The Wall of Worry: U.S. Economic and Market Outlook May 5, 2008 Samuel A. Wardwell, CFA Senior Vice President Director of Investment Communications Pioneer

The Wall of Worry:U.S. Economic and Market OutlookMay 5, 2008

Samuel A. Wardwell, CFASenior Vice PresidentDirector of Investment CommunicationsPioneer Investment Management, Inc.

The views expressed in this presentation are those of the investment professional and are subject to change at any time. These views donot necessarily reflect the views of Pioneer or others in thePioneer organization.

Not FDIC insured May lose value No bank guarantee

19220-21-0508 | May 2008 | Page 2

There is no guarantee that forecasts discussed will be realized.Past performance is no guarantee of future results.

Today’s Wall of Worry (a partial list)

Recession warnings

Credit crunch

Rising energy prices

Falling home prices

Sub-prime mortgage defaults

Falling dollar

Bear market

Politics

19220-21-0508 | May 2008 | Page 3


Year-to-Date Market Returns

Source: DataStream. Last data point: April 30, 2008

The S&P 500, MSCI EAFE, MSCI Emerging Markets, Lehman Brothers Aggregate Bond Index, and ML High Yield Master II index are commonly accepted measures of the performance of US stocks, non-US developed-market stocks, emerging market stocks, investment-grade US bonds and US high yield bonds, respectively.

Historical performance shown is provided to illustrate market trends and is not intended to represent the past or future performance of any Pioneer product. 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.

Total Return in US$ (rescaled to 12/31/07)

-20%

-15%

-10%

-5%

0%

5%

12/31/07 1/31/08 2/29/08 3/31/08 4/30/08

LehmanAggregate

ML HY Bond

MSCI EmgMkts

S&P 500

MSCI EAFE

19220-21-0508 | May 2008 | Page 4


U.S. Economic and Market OutlookKey Themes

The economy had not entered recession at the end of 2007 and may well avoid recession in 2008

– The consumer is weakening, but aggressive fiscal stimulus is coming

– The Fed has moved aggressively

– Exports are a significant source of growth

– Falling home prices and the credit crunch are significant sources of risk

Food and energy prices are rising, but core inflation is a lesser concern

Treasuries appear overvalued, while equities and credit bond market valuations appear relatively inexpensive

19220-21-0508 | May 2008 | Page 5


First Quarter GDP Growth (Advance Reading) Was 0.6%Growth Has Slowed…But Is it a Recession?

Source: DataStream. Last data point: 4th quarter 2007 (Advance)

Change in U.S. Real Gross Domestic Product

-4

-2

0

2

4

6

8

Q4 1985 Q4 1990 Q4 1995 Q4 2000 Q4 2005

Quarterly (annualized) Rolling 4 Quarter

19220-21-0508 | May 2008 | Page 6


Pioneer’s U.S. Real GDP Forecast: Recession Not Expected

Historical Data Source: DataStream. Last data point: 1st quarter 2007 (Advance)Projections by Pioneer Investments Macroeconomics Team. Last forecast: March 26, 2008

Change in U.S. Real Gross Domestic Product

-4

-2

0

2

4

6

8

Q4 1987 Q4 1992 Q4 1997 Q4 2002 Q4 2007

Quarterly (annualized) ProjectedRolling 4 Quarter Projected

19220-21-0508 | May 2008 | Page 7


Components of GDP GrowthPioneer’s 2008 U.S. Real GDP Forecast: 1.9%

Source: Pioneer Investments Macroeconomics Team. Last forecast: March 26, 2008

US GDP Components

-2

-1

0

1

2

3

4

5

6

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 E

Investment Consumption Government Inventories Net Trade

19220-21-0508 | May 2008 | Page 8


The U.S. Housing Market Remains Weak

Source: DataStream. Last data point: March, 2008

Median Existing Single Family Home Selling Price ($000)

$0

$50

$100

$150

$200

$250

Dec-65 Dec-75 Dec-85 Dec-95 Dec-05

NominalConstant (12/05) $

Rolling 12-Month Price Change

-10%

-5%

0%

5%

10%

15%

20%


`̀̀

Existing Single-Family Home Monthly Sales (000)

0

200

400

600


Existing 1-Family Homes for Sale (mm)

