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PIONEER
-----------------------
MUNICIPAL
AND EQUITY
INCOME
TRUST*
PBF
Ticker Symbol
Semiannual
Report
5/31/08
[LOGO]PIONEER
Investments(R)
*Effective November 7, 2007, Pioneer Tax Advantaged Balanced Trust was
renamed Pioneer Municipal and Equity Income Trust
Table of Contents
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Letter to Shareowners 2
Portfolio Summary 4
Prices and Distributions 5
Performance Update 6
Portfolio Management Discussion 7
Schedule of Investments 13
Financial Statements 28
Notes to Financial Statements 33
Trustees, Officers and Service Providers 44
President's
Dear Shareowner,
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Staying diversified and keeping your portfolio invested in the markets are two
general investment principles that have served investors well over time. They
are particularly useful guides to keep in mind today, at a time when markets
around the globe are being buffeted by problems in the financial and real
estate industries and by concerns about a slowing economy.
After an extended period of steady economic growth with sustained low
unemployment and low inflation, the U.S. economy ran into difficulty as 2007
drew to a close. Investors in subprime mortgages were forced to xxxx down the
value of their assets, imperiling leveraged balance sheets. The ensuing credit
crunch forced central banks in the United States and Europe to assume the role
of "lender of last resort" to keep credit markets functioning. Conditions
worsened in the first quarter of 2008, as falling prices, margin calls and
deleveraging continued, and while the auction rate preferred market seized up.
The U.S. Federal Reserve expanded its lender-of-last-resort role to include
lending to primary dealers and continued to cut interest rates. By then,
recession talk was widespread as concern grew that falling home prices, rising
unemployment, sharply rising food and energy prices, and disruptions in
financial markets posed a significant threat to economic growth.
Markets reacted poorly to the developments leading up to the near failure of
Bear Xxxxxxx, with fixed-income credit spreads (the difference in rates between
corporate and U.S. government bonds) widening dramatically and stock markets
declining, wiping out the positive returns markets had delivered in the
preceding calendar year. Treasury bond prices rose as the market underwent a
flight to quality. In the eleven weeks between the Bear Xxxxxxx event and the
end of May 2008, though, there were no further market crises, recession fears
faded in light of positive economic news, and stock markets rallied, recouping
some of their first-quarter losses, while Treasury bond prices fell back.
The Dow Xxxxx Industrial Average and Standard & Poor's 500 Index each fell 4%,
and the NASDAQ Composite Index fell 5% over the six-month period ending May 31,
2008. The MSCI EAFE Developed Market Index of international stock markets fell
5%, and the MSCI Emerging Markets Index fell 2% over the same period. The U.S.
2
Letter
investment-grade bond market, as measured by the Xxxxxx Brothers Aggregate Bond
Index, rose 1% over the six-month period while the U.S. high-yield bond market,
as measured by the Xxxxxxx Xxxxx High Yield Bond Master II Index, rose 2% over
the six-month period.
A weak U.S. dollar and substantial fiscal and monetary stimulus are potent
support for the economy. Markets remain volatile, and falling risk tolerances
and deleveraging may depress asset prices in the short term, but equity and
corporate bond valuations look attractive over a longer time horizon unless the
U.S. economy falls into a severe and protracted recession.
Sudden swings in the markets are always to be expected, but they are difficult
to time. Maintaining a long-term time horizon, being diversified, and paying
attention to asset allocation are important investment principles. As always,
we encourage you to work closely with your financial advisor to find the mix of
stocks, bonds and money market assets that is best aligned to your particular
risk tolerance and investment objective and to adhere to a strategic plan
rather than letting emotions drive investment decisions.
Respectfully,
/s/ Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx
President and CEO
Pioneer Investment Management USA, Inc.
Any information in this shareowner report regarding market or economic trends
or the factors influencing the Trust's historical or future performance are
statements of the opinion of Trust 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.
3
Pioneer Municipal and Equity Income Trust
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PORTFOLIO SUMMARY 5/31/08
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Portfolio Maturity
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(As a percentage of total debt holdings)
[THE TABLE BELOW WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
0-1 Year 10.5%
1-3 Years 6.1%
3-6 Years 30.8%
6-8 Years 4.5%
8-10 Years 4.5%
10+ Years 43.6%
Portfolio Diversification
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(As a percentage of total investment portfolio)
[THE TABLE BELOW WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
Tax-Exempt Obligations 53.2%
Common Stocks 26.9%
Non-Convertible Preferred Stocks 13.3%
Temporary Cash Investment 5.9%
Convertible Preferred Stocks 0.7%
The portfolio is actively managed, and current holdings may be different.
10 Largest Holdings
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(As a percentage of total long-term holdings)*
1. Verizon Communications, Inc. 2.99%
2. Loews Corp. - Carolina Group 2.39
3. Atmos Energy Corp. 2.07
4. Windstream Corp. 2.01
5. Xxxxxx Brothers Municipal Trust Receipts, RIB, 8.056%,
9/1/24 (144A) 2.00
6. Merck & Co., Inc. 1.61
7. Garden State Preservation Trust, RIB, 13.774%, 11/1/22 (144A) 1.59
8. Tobacco Settlement Financing Corp., 5.875%, 5/15/39 1.49
9. Xxxxxxx-Xxxxx Squibb Co. 1.43
10. AT&T, Inc. 1.43
* This list excludes temporary cash and derivative instruments. The portfolio
is actively managed, and current holdings may be different. The holdings
listed should not be considered recommendations to buy or sell any
security listed.
4
Pioneer Municipal and Equity Income Trust
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PRICES AND DISTRIBUTIONS
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Share Prices and Distributions
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Market Price 5/31/08 11/30/07
per Common Share $12.93 $13.41
Net Asset Value
per Common Share $13.32 $14.82
Market Discount 2.9% 9.5%
Net
Distributions Investment Short-Term Long-Term
per Common Share Income Capital Gains Capital Gains
(12/1/07 - 5/31/08) $0.6720 $ - $ -
Yields
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Distribution 5/31/08 11/30/07
Yield at Market Price 10.39% 6.37%
Distribution Yield at
Net Asset Value 10.09% 5.76%
30-Day SEC Yield 6.82% 11.35%
The performance data quoted represents past performance, which is no guarantee
of future results.
5
Pioneer Municipal and Equity Income Trust
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PERFORMANCE UPDATE 5/31/08
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Investment Returns
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The mountain chart on the right shows the change in market value, including
reinvestment of dividends and distributions, of a $10,000 investment made
in common shares of Pioneer Municipal and Equity Income Trust, compared to
that of the Xxxxxx Brothers Municipal Bond Index and the S&P 500 Index.
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Cumulative Total Returns
(As of May 31, 2008)
Net
Asset
Value Market
Period (NAV) Price
Life-of-Trust
(1/30/04) 22.90% 13.98%
1 Year -11.50 -6.93
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[THE TABLE BELOW WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Value of $10,000 Investment
Pioneer Xxxxxx
Municipal Brothers Standard &
and Equity Municipal Poor's 500
Income Trust Bond Index Index
1/04 $10,000 $10,000 $10,000
5/04 8,123 9,840 9,964
5/05 9,487 10,623 10,784
5/06 9,457 10,824 11,715
5/07 12,246 11,349 14,383
5/08 11,398 11,788 13,420
Call 0-000-000-0000 or visit xxx.xxxxxxxxxxxxxxxxxx.xxx for the most recent
month-end performance results. Current performance may be lower or higher
than the performance data quoted.
Performance data shown represents past performance. Past performance is no
guarantee of future results. Investment return and market price will
fluctuate, and your shares may trade below net asset value ("NAV"), due to
such factors as interest rate changes, and the perceived credit quality of
borrowers.
Total investment return does not reflect broker sales charges or
commissions. All performance is for common shares of the Trust.
Closed-end funds, unlike open-end funds, are not continuously offered.
There is a one-time public offering and once issued, shares of closed-end
funds are sold in the open market through a stock exchange and frequently
trade at prices lower than their NAV. NAV per common share is total assets
less total liabilities, which includes preferred shares, divided by the
number of common shares outstanding.
When NAV is lower than market price, dividends are assumed to be reinvested
at the greater of NAV or 95% of the market price. When NAV is higher,
dividends are assumed to be reinvested at prices obtained under the Trust's
dividend reinvestment plan.
The performance table and graph do not reflect the deduction of fees and
taxes that a shareowner would pay on Trust distributions.
Index comparisons begin January 31, 2004. The Xxxxxx Brothers Municipal
Bond Index is a broad measure of the municipal bond market. The Standard &
Poor's 500 Stock Index (the S&P 500) is a commonly used measure of the
broad U.S. stock market. Index returns are calculated monthly, assume
reinvestment of dividends and, unlike Trust returns, do not reflect any
fees, expenses or charges. You cannot invest directly in an index.
6
Pioneer Municipal and Equity Income Trust
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PORTFOLIO MANAGEMENT DISCUSSION 5/31/08
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On May 23, 2008, the Board of Trustees of the Trust approved a plan to merge
the Trust into Pioneer Tax Free Income Fund, an open-end fund. The proposed
merger is subject to the approval of shareholders of the Trust. A shareowner
meeting is anticipated to be held in September 2008. If approved by shareowners
of the Trust, the merger is expected to take place in September 2008. If the
proposed merger is approved by shareowners of the Trust, the Trust would call
for redemption and redeem all of its outstanding Auction Market Preferred
Shares prior to the closing of the merger. The Trustees believe that the
proposed merger is in the best interests of shareowners. Details of the
rationale for this merger will be contained in the proxy materials to be sent
to shareowners of the Trust. There can be no assurance that the merger will be
approved or, if approved, completed.
During the first half of Pioneer Municipal and Equity Income Trust's fiscal
year, the widening credit crisis triggered by problems in the subprime mortgage
market resulted in a sharp decline in both the fixed-income and equity markets.
By the end of the semi-annual period ended May 31, 2008, however, the financial
markets appeared to be stabilizing and had begun to recoup some of their
losses. In the following interview Xxxxx Xxxxxx, who is responsible for the
Trust's fixed-income investments, and Xxxxxx Xxxxxxxxx, Xx., who is responsible
for the Trust's equity investments, discuss the strategies they used in
managing the Trust during this turbulent time.
Q: How did the Trust perform over the six months ended May 31, 2008?
A: For the six-month period ended May 31, 2008, Pioneer Municipal and Equity
Income Trust returned -5.33% at net asset value and 1.56% at market price.
As of May 31, 2008, the Trust was selling at a discount of market price to
net asset value of -2.90%. For the same six-month period, the Xxxxxx
Brothers Municipal Bond Index returned 1.44%, and the S&P 500 Index
returned -4.47%.
