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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-22014
Pioneer Diversified High Income Trust
(Exact name of registrant as specified in charter)
60 State Street, Boston, MA 02109
(Address of principal executive offices) (ZIP code)
Dorothy E. Bourassa, Pioneer Investment Management, Inc.,
60 State Street, Boston, MA 02109
(Name and address of agent for service)
Registrant's telephone number, including area code: (617) 742-7825
Date of fiscal year end: April 30
Date of reporting period: May 1, 2006 through October 31, 2007
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO SHAREOWNERS.
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PIONEER
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DIVERSIFIED
HIGH
INCOME
TRUST
HNW
Ticker Symbol
Semiannual
Report
10/31/07
[LOGO]PIONEER
Investments(R)
Table of Contents
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Letter to Shareowners 2
Portfolio Management Discussion 4
Portfolio Summary 9
Prices and Distributions 10
Performance Update 11
Schedule of Investments 12
Financial Statements 30
Financial Highlights 33
Notes to Financial Statements 34
Trustees, Officers and Service Providers 43
President's
Dear Shareowner,
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Welcome to Pioneer. We thank you for your investment in Pioneer Diversified
High Income Trust, and are pleased to provide you with the Trust's first
shareowner report since its inception on May 30, 2007.
Staying diversified and keeping your portfolio invested in the markets are two
general investment principles that have served investors well over time. They
were particularly useful guides in recent months, when an otherwise healthy
long-term bull market was buffeted by problems in the mortgage and banking
industries.
Since mid-year, issues tied to poor underwriting practices in the subprime
sector of the mortgage industry and to problems with risk management by banks
and hedge funds have resulted in increased market volatility and rising concern
about risks to U.S. economic growth.
U.S. economic growth has slowed over the past two years, though due as much to
the natural maturation of the cyclical expansion, as U.S. factories approached
full utilization and the labor market approached full employment, as to rising
commodity prices or short-term interest rates. The slowdown was, therefore, not
entirely unwelcome, as it reduced the threat of higher inflation. More
recently, however, there has been increasing concern that falling home prices,
and/or disruptions in financial markets pose a larger threat to continuing
economic growth, and we have seen two cuts in short-term interest rates from
the Federal Reserve despite strong economic growth in the second and third
quarters of this year. A weaker U.S. dollar has put upward pressure on some
prices, but it has also significantly benefited exporters and companies
competing in the global marketplace, stimulating U.S. economic growth.
Economic growth in the rest of the world remains relatively positive. In
Europe, solid GDP growth has driven unemployment lower and supported growing
consumption, although concerns about the impact of the strong Euro are a
persistent source of worry. Japanese economic growth continues, albeit at a
muted rate, and the country's deflationary problems are gradually receding.
Economic growth in emerging market countries remains faster than in the
developed world, led by China, which continues its rise as a world economic
power.
The U.S. Federal Reserve and the world's other central banks continue to pursue
policies aimed at producing low and stable inflation, believed to be the best
backdrop for steady economic growth and low average unemployment over the long
term. Keeping inflation low is also an important support for stock and bond
valuations, and so central bank policies have also been "investor friendly." We
view the Fed's recent rate cuts as temporarily "buying insurance" against a
credit crunch, which
2
Letter
would threaten economic growth, rather than as an abandonment of its commitment
to keeping inflation low.
Sudden swings in the markets are always to be expected. Just as staying
diversified and invested are important investment principles, it is also
important to pay attention to asset allocation. 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.
To receive the latest information about Pioneer funds, as well as timely
informative articles on investing, I invite you to visit us at
www.pioneerinvestments.com. All of us at Pioneer thank you for the confidence
and trust you have placed in us.
Respectfully,
/s/ Daniel K. Kingsbury
Daniel K. Kingsbury, 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 the 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 Diversified High Income Trust
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PORTFOLIO MANAGEMENT DISCUSSION 10/31/07
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Pioneer Diversified High Income Trust began operations on May 30, 2007, as a
closed-end fund with the primary objective of pursuing a high level of current
income, with the potential for capital appreciation as a secondary objective.
The Trust pursues its objectives by investing in high-yielding domestic and
foreign bonds, floating rate bank loans and event-linked bonds. The Trust
encountered a challenging investment environment during the first five months
of operations. Declining home values and a looming crisis in the subprime
mortgage market in the United States led to increasing volatility for
income-oriented securities, including high-yield bonds and bank loans. In the
following discussion, Andrew D. Feltus and Jonathan Sharkey provide an update
on the Trust and its investment strategies for the first five months of its
operations. Mr. Feltus and Mr. Sharkey, members of Pioneer's Fixed Income
Group, are responsible for the Trust's day-to-day management.
Q: How did the Trust perform in the first five months of its operations?
A: Pioneer Diversified High Income Trust had a total return of 1.07%, at net
asset value, from its inception on May 30, 2007, through October 31, 2007.
During the same period, the Trust's benchmark returned 0.34%. The
benchmark is based on a 50% weighting of the Merrill Lynch Global High
Yield and Emerging Markets Index and a 50% weighting of the CSFB Leveraged
Loan Index. At market price, the Trust's total return for the period was
-13.39%. During the period, the Trust provided a generous yield. The SEC
yield at the end of the five-month period was 9.68%.
Call 1-800-225-6292 or visit www.pioneerinvestments.com 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.
4
Pioneer Diversified High Income Trust
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Q: What were your principal strategies the in the first five months of the
Trust's investment operations?
A: The Trust is designed to maintain a balanced high-yielding strategy, seeking
both high income and the potential for capital appreciation. To accomplish
that, we draw upon the Pioneer's Fixed Income Group's expertise in credit
research. In constructing a portfolio, we allocated 37.5% of Trust assets
to global high yield securities, 37.5% to floating rate bank loans, and
25% to event-linked bonds. The global high-yield allocation has been
composed primarily of domestic, high-yield corporate bonds, although we
also have exposure to emerging market debt and high-yield corporate bonds
from developed nations. Our investments in bank loans were in
floating-rate securities, often judged to be of generally higher quality
than high-yielding bonds, with solid covenant protection. Event-linked
bonds are mostly securities issued as re-insurance bonds against the
possibility of high occurrences of natural catastrophes, such as
hurricanes or earthquakes. In managing the event-linked bond allocation,
we draw upon the expertise of Montpelier Capital Advisors, Ltd., as
sub-advisor to the Trust. Montpelier has significant expertise in
evaluating catastrophic and insurance-linked risk.
The average credit quality of the Trust's investments on October 31, 2007
was B.
Q: How would you describe the investment environment from the Trust's inception
on May 30, 2007, through the period ended October 31, 2007?
A: Fixed-income and bank loan markets experienced significant volatility during
the period. The bond market began to feel the effects of monetary
tightening policies by the U.S. Federal Reserve Board ("Fed") and other
major central banks. Early signs of a deceleration of growth, particularly
in the United States, began to appear, while the most speculative part of
the domestic economy in recent years - the housing industry - started to
slump. Falling home values created problems in the subprime mortgage
market, which began to affect the balance sheets of banks and other home
lenders as well as investors in some mortgage-related securities. As major
banks began disclosing information about their exposure to subprime
mortgages, anxieties spread through the financial
5
Pioneer Diversified High Income Trust
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PORTFOLIO MANAGEMENT DISCUSSION 10/31/07 (continued)
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markets. In a general flight to quality, investors increasingly sought out
the highest-quality, lowest-risk securities, moving away from high-yield
corporate bonds as the market saw little reward for taking on the added
credit risks of lower-rated corporate debt. Despite this trend, the
underlying economic fundamentals of high-yield issuers remained strong.
With corporations posting strong profits and solid balance sheets, the
default rate of domestic high-yield corporate bonds stood at just 1.1% at
the end of the period - far below the long-term average rates. Outside the
U.S., high-yield bonds in Europe and other major industrialized nations
performed in line with the domestic market, although the appreciation of
most foreign currencies against the dollar boosted the returns of
U.S.-based investors in foreign markets. Emerging market debt outperformed
other parts of the high-yield universe.
The market for bank loans changed dramatically during the five-month
period since the Trust's inception, as growing problems in the subprime
mortgage industry created secondary effects on the supply and demand
dynamics for collateralized bank loans. Over the full period, bank loans
backed by the assets of borrowing companies delivered generally positive
results, as the market for loans improved substantially in August,
September and October after experiencing considerable volatility in June
and July. The period saw a transition from a seller's market, which
favored borrowing companies, to a buyer's market, which favored investors
such as mutual funds. Default rates for bank loans remained near historic
lows of 0.5%.
Event-linked bonds generally performed well over the five-month period
since the Trust's inception, as they tended to appreciate in value, as
well as pay high yields, during a period of relatively light insurance
losses from a relatively mild hurricane season.
