns. Performance shown is past performance, which is no guarantee of future results. Core Universe: Number of managers in universe for -, - and -year: 9, 4 and 9, respectively. Core Plus Universe: Number of managers in universe for -, - and -year: 7, and 6, respectively.

6 Diversification does not guarantee a profit or protect against a loss. The views expressed are those of Pioneer Investments and are current through the date on the first page. These views are subject to change at any time based on market or other conditions, and Pioneer Investments disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Pioneer strategies are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Pioneer strategy or portfolio. The strategy is actively managed; sector allocations will vary over other periods and do not reflect a commitment to an investment policy or sector. Characteristics are of the representative account in the composite. Pioneer Investments ( the Firm ) has prepared and presented this report in compliance with the Global Investment Performance Standards ( GIPS ). GIPS report is available upon request. For the purpose of GIPS Compliance, since January,, the Firm is defined as Pioneer Investment Management, Inc., Pioneer Institutional Asset Management, Inc. and Pioneer Investment Management, Ltd. ( Pioneer Investments ). Pioneer Investments primarily provides investment management and advisory services to mutual fund sponsors, corporations, Public and Taft-Hartley retirement plans, government entities, charitable institutions and insurance companies. Between January, 7 and December, 9, the Firm was defined as Pioneer Investment Management, Inc., Pioneer Asset Management SGRpA, Pioneer Investment Management, Ltd, and Pioneer Investments KAG, all wholly owned subsidiaries of Pioneer Global Asset Management SpA., and Pioneer Pekao Investment Management S.A which is jointly owned by Pioneer Global Asset Management SpA. and Bank Pekao S.A. Between January, and December, 6, the Firm was defined as Pioneer Investment Management, Inc., Pioneer Asset Management SGRpA and Pioneer Investment Management, Ltd, all wholly-owned subsidiaries of Pioneer Global Asset Management SpA., and Pioneer Pekao Investment Management S.A which is jointly owned by Pioneer Global Asset Management SpA. and Bank Pekao S.A. Between July, and December, 4, the Firm was defined as Pioneer Investment Management, Inc., Pioneer Asset Management SGRpA and Pioneer Investment Management, Ltd, all wholly-owned subsidiaries of Pioneer Global Asset Management SpA. Prior to July,, Pioneer Investment Management, Inc. was defined as a separate firm and Pioneer Asset Management SGRpA and Pioneer Investment Management, Ltd were defined as a separate firm. Firm assets on this report represent the combined assets of Pioneer Investment Management, Inc., Pioneer Asset Management SGRpA and Pioneer Investment Management, Ltd. Performance information presented for the periods from January, through June, has not been examined by Deloitte & Touche LLP. Composite dispersion measures represent the consistency of a firm s composite performance results with respect to the individual portfolio returns within a composite. Pioneer utilizes an asset-weighted standard deviation calculation to measure dispersion. Only portfolios that have been included in the composite for a full calendar year are included in the dispersion calculation. This calculation is not considered meaningful if there are not at least two or more portfolios that have been managed within the composite style for a full year. As of September, the U.S. Opportunistic Core Fixed Income Composite has been renamed the Opportunistic Core Fixed Income Composite. This composite was created on January 99, but did not become a GIPS composite until July. Pioneer Investments has been managing assets in this style since October 978. Portfolios are included in the composite in the first full calendar month under management and when the portfolio assets meet the minimum threshold requirements for the composite strategy, as described above, at the beginning of the month. Portfolios are excluded from the composite at the completion of the last full calendar month under management or when assets fall below the minimum threshold. All returns are calculated using the daily valuation methodology. The U.S. mutual funds returns are calculated net of fees and the most recent pro-rated annual expense ratio is added back to create a gross of fee return. Institutional accounts are gross of fee returns with pro-rated management fee subtracted to create net of fee returns. Offshore Accounts are calculated net of fees and the actual monthly expense ratio is added back to create gross of fee return. The performance of the Composite is expressed in U.S. dollars. The calculated net of fee returns provided in this fact sheet are supplemental and reflect the net institutional fee based on the standard annual investment management fee schedule for institutional separate accounts. The calculated net of fee returns reflected in the GIPS report is based on an asset-weighted calculation. A complete list of firm composites and descriptions, along with additional information regarding policies for calculating and reporting returns are available upon request. Pioneer Opportunistic Core ( the Strategy ) seeks total return by investing primarily in investment grade debt securities including corporate, U.S. Treasury, mortgage and agency obligations and up to % in high yield securities. The strategy strives to maintain a yield premium through sector allocation, security selection and tight control over portfolio duration. Risk control measures include diversification across sectors and holdings, a value orientation, and a well-defined buy and sell discipline. The current benchmark is the Barclays U.S. Aggregate Bond Index. Please note that on //, the primary comparative benchmark for this Strategy was revised from the Lehman Government Credit Index to the Lehman Aggregate Bond Index (now the Barclays Capital US Aggregate Bond Index) in an effort to make the benchmark of the composite more consistent with the benchmark designated in the guidelines of the constituent portfolios. The Barclays U.S. Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis Additional information regarding the Firm s policies for calculating and reporting returns is available upon request. Pioneer Investments may use leverage, derivatives and invest in certain markets outside of those represented in the benchmark but these practices are not a significant part of the investment strategy. A complete list and description of the firm s composites is available upon request. The minimum threshold for inclusion in this composite is,, USD. Performance information presented for the periods from January, through June, has not been examined by Deloitte & Touche. Data subsequent to December has not yet been verified by an independent, third-party. Performance shown is past performance, which is no guarantee of future results. Pioneer Institutional Asset Management, Inc., 6 State Street, Boston, Massachusetts Pioneer Investments us.pioneerinvestments.com/institutional