No-Action Letter under
Securities Exchange Act of 1934 – Rule 10A-3 and Form N-SAR and N-CSR

The Pioneer Funds

December 20, 2005

RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF INVESTMENT MANAGEMENT
The Pioneer Funds
File No. 811-21043
Our Ref. No. 2004330140

In your letter dated December 16, 2005, you request that we concur with your view that Stephen K. West, who is a trustee of certain of the Pioneer Funds (the “Funds”), is ‘independent’ within the meaning of Rule 10A-3(b)(1)(iii) under the Securities Exchange Act of 1934 (the “1934 Act”) and Item 3 of Form N-CSR and Sub-Item 102P3(b)(2) of Form N-SAR under the Investment Company Act of 1940 (the “1940 Act”).

FACTS

You state that the Funds consist of a number of open-end and closed-end investment companies. You represent that Mr. West, as trustee of the Funds, is not an ‘interested person’ of the Funds, as defined in Section 2(a)(19) of the 1940 Act (a “non-interested trustee”). You state that he has served as a non-interested trustee since 1993. You also state that Mr. West served on the Funds’ audit committees until 2004. You indicate that another of the Funds’ non-interested trustees has temporarily replaced Mr. West on the audit committees.

You state that, since his initial nomination to serve as a trustee of the Funds, Mr. West has also been affiliated with the law firm of Sullivan & Cromwell LLP (“Sullivan & Cromwell”), first as a partner and now as Senior Counsel. You state that Mr. West does not occupy a position of ownership or control with Sullivan & Cromwell, in that he has no interest in the firm’s general profits and does not occupy a policy making or voting position with the firm. You represent that Mr. West’s role is similar to that of an employee of Sullivan & Cromwell.

You state that Sullivan & Cromwell, generally acting through Mr. West, serves as independent counsel to the non-interested trustees of the Funds, as well as counsel to the Funds’ audit committees, which are comprised entirely of non-interested trustees.¹ You represent that the non-interested trustees of the Funds have determined that Sullivan & Cromwell qualifies as ‘independent counsel’ pursuant to Rule 0-1(a)(6) under the 1940 Act.² You state that the non-interested trustees review Sullivan & Cromwell’s status as independent legal counsel annually.³

You represent that Sullivan & Cromwell has advised the Funds’ non-interested trustees that it provides legal services to the Funds’ non-interested trustees and audit committees, and not to the Funds, and does not have an attorney-client relationship with the Funds. You state that the selection and compensation of Sullivan & Cromwell was, and is, entirely within the discretion of the Funds’ non-interested trustees and their representatives on the audit committees, respectively. You also represent that the Funds have not asked Sullivan & Cromwell to provide legal services to them, and do not view Sullivan & Cromwell as their attorneys.⁴
You note that Sullivan & Cromwell submits invoices directly to the Funds for all of the legal services that it provides to the non-interested trustees and audit committees, and that those invoices are clearly marked to show that they are for services rendered to the Funds’ non-interested trustees and audit committees. You state that the Funds then pay Sullivan & Cromwell for these services at the direction of the non-interested trustees and their representatives on the Funds’ audit committees. You state that Sullivan & Cromwell compensates Mr. West based on a fixed hourly rate for the legal services that he provides to the firm’s clients, including the Funds’ non-interested trustees and audit committees. You state that Mr. West receives no direct payments from the Funds, other than for his service as a trustee for the Funds.

ANALYSIS

You request our concurrence with your view that Mr. West is ‘independent’ within the meaning of Rule 10A-3(b)(1)(iii) under the 1934 Act. You also request our concurrence that Mr. West is ‘independent’ within the meaning of both Item 3 of Form N-CSR and Sub-Item 102P3(b)(2) of Form N-SAR under the 1940 Act.

Rule 10A-3(b)(1)(i) under the 1934 Act requires, as relevant here, each member of a listed company’s audit committee to be an independent member of the board of directors of the company.⁵ Item 3 of Form N-CSR and Sub-Item 102P3(b)(2) of Form N-SAR under the 1940 Act each require any registered management investment company to disclose, among other things, whether it has at least one ‘financial expert’ serving on its audit committee, and whether that person is independent.⁶ Rule 10A-3(b)(1)(iii), Form N-CSR and Form N-SAR state, as relevant here, that in order to be considered to be independent, a director of an investment company:

may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee:…[a]ccept directly or indirectly any consulting, advisory, or other compensatory fee from the [company] ….(emphasis added)⁷