Q: How did the Trust's investments influence performance during the period from
May 30, 2007 through October 31, 2007?
A: The Trust's investments in higher-yielding securities helped provide a
generous income stream during the period, consistent with the primary
investment objective. On a total return basis, the Trust's investments in
event-linked bonds provided the most significant positive support, as many
of the bonds appreciated in value even as they continued to provide high
yields.
6
Pioneer Diversified High Income Trust
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The investments in high-yielding corporate bonds suffered more price loss
during the five-month period since the Trust's inception and held back
Trust performance, although those bonds did recover somewhat in the final
three months of the period. The allocation to bank loans produced positive
performance, despite suffering some price erosion during a market slump in
July and August. However, they recovered strongly during the final three
months of the period.
Q: What is your investment outlook?
A: We believe the fixed-income markets are likely to stay volatile, but we
think the Trust is well positioned because of its diversified portfolio of
higher-yielding investments. We think we are likely to see an economic
deceleration in the United States, but not a recession. The prices of
high-yield bonds - as reflected in their yield advantages over Treasuries
- are now more attractive after the summer corrections, and corporate
profits continue to look healthy. We believe the default rate for
high-yield debt and bank loans is likely to rise, but principally because
it has been extremely low relative to long-term averages. We anticipate
that the Fed will react to developments in the economy and the markets,
and further cuts in the Fed funds rate are possible.
While we see the potential for some continued instability in the bank loan
market because of supply/demand imbalance, we anticipate that conditions
should begin to stabilize in the first quarter of 2008. We anticipate that
new loans entering the market in 2008 are likely to have stronger
covenants to protect investors and are likely to have higher credit
spreads - or yield premiums - reflecting both the supply/demand imbalance
as well as the potential for increased defaults. In the meantime,
investors in bank loans are being well compensated with competitive income
for their investments, and although we expect default rates on the loans
to increase, they remain very low by historical measures.
Overall, we believe the Trust is well positioned with a diversified
portfolio of high-yielding investments with the potential to produce a
generous income stream.
7
Pioneer Diversified High Income Trust
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PORTFOLIO MANAGEMENT DISCUSSION 10/31/07 (continued)
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Investments in high-yield or lower-rated securities are subject to
greater-than-average risk. The Trust may invest in securities of issuers
that are in default or that are in bankruptcy.
Investing in foreign and/or emerging markets securities involves risks
relating to interest rates, currency exchange rates, economic, and
political conditions.
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. 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 up to 50% of its total assets in illiquid securities.
Illiquid securities may be difficult to dispose of at a fair price at the
times when the Trust believes it is desirable to do so and their market
price is generally more volatile than that of more liquid securities.
Illiquid securities are also more difficult to value and investment of the
Trust's assets in illiquid securities may restrict the Trust's ability to
take advantage of market opportunities.
The Trust may use leverage through the issuance of preferred shares with
an aggregate liquidation preference of up to 33 1/3% of the Trust's total
assets after such issuance. 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 for the holders of common shares and may be viewed by visiting the
Securities and Exchange Commission's web site at http://www.sec.gov.
Risks of investing in the Trust are discussed in greater detail in the
Trust's registration statement on Form N-2 relating to its 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 market forecasts discussed will be realized.
8
Pioneer Diversified High Income Trust
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PORTFOLIO SUMMARY 10/31/07
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Portfolio Diversification
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(As a percentage of total investment portfolio)
[THE FOLLOWING DATA WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
Corporate Bonds & Notes 61.8%
Floating Rate Loan Interests 33.4%
Temporary Cash Investments 4.4%
Collateralized Mortgage Obligations 0.2%
Convertible Bonds 0.2%
Warrants* 0.0%
* Amount is less than 0.1%.
Portfolio Quality
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(As a percentage of total investment portfolio; based on S&P ratings)
[THE FOLLOWING DATA WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
B 39.0%
BB 28.8%
Not Rated 14.6%
CCC & Lower 12.2%
Cash Equivalents 4.4%
A & Higher 0.7%
BBB 0.3%
The portfolio is actively managed, and current holdings may be different.
9
Pioneer Diversified High Income Trust
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PRICES AND DISTRIBUTIONS 10/31/07
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Share Prices and Distributions
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Market Value
per Common Share 10/31/07 5/30/07
$21.06 $25.10
Net Asset Value
per Common Share 10/31/07 5/30/07
$23.47 $23.83
Net
Distributions per Investment Short-Term Long-Term
Common Share Income Capital Gains Capital Gains
(5/30/07 - 10/31/07) $0.5940 $ - $ -
10 Largest Holdings
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(As a percentage of long-term holdings)*
1. Redwood Capital IX, Ltd., 11.993%, 1/9/08 (144A) 2.71%
2. Cascadia, Ltd., 8.489%, 6/13/08 (144A) 2.70
3. Foundation Re, Ltd., 9.46%, 11/24/08 (144A) 1.99
4. Australis, Ltd., 9.01%, 3/24/09 (144A) 1.89
5. Fhu-Jin, Ltd., 9.255%, 8/10/11 (144A) 1.65
6. Atlantic & Western Re, Ltd., 11.481%, 1/9/09 (144A) 1.64
7. Australis, Ltd., 9.36%, 2/3/09 (144A) 1.63
8. Residential Reinsurance 2005, Ltd., 14.071%, 6/6/08 (144A) 1.56
9. Blue Fin, Ltd., 9.275% 4/10/12 (144A) 1.35
10. AKIBARE, 8.445%, 5/22/12 (144A) 1.23
* This list excludes temporary cash and derivative investments. 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.
10
Pioneer Diversified High Income Trust
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PERFORMANCE UPDATE 10/31/07
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Investment Returns
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The mountain chart on the right shows the change in market value, plus
reinvested dividends and distributions, of a $10,000 investment made in common
shares of Pioneer Diversified High Income Trust, compared to that of the
combined (50%/50%) Merrill Lynch Global High Yield and EM CSFB Leveraged Loan
Indexes.
Cumulative Total Returns
(As of October 31, 2007)
---------------------------------------------------
Net Asset Market
Period Value (NAV) Price
Life-of-Trust
(5/30/07) 1.07% -13.39%
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[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Value of $10,000 Investment
Pioneer 50% 50%
Diversified High ML Global CSFB
Income Trust HY and EM Leveraged Loan
5/07 10020 10000
6/07 10000 10000
7/07 9232 10000
8/07 8885 10000
9/07 8585 10000
10/07 8661 10100
Call 1-800-225-6292 or visit www.pioneerinvestments.com 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 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 or the redemption of Trust
shares.
The Merrill Lynch Global High Yield and Emerging Markets Plus Index tracks the
performance of the below- and border-line investment-grade global debt markets
denominated in the major developed market currencies. The Index includes
sovereign issuers rated BBB1 and lower along with corporate issues rated BB1 and
lower. There are no restrictions on issuer country of domicile. The CSFB
Leveraged Loan Index is designed to mirror the investible universe of the U.S.
dollar-denominated leveraged loan market. The CSFB Leveraged Loan Index consists
of tradable term loans with at least one year to maturity and rated BBB or
lower.
11
Pioneer Diversified High Income Trust
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SCHEDULE OF INVESTMENTS 10/31/07 (unaudited)
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Principal S&P/Moody's
Amount Ratings
USD($) (unaudited) Value
COLLATERIZED MORTGAGE OBLIGATIONS - 0.2% of Net Assets
Diversified Financials - 0.2%
400,000 BB/Ba3 DB Master Finance LLC, 8.285%, 6/20/31 (144A) $ 411,326
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TOTAL COLLATERIZED MORTGAGE OBLIGATIONS
(Cost $406,092) $ 411,326
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CORPORATE BONDS & NOTES - 62.5% of Net Assets
Energy - 4.9%
Oil & Gas Drilling - 0.2%
300,000 NR/NR Skeie Drilling & Production ASA, 11.25%,
3/8/13 (144A) $ 292,500
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$ 292,500
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Oil & Gas Equipment & Services - 1.3%
400,000 BB/Ba2 Bristow Group, Inc., 7.5%, 9/15/17 (144A) $ 412,000
350,000 B/B2 Complete Production Services, Inc.,
8.0%, 12/15/16 339,500
NOK 5,000,000 NR/NR Norwegian Energy Co. AS, 11.0%,
7/13/10 (144A) 922,774
275,000 NR/B1 SemGroup L.P., 8.75%, 11/15/15 (144A) 264,000
600,000(a) NR/NR Sevan Marine ASA, 8.37%, 5/14/13 (144A) 594,000
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$ 2,532,274
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Integrated Oil & Gas - 0.3%
500,000 NR/B2 Tristan Oil, Ltd., 10.5%, 1/1/12 (144A) $ 485,000
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Oil & Gas Exploration & Production - 1.0%
160,000 B/B3 Berry Petroleum Co., 8.25%, 11/1/16 $ 163,200
500,000 CCC+/Caa1 Harvest Operations Corp., 7.875%, 10/15/11 486,250
160,000 B/B3 Hilcorp Energy I L.P./Hilcorp Finance Co., 7.75%,
11/1/15 (144A) 157,400
675,000 B-/Caa1 Parallel Petroleum Corp., 10.25%, 8/1/14 (144A) 685,125
225,000 B-/Caa2 PetroQuest Energy, Inc., 10.375%, 5/15/12 230,625
250,000 B/B1 Quicksilver Resources, Inc., 7.125%, 4/1/16 246,250
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$ 1,968,850
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Oil & Gas Refining & Marketing - 0.7%
955,000 B-/B3 Aventine Renewable Energy Holdings, Inc.,
10.0%, 4/1/17 $ 849,950
600,000 B-/B3 VeraSun Energy Corp., 9.375%, 6/1/17 (144A) 493,500
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$ 1,343,450
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12 The accompanying notes are an integral part of these financial statements.
