Pioneer Announces Launch of Pioneer Tax-Managed Fund; Discusses Strategies for Tax-Managed Fund Investing.

BOSTON--(BUSINESS WIRE)--Nov. 18, 1999--

Pioneer Investment Management, Inc., announced that it has launched a new equity fund, Pioneer Tax-Managed Fund, effective today, November 18, 1999. The Fund is managed by John A. Carey, portfolio manager of Pioneer Fund, the firm's 71-year-old flagship fund, and Pioneer Equity-Income Fund. Mr. Carey has over 20 years of investment experience.

Pioneer Tax-Managed Fund will seek to minimize the impact of federal income tax on shareholder returns using several tax-efficient strategies, including offsetting gains with losses, managing turnover, and tax-wise accounting (HIFO-highest cost in, first out). The Fund will pursue long-term capital growth with a value approach, building on Pioneer's 71-year-old tradition of value investing. The Fund's management team will focus on companies with quality management, solid assets, market leadership and attractively priced stock.

"Today's investors are increasingly looking at their after-tax returns--the money they actually keep," said David D. Tripple, President of Pioneer Investment Management. "As long-term investors we have always had the same concern, and that's why we are offering Pioneer Tax-Managed Fund."

The Pioneer Group, Inc., parent of Pioneer Investment Management, currently manages $23 billion in assets worldwide on behalf of individual and institutional investors. Based in Boston, Pioneer has financial services operations in Germany, Ireland, Poland, Czech Republic, India, and Russia. Its flagship fund, Pioneer Fund, was founded in 1928 and is the fourth oldest mutual fund in the United States. -0-

                 The Key to Tax-Managed Fund Investing
              Take a value approach and keep turnover low

                           By John A. Carey

              Portfolio Manager, Pioneer Tax-Managed Fund

'Tis the season...for mutual fund distributions! Right about now investors are getting the traditional warnings about making big new investments in stock funds for taxable accounts. If investors buy just before they become eligible for a capital gains distribution--usually in December--they may quickly have a handsome payout. But that payout will be included in the value of the purchase, and they will quickly face a tax bill as well.

Although recent amendments to tax laws have cut the maximum rate on long-term capital gains (to 20% for investments held for more than a year), taxes can still take a large chunk out of investors' profits. Distributions of income and short-term gains (held less than a year) carry federal tax rates as high as 39.6%. And while most investors seem to be aware of the impact taxes can have, few would say they are well informed on the subject.

A study earlier this year by The Dreyfus Corporation showed that 85% of survey respondents agree that taxes play an important role in investment decisions. Yet only one third said they are very knowledgeable about the tax implications of investing. Almost half the respondents believed that it is always better to choose a tax-free investment over a taxable one, and nearly 40% thought the statement "only funds that invest in tax-exempt securities are tax efficient" is true. Actually, both these assertions are wrong.

Enter the tax-managed fund

Tax-managed funds can help investors understand and control their tax liabilities better. They are a relative newcomer to the fund industry; of the 30 tax-managed equity funds currently tracked by Morningstar, managing around $19.5 billion in assets, only a handful have five-year track records. Yet their popularity is growing as investors become more aware of tax implications, especially at distribution time. These funds have a clear goal: to provide good, long-term capital growth while attempting to minimize the impact of taxes on shareholder returns.

Of course, investors must pay taxes when stocks or mutual funds are eventually sold at a gain. The advantage of tax-managed funds lies in their goal of delaying or eliminating (i.e. through a HIFO strategy of offsetting losses) investors' tax payments, and they have the added benefit of aiming to escape random capital gains distributions. In short, they provide investors with tax efficiency and flexibility.

Which types of investor might find these funds particularly attractive? Here are a few likely characteristics:

--Those who have long-term financial goals - such as college education or house purchase - and who don't intend to take money out of their tax-managed fund along the way.

--Those in higher income tax brackets.

--Those who are investing for retirement but have already made their maximum contribution to 401(k) plans and are not eligible for a Roth IRA plan.