Rule 10A-3 is designed, in part, to enhance audit committee independence in recognition that an independent audit committee is “better situated to assess objectively the quality of the [company’s] financial disclosure and the adequacy of internal controls than a committee that is affiliated with management.”⁸ Enhanced audit committee independence, in turn, helps to insulate financial reporting from management’s temptation to tailor financial reporting to satisfy market expectations, and aligns corporate interests with those of shareholders.⁹ Item 3 of Form N-CSR and Sub-Item 102P3(b)(2) of Form N-SAR are designed, in part, to provide shareholders with information that would aid them in determining whether a financial expert who serves on the audit committee also has a management role that may create potential conflicts of interest.¹⁰

You state that you believe that Mr. West is independent for purposes of Rule 10A-3 under the 1934 Act, and Forms N-CSR and N-SAR under the 1940 Act, because he does not receive any direct payment from the Funds, other than payment for his services on the Funds’ boards of trustees and their audit committees. In addition, you contend that, for the reasons described below, Mr. West should not be deemed to indirectly accept payments from the Funds through the Funds’ payments to Sullivan & Cromwell for legal services that Sullivan & Cromwell provides to the Funds’ non-interested trustees and audit committees, and Sullivan & Cromwell’s subsequent payments to Mr. West for his contribution to those services.
Rule 10A-3(e)(8) under the 1934 Act defines ‘indirect acceptance’ by a member of an audit committee, as relevant here, to include acceptance of payments by:

an entity in which such member is a partner, member, an officer such as a managing director occupying a comparable position or executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions who, in each case, have no active role in providing services to the entity)…and which provides…legal…services to the issuer….¹¹

You contend that Mr. West’s Senior Counsel position with Sullivan & Cromwell is not equivalent to any of those positions because he is not a partner or officer of Sullivan & Cromwell. You assert that the treatment of a Senior Counsel position, like that held by Mr. West, is ambiguous under the rule. You recognize that the rule includes a person who occupies ‘a similar position.’ You assert that the similarity required is to partners, members, or executive officers; that is, to positions that reflect ownership or management control. You assert that as Senior Counsel at Sullivan & Cromwell, Mr. West does not occupy a similar position with Sullivan & Cromwell in the sense of either ownership or management control, i.e., you represent that he has no interest in the firm’s general profits and does not occupy a policy making or voting position with the firm. You also state that the adopting release indicates that the rule is not intended to bring within the scope of ‘indirect acceptance’ persons who are merely employees.¹² You believe that the role of a Senior Counsel as used by Sullivan & Cromwell is similar to that of an employee rather than that of an owner or controlling person of the firm.

You also contend that Sullivan & Cromwell, and Mr. West, provide legal services to the Funds’ non-interested trustees and audit committees, and do not provide legal services to the Funds themselves. You represent that the selection and compensation of Sullivan & Cromwell to serve as legal counsel to the Funds’ non-interested trustees and audit committees was, and is, entirely within the discretion of the Funds’ non-interested trustees and their representatives on the audit committees, respectively.

You further contend that the Funds’ payment of Sullivan & Cromwell’s legal bills for services rendered to the Funds’ non-interested trustees and audit committees would not permit the Funds to influence Mr. West, or other members of the Funds’ audit committees. You note that this arrangement would align Mr. West’s interests with those of the other non-interested trustees, whose interests in turn are aligned with those of the Funds’ shareholders.

Based upon the facts and representations contained in your letter we believe that Mr. West is independent for purposes of Rule 10A-3(b)(1)(iii) under the 1934 Act and Item 3 of Form N-CSR and 102P3(b)(2) of Form N-SAR under the 1940 Act. Our conclusion is based in particular on your representations that:

1. Mr. West, as Senior Counsel with Sullivan & Cromwell, is not a partner, member, or an officer (such as a managing director occupying a comparable position) or an executive officer of Sullivan & Cromwell, nor does he occupy a similar position with Sullivan & Cromwell, rather Mr. West’s role is similar to that of an employee of Sullivan & Cromwell;
    
2. Mr. West does not receive any direct payments from the Funds, other than payments for his service on the Funds’ boards of trustees and their audit committees;
    
3. Sullivan & Cromwell provides legal services to the Funds’ non-interested trustees and audit committees, and not to the Funds; and
    
4. The selection and compensation of Sullivan & Cromwell to serve as legal counsel to the Funds’ non-interested trustees and audit committees was, and is, entirely within the discretion of the Funds’ non-interested trustees and their representatives on the audit committees, respectively. Mr. West has recused, and will recuse, himself with respect to any deliberations or vote regarding the hiring, retention, or compensation of Sullivan & Cromwell or its status as independent counsel.

