DEFC14A: Pioneer Funds Seek Stockholder Approval for New Advisory Agreement Following Victory Capital-Amundi US Merger

Pioneer Diversified High Income Fund, Pioneer Floating Rate Fund, and Pioneer High Income Fund are seeking stockholder approval for a new investment advisory agreement with Victory Capital Management Inc. following the merger of Amundi US with Victory Capital.

Summary

• Pioneer Diversified High Income Fund, Pioneer Floating Rate Fund, and Pioneer High Income Fund are holding a special meeting on March 26, 2025, to seek stockholder approval for a new investment advisory agreement with Victory Capital Management Inc.
• This action is prompted by the merger of Amundi Asset Management US, Inc. (the current investment advisor) with Victory Capital, which will result in the automatic termination of the existing advisory agreement.
• Victory Capital is a diversified global asset manager with $171.9 billion in assets under management as of December 31, 2024.
• The proposed agreement ensures that the Funds' current portfolio managers will continue to manage the Funds as part of Pioneer Investments, a Victory Capital investment franchise.
• The advisory fee rate will remain the same under the new agreement, and Victory Capital has agreed to waive fees or reimburse expenses for at least three years to maintain the Funds' net annual operating expenses at or below current levels.
• The Board of Directors unanimously recommends voting FOR the new agreement, cautioning against potential disruption from Saba Capital Management, L.P., an activist investor expected to oppose the agreement.
• The transaction is expected to close at the end of the first quarter of 2025, pending regulatory approvals and other conditions.
• If the new agreement is not approved, an interim agreement will be implemented for up to 150 days, during which Victory Capital's compensation will be held in escrow.

Sentiment

Score: 7

Explanation: The document is generally positive, emphasizing the continuity of management and fee structure. However, the potential disruption from Saba Capital and the need for stockholder approval introduce some uncertainty.

Positives

• The Funds' current portfolio managers are expected to continue managing the Funds.
• The advisory fee rate will remain the same.
• Victory Capital will waive fees or reimburse expenses for at least three years to maintain current net operating expenses.
• The Board of Directors unanimously recommends voting FOR the agreement.
• Amundi will become a strategic shareholder of Victory Capital, owning 26.1% of Victory Holdings fully diluted shares after giving effect to such share issuance.
• The transaction is expected to close at the end of the first quarter of 2025.

Negatives

• Saba Capital is expected to launch a campaign against the approval of the new investment advisory agreement, potentially disrupting the Funds' operations.
• If the new agreement is not approved, an interim agreement will be implemented for up to 150 days, creating uncertainty.

Risks

• Failure to approve the new investment advisory agreement could leave the Funds without an investment advisor.
• Saba Capital's activist campaign could disrupt the Funds' operations and force unwanted structural changes.
• The completion of the Transaction is subject to regulatory and other approvals, which may not be obtained.
• There is a risk that the Maryland Control Share Acquisition Act (MCSAA) may be unenforceable with respect to the Funds.

Future Outlook

The transaction is expected to close at the end of the first quarter of 2025, subject to regulatory approvals and other conditions. The Funds' current portfolio managers are expected to continue managing the Funds under the new advisory agreement.

Management Comments

• The Board unanimously recommends that you vote on the enclosed WHITE proxy card FOR the approval of a new investment advisory agreement with Victory Capital.
• Victory Capital has advised the Board that it does not anticipate that having Victory Capital provide investment advisory services would result in any reduction in the level or quality of services now provided to your Fund, and that Victory Capital is not aware of any circumstances that may have any adverse effect on its ability to fulfill its obligations to your Fund.

Industry Context

This announcement reflects the ongoing consolidation in the asset management industry, where firms are seeking to achieve greater scale and efficiency through mergers and acquisitions. The transaction also highlights the increasing importance of global distribution networks, as evidenced by the reciprocal distribution agreements between Amundi and Victory Capital.

Comparison to Industry Standards

• Victory Capital's AUM of $171.9 billion places it among mid-sized asset managers, while Amundi, with over $2.3 trillion in AUM, is a leading global player.
• The advisory fee rates for the Pioneer Funds are generally in line with industry averages for similar closed-end funds, as indicated by the Strategic Insight peer group comparisons.
• The expense limitation agreement provided by Victory Capital is a common practice in the industry to ensure that fund expenses remain competitive.

Management Changes

Stakeholder Impact

• Shareholders: The proposed changes aim to ensure continuity of investment management and maintain competitive expense ratios.
• Employees: Certain operations and personnel of Amundi US will move to Victory Capital.
• Customers: The transaction is not expected to affect the Funds' investment objectives or strategies.

Next Steps

• Stockholders must vote on the new investment advisory agreement by March 25, 2025.
• The transaction between Amundi and Victory Capital is expected to close at the end of the first quarter of 2025, pending regulatory approvals.
• If the new agreement is not approved, an interim agreement will be implemented, and the Board will consider further actions.

Key Dates

Keywords

investment advisory agreement, Victory Capital, Amundi US, merger, Saba Capital, proxy vote, closed-end funds, investment management, fees, portfolio managers