Pioneer Diversified High Income Trust
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Principal S&P/Moody's
Amount Ratings
USD($) (unaudited) Value
Oil & Gas Storage & Transportation - 1.0%
530,000 B/B1 Inergy L.P./Inergy Finance Corp., 8.25%, 3/1/16 $ 553,850
250,000 BB+/NR LPG International, Inc., 7.25%, 12/20/15 251,625
150,000 CCC+/B3 Targa Resources, Inc., 8.5%, 11/1/13 (144A) 151,500
550,000 B+/B1 Transportadora de Gas del Sur SA, 7.875%,
5/14/17 (144A) 502,425
400,000 BB+/Ba3 Williams Partners L.P./Williams Partners Finance
Corp., 7.25%, 2/1/17 412,500
------------
$ 1,871,900
------------
Coal & Consumable Fuels - 0.4%
900,000 B+/B2 Massey Energy Co., 6.875%, 12/15/13 $ 850,500
------------
Total Energy $ 9,344,474
------------
Materials - 7.0%
Commodity Chemicals - 0.9%
400,000 B+/B1 ARCO Chemical Co., 9.8%, 2/1/20 $ 392,000
1,750,000 CCC+/B3 Georgia Gulf Corp., 10.75%, 10/15/16 1,386,875
------------
$ 1,778,875
------------
Diversified Chemicals - 1.2%
110,000 BB/NR Braskem SA, 11.75%, 1/22/14 (144A) $ 135,300
EURO 1,175,000 B-/B3 Ineos Group Holdings Plc, 7.875%,
2/15/16 (144A) 1,563,947
650,000 B/B2 Montell Finance Co. BV, 8.1%, 3/15/27 (144A) 565,500
------------
$ 2,264,747
------------
Construction Materials - 0.2%
320,000 NR/NR Blaze Recycling & Metals LLC/Blaze Finance Corp.,
10.875%, 7/15/12 (144A) $ 320,000
------------
Metal & Glass Containers - 0.5%
EURO 625,000 B-/B3 Impress Holdings BV, 9.25%, 9/15/14 (144A) $ 958,478
80,000 B/B2 Vitro, S.A.B. de CV, 9.125%, 2/1/17 79,000
------------
$ 1,037,478
------------
Paper Packaging - 1.0%
600,000 B-/B3 Exopack Holding Corp., 11.25%, 2/1/14 $ 607,500
500,000 B-/B3 Graphic Packaging International, Inc.,
9.5%, 8/15/13 525,000
750,000 B/B3 U.S. Corrugated, Inc., 10.0%, 6/1/13 697,500
------------
$ 1,830,000
------------
The accompanying notes are an integral part of these financial statements. 13
Pioneer Diversified High Income Trust
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SCHEDULE OF INVESTMENTS 10/31/07 (unaudited) (continued)