Call 0-000-000-0000 or visit xxx.xxxxxxxxxxxxxxxxxx.xxx for the most
recent month-end performance results. Current performance may be lower or
higher than the performance data quoted. The performance data quoted
represents past performance, which is no guarantee of future results.
Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost.
7
Pioneer Municipal and Equity Income Trust
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PORTFOLIO MANAGEMENT DISCUSSION 5/31/08 (continued)
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Q: What was the investment environment like during the first half of the fiscal
year ending May 31, 2008?
A: It was a challenging investment environment, as both the fixed-income
and equity markets were affected negatively by the credit crisis that
began last summer. In the first quarter of 2008, municipal bonds declined
on concerns that some bond insurers would have to write off losses on
securities tied to subprime mortgage loans. As a result, the AAA credit
quality ratings on some municipal bonds were downgraded - a situation that
led to a loss of confidence and a major sell-off. The outcome was that
municipal bond yields rose above Treasury yields, even before the
tax-exempt effect. As with almost all fixed-income investments, rising
bond yields push prices down. As valuations became more compelling,
investors returned to the municipal bond market, which began to recover
in March.
The uncertainty in the credit markets during the period also spilled over
to the equity markets. Stocks fell from the beginning of the period
through mid-March when they troughed and began a period of recovery, as
the Bear Xxxxxxx implosion reached its conclusion and profits in the
non-financial segment of the S&P 500 continued to grow. The stock market,
as measured by the S&P 500 index, produced positive returns for the months
of April and May.
Q: How did you manage the Trust during the period?
A: We continued to focus on providing tax-favored income from a mix of
municipal bonds and dividend-paying equity securities with the potential
to produce qualified dividend income ("QDI"). We made several changes in
the equity portion of the Trust during the period, selling $24 million of
securities and purchasing $7 million of securities. The net proceeds from
sales and purchases of equity securities were invested into the municipal
side of the portfolio, as yields were attractive and values more
opportune. The changes resulted in a portfolio that had a 59% municipal
bond allocation and a 41% equity allocation at the end of the period.
In the fixed-income portion of the Trust, we continued to favor sectors
that are vital components of the economy, such as health care,
transportation and education. About 70% of the fixed-income part of the
Trust was invested in investment-grade securities, and about 20% was in
below investment-grade securities. Ten percent
8
Pioneer Municipal and Equity Income Trust
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of the Trust's fixed-income assets were in cash. At the end of the period,
the Trust had 125 fixed income issues in 37 states including District of
Columbia, and the credit quality of the fixed-income assets was A+.
As for equities, the focus on higher-dividend yielding companies continued
to emphasize holdings in the financial and utilities sectors, although
portfolio diversification remains an important objective. We sold the
Trust's holdings Washington Mutual a few days into the period; the stock
had underperformed severely, and we saw no likelihood of a timely
recovery. We took profits in Compass Minerals International and trimmed
the Trust's position in AT&T. The balance of equity securities sold by the
Trust during the period represented was in the preferred shares of equity
securities of primarily European money center banks. We believe the full
impact of the credit issues troubling U.S. money center banks has yet to
be recorded overseas. We sold preferred shares held by the Trust in HSBC
Holdings, Deutsche Bank and Barclays Bank. As values emerged in the
municipal fixed-income market, we allocated some proceeds for purchase of
municipal bonds by the Trust. Other proceeds were invested in
non-financial common stocks. For example, we added Idearc to the
Portfolio, one of the yellow pages publishers, and B&G Foods, an owner of
many well-recognized packaged food brands with substantial market share
and brand awareness in their regional markets.
Q: Can you comment on the issues surrounding auction-rate preferred securities?
A: The Trust issued auction-rate preferred shares as an effective way of
borrowing to provide leverage for the Trust. These auction-rate preferred
shares typically have been traded at regularly scheduled auctions, giving
investors in the preferred shares a source of financial liquidity while
keeping the Trust's borrowing costs low. However, the aggravated problems
in the credit markets have recently led to failed auctions for the
preferred shares of many closed-end funds, including the Trust. Investors
holding the preferred shares also have been adversely affected because
they have not had the ability to sell their shares at auctions. Meanwhile,
because of the failed auctions, the Trust pays dividends on the preferred
shares at a higher rate consistent with the terms of documents authorizing
the issuance of preferred shares.
9
Pioneer Municipal and Equity Income Trust
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PORTFOLIO MANAGEMENT DISCUSSION 5/31/08 (continued)
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The Trust continues to pay all dividends in compliance with the terms of
the auction-rate preferred share agreements. Further, auction-rate
preferred shares issued by the Trust continue to be rated AAA/Aaa by Fitch
and Xxxxx'x, the two principal credit rating agencies monitoring the
Trust. Under current market conditions, we believe that the Trust's
auction-rate preferred shares continue to be an effective form of
leverage. As noted earlier, shareowners of the Trust are being asked to
approve a proposed merger of the Trust into Pioneer Tax Free Income Fund,
an open-end fund. If the merger is approved by shareowners, the Trust
would call for redemption and redeem all of its outstanding Auction Market
Preferred Shares prior to the closing of the merger.
Q: What affected the Trust's performance during the period?
A: The decline in the municipal bond market early in the period dampened
results. Also, the Trust's insured municipal bonds suffered because of
concerns surrounding the status of the bond rating agencies. A pull back
in special revenue tobacco bonds also held back the Trust's return.
On an absolute basis, the Trust's top five equity securities that
contributed to the Trust's investment return during the six-month period
were: Windstream Corp. (+7% total return for the period), a rural
wire-line phone service company; Atmos Energy Corp. (+7%), a high
dividend-yield utility with operations in regulated and unregulated
natural gas storage, marketing and distribution; AT&T, Inc. (+7%), which
rose on continued earnings growth; Spectra Energy Corp. (+12%), which
operates predominantly in gathering, processing, storing and distributing
natural gas; and Diamond Offshore Drilling, Inc. (+20%), owner of one of
the largest fleets of deep-water oil drilling vessels.
The Trust's large exposure to the financials sector, an area at the center
of the credit crisis, had a continuing negative impact on performance. In
particular, the Trust's many financial institution preferred-stock
holdings declined as credit-worthiness continued to be called into
question. The equity securities that had the greatest negative impact on
the Trust's absolute returns during the period was the pharmaceutical
company Merck & Co., Inc. (-33% total return for the period). After
producing strong returns in the previous six months, Merck gave back its
gains because of
10
Pioneer Municipal and Equity Income Trust
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adverse publicity surrounding its cholesterol-lowering drug joint venture
with Schering-Plough. We believe the damage caused by adverse publicity
will xxxxx to a degree, and the Trust continues to hold Merck in the
portfolio. Idearc, Inc. (-78%) declined dramatically as the market
interpreted the current cyclical decline in yellow pages advertising as
irreversible. We believe that Idearc stock should make a dramatic recovery
as the economy improves. The Trust's large position in Carolina Group
(-17%), the tobacco tracking stock of Lowes Corp., also declined. Shortly
after period-end, Carolina Group was spun out from Lowes and renamed
Lorillard. We believe Lorillard will increase its dividend and has the
potential to be a strong contributor to the Trust's future performance.
Xxxxxxx-Xxxxx Squibb Co. (-21%), another pharmaceutical company, also
disappointed during the period. We feel the company's strong dividend
yield and promising drug pipeline will continue to work to the Trust's
advantage, and the stock remains in the Trust's portfolio. The Trust's
large and long-standing convertible preferred holding in Lazard (-25%), an
investment banking advisory and asset management firm - a significant
contributor to performance in the past - declined because of the general
downturn in the financials sector. As we expected, the security converted
to common shares during the period, and the Trust continues to hold it.
Q: What is your investment outlook over the next several months?
A: The credit crisis has had an impact on the overall economy, as banks have
reduced their inclination to provide credit. The pullback in gross
domestic product (GDP) and the higher jobless numbers could be a direct
result of this situation. Nevertheless, we are positive for the long-term
prospects for the Trust. The municipal-bond market has recovered somewhat
from the turmoil of the first quarter, and demand for tax-free securities
is improving - a situation that should benefit the Trust. While the stock
market has retreated from its positive performance in April and May,
valuations currently present attractive investment opportunities. Also,
while current economic news remains unsettling, we expect the market to
begin focusing on potential for economic recovery in the future.
Information regarding the Trust's principal investment risks is contained in
the Trust's prospectus. Please refer to those documents when considering the
Trust's risks.
11
Pioneer Municipal and Equity Income Trust
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PORTFOLIO MANAGEMENT DISCUSSION 5/31/08 (continued)
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There can be no assurance as to the portion of the Trust's dividends that will
be tax-exempt or tax-qualified.
A portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to a capital gains tax. When
interest rates rise, the prices of fixed-income securities in the Trust will
generally fall. Conversely, when interest rates fall the prices of fixed-income
securities in the Trust will generally rise. By concentrating in municipal
securities, the portfolio is more susceptible to adverse economic, political or
regulatory developments than is a portfolio that invests more broadly.
Investments in the Trust are subject to possible loss due to the financial
failure of underlying securities and their inability to meet their debt
obligations.
The Trust may invest in derivative securities, which may include futures and
options. These types of instruments can increase price fluctuation.
The Trust currently uses leverage through the issuance of preferred shares. The
Trust is also authorized to borrow from banks and to issue debt securities,
which are other forms of leverage. Leverage creates significant risks,
including the risk that the Trust's income or capital appreciation will not be
sufficient to cover the cost of leverage, which may adversely affect the return
of the holders of common shares.
Any information in this shareowner report regarding market or economic trends
or the factors influencing the Trust's historical or future performance are
statements of the opinion of Trust 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
the market forecasts discussed will be realized.