--Those who might be looking for an alternative to variable annuities. Although investors can save on a tax-deferred basis with variable annuities, distributions are taxed as ordinary income on withdrawal.

What's the strategy?

Tax-managed funds use specific strategies both to reduce and defer taxes. Ideally, these strategies may also maximize after-tax returns by delivering good pre-tax performance. A manager will typically create a portfolio that emphasizes long-term capital gains, and steers away from short-term capital gains and income distributions. Here are some of the ways a manager may pursue this:

--Defer taxes by holding most investments well beyond the one-year holding period necessary for long-term capital gains treatment.

--Limit portfolio trading and, when selling, consider the tax basis carefully. For example, a tax-managed fund is more likely to sell a security if it would generate a capital loss. And when selling part of a security position, it will generally identify the highest cost shares to sell.

--Offset realized long- and short-term gains by selling stocks at a loss to offset those gains.

--Invest in stocks that pay a low dividend or none at all.

In fact, a value approach to investing--buying stocks at substantial discounts to their underlying values and keeping them until market values reflect intrinsic values--is ideally suited to meeting the goals of a tax-managed fund. Pioneer Fund, for example, has a 71-year-old tradition of value investing with a clear focus on buying high quality growth stocks at reasonable prices and holding them for the long term. The same focus will be apparent in Pioneer Tax-Managed Fund. However, there may be differences in the portfolio make-up of a traditional value fund and a tax-managed vehicle.

Comparing returns

Of course, there are no guarantees that a tax-managed equity fund will produce better after-tax returns than a conventional equity fund. But a 1998 study done by KPMG Peat Marwick for Eaton Vance contained the following hypothethical illustration that shows that tax-managed funds have the potential to outperform.

The study assumed an investor makes $10,000 investments in both a tax-managed equity fund and a typical equity fund managed without regard to tax considerations. Each fund has annual pre-tax returns of 10%. The tax-managed fund is further assumed to generate 90% of its annual returns from price appreciation and 10% from long-term gains distribution. The conventional fund, on the other hand, is assumed to generate 30% of its returns from price appreciation, 40% from long-term gains, and 30% from distributions of income and short-term gains.

Based on these assumptions, the study showed that, over a holding period of 20 years, the tax-managed investment would generate 25% more in liquidation value than the conventional investment for an individual in the highest federal income tax bracket. The annual after-tax rate of return would be 1.2% higher. If the investor were to hold until death--eliminating taxes on accumulated gains--the tax-managed investment would generate 39% more in value to the estate over 20 years, with an after-tax return 1.8% higher. This example is for illustrative purposes only; investors should consult with their tax advisor.

It's also worth remembering that returns from a tax-managed fund are very unlikely to be entirely tax-free. A buy-and-hold strategy reduces, but does not entirely eliminate taxes on capital gains and dividend income. Unexpected events like a cash takeover of a company represented in the portfolio may deliver an immediate and unavoidable capital gain.

How often have we heard investors complain: "I worked hard to get where I am; now my tax bracket is killing me!" Others may find it hard to come up with the cash to pay taxes on capital gains that were then reinvested. We believe tax-managed funds, combining potential capital growth over the long term with an investor's ability to control when to buy and sell shares of the fund, and thereby when and how much taxes are paid, are worthy of serious consideration as a way of solving these problems.

We invite the press to use any part of the following, reprint it in its entirety, or call for more information.

Note: Past performance does not guarantee future results.

This release should not be deemed as an offer of any fund described within it. Pioneer Tax-Managed Fund's ability to pursue tax-managed strategies may be reduced under certain circumstances including adverse market conditions, changes in tax laws and shareholder redemptions.

For information on Pioneer Tax-Managed Fund, or any Pioneer fund, please request a free kit from your investment representative or Pioneer at 800-225-6292. The kit includes a prospectus describing charges and expenses, and a quarterly fact sheet containing the latest holdings and fund performance. Please read the prospectus carefully before you invest or send money.

Pioneer Funds Distributor Inc., is the underwriter for the Pioneer mutual funds.