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Principal S&P/Moody's
Amount Ratings
USD($) (unaudited) Value
Aluminum - 0.8%
700,000 B-/Caa1 Aleris International, Inc., 10.0%, 12/15/16 $ 616,000
350,000 B+/B1 Asia Aluminum Holdings, Ltd., 8.0%,
12/23/11 (144A) 339,955
500,000 B/Caa1 Indalex Holding Corp., 11.5%, 2/1/14 465,000
------------
$ 1,420,955
------------
Diversified Metals & Mining - 1.2%
350,000 B-/B3 American Rock Salt Co., LLC, 9.5%, 3/15/14 $ 356,125
250,000 BB-/Ba3 FMG Finance Pty., Ltd., 10.625%, 9/1/16 (144A) 296,250
1,085,000 B/NR Industrias Metalurgicas Pescarmona SA, 11.25%,
10/22/14 (144A) 1,083,921
500,000(a)(b) CCC+/B3 Noranda Aluminum Acquisition Corp., 9.36%,
5/15/15 (144A) 461,250
75,000 B-/B3 PNA Group, Inc., 10.75%, 9/1/16 76,688
------------
$ 2,274,234
------------
Steel - 0.9%
1,245,000 B-/Caa1 Algoma Acquisition Corp., 9.875%,
6/15/15 (144A) $ 1,101,825
EURO 600,000 NR/Caa1 Bulgaria Steel Finance BV, 12.0%, 5/4/13 577,257
EURO 50,000 B-/Caa1 Zlomrex International Finance SA, 8.5%,
2/1/14 (144A) 65,466
------------
$ 1,744,548
------------
Forest Products - 0.3%
250,000 CCC+/B2 Ainsworth Lumber Co., Ltd., 6.75%, 3/15/14 $ 160,625
500,000 B-/B3 Mandra Forestry Holdings, Ltd., 12.0%,
5/15/13 (144A) 471,250
------------
$ 631,875
------------
Total Materials $ 13,302,712
------------
Capital Goods - 3.3%
Aerospace & Defense - 0.2%
300,000 B-/B3 TransDigm, Inc., 7.75%, 7/15/14 $ 305,250
------------
Building Products - 0.4%
500,000(a) B+/B2 Builders FirstSource, Inc., 9.808%, 2/15/12 $ 470,000
300,000(a)(c) BBB-/NR C8 Capital SPV, Ltd., 6.64% (144A) 292,491
------------
$ 762,491
------------
Construction & Engineering - 0.5%
750,000 NR/B2 Desarrolladora Metropolitana SA de CV, 10.875%,
5/9/17 (144A) $ 757,500
200,000 B+/Ba3 Dycom Industries, Inc., 8.125%, 10/15/15 203,500
------------
$ 961,000
------------
14 The accompanying notes are an integral part of these financial statements.
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD($) (unaudited) Value
Electrical Components & Equipment - 0.3%
650,000(c) NR/B3 Rede Empresas de Energia Eletrica SA,
11.125% (144A) $ 654,875
------------
Construction & Farm Machinery & Heavy Trucks - 1.9%
600,000 B-/B3 Accuride Corp., 8.5%, 2/1/15 $ 564,000
520,000 B+/B1 Commercial Vehicle Group, Inc., 8.0%, 7/1/13 499,200
500,000 B/B2 Esco Corp., 8.625%, 12/15/13 (144A) 508,750
1,300,000 B+/B2 Greenbrier Companies, Inc., 8.375%, 5/15/15 1,285,375
500,000(d) CCC+/Caa2 Stanadyne Corp., 0.0%, 2/15/15 405,000
400,000 B/B3 Titan International, Inc., 8.0%, 1/15/12 400,000
------------
$ 3,662,325
------------
Total Capital Goods $ 6,345,941
------------
Commercial Services & Supplies - 1.0%
Diversified Commercial & Professional Services - 1.0%
350,000 B+/Ba2 FTI Consulting, Inc., 7.75%, 10/1/16 $ 365,750
425,000(a) B-/B3 NCO Group, Inc., 10.428%, 11/15/13 421,812
900,000 B-/Caa1 NCO Group, Inc., 11.875%, 11/15/14 895,500
250,000 B-/B3 Park-Ohio Industries, Inc., 8.375%, 11/15/14 233,125
------------
Total Commercial Services & Supplies $ 1,916,187
------------
Transportation - 0.5%
Airlines - 0.3%
154,114 B-/B1 American Airlines, Inc., 7.377%, 5/23/19 $ 144,867
500,000(c) NR/Ba2 GOL Finance, 8.75% (144A) 491,250
------------
$ 636,117
------------
Railroads - 0.2%
350,000 B+/B2 Kansas City Southern de Mexico,
7.625%, 12/1/13 $ 357,000
------------
Total Transportation $ 993,117
------------
Automobiles & Components - 0.7%
Auto Parts & Equipment - 0.7%
330,000 B-/Caa1 Allison Transmission, Inc., 11.0%,
11/1/15 (144A) $ 336,600
500,000(b) B-/Caa1 Allison Transmission, Inc., 11.25%,
11/1/15 (144A) 495,000
500,000 CCC+/Caa1 Cooper-Standard Automotive, Inc.,
8.375%, 12/15/14 445,000
------------
Total Automobiles & Components $ 1,276,600
------------
The accompanying notes are an integral part of these financial statements. 15
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 10/31/07 (unaudited) (continued)
--------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD($) (unaudited) Value
Consumer Durables & Apparel - 1.3%
Homebuilding - 0.3%
315,000 BB-/Ba3 Desarrolladora Homex S.A.B. de CV,
7.5%, 9/28/15 $ 319,725
500,000 B/Caa1 William Lyon Homes, Inc., 7.5%, 2/15/14 315,000
------------
$ 634,725
------------
Housewares & Specialties - 0.5%
200,000 B-/B3 Jarden Corp., 7.5%, 5/1/17 $ 190,000
750,000 CCC+/Caa1 Yankee Acquisition Corp., 9.75%, 2/15/17 693,750
------------
$ 883,750
------------
Footwear - 0.5%
EURO 730,000(a) B-/Caa1 Edcon Holdings Proprietary, Ltd., 10.23%,
6/15/15 (144A) $ 971,644
------------
Total Consumer Durables & Apparel $ 2,490,119
------------
Consumer Services - 1.4%
Casinos & Gaming - 1.4%
EURO 50,000 B/B2 Codere Finance Luxembourg SA, 8.25%,
6/15/15 (144A) $ 73,423
550,000 CCC+/Caa1 Fontainebleau Las Vegas Holdings LLC/
Fontainebleau Las Vegas Capital Corp., 10.25%,
6/15/15 (144A) 514,250
275,000 B/B2 Little Traverse Bay Bands of Odawa Indians,
10.25%, 2/15/14 (144A) 281,875
EURO 50,000 B/B3 Peermont Global, Ltd., 7.75%, 4/30/14 (144A) 69,444
750,000 B/Ba3 Station Casinos, Inc., 6.625%, 3/15/18 594,375
750,000 B/Caa1 Trump Entertainment Resorts, Inc., 8.5%, 6/1/15 635,625
650,000 CCC+/Caa1 Wimar Opco LLC, 9.625%, 12/15/14 (144A) 487,500
------------
Total Consumer Services $ 2,656,492
------------
Media - 0.8%
Movies & Entertainment - 0.2%
400,000 B+/Ba2 Corporacion Interamericana de Entretenimiento
SA de CV, 8.875%, 6/14/15 (144A) $ 408,000
------------
Publishing - 0.6%
536,875(b) CCC+/Caa1 AAC Group Holding Corp., 14.75%, 10/1/12 $ 518,084
600,000 CCC+/Caa1 TL Acquisitions, Inc., 10.5%, 1/15/15 (144A) 597,000
------------
$ 1,115,084
------------
Total Media $ 1,523,084
------------
16 The accompanying notes are an integral part of these financial statements.
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD($) (unaudited) Value
Retailing - 0.5%
Distributors - 0.3%
500,000 B-/B3 Intcomex, Inc., 11.75%, 1/15/11 $ 510,000
------------
Specialty Stores - 0.2%
500,000 CCC+/B2 Sally Holdings LLC, 9.25%, 11/15/14 $ 502,500
------------
Total Retailing $ 1,012,500
------------
Food & Staples Retailing - 0.4%
Drug Retail - 0.1%
275,000 CC/Caa3 Duane Reade, Inc., 9.75%, 8/1/11 $ 266,750
------------
Food Distributors - 0.3%
250,000 B+/B1 JBS SA, 10.5%, 8/4/16 (144A) $ 264,375
275,000(d) NR/B2 SA Fabrica de Produtos Alimenticios Vigor, 9.25%,
2/23/17 (144A) 273,281
------------
$ 537,656
------------
Total Food & Staples Retailing $ 804,406
------------
Food, Beverage & Tobacco - 1.1%
Brewers - 0.1%
189,000 B+/Ba3 Cerveceria Nacional Dominicana C por A, 8.0%,
3/27/14 (144A) $ 195,143
------------
Agricultural Products - 0.5%
580,000(c) BB/Ba2 Cosan SA Industria e Comercio, 8.25% (144A) $ 569,850
400,000 B+/B1 Marfrig Overseas, Ltd., 9.625%, 11/16/16 (144A) 420,000
------------
$ 989,850
------------
Packaged Foods & Meats - 0.3%
500,000 B/NR Minerva Overseas, Ltd., 9.5%, 2/1/17 (144A) $ 503,750
------------
Tobacco - 0.2%
500,000 B/B2 Alliance One International, Inc., 8.5%, 5/15/12 $ 497,500
------------
Total Food, Beverage & Tobacco $ 2,186,243
------------
Health Care Equipment & Services - 2.2%
Health Care Equipment & Services - 0.4%
750,000 CCC+/Caa2 Accellent, Inc., 10.5%, 12/1/13 $ 706,875
------------
Health Care Supplies - 0.2%
500,000(a) CCC+/B3 Medical Services Co., 12.743%, 10/15/11 $ 467,500
------------
The accompanying notes are an integral part of these financial statements. 17
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 10/31/07 (unaudited) (continued)
--------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD($) (unaudited) Value