0

1

2

3

4


19220-21-0508 | May 2008 | Page 9


Homebuilding Continues to Contract


U.S. Housing Permits and Starts (000)

0

500

1000

1500

2000

2500

Dec-60 Dec-65 Dec-70 Dec-75 Dec-80 Dec-85 Dec-90 Dec-95 Dec-00 Dec-05

Single-Family Permits Total Permits Starts

19220-21-0508 | May 2008 | Page 10


Home Prices are Falling


Median Existing Single Family Home Selling Price ($000)

$0

$50

$100

$150

$200

$250


Month Rolling 12-Month Average Latest

19220-21-0508 | May 2008 | Page 11


Elements of the Credit Market Crisis

Securitization

Relying on ratings

Greed

Leverage

Mark-to-market

Margin calls

Fear

Panic

19220-21-0508 | May 2008 | Page 12


Source: FactSet. Last data point: April 30, 2008

Fear and Illiquidity in Interbank Lending Markets

Spread Between LIBOR and Treasury Bill Yields

0.0

0.5

1.0

1.5

2.0

2.5

12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07

3 Month Latest

19220-21-0508 | May 2008 | Page 13


A Flight to Quality


Difference Between 1-Month T-Bill Yield and Fed Funds (%)

-3

-2

-1

0

1

12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07

Yield Spread Latest

19220-21-0508 | May 2008 | Page 14


A Flight to Quality…And a Partial Retreat


Fed Funds and U.S. Treasury Yields (%)

0

1

2

3

4

5

6

6/30/07 9/30/07 12/30/07 3/30/08

Fed Funds Target Rate

2 Year

5 Year

10 Year

19220-21-0508 | May 2008 | Page 15


Inflation-Adjusted 10-Year Treasury Yields Are Near 25-Year Lows


0%

5%

10%

15%10-Year Treasury Bond YieldRolling 12-month Core CPI

-5%

0%

5%

10%

12/31/65 12/31/75 12/31/85 12/31/95 12/31/05

Real Treasury Bond Yield

19220-21-0508 | May 2008 | Page 16


The Evolving Federal Reserve Outlook…And Willingness to ActExcerpts from Recent Press Releases and Speeches

September 18, 2007: “…intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets…”

February 14, 2008: “The Federal Open Market Committee will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks.”

April 30, 2008: “…will act as needed to promote sustainable economic growth and price stability.”

Source: Federal Reserve press releases and congressional testimony

19220-21-0508 | May 2008 | Page 17


Monetary Policy Is Very AccommodativeThe Fed Funds Rate is Below Trailing 12-Month Core Inflation


0%

5%

10%

15%

20%

Fed Funds Rate

Rolling 12-month Core CPI

-10%

-5%

0%

5%

10%

12/31/60 12/31/70 12/31/80 12/31/90 12/31/00

Real Fed Funds Rate

19220-21-0508 | May 2008 | Page 18


Oil Prices Increases are Accelerating…And Food Prices are in the Headlines


Oil (WTI in $US)

0

10

20

30

40

50

60

70

80

90

100

110

120

130

Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

19220-21-0508 | May 2008 | Page 19


Commodity Prices Have Lifted Headline CPI relative to Core CPIThe Fed’s Focus is (Appropriately) on Core CPI


Rolling 12-Month Inflation

-20%-10%

0%10%20%30%40%50%


CPI

Core CPI

CPI-Energy

Rolling 12-Month Inflation

0%

1%

2%

3%

4%

5%

6%

Dec-95 Dec-00 Dec-05

CPI Core CPI

19220-21-0508 | May 2008 | Page 20


Unit Labor Costs and Inflation: Strong Long-Term RelationshipRecent Data Suggests Diminishing Labor Cost Pressures on Core CPI

Source: DataStream. Last data point: 2007Q4

Unit Labor Costs and Inflation (Rolling 4 Quarter Change)

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Q4 1960 Q4 1970 Q4 1980 Q4 1990 Q4 2000

Unit Labor Costs Core CPI

19220-21-0508 | May 2008 | Page 21


The Unemployment Rate Stands at 5.0%Unemployment is Not Rising as Rapidly as in Past Recessions

Source: DataStream. Last data point: April, 2008

U.S. Unemployment Rate

0

1

2

3

4

5

6

7

8

9

10

11


19220-21-0508 | May 2008 | Page 22


Initial Unemployment Claims Continue to Trend HigherBut Remain Below Levels of the Last Recession