12
Pioneer Municipal and Equity Income Trust
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SCHEDULE OF INVESTMENTS 5/31/08 (unaudited)
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S&P/Xxxxx'x
Principal Ratings
Amount (unaudited) Value
TAX EXEMPT OBLIGATIONS - 77.5% of Net Assets
Alabama - 1.5%
$5,000,000 NR/NR Huntsville-Redstone Village Special Care
Facilities Financing Authority, 5.5%, 1/1/43 $ 4,195,800
1,500,000 NR/NR Sylacauga Health Care Authority Revenue,
6.0%, 8/1/35 1,369,275
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$ 5,565,075
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Arizona - 1.1%
1,000,000 BBB/Baa1 Maricopa County Hospital Revenue,
5.0%, 4/1/35 $ 899,240
470,000+ NR/Baa3 Pima County Industrial Development Authority,
6.375%, 7/1/31 537,854
530,000 NR/Baa3 Pima County Industrial Development Authority,
6.375%, 7/1/31 530,419
989,000 NR/Baa3 Pima County Industrial Development Authority,
6.75%, 7/1/31 1,000,403
1,000,000+ NR/NR Pima County Industrial Development Authority,
7.5%, 7/1/34 1,192,370
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$ 4,160,286
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California - 3.3%
1,000,000 A/A2 California Health Facilities Authority Revenue,
5.25%, 7/1/23 $ 1,018,710
9,000,000 BBB/Baa3 Golden State Tobacco Securitization Corp.,
5.125%, 6/1/47 7,015,950
4,000,000+ AAA/Aaa Golden State Tobacco Securitization Corp.,
6.75%, 6/1/39 4,591,480
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$ 12,626,140
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Colorado - 0.7%
3,000,000 NR/NR Colorado Educational & Cultural Facilities
Authority Revenue, 5.5%, 6/1/37 (144A) $ 2,638,860
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Connecticut - 0.9%
1,500,000 BB/NR Mohegan Tribe Indians Gaming Authority,
5.25%, 1/1/33 (144A) $ 1,256,850
2,470,000 BB/NR Mohegan Tribe Indians Gaming Authority,
6.25%, 1/1/31 (144A) 2,349,612
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$ 3,606,462
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District of Columbia - 1.1%
4,000,000 BBB/Baa3 District of Columbia Tobacco Settlement
Financing Corp., 6.75%, 5/15/40 $ 4,021,800
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The accompanying notes are an integral part of these financial statements. 13
Pioneer Municipal and Equity Income Trust
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SCHEDULE OF INVESTMENTS 5/31/08 (unaudited) (continued)
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S&P/Xxxxx'x
Principal Ratings
Amount (unaudited) Value
Florida - 3.2%
$1,105,000 A+/A1 Highlands County Health Facilities Authority
Revenue, 5.0%, 11/15/24 $ 1,106,337
5,000,000+ XX/X0 Xxxxxxxxx Xxxxxx Health Facilities Authority
Revenue, 6.0%, 11/15/25 5,589,450
2,000,000 BB/XX Xxx County Industrial Development Authority
Revenue, 5.375%, 6/15/37 1,625,900
585,000 NR/NR Madison County First Mortgage Revenue,
6.0%, 7/1/25 555,680
2,025,000 BB+/NR Miami Beach Health Facilities Authority
Revenue, 5.375%, 11/15/28 1,803,728
500,000 BB+/Ba1 Miami Beach Health Facilities Authority
Revenue, 6.7%, 11/15/19 513,455
1,400,000 NR/NR Orange County Health Facilities Authority
Revenue, 5.5%, 7/1/38 1,188,446
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$ 12,382,996
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Georgia - 0.7%
2,500,000+ AAA/NR Milledgeville-Xxxxxxx County Development
Authority Revenue, 5.625%, 9/1/30 $ 2,844,075
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Illinois - 4.7%
3,000,000 AAA/Aaa Chicago Illinois General Obligation,
5.0%, 1/1/28 $ 3,062,850
4,580,000 XX/X0 Xxxxxxxx Development Finance Authority
Revenue, 5.25%, 10/1/24 4,706,271
5,000,000 AA+/Aaa Illinois Educational Facilities Authority
Revenue, 5.0%, 12/1/38 5,076,850
2,000,000+ AA+/Aa2 Illinois Finance Authority Revenue,
5.5%, 8/15/43 2,248,660
2,055,000(a) NR/Aa2 Illinois Finance Authority Revenue, RIB,
12.384%, 8/15/43 (144A) 2,923,690
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$ 18,018,321
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Indiana - 2.9%
5,000,000 A+/A2 Indiana Health & Educational Facilities
Financing Authority Hospital Revenue,
5.0%, 2/15/39 $ 4,708,450
4,135,000 BBB+/NR Indiana State Development Finance Authority
Revenue, 5.75%, 10/1/11 4,217,452
2,570,000 NR/XX Xxxx County Hospital Authority Revenue,
5.8%, 9/1/47 (144A) 2,247,928
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$ 11,173,830
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14 The accompanying notes are an integral part of these financial statements.
Pioneer Municipal and Equity Income Trust
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S&P/Xxxxx'x
Principal Ratings
Amount (unaudited) Value
Iowa - 0.9%
$4,000,000 NR/NR Iowa Financing Authority Senior Housing
Revenue, 5.625%, 12/1/45 $ 3,349,760
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Kansas - 0.6%
750,000 NR/NR Manhattan Health Care Facilities Revenue,
5.125%, 5/15/37 $ 600,622
2,000,000 NR/NR Manhattan Health Care Facilities Revenue,
5.125%, 5/15/42 1,611,300
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$ 2,211,922
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Louisiana - 3.3%
5,000,000 NR/A3 Louisiana Public Facilities Authority Revenue,
5.5%, 5/15/47 $ 4,819,100
8,335,000 BBB/Baa3 Tobacco Settlement Financing Corp.,
5.875%, 5/15/39 7,811,895
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$ 12,630,995
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Maryland - 1.9%
3,000,000 BBB-/Baa3 Xxxxxxxxx County Educational Facilities
Revenue, 5.625%, 9/1/38 $ 2,898,300
1,000,000 NR/NR Maryland State Economic Development
Revenue, Series A, 5.0%, 12/1/16 952,050
660,000 NR/NR Maryland State Economic Development
Revenue, Series B, 5.0%, 12/1/16 28,353
1,000,000 NR/NR Maryland State Economic Development
Revenue, 5.0%, 12/1/31 774,790
2,000,000+ X/X0 Xxxxxxxx Xxxxx Health & Higher Educational
Facilities Authority Revenue,
5.125%, 7/1/34 2,185,880
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$ 7,439,373
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Massachusetts - 7.4%
8,500,000(a) AAA/Aaa Xxxxxx Brothers Municipal Trust Receipts,
RIB, 8.056%, 9/1/24 (144A) $ 10,458,230
4,500,000 AA/NR Massachusetts Health & Educational Facilities
Authority Revenue, 4.625%, 8/15/28 4,128,300
2,000,000 AA+/Aaa Massachusetts Health & Educational Facilities
Authority Revenue, 5.0%, 7/1/33 2,032,200
1,550,000 BBB-/Baa3 Massachusetts Health & Educational Facilities
Authority Revenue, 5.25%, 7/15/18 1,540,297
1,600,000 BBB/NR Massachusetts Health & Educational Facilities
Authority Revenue, 5.45%, 11/15/23 1,603,520
2,120,000 BBB/Baa3 Massachusetts Health & Educational Facilities
Authority Revenue, 5.625%, 7/1/20 2,100,666
The accompanying notes are an integral part of these financial statements. 15
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 5/31/08 (unaudited) (continued)
--------------------------------------------------------------------------------
S&P/Xxxxx'x
Principal Ratings
Amount (unaudited) Value
Massachusetts - (continued)