Health Care Services - 0.8%
350,000 CCC+/B3 Rural/Metro Corp., 9.875%, 3/15/15 $ 338,187
725,000(b) CCC+/B3 Surgical Care Affiliates, Inc., 8.875%,
7/15/15 (144A) 692,375
570,000 CCC+/Caa1 Surgical Care Affiliates, Inc., 10.0%,
7/15/17 (144A) 544,350
------------
$ 1,574,912
------------
Health Care Facilities - 0.5%
500,000 B-/B3 Community Health Systems, Inc., 8.875%,
7/15/15 (144A) $ 506,250
420,000 CCC+/Caa1 Hanger Orthopedic Group, Inc., 10.25%, 6/1/14 436,800
------------
$ 943,050
------------
Managed Health Care - 0.3%
500,000 B-/Caa1 Multiplan, Inc., 10.375%, 4/15/16 (144A) $ 511,250
------------
Total Health Care Equipment & Services $ 4,203,587
------------
Pharmaceuticals & Biotechnology & Life Sciences - 0.5%
Biotechnology - 0.2%
400,000 CCC/Caa1 Angiotech Pharmaceuticals, Inc., 7.75%, 4/1/14 $ 338,000
------------
Pharmaceuticals - 0.3%
250,000 B-/B2 Phibro Animal Health Corp., 10.0%,
8/1/13 (144A) $ 256,875
250,000 B-/B3 Warner Chilcott Corp., 8.75%, 2/1/15 258,750
------------
$ 515,625
------------
Total Pharmaceuticals & Biotechnology &
Life Sciences $ 853,625
------------
Banks - 1.2%
Diversified Banks - 1.2%
500,000(a)(c) NR/B2 ALB Finance BV, 9.375% $ 386,150
250,000 B+/Ba1 ATF Capital BV, 9.25%, 2/21/14 (144A) 257,500
375,000 NR/B2 Banco Macro SA, 8.5%, 2/1/17 342,187
700,000(a) NR/Ba1 Banco Macro SA, 10.75%, 6/7/12 579,250
300,000 B+/Ba3 Petrocommerce Finance SA, 8.75%, 12/17/09 296,370
500,000 BB/Ba1 TuranAlem Finance BV, 8.5%, 2/10/15 (144A) 465,000
------------
Total Banks $ 2,326,457
------------
Diversified Financials - 13.4%
Other Diversified Financial Services - 1.9%
2,500,000(a) BB+/NR Blue Fin, Ltd., 9.275% 4/10/12 (144A) $ 2,500,000
1,000,000(a) B/NR Carillon, Ltd., 20.944%, 1/10/11 (144A) 1,052,600
------------
$ 3,552,600
------------
18 The accompanying notes are an integral part of these financial statements.
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD($) (unaudited) Value
Specialized Finance - 10.3%
3,500,000(a) BB/NR Australis, Ltd., 9.01%, 3/24/09 (144A) $ 3,497,550
3,000,000(a) BB/NR Australis, Ltd., 9.36%, 2/3/09 (144A) 3,011,700
2,000,000(a) BB/NR Calabash Re, Ltd., 13.999%, 6/1/09 (144A) 2,100,000
1,000,000(a) BB/NR Calabash Re II, Ltd., 14.094%, 1/8/10 (144A) 1,033,600
5,000,000(a) BB+/NR Cascadia, Ltd., 8.849%, 6/13/08 (144A) 5,001,500
1,000,000(a) NR/B1 Spinnaker Capital, Ltd., 17.194%,
6/15/08 (144A) 1,056,600
2,000,000(a) B/B2 Successor Hurricane Industry, Ltd., 18.998%,
12/6/07 (144A) 2,018,200
2,000,000(a) NR/NR Successor II, Ltd., 44.948%, 6/6/08 (144A) 2,101,000
------------
$ 19,820,150
------------
Consumer Finance - 0.7%
460,000 B+/Ba3 AmeriCredit Corp., 8.5%, 7/1/15 (144A) $ 411,700
500,000 CCC/Caa1 KAR Holdings, Inc., 10.0%, 5/1/15 (144A) 477,500
550,000 BB-/Ba2 Russian Standard Finance SA, 7.5%,
10/7/10 (144A) 501,875
------------
$ 1,391,075
------------
Investment Banking & Brokerage - 0.5%
965,000(b) B-/B3 LVB Acquisition Merger Sub, Inc., 10.375%,
10/15/17 (144A) $ 977,063
------------
Total Diversified Financials $ 25,740,888
------------
Insurance - 12.8%
Insurance Brokers - 0.5%
600,000 CCC+/Caa1 HUB International Holdings, Inc., 10.25%,
6/15/15 (144A) $ 555,000
500,000 CCC/Caa1 USI Holdings Corp., 9.75%, 5/15/15 (144A) 441,250
------------
$ 996,250
------------
Multi-Line Insurance - 0.6%
1,000,000(a) BB+/Baa3 Liberty Mutual Group, Inc., 7.0%, 3/15/37 (144A) $ 939,992
100,000 B/NR Sul America Participacoes SA, 8.625%,
2/15/12 (144A) 104,250
------------
$ 1,044,242
------------
Property & Casualty Insurance - 0.2%
625,000(a) A+/Aa3 AMBAC Financial Group, Inc., 6.15%, 2/15/37 $ 477,538
------------
The accompanying notes are an integral part of these financial statements. 19
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 10/31/07 (unaudited) (continued)
--------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD($) (unaudited) Value
Reinsurance - 11.5%
2,250,000(a) BB+/NR AKIBARE, 8.445%, 5/22/12 (144A) $ 2,279,700
1,500,000(a) BB+/NR AKIBARE, 8.645%, 5/22/12 (144A) 1,519,650
3,000,000(a) CCC/NR Atlantic & Western Re, Ltd., 11.481%,
1/9/09 (144A) 3,033,240
3,000,000(a) BB+/NR Fhu-Jin, Ltd., 9.26%, 8/10/11 (144A) 3,061,470
3,750,000(a) BB/NR Foundation Re, Ltd., 9.62%, 11/24/08 (144A) 3,687,675
5,000,000(a) NR/Ba2 Redwood Capital IX, Ltd., 11.993%,
1/9/08 (144A) 5,014,500
2,900,000(a) B-/NR Residential Reinsurance 2005, Ltd., 14.071%,
6/6/08 (144A) 2,893,910
500,000(a) B/NR Residential Reinsurance 2006, Ltd., 15.621%,
6/5/09 (144A) 516,350
------------
$ 22,006,495
------------
Total Insurance $ 24,524,525
------------
Real Estate - 0.8%
Real Estate Management & Development - 0.8%
100,000(a) B+/NR Alto Palermo SA, 11.0%, 6/11/12 (144A) $ 88,000
105,000 B+/B1 China Properties Group, Ltd., 9.125%,
5/4/14 (144A) 94,500
410,000 B+/NR IRSA Inversiones y Representaciones SA, 8.5%,
2/2/17 (144A) 372,485
1,100,000 B+/B1 Neo-China Group Holdings, Ltd., 9.75%,
7/23/14 (144A) 1,014,750
------------
Total Real Estate $ 1,569,735
------------
Software & Services - 1.7%
IT Consulting & Other Services - 0.2%
400(e) CCC+/B2 MSX International UK/MXS International Business
Services FR/MXS International GmbH, 12.5%,
4/1/12 (144A) $ 380,000
------------
Data Processing & Outsourced Services - 1.2%
1,440,000 B-/B3 First Data Corp., 9.875%, 9/24/15 (144A) $ 1,378,800
1,110,000 CCC+/Caa1 Pegasus Solutions, Inc., 10.5%, 4/15/15 (144A) 999,000
------------
$ 2,377,800
------------
Application Software - 0.3%
500,000 CCC+/Caa1 Open Solutions, Inc., 9.75%, 2/1/15 (144A) $ 482,500
------------
Total Software & Services $ 3,240,300
------------
Technology Hardware & Equipment - 0.6%
Computer Hardware - 0.4%
870,000 CCC+/Caa1 Activant Solutions, Inc., 9.5%, 5/1/16 $ 793,875
------------
20 The accompanying notes are an integral part of these financial statements.
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD($) (unaudited) Value
Electronic Manufacturing Services - 0.2%
300,000 B/NR Cia de Transporte de Energia Electrica de Alta
Tension SA, 8.875%, 12/15/16 (144A) $ 276,750
70,000 B-/B2 Sanmina-SCI Corp., 6.75%, 3/1/13 61,075
------------
$ 337,825
------------
Total Technology Hardware & Equipment $ 1,131,700
------------
Semiconductors & Semiconductor Equipment - 0.7%
Semiconductors - 0.7%
1,000,000(b) B/B1 Freescale Semiconductor, Inc., 9.125%, 12/15/14 $ 905,000
500,000 B/B2 Freescale Semiconductor, Inc., 10.125%, 12/15/16 453,125
------------
Total Semiconductors & Semiconductor
Equipment $ 1,358,125
------------
Telecommunication Services - 4.2%
Alternative Carriers - 0.5%
1,000,000 CCC+/Caa1 PAETEC Holding Corp., 9.5%, 7/15/15 (144A) $ 1,025,000
------------
Integrated Telecommunication Services - 1.0%
1,200,000 B-/B3 GC Impsat Holdings I Plc, 9.875%,
2/15/17 (144A) $ 1,167,000
142,000 NR/Baa3 Tele Norte Leste Participacoes SA,
8.0%, 12/18/13 150,520
500,000 BB-/Ba3 Windstream Corp., 8.625%, 8/1/16 535,000
------------
$ 1,852,520
------------
Wireless Telecommunication Services - 2.7%
910,000 CCC+/B3 Broadview Networks Holdings, Inc., 11.375%,
9/1/12 (144A) $ 964,600
500,000 CCC+/Caa3 Cell C Property, Ltd., 11.0%, 7/1/15 (144A) 410,000
500,000 CCC/Caa1 Cricket Communications, Inc., 9.375%,
11/1/14 (144A) 496,250
150,000 NR/B3 Digicel, Ltd., 9.25%, 9/1/12 (144A) 153,750
EURO 500,000(a) CCC+/Caa1 Hellas Telecommunications Luxembourg II,
10.732%, 1/15/15 (144A) 708,912
850,000(d) B-/B3 Intelsat Intermediate Holding Co., Ltd.,
0.0%, 2/1/15 699,125
400,000 B-/B2 Kabel Deutschland GmbH, 10.625%, 7/1/14 434,000
1,330,000 B/B1 True Move Co., Ltd., 10.375%, 8/1/14 (144A) 1,360,683
------------
$ 5,227,320
------------
Total Telecommunication Services $ 8,104,840
------------
The accompanying notes are an integral part of these financial statements. 21
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 10/31/07 (unaudited) (continued)
--------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD($) (unaudited) Value
Utilities - 1.5%
Electric Utilities - 1.3%
2,000,000 BB-/Ba3 Intergen NV, 9.0%, 6/30/17 (144A) $ 2,115,000
250,000 NR/NR Mirant JPSCo. Finance, Ltd., 11.0%,
7/6/16 (144A) 270,000
------------
$ 2,385,000
------------
Independent Power Producers & Energy Traders - 0.2%
390,000 CCC/B3 Texas Competitive Electric Holdings Co. LLC,
10.25%, 11/1/15 (144A) $ 391,950
------------
Total Utilities $ 2,776,950
------------
TOTAL CORPORATE BONDS & NOTES
(Cost $121,935,674) $119,682,607
------------
CONVERTIBLE BONDS & NOTES - 0.2% of Net Assets
Real Estate - 0.2%
Retail Real Estate Investment Trust - 0.2%
400,000 NR/NR General Growth Properties, Inc., 3.98%,
4/15/27 (144A) $ 363,000
------------
TOTAL CONVERTIBLE BONDS & NOTES
(Cost $384,160) $ 363,000
------------
FLOATING RATE LOAN INTERESTS - 33.7% of Net Assets (f)