Eric S. Purple
Senior Counsel

¹ You indicate that Mr. West is deemed to be a non-interested trustee in reliance on the staff’s position in Ballard Spahr Andrews & Ingersoll, LLP (pub. avail. April 3, 2002) (a person is not an interested person of a fund under Section 2(a)(19)(A)(iv) of the 1940 Act when that person acts as legal counsel for the fund's independent directors, and not the fund or its investment adviser).

² You represent that the other non-interested trustees are independent within the meaning of Rule 10A-3(b)(1)(iii).

³ You represent that Mr. West, in his capacity as a trustee for the Funds, has recused, and will recuse, himself from any deliberations or vote regarding the hiring, retention, or compensation of Sullivan & Cromwell, or in determining Sullivan & Cromwell’s status as independent counsel.

⁴ Also, you represent that Sullivan & Cromwell has not provided any legal services to Pioneer Investment Management, Inc., investment adviser to the Funds (the “Adviser”).

⁵ Rule 10A-3 under the 1934 Act requires each national securities exchange that is registered with the Commission under Section 6 of the 1934 Act, and each national securities association that is registered with the Commission under Section 15A of the 1934 Act, to prohibit the initial or continued listing of any security of an issuer that does not comply with the substantive requirements of the rule. Closed-end funds typically list their shares for trading on an exchange. Consequently, in order to retain their listing, those listed funds must comply with the listing standards adopted by their listing exchange pursuant to the provisions of Rule 10A-3 under the 1934 Act.

⁶ Registered management investment companies generally use Form N-CSR under the 1940 Act to satisfy certain reporting requirements under both the 1940 Act and the 1934 Act (e.g., Section 30(b)(2) under the 1940 Act and Sections 13(a) or 15(d) under the 1934 Act), and use Form N-SAR under the 1940 Act to file semi-annual and annual reports with the Commission.

⁷ See also Rule 10A-3(b)(1)(iii)(B); Item 3(a)(2)(ii) of Form N-CSR; and Sub-Item 102P3(b)(2)(ii) of Form N-SAR (each providing that, in order to be independent, a director of a fund also must not be an interested person of the fund as defined in Section 2(a)(19) of the 1940 Act).

⁸ Standards Relating to Listed Company Audit Committees, SEC Rel. No. 33-8220 (Apr. 9, 2003) published at 68 Fed. Reg. 18,788, 18,790 (Apr. 16, 2003) (the “Adopting Release”) (release adopting Rule 10A-3 under the 1934 Act).

⁹ See id. at 18,790-91.

¹⁰ See Disclosure Required by Sections 404, 406 and 407 of the Sarbanes-Oxley Act of 2002, SEC Rel. No. 34-46701 (Oct. 22, 2002) published at 67 Fed. Reg. 66,208, 66,210 (Oct. 30, 2002) (stating that “[i]nvestors may be interested to know, for example, if the only financial expert on the audit committee is the company's chief financial officer or another individual who is responsible for, or participates in, the preparation of the company's financial statements.”).

¹¹ Neither Item 3 of Form N-CSR nor Sub-Item 102P3(b)(2) of Form N-SAR under the 1940 Act defines the phrase “accept…indirectly any…fee from the issuer.” We believe that it is appropriate to apply the definition contained in Rule 10A-3(e)(8) under the 1934 Act when interpreting the phrase in Form N-CSR and Form N-SAR under the 1940 Act.

¹² The Commission stated in the Adopting Release that:
We believe extending the prohibition to any employee of an associated entity, as requested by some commenters, would be overly broad for purposes of [1934] Act Rule 10A-3, although SROs may require such an extension in their implementing rules. However, we do believe the formulation should include those persons, such as partners or members in professional organizations, regardless of control, whose compensation could be directly affected by the prohibited fees….(citation omitted)
An exchange upon which a Fund lists its shares could adopt more restrictive requirements for the independence of audit committee members than those required by Rule 10A-3. Your request relates to Rule 10A-3, and not to any listing standard adopted by any exchange.

¹³ For instance, we note that we would not view Mr. West as independent for purposes of Rule 10A-3(b)(1)(iii) under the 1934 Act and Item 3 of Form N-CSR and Sub-Item 102P3(b)(2) under the 1940 Act if Sullivan & Cromwell provided legal services to the Funds or the Adviser.

Incoming Letter

The Incoming Letter is in Acrobat format.

http://www.sec.gov/divisions/investment/noaction/pioneerfunds122005.htm