$ 900,000 BBB/Baa3 Massachusetts Health & Educational Facilities
Authority Revenue, 6.25%, 7/1/22 $ 918,351
2,750,000 BBB/Baa2 Massachusetts Health & Educational Facilities
Authority Revenue, 6.625%, 7/1/32 2,824,387
500,000 BBB-/NR Massachusetts State Development Finance
Agency, 5.5%, 1/1/35 439,945
1,100,000 BBB/Baa2 Massachusetts State Development Finance
Agency, 5.625%, 10/1/24 1,114,223
1,000,000 BBB/Baa2 Massachusetts State Development Finance
Agency, 5.7%, 10/1/34 1,001,490
-------------
$ 28,161,609
-------------
Michigan - 3.1%
5,000,000 BB+/NR Macomb County Hospital Finance Authority
Revenue, 5.875%, 11/15/34 $ 4,693,100
1,595,000 NR/NR Meridian Economic Development Corporate
Ltd. Obligation Revenue, 5.25%, 7/1/26 1,488,135
3,340,000 NR/NR Michigan Public Educational Facilities Authority
Revenue, 5.875%, 6/1/37 2,943,375
2,000,000 NR/NR Michigan State Hospital Finance Authority
Revenue, 5.25%, 11/15/25 1,745,940
1,000,000 NR/NR Michigan State Hospital Finance Authority
Revenue, 5.5%, 11/15/35 859,080
-------------
$ 11,729,630
-------------
Minnesota - 1.5%
2,000,000+ A-/NR Duluth Economic Development Authority
Health Care Facilities Revenue,
5.25%, 2/15/28 $ 2,202,940
1,500,000+ A-/NR Duluth Economic Development Authority
Health Care Facilities Revenue,
5.25%, 2/15/33 1,652,205
1,000,000 NR/NR North Oaks Senior Housing Revenue,
6.0%, 10/1/33 959,730
1,000,000 NR/NR North Oaks Senior Housing Revenue,
6.5%, 10/1/47 1,009,630
-------------
$ 5,824,505
-------------
Missouri - 0.4%
1,720,000 AA/Aa3 Missouri State Health & Educational Authority
Health Facilities Revenue, 5.25%, 8/15/28 $ 1,717,730
-------------
16 The accompanying notes are an integral part of these financial statements.
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
S&P/Xxxxx'x
Principal Ratings
Amount (unaudited) Value
Montana - 0.3%
$1,000,000 NR/A3 Montana Finance Authority Hospital Facilities
Revenue, 5.0%, 6/1/24 $ 1,003,600
-------------
Nevada - 0.4%
1,500,000 A/A2 Henderson Nevada Health Care Facilities
Revenue, 5.625%, 7/1/24 $ 1,542,270
-------------
New Hampshire - 0.7%
1,700,000+ NR/NR New Hampshire Business Finance Authority
Revenue, 6.05%, 9/1/29 $ 1,781,923
1,000,000 A+/A2 New Hampshire Health & Education Facilities
Authority Revenue, 5.75%, 10/1/31 1,018,270
-------------
$ 2,800,193
-------------
New Jersey - 6.2%
1,250,000 BBB/Baa3 Camden County Improvement Authority
Revenue, 5.75%, 2/15/34 $ 1,221,987
5,920,000(a) NR/Aaa Garden State Preservation Trust, RIB,
13.774%, 11/1/22 (144A) 8,325,710
710,000 NR/NR New Jersey Economic Development Authority
Revenue, 5.75%, 1/1/25 656,388
1,000,000 NR/NR New Jersey Economic Development Authority
Revenue, 5.875%, 1/1/37 880,950
1,000,000 BB/Ba2 New Jersey Health Care Facilities Financing
Authority Revenue, 5.125%, 7/1/14 943,080
5,000,000 BBB/Baa1 New Jersey Health Care Facilities Financing
Authority Revenue, 5.375%, 7/1/33 4,771,450
3,500,000 NR/NR New Jersey Health Care Facilities Financing
Authority Revenue, 7.25%, 7/1/27 3,449,950
3,000,000+ AAA/Aaa Tobacco Settlement Financing Corp.,
6.25%, 6/1/43 3,413,670
-------------
$ 23,663,185
-------------
New Mexico - 0.6%
1,000,000 AA/NR Dona Xxx County PILT Revenue,
5.25%, 12/1/25 $ 1,009,310
1,500,000 NR/A3 Farmington New Mexico Hospital Revenue,
5.0%, 6/1/23 1,446,315
-------------
$ 2,455,625
-------------
The accompanying notes are an integral part of these financial statements. 17
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 5/31/08 (unaudited) (continued)
--------------------------------------------------------------------------------
S&P/Xxxxx'x
Principal Ratings
Amount (unaudited) Value
New York - 5.4%
$2,500,000 BBB+/Baa2 Albany Industrial Development Agency Civic
Facilities Revenue, 5.25%, 11/15/32 $ 2,426,250
2,000,000 NR/NR Dutchess County Industrial Development
Agency Revenue, 7.5%, 3/1/29 2,130,320
3,255,000(a) NR/Aa2 Xxxxxx Brothers Municipal Trust Receipts,
RIB, 10.039%, 6/15/38 (144A) 3,452,676
1,700,000 NR/NR Nassau County Industrial Development
Agency, 6.7% 1/1/43 1,702,006
1,000,000 NR/Aa1 New York City Industrial Development Agency,
5.0%, 7/1/27 1,028,470
1,000,000 NR/Aa1 New York City Industrial Development Agency,
5.25%, 7/1/24 1,050,360
5,000,000 AA-/Aa3 Port Authority of New York & New Jersey
Revenue, 5.0%, 9/1/38 5,097,100
1,000,000 NR/NR Suffolk County Industrial Development
Agency Civic Facilities Revenue, 5.5%,
1/1/37 (144A) 834,840
3,000,000 NR/NR Ulster County Industrial Development Agency
Civic Facility Revenue, 6.0%, 9/15/27 2,792,490
-------------
$ 20,514,512
-------------
North Carolina - 0.5%
1,000,000 AA/Aa3 North Carolina Capital Facilities Finance
Agency Student Revenue, 5.0%, 6/1/27 $ 981,950
1,000,000 AA/Aa3 North Carolina Capital Facilities Finance
Agency Student Revenue, 5.0%, 6/1/32 947,830
-------------
$ 1,929,780
-------------
Ohio - 2.2%
1,500,000 NR/NR Cuyahoga County Health Care & Independent
Living Facilities Revenue, 6.0%, 5/15/37 $ 1,364,700
1,500,000 NR/NR Cuyahoga County Health Care & Independent
Living Facilities Revenue, 6.0%, 5/15/42 1,354,425
1,000,000 NR/Baa3 Xxxxxxxx County Hospital Facilities Revenue,
5.125%, 5/15/28 961,910
3,955,000(a) NR/Aa2 Xxxxxx Brothers Municipal Trust Receipts,
RIB, 10.212%, 6/1/28 (144A) 4,526,933
-------------
$ 8,207,968
-------------
18 The accompanying notes are an integral part of these financial statements.
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
S&P/Xxxxx'x
Principal Ratings
Amount (unaudited) Value
Oregon - 0.8%
$2,935,000 NR/Aaa Oregon State Housing & Community
Services Department Multi-Family
Revenue, 6.0%, 7/1/31 $ 2,947,327
-------------
Pennsylvania - 3.6%
3,000,000 BB/Ba2 Allegheny County Hospital Development
Authority Revenue, 5.375%, 11/15/40 $ 2,524,680
5,000,000+ AAA/Aaa Pennsylvania State Turnpike Commission Oil
Franchise Tax Revenue, 5.0%, 12/1/31 5,467,450
1,315,000+ A/XX Xxxxx Health Care Facilities Authority
Revenue, 5.875%, 12/1/31 1,453,338
685,000 A/XX Xxxxx Health Care Facilities Authority
Revenue, 5.875%, 12/1/31 701,693
280,000 B-/XX Xxxxxxxx-Lackawanna Health and Welfare
Authority Hospital Revenue, 5.9%, 7/1/08 279,969
700,000 B-/XX Xxxxxxxx-Lackawanna Health and Welfare
Authority Hospital Revenue, 6.0%, 7/1/09 700,462
460,000 B-/XX Xxxxxxxx-Lackawanna Health and Welfare
Authority Hospital Revenue, 6.05%, 7/1/10 460,304
2,165,000 AAA/Aaa Swarthmore Borough Authority College
Revenue, 5.0%, 9/15/31 2,189,703
-------------
$ 13,777,599
-------------
Puerto Rico - 1.3%
75,000+ BBB-/Baa3 Puerto Rico Public Buildings Authority
Revenue, 5.25%, 7/1/33 $ 82,093
4,925,000 BBB-/Baa3 Puerto Rico Public Buildings Authority
Revenue, 5.25%, 7/1/33 4,884,073
-------------
$ 4,966,166
-------------
Rhode Island - 1.2%
1,640,000 BBB/Baa3 Tobacco Settlement Financing Corp.,
6.125%, 6/1/32 $ 1,594,654
3,100,000 BBB/Baa3 Tobacco Settlement Financing Corp.,
6.25%, 6/1/42 2,957,679
-------------
$ 4,552,333
-------------
South Carolina - 3.5%
2,000,000 A-/A3 Berkeley County School District Installment
Lease, 5.0%, 12/1/28 $ 2,003,800
5,000,000 AAA/Aaa Xxxxxxxx County Hospital Revenue,
5.25%, 11/1/34 5,092,450
3,500,000+ A+/A2 Lexington County Health Services District,
Inc., Hospital Revenue, 5.5%, 11/1/32 3,858,505
The accompanying notes are an integral part of these financial statements. 19
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 5/31/08 (unaudited) (continued)
--------------------------------------------------------------------------------
S&P/Xxxxx'x
Principal Ratings
Amount (unaudited) Value
South Carolina - (continued)
$ 540,000+ A-/A3 South Carolina Jobs Economic Development
Authority Revenue, 5.5%, 11/15/23 $ 594,632
1,960,000 A-/A3 South Carolina Jobs Economic Development
Authority Revenue, 5.5%, 11/15/23 2,002,610
-------------
$ 13,551,997
-------------
Tennessee - 0.7%
2,500,000 NR/Ba2 Xxxx County Health Educational & Housing
Facilities Board Hospital Revenue,
6.5%, 4/15/31 $ 2,591,400
-------------
Texas - 4.6%
1,552,000 NR/Aaa Houston Housing Financing Corp.,
6.25%, 9/20/31 $ 1,610,821
2,750,000 AAA/Aaa Lower Colorado River Authority,
5.0%, 5/15/31 2,785,365
1,711,000 NR/Aaa Panhandle Regional Housing Finance Corp.,
6.6%, 7/20/31 1,807,381
3,000,000 BBB-/Baa2 Xxxxxxxxxx Hospital Authority, 6.0%, 12/1/34 2,926,200
1,000,000 BBB/XX Xxxxxx Higher Education Facilities Corp.
Revenue, 5.0%, 9/1/23 956,700
1,500,000 NR/Baa3 Texas State Student Housing Revenue,
6.5%, 9/1/34 1,521,300
3,000,000 NR/XX Xxxxxxx County Local Government Corp.
Revenue, 6.0%, 9/1/10 2,990,520
3,000,000 NR/XX Xxxxxxx County Local Government Corp.
Revenue, 6.875%, 9/1/28 2,958,630
-------------
$ 17,556,917
-------------
Vermont - 1.4%
3,750,000(a) AA/XX Xxxxxx Brothers Municipal Trust Receipts,
RIB, 12.392%, 10/31/46 (144A) $ 3,980,100
1,295,000 AA/Aa3 Vermont Educational & Health Buildings
Financing Agency Revenue, 5.0%, 7/1/24 1,289,276
-------------
$ 5,269,376
-------------
Virginia - 1.4%
1,500,000 NR/A3 Prince Xxxxxxx County Industrial Development
Hospital Revenue, 5.2%, 10/1/26 $ 1,508,070
3,925,000 NR/A3 Prince Xxxxxxx County Industrial Development
Hospital Revenue, 5.35%, 10/1/36 3,868,362
-------------
$ 5,376,432
-------------
20 The accompanying notes are an integral part of these financial statements.
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
Washington - 2.6%
$3,000,000 AA/A1 King County Washington Sewer Revenue,
5.0%, 1/1/35 $ 3,037,470
7,000,000 BBB/Baa3 Tobacco Settlement Authority Revenue,
6.625%, 6/1/32 7,039,830
-------------
$ 10,077,300
-------------
Wisconsin - 0.9%
3,500,000 BBB+/NR Wisconsin State Health & Educational
Facilities Authority Revenue,
5.6%, 2/15/29 $ 3,382,365
-------------
TOTAL TAX-EXEMPT OBLIGATIONS
(Cost $294,041,774)(b) $ 296,269,714
-------------
Shares
COMMON STOCKS - 39.2% of Net Assets
Energy - 1.7%
Oil & Gas Drilling - 0.7%
19,566 Diamond Offshore Drilling, Inc. $ 2,669,585
-------------
Oil & Gas Storage & Transportation - 1.0%
142,876 Spectra Energy Corp. $ 3,860,510
-------------
Total Energy $ 6,530,095
-------------
Materials - 0.5%
Diversified Chemicals - 0.5%
94,000 Xxxx Corp. $ 2,115,000
-------------
Total Materials $ 2,115,000
-------------
Capital Goods - 0.5%
Aerospace & Defense - 0.5%
27,334 Northrop Grumman Corp., 7.0% $ 2,062,624
-------------
Total Capital Goods $ 2,062,624
-------------
Commercial Services & Supplies - 0.8%
Commercial Printing - 0.7%
79,034 X.X. Xxxxxxxxx & Sons Co. $ 2,594,686
-------------
Office Services & Supplies - 0.1%
31,486 Xxxxxxx International, Inc. $ 332,177
-------------
Total Commercial Services & Supplies $ 2,926,863
-------------
Consumer Durables & Apparel - 0.2%
Home Furnishings - 0.2%
50,000 Xxxxxxx Furniture Industries, Inc. $ 599,500
-------------
Total Consumer Durables & Apparel $ 599,500
-------------
The accompanying notes are an integral part of these financial statements. 21
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 5/31/08 (unaudited) (continued)