Energy - 0.8%
Oil & Gas Exploration & Production - 0.8%
562,000 B+/Ba3 Concho Resources, Inc., Second Lien Term Loan,
9.755%, 3/27/12 $ 560,595
996,429 NR/Ba2 W&T Offshore, Inc., Tranche B Term Loan,
7.45%, 5/26/10 992,692
------------
Total Energy $ 1,553,287
------------
Materials - 2.9%
Paper Packaging - 0.8%
1,496,193 BB+/NR Georgia-Pacific LLC, Term Loan B,
6.948% - 7.11%, 12/20/12 $ 1,463,196
------------
Steel - 1.4%
1,845,375 BB-/B3 Algoma Steel, Inc., Term Loan, 8.09%, 6/20/13 $ 1,780,787
898,375 NR/B1 Niagara Corp., Term Loan, 10.129%, 6/29/14 862,440
------------
$ 2,643,227
------------
Forest Products - 0.7%
1,500,000 NR/Ba3 Ainsworth Lumber Co., Ltd., Term Loan,
8.375%, 6/26/14 $ 1,447,500
------------
Total Materials $ 5,553,923
------------
22 The accompanying notes are an integral part of these financial statements.
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD($) (unaudited) Value
Capital Goods - 1.0%
Construction & Farm Machinery & Heavy Trucks - 1.0%
2,000,000 BB-/B2 Rental Service Corp., Second Lien Initial Term
Loan, 8.82% - 8.85%, 11/30/13 $ 1,980,000
------------
Total Capital Goods $ 1,980,000
------------
Commercial Services & Supplies - 1.3%
Environmental & Facilities Services - 1.3%
1,246,875 BB-/Ba3 Synagro Technologies, Inc., First Lien Term Loan,
7.5%, 4/2/14 $ 1,214,145
1,223,109 B/Ba3 Waste Services, Inc., Tranche E Term Loan,
8.05%, 3/31/11 1,204,763
------------
Total Commercial Services & Supplies $ 2,418,908
------------
Consumer Durables & Apparel - 1.3%
Homebuilding - 0.8%
2,000,000 BB/Ba3 LandSource Communities Development LLC,
Second Lien Term Loan, 9.86%, 2/27/14 $ 1,605,000
------------
Housewares & Specialties - 0.5%
997,494 BB-/Ba3 Yankee Candle Company, Inc., Term Loan,
7.2%, 2/6/14 $ 971,933
------------
Total Consumer Durables & Apparel $ 2,576,933
------------
Consumer Services - 1.5%
Casinos & Gaming - 1.5%
1,000,000 B/NR Fontainebleau Las Vegas, LLC/Fontainebleau Las
Vegas II, LLC, Intial Term Loan, 8.61%, 6/6/14 $ 977,500
833,350 BB-/NR New World Gaming Partners, First Lien Term Loan,
2.5%, 6/15/14 800,016
1,000,000 BB-/Caa1 New World Gaming Partners, Second Lien Term
Loan, 5.5%, 12/16/14 935,000
250,000 BB-/B2 Riviera Holdings Corp., Term Loan, 7.36%, 6/8/14 247,812
------------
Total Consumer Services $ 2,960,328
------------
Media - 3.1%
Broadcasting & Cable Television - 1.0%
2,000,000 B+/B1 Charter Communications Operating, LLC,
Replacement Term Loan, 7.35%, 3/6/14 $ 1,956,250
------------
Movies & Entertainment - 0.5%
997,500 B+/B1 Lodgenet Entertainment Corp., Closing Date Term
Loan, 7.2%, 4/4/14 $ 980,979
------------
The accompanying notes are an integral part of these financial statements. 23
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 10/31/07 (unaudited) (continued)
--------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD($) (unaudited) Value
Publishing - 1.6%
1,246,875 CCC+/Ba1 Canwest Mediaworks, LP, Credit D Term Loan,
7.34%, 7/10/14 $ 1,234,406
1,736,845 B/Ba3 Riverdeep Interactive Learning USA, Inc., Term
Loan, 7.948%, 12/20/13 1,729,607
------------
$ 2,964,013
------------
Total Media $ 5,901,242
------------
Retailing - 1.0%
Apparel, Accessories & Luxury Goods - 1.0%
1,884,304 BB-/Ba2 Hanesbrands, Inc., Term Loan B,
7.105% - 7.11%, 9/5/13 $ 1,863,460
------------
Total Retailing $ 1,863,460
------------
Household & Personal Products - 0.9%
Household Products - 0.9%
2,000,000 B/B1 Huish Detergents, Inc., Second Lien Term Loan,
9.45%, 10/26/14 $ 1,743,750
------------
Total Household & Personal Products $ 1,743,750
------------
Health Care Equipment & Services - 4.9%
Health Care Equipment & Services - 0.9%
1,745,603 NR/B2 Talecris Biotherapeutics Holdings Corp., First Lien
Term Loan, 9.08%, 12/6/13 $ 1,740,511
------------
Health Care Supplies - 0.6%
498,750 B+/B2 IM US Holdings, LLC, First Lien Term Loan,
7.198%, 6/26/14 $ 489,398
600,000 B+/B2 IM US Holdings, LLC, Second Lien Term Loan,
9.448%, 6/26/15 598,875
------------
$ 1,088,273
------------
Health Care Services - 0.8%
1,500,000 B/B3 HealthSouth Corp., Term Loan, 7.82%, 3/10/13 $ 1,471,534
------------
24 The accompanying notes are an integral part of these financial statements.
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD($) (unaudited) Value
Health Care Facilities - 2.6%
938,128 NR/Ba3 CHS/Community Health Systems, Inc., Term Loan,
7.57%, 7/25/14 $ 917,607
1,745,581 B+/Ba3 Hanger Orthopedic Group, Inc., Tranche B Term
Loan, 7.45%, 5/26/13 1,711,760
997,487 B+/B2 HCA, Inc., Tranche B Term Loan, 7.448%,
11/18/13 976,217
498,858 BB-/Ba3 Psychiatric Solutions, Inc., Term Loan,
7.09% - 7.134%, 7/2/12 490,128
57,949 B+/B1 Sun Healthcare Group, Inc., Delayed Draw Term
Loan, 7.066%, 4/19/14 56,500
162,256 B+/B1 Sun Healthcare Group, Inc., Synthetic LC Loan,
5.26%, 4/19/14 158,200
706,608 B+/B1 Sun Healthcare Group, Inc., Term Loan,
6.893% - 7.381%, 4/19/14 688,943
------------
$ 4,999,355
------------
Total Health Care Equipment & Services $ 9,299,673
------------
Diversified Financials - 3.1%
Specialized Finance - 1.3%
877,981 BB-/B3 Ace Cash Express, Inc., Term Loan,
8.34% - 8.39%, 10/5/13 $ 860,422
439,482 NR/Ba2 Louis No. 1 PLC, Pre-Funded LC Loan,
7.86%, 11/4/13 432,890
1,337,774 NR/Ba2 Louis No. 1 PLC, Term Loan, 8.129%, 11/4/13 1,317,707
------------
$ 2,611,019
------------
Consumer Finance - 1.4%
994,987 B-/B2 Collect Acquisition Corp., Facility Term Loan B,
8.2% - 8.36%, 5/15/13 $ 968,247
1,005,934 BB-/NR Dollar Financial Corp., Canadian Borrower Term
Loan, 7.95%, 10/30/12 980,786
739,658 BB-/NR Dollar Financial Corp., Delayed Draw Term Loan,
7.95%, 10/30/12 721,166
------------
$ 2,670,199
------------
Asset Management & Custody Banks - 0.4%
748,125 BB+/B1 Asset Acceptance Capital Corp., Tranche B Term
Loan, 7.625%, 6/12/13 $ 725,681
------------
Total Diversified Financials $ 6,006,899
------------
The accompanying notes are an integral part of these financial statements. 25
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 10/31/07 (unaudited) (continued)
--------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD($) (unaudited) Value