Source: DataStream. Last data point: week ending April 26, 2008

U.S. Initial Unemployment Claims (000)

0

100

200

300

400

500

600


claims latest 13-wk average

19220-21-0508 | May 2008 | Page 23


New Job Creation Continues to Weaken But Job Losses Are Not (Yet) as Severe as in the Last Recession


Monthly Change in non-Farm Employment

-600

-400

-200

0

200

400

600


Monthly Change Most Recent Rolling 12-Month Average

19220-21-0508 | May 2008 | Page 24


Why Employment Matters: A Top-Down View of the US Economy

Source: DataStream

Composition of 2007 U.S. Gross Domestic Product

-10% 0% 10% 20% 30% 40% 50% 60% 70% 80%

Government

Net Exports

Change in Inventories

Private Investment

Personal Consumption

19220-21-0508 | May 2008 | Page 25


Incremental Contribution to Rolling 4-Quarter GDP Growth Spending Growth Has Slowed, But Not Stopped

Source: DataStream. Last data point: 1st Quarter 2008 (Advance)

Personal Consumption

-5%

0%

5%

Private Investment

-5%

0%

5%

Q4 1970 Q4 1980 Q4 1990 Q4 2000

Government, Change in Inventories

-5%

0%

5%

Q4 1970 Q4 1980 Q4 1990 Q4 2000

Change in Inventories Government

Net Exports

-5%

0%

5%

19220-21-0508 | May 2008 | Page 26


The Economic Stimulus Act of 2008 Should Provide Significant Stimulus for Consumer Spending

Source: DataStream. Last data point: 2007Q4

Recession-Fighting Tax Rebates and Change in U.S. Real GDP

-5

-3

-1

1

3

5

7

9

Q4 1955 Q4 1965 Q4 1975 Q4 1985 Q4 1995 Q4 2005

Intervention (as % of GDP)

Rolling 4 Quarter GDP Growth

19220-21-0508 | May 2008 | Page 27


US Trade Weighted Dollar Is At 30-Year Lows


Trade-Weighted Value of the U.S. Dollar

70

80

90

100

110

120

130

140

150

12/31/75 12/31/80 12/31/85 12/31/90 12/31/95 12/31/00 12/31/05

19220-21-0508 | May 2008 | Page 28


Stronger Export Growth is Shrinking the Trade Deficit

Source: DataStream. Last data point: 1st Quarter 2008 (Advance)

US Foreign Trade (% of GDP)

-10%

-5%

0%

5%

10%

15%

20%

Q4 1955 Q4 1965 Q4 1975 Q4 1985 Q4 1995 Q4 2005

Imports Exports Deficit

19220-21-0508 | May 2008 | Page 29


U.S. Capacity Utilization Remains at High Levels And Industrial Production Continues to Grow


U.S. Capacity Utilization and Industrial Production Growth

65

70

75

80

85

90

95


-15%

-10%

-5%

0%

5%

10%

15%

20%Capacity UtilizationIndustrial Production annual growth (RHS)

19220-21-0508 | May 2008 | Page 30


Losses in the Financial Sector Have Stalled Profit GrowthProfit Growth Outside the Financial Sector Remains Solid

Source: DataStream. Last data point: 4th Quarter 2007

U.S. After-Tax Corporate Profits (log scale)

Q4 1950 Q4 1960 Q4 1970 Q4 1980 Q4 1990 Q4 2000

19220-21-0508 | May 2008 | Page 31


U.S. Equity Valuations Are Very Attractive Relative to Treasury Yields

The Standard & Poor's 500 Stock Index (the S&P 500) is a commonly used measure of the broad U.S. stock market. The historical performance shown is provided to illustrate market trends and is not intended to represent the past or future performance of any Pioneer product. 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. Source: DataStream. Last data point: April 30, 2008

S&P 500 Earnings Yield and Bond Yields

2

3

4

5

6

7

Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

S&P 500 E/P (T-12) 10-Yr T-Bond

19220-21-0508 | May 2008 | Page 32


High Yield Bond Default Rates Remain LowDefaults are Expected to Rise…

Source: Moody’s Investor Service. Chart prepared by Pioneer. Last data point: March, 2008.