--------------------------------------------------------------------------------
Shares Value
Media - 1.3%
Movies & Entertainment - 1.0%
206,487 Regal Entertainment Group $ 3,627,977
-------------
Publishing - 0.3%
295,935 Idearc, Inc. $ 1,189,659
-------------
Total Media $ 4,817,636
-------------
Food, Beverage & Tobacco - 8.5%
Packaged Foods & Meats - 2.2%
532,758 B&G Foods, Inc. $ 5,178,408
92,828 Kraft Foods, Inc. 3,015,053
-------------
$ 8,193,461
-------------
Tobacco - 6.3%
134,140 Altria Group, Inc. $ 2,985,956
172,872 Loews Corp. - Carolina Group 12,541,864
134,140 Xxxxxx Xxxxxx International, Inc. 7,063,812
29,704 Xxxxxxxx American, Inc. 1,631,344
-------------
$ 24,222,976
-------------
Total Food, Beverage & Tobacco $ 32,416,437
-------------
Pharmaceuticals, Biotechnology & Life Sciences - 4.2%
Pharmaceuticals - 4.2%
329,758 Xxxxxxx-Xxxxx Squibb Co. $ 7,515,185
216,536 Merck & Co., Inc. 8,436,243
-------------
Total Pharmaceuticals, Biotechnology &
Life Sciences $ 15,951,428
-------------
Banks - 1.4%
Diversified Banks - 0.2%
28,642 Wachovia Corp. $ 681,680
-------------
Regional Banks - 0.7%
81,550 KeyCorp $ 1,587,778
67,800 Regions Financial Corp. 1,208,196
-------------
$ 2,795,974
-------------
Thrifts & Mortgage Finance - 0.5%
222,700 TrustCo Bank Corp., NY $ 1,950,852
-------------
Total Banks $ 5,428,506
-------------
Diversified Financials - 1.7%
Other Diversified Financial Services - 0.4%
42,500 Bank of America Corp. $ 1,445,425
-------------
Investment Banking & Brokerage - 1.3%
134,161 Lazard, Ltd., 6.625% $ 5,110,204
-------------
Total Diversified Financials $ 6,555,629
-------------
22 The accompanying notes are an integral part of these financial statements.
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Shares Value
Telecommunication Services - 10.4%
Integrated Telecommunication Services - 10.4%
187,900 AT&T, Inc. $ 7,497,210
529,946 Citizens Communications Co. 6,179,170
7,670 FairPoint Communications, Inc. 69,030
406,745 Verizon Communications, Inc. 15,647,480
790,184 Windstream Corp. 10,541,055
-------------
Total Telecommunication Services $ 39,933,945
-------------
Utilities - 8.0%
Electric Utilities - 0.8%
138,400 Empire District Electric Co. $ 2,862,112
-------------
Gas Utilities - 3.6%
81,249 AGL Resources, Inc. $ 2,900,589
395,466 Atmos Energy Corp. 10,831,814
-------------
$ 13,732,403
-------------
Multi-Utilities - 3.6%
100,000 Consolidated Edison, Inc. $ 4,130,000
285,753 Duke Energy Corp. 5,280,715
134,112 NSTAR 4,496,775
-------------
$ 13,907,490
-------------
Total Utilities $ 30,502,005
-------------
TOTAL COMMON STOCKS
(Cost $141,760,163) $ 149,839,668
-------------
NON-CONVERTIBLE PREFERRED STOCKS - 19.4% of Net Assets
Energy - 1.1%
Oil & Gas Exploration & Production- 1.1%
49,300 Apache Corp., Series B, 5.68% $ 4,073,413
-------------
Total Energy $ 4,073,413
-------------
Automobiles & Components - 1.1%
Automobile Manufacturers - 1.1%
126,542 Ford Motor Co. Capital Trust II, 6.5% $ 4,203,770
-------------
Total Automobiles & Components $ 4,203,770
-------------
Banks - 5.0%
Diversified Banks - 2.1%
105,000 Bank One Capital VI, 7.2% $ 2,580,646
170,579 Royal Bank of Scotland Group Plc,
Series Q, 6.75% 3,880,672
71,000 Wachovia Preferred Funding Corp., Series A, 7.25% 1,668,500
-------------
$ 8,129,818
-------------
The accompanying notes are an integral part of these financial statements. 23
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 5/31/08 (unaudited) (continued)
--------------------------------------------------------------------------------
Shares Value
Thrifts & Mortgage Finance - 2.9%
56,980 Countrywide Capital V, 7.0% $ 1,025,787
171,677 Xxxxxx Xxx, Series N, 6.75% 3,948,571
57,000 Xxxxxxx Mac, 5.81% 2,257,200
39,000 Xxxxxxx Mac, Series F, 5.0% 1,361,100
58,000 Xxxxxxx Mac, Series K, 5.79% 2,279,400
-------------
$ 10,872,058
-------------
Total Banks $ 19,001,876
-------------
Diversified Financials - 5.6%
Other Diversified Financial Services - 1.6%
120,000 Bank of America Corp., Series D, 6.204% $ 2,593,200
150,000 JPMorgan Chase Capital Trust XVI, 6.35% 3,582,000
-------------
$ 6,175,200
-------------
Consumer Finance - 0.9%
18,000 MBNA Capital, Series D, 8.125% $ 446,033
71,300 SLM Holdings Corp., Series A, 6.97% 2,914,744
-------------
$ 3,360,777
-------------
Investment Banking & Brokerage - 3.1%
57,000 Bear Xxxxxxx Companies, Inc., Series F, 5.72% $ 2,416,800
40,000 Bear Xxxxxxx Companies, Inc., Series G, 5.49% 1,560,000
100,000 Xxxxxx Brothers Holdings, Inc., 6.5% 1,948,000
19,000 Xxxxxx Brothers Holdings, Inc., Series C, 5.94% 684,000
50,800 Xxxxxx Brothers Holdings, Inc., Series D, 5.67% 1,728,216
65,000 Xxxxxxx Xxxxx Preferred Capital Trust IV, 7.12% 1,438,793
87,000 Xxxxxxx Xxxxx Preferred Capital Trust V, 7.28% 1,970,413
-------------
$ 11,746,222
-------------
Total Diversified Financials $ 21,282,199
-------------
Insurance - 2.2%
Life & Health Insurance - 0.2%
159,000 Scottish Re Group, Ltd., 7.25% $ 874,500
-------------
Property & Casualty Insurance - 2.0%
160,000 ACE, Ltd., Series C, 7.8% $ 4,000,000
161,000 Xxxxxxx X.X. Capital Trust II, 6.75% 3,722,845
-------------
$ 7,722,845
-------------
Total Insurance $ 8,597,345
-------------
Real Estate - 1.4%
Industrial Real Estate Investment Trust - 0.2%
40,000 Prologis Trust, Series G, 6.75% $ 931,600
-------------
24 The accompanying notes are an integral part of these financial statements.
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Shares Value
Office Real Estate Investment Trust - 0.3%
15,000 Brandywine Realty Trust, Series C, 7.5% $ 345,000
34,500 Brandywine Realty Trust, Series D, 7.375% 772,800
-------------
$ 1,117,800
-------------
Retail Real Estate Investment Trust - 0.9%
94,000 Regency Centers Corp., Series C, 7.45% $ 2,231,560
53,500 Regency Centers Corp., Series E, 6.7% 1,166,835
-------------
$ 3,398,395
-------------
Total Real Estate $ 5,447,795
-------------
Utilities - 3.0%
Electric Utilities - 2.6%
98,000 Alabama Power Co., 5.3% $ 2,190,300
113,000 Alabama Power Co., 5.83% 2,751,550
78,000 Interstate Power and Light Co., Series B, 8.375% 2,184,000
40,000 Mississippi Power Co., 5.25% 960,000
7,700 PPL Electric Utilities Corp., 4.5% 623,700
73,000 Southern California Edison Co., 4.32% 1,405,980
-------------
$ 10,115,530
-------------
Gas Utilities - 0.4%
62,000 Southern Union Co., Series C, 7.55% $ 1,563,640
-------------
Total Utilities $ 11,679,170
-------------
TOTAL NON-CONVERTIBLE PREFERRED STOCKS
(Cost $88,994,758) $ 74,285,568
-------------
CONVERTIBLE PREFERRED STOCKS - 1.0% of Net Assets
Commercial Services & Supplies - 0.8%
Office Services & Supplies - 0.8%
60,000 Xxxxx Xxxxxxxx Corp., 7.875% $ 3,000,000
-------------
Total Commercial Services & Supplies $ 3,000,000
-------------
Insurance - 0.2%
Property & Casualty Insurance - 0.2%
47,919 XL Capital, Ltd., Class A, 7.0% $ 667,032
-------------
Total Insurance $ 667,032
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $4,203,880) $ 3,667,032
-------------
The accompanying notes are an integral part of these financial statements. 25
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 5/31/08 (unaudited) (continued)
--------------------------------------------------------------------------------
Shares Value
TAX-EXEMPT MONEY MARKET MUTUAL FUND - 8.6% of Net Assets
33,005,000 BlackRock Liquidity Funds MuniFund Portfolio $ 33,005,000
-------------
TOTAL TAX-EXEMPT MONEY MARKET MUTUAL FUND
(Cost $33,005,000) $ 33,005,000
-------------
TOTAL INVESTMENTS IN SECURITIES - 145.7%
(Cost $562,005,575)(c) $ 557,066,982
-------------
OTHER ASSETS AND LIABILITIES 0.5% $ 1,789,349
-------------
PREFERRED SHARES AT REDEMPTION VALUE,
INCLUDING DIVIDENDS PAYABLE - (46.2%) $(176,446,296)
-------------
NET ASSETS APPLICABLE TO COMMON
SHAREOWNERS - 100.0% $ 382,410,035
=============
Portfolio Abbreviations
RIB Residual Interest Bonds
(144A) Security is exempt from registration under Rule 144A of the Securities
Act of 1933. Such securities may be resold normally to qualified
institutional buyers in a transaction exempt from registration. At
May 31, 2008, the value of these securities amounted $42,995,429, or
11.2% of total net assets.
NR Security not rated by S&P or Moody's.
+ Prerefunded bonds have been collateralized by U.S. Treasury securities or
U.S. Government Agencies, which are held in escrow to pay interest and
principal on the tax exempt issue and to retire the bonds in full at the
earliest refunding date.
(a) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the coupon rate
at May 31, 2008.
(b) The concentration of tax-exempt investments by type of obligation/market
sector is as follows:
Insured:
FSA 8.1%
Radian 3.1
MBIA 1.7
FGIC 1.2
AMBAC 0.9
-----
15.0%
General Obligation 3.2
Revenue Bonds:
Health Revenue 30.2
Tobacco Revenue 15.3
Other Revenue 10.0
Development Revenue 9.4
Education Revenue 7.1
Housing Revenue 3.5
Facilities Revenue 3.0
Transportation Revenue 1.6
Gaming Revenue 1.1
School District Revenue 0.6
-----
100.0%
=====
26 The accompanying notes are an integral part of these financial statements.
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(c) At May 31, 2008, the net unrealized loss on investments based on cost for
federal income tax purposes of $561,737,943 was as follows:
Aggregate gross unrealized gain for all investments in which there is an
excess of value over tax cost $31,126,949
Aggregate gross unrealized loss for all investments in which there is an
excess of tax cost over value (35,797,910)
-----------
Net unrealized loss $(4,670,961)
===========
For financial reporting purposes net unrealized loss on investments was
$4,938,593 and cost of investments aggregated $562,005,575.