Insurance - 2.0%
Insurance Brokers - 1.3%
28,686 B/B2 HUB International, Ltd., Delay Draw Term Loan,
8.01%, 6/13/14 $ 28,166
407,475 B/B3 HUB International, Ltd., Initial Term Loan,
8.203%, 6/13/14 400,090
1,995,000 B-/B2 USI Holdings Corp., Tranche B Term Loan,
7.95%, 5/5/14 1,965,075
------------
$ 2,393,331
------------
Multi-Line Insurance - 0.7%
498,750 B-/B2 AmWins Group, Inc., Initial Term Loan,
7.82% - 8.07%, 6/8/13 $ 473,813
1,000,000 B-/B2 AmWins Group, Inc., Second Lien Initial Term
Loan, 10.84% - 11.07%, 6/9/14 915,000
------------
$ 1,388,813
------------
Total Insurance $ 3,782,144
------------
Software & Services - 1.8%
Computer Storage & Peripherals - 1.8%
1,989,975 B+/Ba3 SunGard Data Systems Inc., Term Loan B,
7.356%, 2/28/14 $ 1,967,361
1,492,500 BB-/B3 Vangent, Inc., Term Loan, 7.62%, 2/14/13 1,453,322
------------
Total Software & Services $ 3,420,683
------------
Technology Hardware & Equipment - 1.3%
Electronic Equipment Manufacturers - 1.0%
1,980,000 BB/Ba2 H3C Holdings, Ltd., Tranche B Term Loan,
8.141%, 9/28/12 $ 1,900,800
------------
Technology Distributors - 0.3%
515,000 B/B3 Scitor Corp., Term Loan, 9.38%, 9/28/14 $ 515,000
------------
Total Technology Hardware & Equipment $ 2,415,800
------------
Semiconductors & Semiconductor Equipment - 0.5%
Semiconductors - 0.5%
997,487 BB-/Ba3 Freescale Semiconductor, Inc., Term Loan,
7.11%, 11/29/13 $ 959,650
------------
Total Semiconductors & Semiconductor
Equipment $ 959,650
------------
Telecommunication Services - 2.4%
Alternative Carriers - 0.7%
1,250,000 B-/Ba3 PAETEC Holding Corp., Replacement Term Loan,
2.5%, 2/28/13 $ 1,242,188
------------
26 The accompanying notes are an integral part of these financial statements.
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD($) (unaudited) Value
Wireless Telecommunication Services - 1.7%
997,475 B-/B1 Cricket Communications, Inc., Term Loan B,
7.448%, 6/16/13 $ 985,733
1,745,592 B/B1 MetroPCS Wireless, Inc., New Tranche B Term
Loan, 7.5% -7.625%, 11/4/13 1,714,845
625,000 B+/B1 Stratos Global Corp./Stratos Funding LP, Facility
Term Loan B, 7.948%, 2/13/12 614,583
------------
$ 3,315,161
------------
Total Telecommunication Services $ 4,557,349
------------
Utilities - 3.9%
Multi-Utilities - 0.8%
1,500,000 B-/B3 Alliant Holdings I, Inc., Term Loan, 3.0%, 8/21/14 $ 1,485,000
------------
Independent Power Producers & Energy Traders - 3.1%
750,000 B+/NR Aeroflex, Inc., Tranche B-2 Term Loan,
9.313%, 8/15/14 $ 738,750
1,990,000 NR/NR Calpine Corp., First Priority Term Loan,
7.448%, 3/29/09 1,973,121
187,926 B/B2 Mach Gen, LLC, First Lien Synthetic LC Loan,
7.35%, 2/22/13 182,241
1,802,991 B/B2 Mach Gen, LLC, First Lien Term Loan B,
7.2%, 2/22/14 1,748,451
418,256 B+/Ba1 NRG Energy, Inc., Credit-Linked Deposit Loan,
7.11%, 2/1/13 410,179
1,004,958 B+/Ba1 NRG Energy, Inc., Term Loan, 6.948%, 2/1/13 985,550
------------
$ 6,038,292
------------
Total Utilities $ 7,523,292
------------
TOTAL FLOATING RATE LOAN INTERESTS
(Cost $66,390,763) $ 64,517,321
------------
The accompanying notes are an integral part of these financial statements. 27
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 10/31/07 (unaudited) (continued)
--------------------------------------------------------------------------------
S&P/Moody's
Ratings
Shares (unaudited) Value
WARRANTS - 0.0% of Net Assets (g)
Real Estate - 0.0%
Real Estate Management & Development - 0.0%
750,000 Neo-China Group Holdings, Ltd., Expires 7/22/12 $ 65,316
------------
TOTAL WARRANTS
(Cost $17,012) $ 65,316
------------
Principal
Amount
USD($)
TEMPORARY CASH INVESTMENTS - 4.5% of Net Assets
Commercial Paper - 4.5%
8,505,000 NR/NR BNP Paribas Finance, Inc., 4.9% 11/1/07 $ 8,505,000
------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $8,505,000) $ 8,505,000
------------
TOTAL INVESTMENTS IN SECURITIES - 101.1%
(Cost $197,638,701) (h) $193,544,570
------------
OTHER ASSETS AND LIABILITIES - (1.1)% $ (2,161,852)
------------
NET ASSETS APPLICABLE TO COMMON
SHAREOWNERS - 100.0% $191,382,718
============
28 The accompanying notes are an integral part of these financial statements.
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NR Security not rated by S&P or Moody's.
(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
October 31, 2007, the value of these securities amounted to $89,435,098
or 46.7% of total net assets.
(a) Floating rate note. The rate shown is the rate at October 31, 2007.
(b) Represents a pay-in-kind security which may pay interest in additional
principal.
(c) Security is a perpetual bond and has no definite maturity date.
(d) Debt obligation initially issued at one coupon which converts to a higher
coupon at a specific date. The rate shown is the rate at October 31,
2007.
(e) Security is priced as a unit.
(f) Floating rate loan interests in which the Trust invests generally pay
interest at rates that are periodically redetermined by reference to a
base lending rate plus a premium. These base lending rates are generally
(i) the lending rate offered by one or more major European banks, such as
LIBOR (London InterBank Offered Rate), (ii) the prime rate offered by one
or more major United States banks, (iii) the certificate of deposit or
(iv) other base lending rates used by commercial lenders. The rate shown
is the coupon rate at October 31, 2007.
(g) Non-income producing.
(h) At October 31, 2007, the net unrealized loss on investments based on cost
for federal income tax purposes of $197,638,701 was as follows:
Aggregate gross unrealized gain for all investments in which there is
an excess of value over tax cost $ 1,245,663
Aggregate gross unrealized loss for all investments in which there is
an excess of tax cost over value (5,339,794)
------------
Net unrealized loss $ (4,094,131)
============
For financial reporting purposes net unrealized loss was $4,094,131 and
cost of investments aggregated $197,638,701.
Glossary of Terms:
LC - Letter of Credit
Note: Principal amounts are denominated in U.S. dollars unless otherwise
denoted.
EURO Euro
NOK Norwegian Krone
Purchases and sales of securities (excluding temporary cash investments) for
the period ended October 31, 2007, aggregated $197,973,924 and $8,063,331,
respectively.
The accompanying notes are an integral part of these financial statements. 29
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 10/31/07 (unaudited)
--------------------------------------------------------------------------------
ASSETS:
Investments in securities, at value (cost $197,638,701) $193,544,570
Foreign currencies, at value (cost $3,888,431) 4,125,015
Receivables -
Paydowns 2,066
Interest 3,349,978
Commitment fees 605
------------
Total assets $201,022,234
------------
LIABILITIES:
Payables -
Investment securities purchased $ 9,302,169
Unrealized depreciation on unfunded loan commitment 26,286
Due to custodian 121,858
Due to affiliate 128,020
Accrued expenses 61,183
------------
Total liabilities $ 9,639,516
------------
NET ASSETS:
Paid-in capital $194,273,750
Undistributed net investment income 1,150,634
Accumulated net realized loss on investments and foreign
currency transactions (161,848)
Net unrealized loss on investments (4,120,417)
Net unrealized gain on forward foreign currency contracts
and other assets and liabilities denominated in
foreign currencies 240,599
------------
Net assets $191,382,718
============
NET ASSET VALUE PER SHARE:
No par value (unlimited number of shares authorized)
