The Benefits of Active, Multi-Sector Fixed Income Investing

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Active, multi-sector fixed income investing follows an approach that is dynamic and value driven. Unlike indexed investing, an active, multi-sector approach invests across a broad range of fixed income asset classes, including non-benchmark sectors, with particular focus on non-duration1 drivers of returns.

We believe a value-driven approach to fixed income investing can benefit from valuation differences among fixed income sectors and

securities. Relative value is determined primarily by the comparison of sector spreads2 and spread relationships between sectors to

long-term averages. Active managers take a dynamic and flexible approach to sector allocation, assessing spreads and fundamentals

in the context of the particular phase of the economic, interest rate and credit cycle. We believe dynamically allocating among sectors

can also benefit from the rebalancing of factors that drive returns, which can represent a significant source of potential return for

diversified portfolios over the long-term.

We believe increasing the opportunity set to include both benchmark and non-benchmark sectors enhances the ability to add

return, while also potentially benefiting from additional diversification, due to lower correlations3 of certain sectors with benchmark

asset classes. This approach considers both absolute as well as benchmark-relative risk, which can result in reduced downside and

drawdown risk. While active, multi-sector fixed income strategies can have different risk profiles and may vary with respect to target

duration, quality, global and currency exposures, we believe their consistent use of a broader range of asset classes within specified

constraints, may enable them to pursue higher returns with lower volatility than their peer universe.

The chart below illustrates the lower correlations of non-benchmark sectors with benchmark sectors over the past ten years.

Correlations of Non-Benchmark Sectors to Benchmark Sectors

10-Year Correlation Matrix (10/1/2006 – 9/30/2016)

Asset Categories 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

1. US Treasuries 1.00

2. US Govt Bond 0.93 1.00

3. US Agency MBS 0.80 0.86 1.00

4. US CMBS -0.03 0.13 0.00 1.00

5. US Corporate Inv Grade 0.40 0.56 0.51 0.48 1.00

6. US TIPS 0.57 0.63 0.62 0.41 0.67 1.00

7. Municipals 0.27 0.34 0.37 0.30 0.55 0.43 1.00

8. Asset-backed Securities -0.43 -0.41 -0.30 0.38 0.16 0.07 0.15 1.00

9. US High Yield Bonds -0.26 -0.04 0.02 0.72 0.64 0.43 0.33 0.49 1.00

10. Bank Loans -0.47 -0.33 -0.17 0.54 0.40 0.23 0.26 0.67 0.85 1.00

11. Convertibles -0.31 -0.12 -0.06 0.57 0.55 0.31 0.24 0.43 0.88 0.75 1.00

12. Preferred Stock -0.01 0.07 -0.04 0.51 0.51 0.24 0.29 0.17 0.51 0.30 0.54 1.00

13. Non-US Developed Govt Bonds 0.49 0.60 0.50 0.30 0.52 0.58 0.23 -0.17 0.27 -0.04 0.22 0.30 1.00

14. Emerging Markets 0.19 0.39 0.41 0.53 0.76 0.64 0.47 0.19 0.75 0.49 0.66 0.41 0.54 1.00

15. Insurance-Linked Securities 0.02 0.06 0.06 0.20 0.26 0.17 0.19 0.28 0.29 0.34 0.28 0.10 0.09 0.23 1.00

Source: Morningstar. Data as of 9/30/16. Indices are used to represent fixed income asset classes. Please see index descriptions on page 4. Indices are unmanaged and their returns assume reinvestment of dividends, and unlike investment products returns, do not reflect any fees or expenses. It is not possible to invest directly in an index.

1 Duration is a measure of the sensitivity of the price (the value of principal) of a fixed income investment to a change in interest rates, expressed as a number of years. 2 Sector Spread is the difference in yields between two fixed income securities with the same maturity, but originating from different investment sectors. 3 Correlation is the degree to which assets or asset class prices have moved in relation to one another. Correlation ranges from -1 (always moving in opposite directions) through 0 (absolutely independent) to 1 (always move together).

Even within credit sectors, portfolios can benefit from more diversified4 exposures. The chart below depicts the range of correlations

of various credit sectors with investment grade corporates.