Purchases and sales of securities (excluding temporary cash investments) for
the six months ended May 31, 2008, aggregated $37,122,225 and $71,899,278,
respectively.
FAS 157 Footnote Disclosures
Various inputs are used in determining the value of the Trust's investments.
These inputs are summarized in the three broad levels listed below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk,
etc.)
Level 3 - significant unobservable inputs (including the Trust's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of May 31, 2008, in valuing
the Trust's assets:
Investments Other Financial
Valuation Inputs in Securities Instruments*
--------------------------------------------------------------------------------
Level 1 - Quoted Prices $223,718,855 $ -
Level 2 - Other Significant Observable Inputs 333,348,127 (906,708)
Level 3 - Significant Unobservable Inputs - -
------------ ----------
Total $557,066,982 $ (906,708)
============ ==========
* Other financial instruments include, interest rate swaps.
The accompanying notes are an integral part of these financial statements. 27
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 5/31/08 (unaudited)
--------------------------------------------------------------------------------
ASSETS:
Investments in securities, at value (cost $562,005,575) $557,066,982
Receivables -
Dividends and interest 6,173,665
Prepaid expenses 21,525
------------
Total assets $563,262,172
------------
LIABILITIES:
Due to custodian $ 3,143,472
Due to affiliates 292,163
Administration fee payable 31,134
Unrealized depreciation on interest rate swaps 906,708
Accrued other expenses 32,364
------------
Total liabilities $ 4,405,841
------------
PREFERRED SHARES AT REDEMPTION VALUE:
$25,000 liquidation value per share applicable to 7,050
shares, including dividends payable of $196,296 $176,446,296
------------
NET ASSETS APPLICABLE TO COMMON SHAREOWNERS:
Paid-in capital $406,036,048
Distribution in excess of net investment income (9,312,273)
Accumulated net realized loss on investments and interest
rate swaps (8,468,439)
Net unrealized loss on investments (4,938,593)
Net unrealized loss on interest rate swaps (906,708)
------------
Net assets applicable to common shareowners $382,410,035
============
NET ASSET VALUE PER SHARE:
No par value, (unlimited number of shares authorized)
Based on $382,410,035/28,706,981 common shares $ 13.32
============
28 The accompanying notes are an integral part of these financial statements.
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (unaudited)
--------------------------------------------------------------------------------
For the Six Months Ended 5/31/08
INVESTMENT INCOME:
Dividends $ 6,438,103
Interest 10,154,571
------------
$ 16,592,674
------------
EXPENSES:
Management fees $ 1,713,148
Administration fees 235,624
Transfer agent fees and expenses 65,680
Auction agent fees 234,182
Custodian fees 17,173
Registration fees 13,143
Professional fees 222,423
Printing expense 15,590
Trustees' fees 16,147
Pricing fees 7,249
Insurance fees 9,111
Miscellaneous 23,478
------------
Total expenses $ 2,572,948
Less fees paid indirectly (50)
------------
Net expenses $ 2,572,898
------------
Net investment income $ 14,019,776
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND INTEREST RATE SWAPS:
Net realized loss from:
Investments $ (8,397,381)
Interest rate swaps (71,058) $ (8,468,439)
------------ ------------
Change in net unrealized gain (loss) from:
Investments $(24,149,426)
Interest rate swaps (995,071) $(25,144,497)
------------ ------------
Net loss on investments and interest
rate swaps $(33,612,936)
------------
DISTRIBUTIONS TO PREFERRED SHAREOWNERS
FROM NET INVESTMENT INCOME: $ (4,064,010)
------------
Net decrease in net assets applicable to common
shareowners resulting from operations $(23,657,170)
============
The accompanying notes are an integral part of these financial statements. 29
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
For the Six Months Ended 5/31/08 and Year Ended 11/30/07, respectively
Six Months
Ended Year
5/31/08 Ended
(unaudited) 11/30/07
FROM OPERATIONS:
Net investment income $ 14,019,776 $ 27,937,587
Net realized gain (loss) on investments and interest
rate swaps (8,468,439) 4,083,359
Change in net unrealized gain on investments
and interest rate swaps (25,144,497) (35,033,973)
Dividends and distributions to preferred
shareowners from:
Net investment income (4,064,010) (7,768,522)
Net realized gains - (908,387)
------------- -------------
Net decrease in net assets applicable to
common shareowners $ (23,657,170) $ (11,689,936)
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON
SHAREOWNERS:
Net investment income
($0.67 and $0.85 per share, respectively) $ (19,291,091) $ (24,511,851)
Net realized gains
($0.00 and $0.10 per share, respectively) - (2,731,074)
------------- -------------
Total distributions to common shareowners $ (19,291,091) $ (27,242,925)
------------- -------------
Net decrease in net assets applicable
to common shareowners $ (42,948,261) $ (38,932,861)
NET ASSETS APPLICABLE TO COMMON
SHAREOWNERS:
Beginning of period $ 425,358,296 $ 464,291,157
------------- -------------
End of period $ 382,410,035 $ 425,358,296
============= =============
Undistributed (distribution in excess of) net
investment income $ (9,312,273) $ 23,052
============= =============
30 The accompanying notes are an integral part of these financial statements.
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For the
Six Months
Ended Year
5/31/08 Ended
(unaudited) 11/30/07
Per Common Share Operating Performance
Net asset value, beginning of period $ 14.82 $ 16.17
-------- --------
Increase (decrease) from investment operations:(a)
Net investment income $ 0.49 $ 0.97
Net realized and unrealized gain (loss) on investments and
interest rate swaps (1.18) (1.07)
Dividends and distributions to preferred shareowners from:
Net Investment income (0.14) (0.27)
Net realized gain - (0.03)
-------- --------
Net increase (decrease) from investment operations $ (0.83) $ (0.40)
Dividends and distributions to common shareowners from:
Net investment income (0.67) (0.85)
Net realized gain - (0.10)
Capital charge with respect to issuance of:
Common shares - -
Preferred shares - -
-------- --------
Net increase (decrease) in net asset value $ (1.50) $ (1.35)
-------- --------
Net asset value, end of period(e) $ 13.32 $ 14.82
======== ========
Market value, end of period(e) $ 12.93 $ 13.41
======== ========
Total return at market value(f) 1.56% 2.30%
Ratios to average net assets of common shareowners
Net expenses(g) 1.30%(h) 1.26%
Net investment income before preferred share dividends 7.10%(h) 6.12%
Preferred share dividends 2.06%(h) 1.70%
Net investment income available to common shareowners 5.04%(h) 4.42%
Portfolio turnover 7% 23%
Net assets of common shareowners, end of period (in thousands) $382,410 $425,358
Preferred shares outstanding (in thousands) $176,250 $176,250
Asset coverage per preferred share, end of period $ 79,270 $ 85,354
Average market value per preferred share(i) $ 25,000 $ 25,000
Liquidation value, including dividends payable, per preferred share $ 25,028 $ 25,019
Year Year 1/30/04(b)
Ended Ended to
11/30/06 11/30/05 11/30/04
Per Common Share Operating Performance
Net asset value, beginning of period $ 14.65 $ 14.55 $ 14.33(c)
-------- -------- --------
Increase (decrease) from investment operations:(a)
Net investment income $ 0.98 $ 0.95 $ 0.66
Net realized and unrealized gain (loss) on investments and
interest rate swaps 1.57 0.13 0.27
Dividends and distributions to preferred shareowners from:
Net Investment income (0.26) (0.19) (0.06)
Net realized gain (0.02) -(d) -
-------- -------- --------
Net increase (decrease) from investment operations $ 2.27 $ 0.89 $ 0.87
Dividends and distributions to common shareowners from:
Net investment income (0.67) (0.79) (0.55)
Net realized gain (0.08) - -
Capital charge with respect to issuance of:
Common shares - - (0.03)
Preferred shares - - (0.07)
-------- -------- --------
Net increase (decrease) in net asset value $ 1.52 $ 0.10 $ 0.22
-------- -------- --------
Net asset value, end of period(e) $ 16.17 $ 14.65 $ 14.55
======== ======== ========
Market value, end of period(e) $ 14.00 $ 12.18 $ 12.74
======== ======== ========
Total return at market value(f) 21.79% 1.51% (11.26)%
Ratios to average net assets of common shareowners
Net expenses(g) 1.12% 1.12% 1.04%(h)
Net investment income before preferred share dividends 6.43% 6.32% 5.69%(h)
Preferred share dividends 1.69% 1.28% 0.55%(h)
Net investment income available to common shareowners 4.74% 5.04% 5.14%(h)
Portfolio turnover 16% 27% 63%
Net assets of common shareowners, end of period (in thousands) $464,291 $420,476 $417,789
Preferred shares outstanding (in thousands) $176,250 $176,250 $176,250
Asset coverage per preferred share, end of period $ 90,870 $84,651 $ 84,264
Average market value per preferred share(i) $ 25,000 $25,000 $ 25,000
Liquidation value, including dividends payable, per preferred share $ 25,015 $25,009 $ 25,003
The accompanying notes are an integral part of these financial statements. 31
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Ratios to average net assets of common shareowners before
waivers and reimbursements of expenses
Net expenses(g) 1.30%(h) 1.26% 1.12% 1.12% 1.05%(h)
Net investment income before preferred share dividends 7.10%(h) 6.12% 6.43% 6.32% 5.68%(h)
Preferred share dividends 2.06%(h) 1.70% 1.69% 1.28% 0.55%(h)
Net investment income available to common shareowners 5.04%(h) 4.42% 4.74% 5.04% 5.13%(h)
(a) The per common share data presented above is based upon the average common
shares outstanding for the periods presented.
(b) The Trust shares were first publicly offered on January 28, 2004.
(c) Net asset value immediately after the closing of the first public offering
was $14.30.
(d) Amount is less than $0.01 per common share.
(e) Net asset value and market value are published in Xxxxxx'x on Saturday, The
Wall Street Journal on Monday and The New York Times on Monday and Saturday.
(f) Total investment return is calculated assuming a purchase of common shares
at the current market value on the first day and a sale at the current
market value on the last day of the periods reported. Dividends and
distributions, if any, are assumed for purposes of this calculation to be
reinvested at prices obtained under the Trust's dividend reinvestment plan.
Total investment return does not reflect brokerage commissions. Total
investment return less than a full period is not annualized. Past
performance is not a guarantee of future results.
(g) Expense ratios do not reflect the effect of dividend payments to preferred
shareowners.
(h) Annualized.
(i) Market value is redemption without an active market.
The information above represents the operating performance data for a share of
common stock outstanding, total investment return, ratios to average net assets
of common shareowners and other supplemental data for the periods indicated.