Trailing 12-Month U.S. High Yield Bond Issuer-Based Default Rate

0

5

10

15

Dec-75 Dec-80 Dec-85 Dec-90 Dec-95 Dec-00 Dec-05

19220-21-0508 | May 2008 | Page 33


Credit Spreads Remain Extremely Wide After the Flight to QualitySpreads Have Narrowed Slightly Since Mid-March

Source: Bloomberg. Last data point: April 30, 2008

US Investment Grade

0

50

100

150

200

250

300


Mortgages

0

50

100

150

200

Dec-97 Dec-00 Dec-03 Dec-06

US High Yield

0

300

600

900


Global HY, ex-US

0

300

600

900

1200

Dec-99 Dec-02 Dec-05

+3 sd

+2 sd

+1 sd

Average

-1 sd

-2 sd

19220-21-0508 | May 2008 | Page 34


Wider Spreads Were Largely the Product of Lower Treasury Yields Investment-Grade Corporate Bond Yields Have Not Risen Dramatically

Source: Bloomberg. Last data point: April 30, 2008

US Bond Index Yields

0

1

2

3

4

5

6

7

8

9

Dec-04 Dec-05 Dec-06 Dec-07

10-yr Treasury Lehman BAA Credit

Lehman AA Credit Merill Lynch BB Corporate

19220-21-0508 | May 2008 | Page 35


The US Dollar in 2007-8 A Bottom or Just a Bear Market Rally?


U.S. Dollar Relative to the Euro and Yen (rebased to 12/31/2007)

-20%

-15%

-10%

-5%

0%

5%

10%

15%

12/31/06 12/31/07

<-

we

ake

r

U

S$

str

on

ge

r ->

Euro Yen

19220-21-0508 | May 2008 | Page 36


U.S. Economic and Market OutlookSummary

The economy can avoid recession in 2008

+ weak dollar, fiscal stimulus, accommodative monetary policy

- House prices, credit availability, systemic risk

Home prices are a key source of risk

There is elevated risk of systemic failures in the financial system

Investor psychology remains dominated by fear

Valuations appear to reflect market technical conditions more than underlying fundamentals

19220-21-0508 | May 2008 | Page 37


Global Tactical Asset Allocation Outlook – April 24, 2008

Global Equities

– US

– Europe

– Japan

– Emerging Markets

Bonds– US Government

– European Government

– Japanese Government

– US Inv. Grade Corporate

– US High Yield Corporate

– European Corporate

US Cash/Liquidity

U.S. Dollar

Yen

Euro

Source: Pioneer Investments Global Asset Allocation Committee. Last update: April 24, 2008

19220-21-0508 | May 2008 | Page 38


Investment Suitability Is Important

Pioneer Investment Management USA, Inc. 60 State Street

Boston, Massachusettswww.pioneerinvestments.com

2008 Pioneer Investments

There is no guarantee that forecasts discussed will be realized.

The views expressed in this presentation are those of the investment professional and are subject to change at any time. These views do not necessarily reflect the views of Pioneer or others in the Pioneer organization.

Learn MoreFor information about Pioneer Investments or Pioneer products and services, visit us at www.pioneerinvestments.com

http://www.pioneerinvestments.com/

19220-21-0508 | May 2008 | Page 39


Glossary of TermsThe consumer price index (CPI) is a statistical time-series measure of a weighted average of prices of a specified set of goods and services purchased by consumers. The CPI measure of core inflation systematically excludes food and energy prices because they are highly volatile.

The federal funds rate is the interest rate at which depository institutions lend balances (federal funds) at the Federal Reserve to other depository institutions overnight.

The Goldman Sachs Commodity Index is a composite index of commodity sector returns, representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. The returns are calculated on a fully-collateralized basis with full reinvestment. The combination of these attributes provides investors with a representative and realistic picture of realizable returns attainable in the commodities markets.

Government Bonds and Treasury Bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.

A Treasury Inflation-Protected Security (TIPS) is identical to a treasury bond except that principal and coupon payments are adjusted to eliminate the effects of inflation.

The Standard & Poor's 500 Stock Index (the S&P 500) is a commonly used measure of the broad U.S. stock market.

Indices are unmanaged and it is not possible to invest directly in an index.

Documents

The Wall of Worry: U.S. Economic and Market Outlook May 5, 2008 Samuel A. Wardwell, CFA Senior Vice President Director of Investment Communications Pioneer