Range of Correlations of Credit Sectors to Investment Grade Corporates

5-Year Isolated TEV Correlations5 (10/01/2011 – 9/30/2016)

US IG Corporates

Non-Agency MBS

US High Yield

Intl High Yield Bank Loan Intl IG EM Govt

Related

US IG Corporates 1.00 0.17 0.68 0.43 0.33 0.82 0.53

Non-Agency MBS 0.17 1.00 0.06 0.01 -0.03 0.17 0.23

US High Yield 0.68 0.06 1.00 0.53 0.86 0.48 0.24

Intl High Yield 0.43 0.01 0.53 1.00 0.42 0.46 0.14

Bank Loan 0.33 -0.03 0.86 0.42 1.00 0.15 -0.02

Intl IG 0.82 0.17 0.48 0.46 0.15 1.00 0.63

EM Govt Related 0.53 0.23 0.24 0.14 -0.02 0.63 1.00

Source: Barclays Point and Pioneer Investments. Data as of 9/30/16. Asset classes reflect categories of a representative multi-sector fixed income portfolio. Not meant to represent performance of any Pioneer product. The asset classes listed are within the Bloomberg Barclays US Universal Index, which is the union of the US Aggregate Index, the US High Yield Corporate Index, the 144A Index, the Eurodollar Index, the Emerging Markets Index, the non-ERISA portion of the CMBS Index, and the CMBS High Yield Index. Municipal debt, private placements and non-dollar-denominated issues are excluded. Indices are unmanaged and their returns assume reinvestment of dividends, and unlike investment products returns, subsets of fixed income asset classes do not reflect any fees or expenses. It is not possible to invest directly in an index.

Where can Active Multi-Sector Fit within an Investor’s Portfolio?A multi-sector fixed income portfolio can serve as an investor’s core or target fixed income exposure, or as a higher alpha6

complement to their core exposure. To the extent the investor seeks higher potential return, lower volatility and sufficient

duration to diversify their equity portfolio, we believe certain multi-sector portfolios, with specific duration limits relative to

their benchmarks, can achieve this goal.

Other investors, however, may require that the core fixed income portfolio show high correlation with duration, in an effort

to ensure its negative correlation to equities in a significant market sell-off. In this case, we believe an active, multi-sector

portfolio, can complement, but not replace, an indexed portfolio.

Primer | The Benefits of Active, Multi-Sector Fixed Income Investing

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4 Diversification does not assure a profit or protect against loss.

5 Tracking error volatility (TEV) measures the volatility of the difference between the performance of a fund and the performance of its benchmark. A higher TEV indicates the greater dispersion of fund performance versus its benchmark. A lower TEV indicates performance more closely mirroring its benchmark. Investors seeking active management will look for higher TEV. Systematic TEV mainly reflects the variances generated by the investment strategy when compared to a benchmark. Not meant to represent performance of any Pioneer fund.

6 Alpha measures risk-adjusted performance, representing excess return relative to the return of the benchmark. A positive alpha suggests risk-adjusted value added by the manager versus the index.

Primer | The Benefits of Active, Multi-Sector Fixed Income Investing

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What can an Active-Driven Approach Offer over an Indexed Approach?Some broad fixed income indices, such as the Bloomberg Barclays US Aggregate Bond Index, tend to be dominated by government

bonds and by the single factor of duration. See chart below.

Bloomberg Barclays US Aggregate Bond Index: Yield-to-Worst vs. Effective Duration

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Bloomberg Barclays Agg Duration Bloomberg Barclays Agg Yield-to-Worst

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Source: Bloomberg Barclays and Pioneer Investments. Last data point 9/30/16. Yield-to-worst is the lowest potential yield that can be received on a bond without the issuer actually defaulting. Past performance is no guarantee of future results. Not meant to represent performance of any Pioneer investment.

A passive approach does not mean that index risk is static—its risk varies, reflecting among other things, differing sector weights,

yield levels and durations. As the chart below indicates, sector exposures have varied significantly over time. In addition, the current

low interest rate environment has contributed to the nearly lowest yields and the highest duration levels in the history of the

Bloomberg Barclays US Aggregate Bond Index.