This information has been determined based upon financial information provided
in the financial statements and market value data for the Trust's common shares.
32 The accompanying notes are an integral part of these financial statements.
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
--------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Municipal and Equity Income Trust (the "Trust") was organized as a
Delaware statutory trust and registered as a diversified, closed-end management
investment company under the Investment Company Act of 1940. The Trust changed
its name from Pioneer Tax Advantaged Balanced Trust effective November 7, 2007.
The Trust's investment objective is to provide a high level of total after-tax
return, including attractive tax-advantaged income.
The Trust may invest in municipal securities with a broad range of maturities
and credit ratings, including both investment grade and below investment grade
municipal securities. By concentrating in municipal securities, the portfolio
is more susceptible to adverse economic, political or regulatory developments
than is a portfolio that invests more broadly. Investments in the Trust are
subject to possible loss due to the financial failure of underlying securities
and their inability to meet their debt obligations. The Trust may also invest
in common stocks and preferred securities that pay tax-qualified dividends. In
addition, the Trust may invest in other securities, including debt instruments,
real estate investment trusts ("REITs") and equity securities, that generate
income taxable at ordinary income rates, rather than long-term capital gain
rates.
There can be no assurance as to the portion of the Trust's dividends that will
be tax-exempt or tax-qualified.
A portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to a capital gains tax. When
interest rates rise, the prices of fixed income securities in the Trust will
generally fall. Conversely, when interest rates fall the prices of fixed-income
securities in the Trust will generally rise.
The Trust may invest in derivative securities, which may include futures and
options. These types of instruments can increase price fluctuation.
Information regarding the Trust's principal risks is contained in the Trust's
original offering prospectus, with additional information included in the
Trust's shareowner reports from time to time. Please refer to those documents
when considering the Trust's risks. At times, the Trust's investments may
represent industries or industry sectors that are interrelated or have common
risks, making it more
33
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
--------------------------------------------------------------------------------
susceptible to any economic, political, or regulatory developments or other
risks affecting those industries and sectors.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, and the reported amounts of income,
expenses and gains and losses on investments during the reporting period.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Trust in preparation of its financial statements, which are consistent with
those policies generally accepted in the investment company industry:
A. Security Valuation
Security transactions are recorded as of trade date. Fixed-income
securities are valued at prices supplied by independent pricing services,
which consider such factors as Treasury spreads, yields, maturities and
ratings. Valuations may be supplemented by values obtained from dealers
and other sources, as required. Equity securities are valued at the last
sale price on the principal exchange where they are traded. The values of
interest rate swaps are determined by obtaining dealer quotations.
Securities for which market quotations are not readily available are
valued using fair value methods pursuant to procedures adopted by the
Board of Trustees. The Trust may also use the fair value of a security,
including a non U.S. security, when the closing market price on the
principal exchange where the security is traded no longer accurately
reflects the value of the security as of the close of the exchange. At May
31, 2008, there were no securities fair valued. Temporary cash investments
are valued at cost which approximates market value.
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 Trust becomes aware of the ex-dividend
data in the exercise of reasonable diligence. Discount and premium on debt
securities are accreted or amortized, respectively, daily, on an effective
yield to maturity basis and are included in interest income. Interest
income,
34
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
including income on interest bearing cash accounts, is recorded on an
accrual basis.
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes.
B. Federal Income Taxes
It is the Trust'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. All tax returns filed thus far are subject to examination by tax
authorities.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the source of the Trust's distributions may
be shown in the accompanying financial statements as either from or in
excess of net investment income or net realized gain (loss) on investment
transactions, or from paid-in capital, depending on the type of book/tax
differences that may exist.
The tax character of current year distributions paid to common and
preferred shareowners will be determined at the end of the fiscal year.
Distributions during the year ended November 30, 2007 were as follows:
--------------------------------------------------------------------------------
2007
--------------------------------------------------------------------------------
Distributions paid from:
Tax-Exempt income $15,264,954
Ordinary income* 17,015,419
Long-term capital gain 3,639,461
-----------
$35,919,834
===========
--------------------------------------------------------------------------------
* Included in the Trust's distributions from 2007 ordinary income is $2,324,009
($0.08 per common share) in excess of investment company taxable income,
which, in accordance with applicable U.S. tax law, is taxable to
shareowners as ordinary income distributions.
35
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
--------------------------------------------------------------------------------
The following shows the components of distributable earnings on a federal
income tax basis at November 30, 2007.
--------------------------------------------------------------------------------
2007
--------------------------------------------------------------------------------
Undistributed ordinary income $ -
Undistributed long-term gains -
Dividends payable (134,031)
Unrealized appreciation 19,456,279
-----------
Total $19,322,248
===========
--------------------------------------------------------------------------------
The difference between book basis and tax basis unrealized appreciation is
primarily attributable to the difference between book and tax amortization
methods for premiums and discounts on fixed income securities and the
accounting treatment for swap agreements.
C. Automatic Dividend Reinvestment Plan
All common shareowners automatically participate in the Automatic Dividend
Reinvestment Plan (the "Plan"), under which participants receive all
dividends and capital gain distributions (collectively, "dividends") in
full and fractional common shares of the Trust in lieu of cash.
Shareowners may elect not to participate in the Plan. Shareowners not
participating in the Plan receive all dividends and capital gain
distributions in cash. Participation in the Plan is completely voluntary
and may be terminated or resumed at any time without penalty by notifying
American Stock Transfer & Trust Company, the agent for shareowners in
administering the Plan (the "Plan Agent"), in writing prior to any
dividend record date; otherwise such termination or resumption will be
effective with respect to any subsequently declared dividend or other
distribution.
Whenever the Trust declares a dividend on common shares payable in cash,
participants in the Plan will receive the equivalent in common shares
acquired by the Plan Agent either (i) through receipt of additional
unissued but authorized common shares from the Trust or (ii) by purchase
of outstanding common shares on the New York Stock Exchange or elsewhere.
If, on the payment date for any dividend, the net asset value per common
share is equal to or less than the market price per share plus estimated
brokerage trading fees ("market premium"), the Plan Agent will invest the
36
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
dividend amount in newly issued common shares. The number of newly issued
common shares to be credited to each account will be determined by
dividing the dollar amount of the dividend by the net asset value per
common share on the date the shares are issued, provided that the maximum
discount from the then current market price per share on the date of
issuance does not exceed 5%. If, on the payment date for any dividend, the
net asset value per common share is greater than the market value ("market
discount"), the Plan Agent will invest the dividend amount in common
shares acquired in open-market purchases. There are no brokerage charges
with respect to newly issued common shares. However, each participant will
pay a pro rata share of brokerage trading fees incurred with respect to
the Plan Agent's open-market purchases. Participating in the Plan does not
relieve shareowners from any federal, state or local taxes which may be
due on dividends paid in any taxable year. Shareowners holding Plan shares
in a brokerage account may not be able to transfer the shares to another
broker and continue to participate in the Plan.
2. Management Agreement
Pioneer Investment Management, Inc. ("PIM"), a wholly owned indirect subsidiary
of UniCredit S.p.A. ("UniCredit"), manages the Trust's portfolio. Management
fees payable under the Trust's Management Agreement with PIM are calculated
daily at the annual rate of 0.60% of the Trust's average daily managed assets.
"Managed assets" is the average daily value of the Trust's total assets minus
the sum of the Trust's liabilities, which liabilities exclude debt related to
leverage, short-term debt and the aggregate liquidation preference of any
outstanding preferred shares. For the six months ended, May 31, 2008, the net
management fee was equivalent to 0.60% of the Trust's average daily managed
assets, which was equivalent to 0.87% of the Trust's average daily net assets
attributable to common shareowners.
In addition, under PIM's management and administration agreements, certain
other services and costs are paid by PIM and reimbursed by the Trust. Included
in "Due to affiliates" reflected on the Statement of Assets and Liabilities is
$292,163 in management costs, administrative costs and certain other fees
payable to PIM at May 31, 2008.
The Trust has retained Princeton Administrators, LLC, ("Princeton") to provide
certain administrative and accounting services to the Trust on
37
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
--------------------------------------------------------------------------------
its behalf. The Trust pays Princeton a monthly fee at an annual rate of 0.07%
of the average daily value of the Trust's managed assets up to $500 million and
0.03% for average daily managed assets in excess of $500 million, subject to a
minimum monthly fee of $10,000.
3. Transfer Agents
Pioneer Investment Management Shareholder Services, Inc. ("PIMSS"), a wholly
owned indirect subsidiary of UniCredit, through a sub-transfer agency agreement
with American Stock Transfer & Trust Company, provides substantially all
transfer agent and shareowner services related to the Trust's common shares at
negotiated rates. Deutsche Bank Trust Company Americas ("Deutsche Bank") is the
transfer agent, registrar, dividend paying agent and auction agent with respect
to the Trust's Auction Market Preferred Shares ("AMPS"). The Trust pays
Deutsche Bank an annual fee, as is agreed to from time to time by the Trust and
Deutsche Bank, for providing such services.
4. Expense Offset Arrangements
The Trust has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion
of the Trust's custodian expenses. For the six months ended May 31, 2008, the
Trust expenses were reduced by $50 under such arrangements.
5. Interest Rate Swaps
The Trust may enter into interest rate swap transactions to attempt to protect
itself from increasing dividend or interest expense on its leverage resulting
from increasing short-term interest rates. The cost of leverage may rise with
an increase in interest rates, generally having the effect of lower yields and
potentially lower dividends to common shareowners. Interest rate swaps can be
used to "lock in" the cost of leverage and reduce the negative impact that
rising short-term interest rates would have on the Trust's leveraging costs.
An interest rate swap is an agreement between two parties, which involves
exchanging floating rate and fixed rate interest payments for a specified period
of time. Interest rate swaps involve the accrual of the net interest payments
between the parties on a daily basis, with the net amount recorded within the
unrealized appreciation/depreciation of interest rate swaps on the Statement of
Assets and Liabilities. Once the interim payments are settled in cash, at the
38
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
pre-determined dates specified in the agreement, the net amount is recorded as
realized gain or loss from interest rate swaps on the Statement of Operations.
During the term of the swap, changes in the value of the swap are recognized as
unrealized gains and losses by "marking-to market" the value of the swap based
on values obtained from dealer quotations. When the swap is terminated, the
Trust will record a realized gain or loss equal to the difference, if any,
between the proceeds from (or cost of) closing the contract and the cost basis
of the contract. The Trust is exposed to credit risk in the event of non-
performance by the other party to the interest rate swap. However, at May 31,
2008 the Trust does not anticipate non-performance by any counterparty. Risk
may also arise with regard to market movements in the value of the swap
arrangement that do not exactly offset the changes in the related dividend
requirement or interest expense on the Trust's leverage.
Under the terms of the agreement entered into by the Trust, the Trust receives
a floating rate of interest and pays a fixed rate of interest for the term.
Details of the swap agreement outstanding as of May 31, 2008 were as follows:
-----------------------------------------------------------------------------------------
Termination Notional Unrealized
Counterparty Date Amount (000) Fixed Rate Floating Rate Depreciation
------------ ---- ------------ ---------- ------------- ------------
UBS AG Sept. 1, 2009 $106,000 2.855% 1 month BMA $ (906,708)
-----------------------------------------------------------------------------------------
6. Trust Shares
There are an unlimited number of common shares of beneficial interest
authorized.
During the six months ended May 31, 2008 and year ended November 30, 2007,
there were no share transactions by the Trust. All reinvested distributions
were satisfied with previously issued shares purchased in the open market by
the Plan Agent and credited to shareowner accounts.
The Trust may classify and reclassify any unissued common shares of beneficial
interest into one or more series of preferred shares of beneficial interest. As
of May 31, 2008, there were 7,050 AMPS as follows: Series T7-2,350, Series
F7-2,350 and Series TH28-2,350.
Dividends on Series T7 and Series F7 are cumulative at a rate which is reset
every seven days based on the results of an auction.
39
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
--------------------------------------------------------------------------------
Dividends on Series TH28 are also cumulative at a rate reset every 28 days
based on the results of an auction. An auction fails if there are more AMPS
offered than there are buyers. When an auction fails, the dividend rate for the
period will be the maximum rate on the auction dates described in the
prospectus for the AMPS. You will not be able to sell your AMPS at an auction
if the auction fails. Since February 13, 2008, the Trust's auctions related to
the AMPS have failed. The maximum rate for the 7-Day Series is 1.25% spread,
over, or 125% of (the greater of) the one week LIBOR rate. The maximum rate for
the 28 day Series is 1.25% spread, over, or 125% of (the greater of) of the one
month LIBOR rate. Dividend rates ranged from 3.54% to 6.15% during the six
months ended May 31, 2008.
The Trust may not declare dividends or make other distributions on its common
shares or purchase any such shares if, at the time of the declaration,
distribution or purchase, asset coverage with respect to the outstanding
preferred shares would be less than 200%.
The AMPS are redeemable at the option of the Trust, in whole or in part, on any
dividend payment date at $25,000 per share plus any accumulated or unpaid
dividends, whether or not declared. The AMPS are also subject to mandatory
redemption at $25,000 per share plus any accumulated or unpaid dividends,
whether or not declared, if certain requirements relating to the composition of
the assets and liabilities of the Trust as set forth in the Agreement and
Declaration of Trust are not satisfied.
The holders of AMPS have voting rights equal to the holders of the Trust's
common shares (one vote per share) and will vote together with holders of the
common shares as a single class. However, holders of AMPS are also entitled to
elect two of the Trust's Trustees. In addition, the Investment Company Act of
1940, as amended, requires that along with approval by shareowners that might
otherwise be required, the approval of the holders of a majority of any
outstanding preferred shares, voting separately as a class, would be required
to (a) adopt any plan of reorganization that would adversely affect the
preferred shares and (b) take any action requiring a vote of security holders,
including, among other things, changes in the Trust's subclassification as a
closed-end investment company or changes in its fundamental investment
restrictions.
40
Pioneer Municipal and Equity Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
7. New Pronouncements
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities ("SFAS 161"), was issued
and is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Trust's financial statement disclosures.
8. Subsequent Events
Subsequent to May 31, 2008, the Board of Trustees of the Trust declared a
dividend from undistributed net investment income of $0.112 per common share
payable June 30, 2008 to common shareowners of record on June 16, 2008.
Subsequent to May 31, 2008, dividends declared and paid on preferred shares
totaled $524,262 in aggregate for the three outstanding preferred share series
through July 7, 2008.
ADDITIONAL INFORMATION (unaudited)
On May 23, 2008, the Trust and Pioneer Tax Free Income Fund announced that each
fund's Board of Trustees approved a plan to merge the Trust, a closed-end fund,
into Pioneer Tax Free Income Fund, an open-end fund.
The proposed merger is subject to the approval of shareowners of the Trust. A
shareowner meeting is anticipated to be held in September 2008. If approved by
shareowners of the Trust, the merger is expected to take place in September
2008. The Trustees believe that the proposed merger is in the best interests of
shareowners. Details of the rationale for this merger will be contained in the
proxy materials to be sent to shareowners of the Trust. There can be no
assurance that the merger will be approved or, if approved, completed.
Under the terms of the proposed merger, all of the assets and liabilities of
the Trust attributable to its common shares would become the assets and
liabilities of Pioneer Tax Free Income Fund, and the Trust would cease to
exist. The outstanding common shares of the Trust would be converted into a
number of whole or fractional Class A shares of Pioneer Tax Free Income Fund
with an aggregate net asset value equal to the aggregate net asset value of the
common shares of the Trust immediately prior to the merger. The merger
41
Pioneer Municipal and Equity Income Trust
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NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
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is expected to qualify as a tax-free transaction. In connection with the
proposed merger, the Trust would call for redemption and redeem all of its
outstanding Auction Market Preferred Shares.
In connection with the proposed merger, the Trust and Pioneer Tax Free Income
Fund have filed relevant materials with the Securities and Exchange Commission
("SEC"), including a combined proxy statement for the Trust and prospectus for
Pioneer Tax Free Income Fund. The information in these materials is not
complete and may be changed. Any solicitation of proxies by the Trust in
connection with the shareowner meeting will be made only pursuant to such proxy
materials. Investors should consider the investment objectives, risks and
expenses of Pioneer Tax Free Income Fund before investing or voting with
respect to the merger. Because the final proxy statement/prospectus will
contain this and other important information, the Trust's shareowners are
urged to read it carefully when it becomes available and before voting with
respect to the reorganization. The preliminary materials filed with
the SEC are available, and when filed with the SEC, the final proxy
statement/prospectus will be available free of charge at the SEC's website,
xxx.xxx.xxx, under filings for Pioneer Tax Free Income Fund. The Trust's
shareowners also will be able to obtain copies of the final documents, when
available, by calling Pioneer Investments at 0-000-000-0000. This is not an
offer to buy shares of any fund, nor is it a solicitation of any proxy.
During the period ended May 31, 2008, there were no material changes in the
Trust's investment objective or fundamental policies that have not been
approved by the shareowners. There were no changes in the Trust's Charter or
By-Laws that would delay or prevent a change in control of the Trust which has
not been approved by the shareowners. There were no changes in the principal
risk factors associated with investment in the Trust. Day-to-day management of
the Trust's portfolio of municipal securities is the responsibility of Xxxxx
Xxxxxx. Xx. Xxxxxx is supported by the fixed income team. Members of this team
manage other Pioneer funds investing primarily in fixed income securities.
Xx. Xxxxxx joined Pioneer as a senior vice president in January 2000 and has
been an investment professional since 1969. Day-to-day management of the Trust's
portfolio of equity securities is the responsibility of Xxxxxx Xxxxxxxxx, Xx.
Xx. Xxxxxxxxx is supported by the domestic equity team. Members of this team
manage other Pioneer funds investing primarily in U.S. equity securities.
Xx. Xxxxxxxxx, a vice president, joined Pioneer in August 2001
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Pioneer Municipal and Equity Income Trust
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and has been an investment professional since 1985. The portfolio managers and
each team also may draw upon the research and investment management expertise
of the global research teams, which provide quantitative and fundamental
research on companies and include members from Pioneer's affiliate, Pioneer
Investment Management Limited ("PIML").
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Trust may purchase, from time to time, its common
shares in the open market.
CEO CERTIFICATION DISCLOSURE (unaudited)
The Trust's Chief Executive Officer has submitted to the New York Stock
Exchange the annual CEO certification as required by Section 303A.12(a) of the
NYSE Listed Company Manual. In addition, the Trust has filed with the
Securities and Exchange Commission the certification of its Chief Executive
Officer and Chief Financial Officer required by Section 302 of the
Xxxxxxxx-Xxxxx Act.
43
Pioneer Municipal and Equity Income Trust
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TRUSTEES, OFFICERS AND SERVICE PROVIDERS
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Trustees Officers
Xxxx X. Xxxxx, Xx., Chairman Xxxx X. Xxxxx, Xx., President
Xxxx X. Xxxx Xxxxxx X. Xxxxxxxxx, Executive
Xxxxxx Xxxxxxxx Vice President
Xxxxxxxx X.X. Xxxxxx Xxxx X. Xxxxxxx, Treasurer
Xxxxxx X. Xxxxxxxxx Xxxxxxx X. Xxxxxxxx, Secretary
Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxx
Xxxxxxxxxx X. Xxxxx
Xxxx Xxxxxxxx
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Xxxxx Brothers Xxxxxxxx & Co.
Legal Counsel
Xxxxxxx XxXxxxxxx LLP
Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
Shareowner Services and Sub-Transfer Agent
American Stock Transfer & Trust Company
Preferred Share Auction/Transfer Agent and Registrar
Deutsche Bank Trust Company Americas
Sub-Administrator
Princeton Administrators, LLC
Proxy Voting Policies and Procedures of the Trust are available without charge,
upon request, by calling our toll free number (0-000-000-0000). Information
regarding how the Trust voted proxies relating to portfolio securities during
the most recent 12-month period ended June 30 is publicly available to
shareowners at xxx.xxxxxxxxxxxxxxxxxx.xxx. This information is also available
on the Securities and Exchange Commission's web site at xxxx://xxx.xxx.xxx.
44
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HOW TO CONTACT PIONEER
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We are pleased to offer a variety of convenient ways for you to contact us for
assistance or information.
You can call American Stock Transfer & Trust Company (AST) for:
Account Information 0-000-000-0000
Or write to AST:
For Write to
General inquiries, lost dividend checks, American Stock
change of address, lost stock certificates, Transfer & Trust
stock transfer Operations Center
0000 00xx Xxx.
Xxxxxxxx, XX 00000
Dividend reinvestment plan (DRIP) American Stock
Transfer & Trust Company
Xxxx Xxxxxx Xxxxxxx
X.X. Xxx 000
Xxx Xxxx, XX 00000-0000
Website xxx.xxxxxxx.xxx
For additional information, please contact your investment advisor or visit
our web site xxx.xxxxxxxxxxxxxxxxxx.xxx.
The Trust files a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareowners may view the filed Form N-Q by visiting the Commission's
web site at xxxx://xxx.xxx.xxx. The filed form may also be viewed and copied
at the Commission's Public Reference Room in Washington, DC. Information
regarding the operations of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
The Trust's Chief Executive Officer is required by the New York Stock
Exchange's Listing Standards to file annually with the Exchange a
certification that he is not aware of any violation by the Trust of the
Exchange's Corporate Governance Standards applicable to the Trust. The Trust
has filed such certification.