Bloomberg Barclays US Aggregate Bond Index by Asset Type

ABS/CMBS Yankees

Investment Grade Corporates

Agency MBS

Agencies

Treasuries

0%

10%

20%

30%

40% }50%

60%

70%

80%

90%

100%

2003 2006 2009 2012 2015

36.3%

27.9%

3.3%

25.1%

5.3%2.2%

Total US Government: 67.5%

Source: Bloomberg Barclays, Pioneer Investments. Last data point 9/30/16.

ABS: Asset-Backed Securities (0.46%). CMBS: Commercial Mortgage-Backed Securities (1.72%). Yankees are bonds denominated in US dollars and publicly issued in the US by foreign banks and corporations.

An Active, Multi-Sector Approach A value-driven, multi-sector approach can respond to different economic, credit and rate environments, taking specific risks

when the markets pay for these risks, and reducing risk in markets that do not offer compelling value. While an indexed

approach takes on risk, regardless of potential return, the active, multi-sector approach seeks to align risk with expected return.

What Tools and Skills are Required of an Active, Multi-Sector Manager?A multi-sector manager must have sufficient expertise in and access to a broad range of fixed income asset classes. Specialist

teams, moreover, should be integrated into the investment decision-making process. Instead of merely managing the allocation

decision and delegating sector allocations and security selection to the specialist team (also known as a “siloed” approach), we

believe a multi-sector strategy can benefit from greater involvement of the specialist team with the portfolio management team,

to seek the optimal reward for risk taken. In addition to a skilled specialist team, a multi-sector approach requires robust risk

management to properly assess risk exposures and their contributions to absolute and relative volatility.

SummaryActive, multi-sector management in fixed income has become increasingly popular in the current low yield environment,

as investors seek higher income from their fixed income portfolios and mitigation of downside risk in a rising interest rate

environment. We believe this approach can prove itself over a broad range of economic, credit and interest rate cycles.

Index DescriptionsUS Treasuries: Bloomberg Barclays US Treasury Index - Measures US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury, excluding Treasury bills.

US Govt Bond: Bloomberg Barclays US Agency Index - Measures the performance of the agency sector of the US government bond market.

US CMBS: Bloomberg Barclays Investment Grade (IG) Commercial Mortgage-backed Securities (CMBS) Index – Measures performance of the mortgage-backed securities market.

US Corporate Inv Grade: Bloomberg Barclays US Corporate Investment Grade Index - An unmanaged index considered representative of the US investment-grade, fixed-rate bond market.

US TIPS: Bloomberg Barclays US Treasury Inflation Protection Securities (TIPS) Index – Includes all publicly issued, US TIPS with one year remaining to maturity, are rated investment grade.

Municipals: Bloomberg Barclays Municipal Bond Index – A broad-based measure of the municipal bond market.

Asset-Backed Securities: BofA ML US Asset-Backed Securities (ABS) Floating Rate Index - Tracks the performance of US dollar-denominated investment grade floating rate asset backed securities publicly issued in the US domestic market.

US High Yield Bonds: BofA ML US High Yield Bond Index - A commonly accepted measure of the performance of high yield securities.

Bank Loans: Credit Suisse Leveraged Loan Index - Tracks the investable market of the US dollar denominated leveraged loan market

Convertibles: BofA ML All US Convertibles Index - Consists of convertible bonds traded in the US dollar-denominated investment grade and non-investment grade convertible securities sold into the US market and publicly traded in the US.

Preferred Stock: BofA ML Perpetual Preferred Securities Index - A subset of The BofA ML Fixed Rate Preferred Securities Index including all perpetual securities (bonds with no maturity dates).

Non-US Developed Govt Bonds: Citigroup World Government Bond (Citi WGBI) Index - Measures the government bond markets around the world.

Emerging Markets: JP Morgan Emerging Markets Bond Plus (the EMBI Plus) Index - Comprised of external-currency-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities. Issues include: Brady bonds (restructured bank loans) Eurobonds and other US dollar-denominated bonds.

Insurance-Linked Securities: Swiss Re Cat Bond Index - Constructed to track the price return and the total rate of return for US dollar-denominated catastrophe bonds.

Primer | The Benefits of Active, Multi-Sector Fixed Income Investing

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