Based on $191,382,718/8,154,188 shares $ 23.47
============
30 The accompanying notes are an integral part of these financial statements.
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (unaudited)
--------------------------------------------------------------------------------
For the Period 5/30/07 (commencement of operations) to 10/31/07
INVESTMENT INCOME:
Interest $ 6,692,705
Facility and other fees 9,810
-----------
Total investment income $ 6,702,515
-----------
EXPENSES:
Management fees $ 668,481
Administrative fees and reimbursement 68,814
Transfer agent fees and expenses 8,191
Custodian fees 12,873
Registration fees 5,251
Organization costs 51,000
Professional fees 30,769
Printing expense 3,488
Trustees' fees 3,488
Pricing fees 16,324
Miscellaneous 4,673
-----------
Total expenses $ 873,352
Less management fees waived and expenses
reimbursed by Pioneer Investment
Management, Inc. (114,059)
Reimbursement of organization fees (51,000)
-----------
Net expenses $ 708,293
-----------
Net investment income $ 5,994,222
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ (226,605)
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies 64,757 $ (161,848)
----------- -----------
Net unrealized gain (loss) from:
Investments $(4,094,131)
Unfunded corporate loans (26,286)
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies 240,599 $(3,879,818)
----------- -----------
Net loss on investments and foreign currency
transactions $(4,041,666)
-----------
Net increase in net assets resulting from operations $ 1,952,556
===========
The accompanying notes are an integral part of these financial statements. 31
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
For the Period 5/30/07 (commencement of operations) to 10/31/07
5/30/07
to
10/31/07
(unaudited)
FROM OPERATIONS:
Net investment income $ 5,994,222
Net realized loss on investments and foreign currency transactions (161,848)
Net unrealized loss on investments and foreign currency
transactions (3,879,818)
------------
Net increase in net assets resulting from operations $ 1,952,556
------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income ($0.59 per share) $ (4,843,588)
------------
Total distributions to shareowners $ (4,843,588)
------------
FROM TRUST SHARE TRANSACTIONS:
Net proceeds from the issuance of shares $174,287,500
Net proceeds from the underwriters' over-allotment option exercised 20,293,750
Offering expenses charged to paid-in-capital (407,500)
------------
Net increase in net assets resulting from Trust share transactions $194,173,750
------------
Net increase in net assets $191,282,718
NET ASSETS:
Beginning of period $ 100,000
------------
End of period $191,382,718
============
Undistributed net investment income $ 1,150,634
============
32 The accompanying notes are an integral part of these financial statements.
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
5/30/07 (b)
to
10/31/07
(unaudited)
Per Common Share Operating Performance
Net asset value, beginning of period $ 23.88(c)
-------
Increase (decrease) from investment operations:(a)
Net investment income $ 0.75
Net realized and unrealized loss on investments and
foreign currency transactions (0.52)
-------
Net increase from investment operations $ 0.23
Distributions from net investment income (0.59)
Capital charge with respect to issuance of shares (0.05)
-------
Net decrease in net asset value $ (0.41)
-------
Net asset value, end of period(d) $ 23.47
=======
Market value, end of period(d) $ 21.06
=======
Total return at market value (e) (13.39)%
Ratios to average net assets
Net expenses 0.90%(f)
Net investment income 7.62%(f)
Portfolio turnover 6%
Net assets end of period (in thousands) $191,383
Ratios to average net assets before reimbursement
of expenses
Net expenses 1.11%(f)
Net investment income 7.41%(f)
(a) The per common share data presented above is based upon the average common
shares outstanding for the periods presented.
(b) The Trust commenced operations on May 30, 2007.
(c) Net asset value immediately after the closing of the first public offering
was $23.83.
(d) Net asset value and market value are published in Barron's on Saturday, The
Wall Street Journal on Monday and The New York Times on Monday and Saturday.
(e) 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 period 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 returns less than a full period are not annualized. Past
performance is not a guarantee of future results.
(f) Annualized.
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 period
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.
The accompanying notes are an integral part of these financial statements. 33
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 10/31/07 (unaudited)
--------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Diversified High Income Trust (the "Trust") was organized as a Delaware
statutory trust on January 30, 2007. Prior to commencing operations on May 30,
2007, the Trust had no operations other than matters relating to its
organization and registration as a diversified, closed-end management investment
company under the Investment Company Act of 1940, as amended, and the sale and
issuance to Pioneer Investment Management, Inc. ("PIM"), the Trust's investment
adviser, a wholly owned indirect subsidiary of UniCredito Italiano S.p.A.
(UniCredito Italiano), of 4,188 shares of beneficial interest at an aggregate
purchase price of $100,000. PIM has agreed to pay all the Trust's organizational
expenses and to pay the amount by which the aggregate offering costs (other than
the sales load) exceed $0.05 per share of the common share offering. The
investment objective of the Trust is to provide a high level of current income.
The Trust will, as a secondary objective, also seek preservation of capital to
the extent consistent with its primary goal of high current income.
The Trust's investments in certain foreign markets or countries with limited
developing markets may subject the Trust to a greater degree of risk than in a
developed market. These risks include disruptive political or economic
conditions and the possible imposition of adverse governmental laws or currency
exchange restrictions.
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 susceptible to any economic, political, or regulatory
developments or other risks affecting those industries and sectors.
The Trust invests in below investment grade (high yield) debt securities,
floating rate loans and event-linked bonds sometimes referred to as
"catastrophic" bonds or "insurance-linked" bonds. The Trust may invest in
securities and other obligations of any credit quality, including those that
are rated below investment grade, or are unrated but are determined by the
investment adviser and/or subadviser to be of equivalent credit quality. Below
investment grade securities are commonly referred to as "junk bonds" and are
considered speculative with respect to the issuer's capacity to pay interest
and repay
34
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
principal. These securities involve greater risk of loss, are subject to
greater price volatility, and are less liquid, especially during periods of
economic uncertainty or change, than higher rated debt securities. The Trust
may invest in securities of issuers that are in default or that are in
bankruptcy.
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, the disclosure of contingent assets
and liabilities at the date of the financial statements, 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 generally accepted in the investment company industry:
A. Security Valuation
Security transactions are recorded as of trade date. Investments in
floating rate loans are valued in accordance with guidelines established
by the Board of Trustees at the mean between the last available bid and
asked prices from one or more brokers or dealers as obtained from Loan
Pricing Corporation. For the limited number of loans for which no reliable
price quotes are available, such investments will be valued by Loan
Pricing Corporation through the use of pricing matrices to determine
valuations.
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.
Securities or loans for which quotations are not readily available are
valued at their fair values as determined by, or under the direction of,
the Board of Trustees. Trading in foreign securities is substantially
completed each day at various times prior to the close of the NYSE. The
values of such securities used in computing the net asset value of the
Trust's shares are determined as of such times. The Trust may
35
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 10/31/07 (unaudited) (continued)
--------------------------------------------------------------------------------
also use the fair value of a security, including a non-U.S. security, when
the closing market price on the primary exchange where the security is
traded no longer accurately reflects the value of the security as of the
close of the exchange. As of October 31, 2007, the Trust held no fair
valued securities. Temporary cash investments are valued at amortized
cost.
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, 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. Foreign Currency Translation
The books and records of the Trust are maintained in U.S. dollars. Amounts
denominated in foreign currencies are translated into U.S. dollars using
current exchange rates.
Net realized gains and losses on foreign currency transactions represent,
among other things, the net realized gains and losses on foreign currency
contracts, disposition of foreign currencies and the difference between
the amount of income accrued and the U.S. dollars actually received.
Further, the effects of changes in foreign currency exchange rates on
investments are not segregated in the Statement of Operations from the
effects of changes in market price of those securities but are included
with the net realized and unrealized gain or loss on investments.
C. Forward Foreign Currency Contracts
The Trust enters into forward foreign currency contracts (contracts) for
the purchase or sale of a specific foreign currency at a fixed price on a
future date as a hedge or cross-hedge against either specific investment
transactions (settlement hedges) or portfolio positions (portfolio
hedges). All contracts are marked to market
36
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
daily at the applicable exchange rates, and any resulting unrealized gains
or losses are recorded in the Trust's financial statements. The Trust
records realized gains and losses at the time a portfolio hedge is offset
by entry into a closing transaction or extinguished by delivery of the
currency. Risks may arise upon entering into these contracts from the
potential inability of counterparties to meet the terms of the contract
and from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar (see Note 3).
D. 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.
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 loss on investment and
foreign currency 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 will be determined at
the end of the current fiscal year.
E. 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;
37
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 10/31/07 (unaudited) (continued)
--------------------------------------------------------------------------------
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 American 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
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
PIM manages the Trust's portfolio. Management fees payable under the Trust's
Advisory Agreement with PIM are calculated daily at the annual rate of 0.85% 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
period ended October 31, 2007, the net management fee was equivalent to 0.70%
of the Trust's average daily managed assets.
38
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 affiliate" reflected on the Statement of Assets and Liabilities is
$128,020 in management fees, administrative costs and certain other services
payable to PIM at October 31, 2007.
PIM has appointed Princeton Administrators, LLC ("Princeton") to provide
certain administrative and accounting services to the Trust on its behalf. PIM
pays Princeton a monthly fee equal to 0.07% of the Trust's average daily
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. Princeton
receives no compensation directly from the Trust.
PIM has engaged Montpelier Capital Advisors, Ltd. to act as the Trust's
investment sub-adviser ("Sub-adviser") with respect to the Trust's investments
in event-linked bonds. PIM pays the Sub-adviser a monthly fee at an annual rate
of 0.80% of the Trust's average daily Sub-advised assets; provided, however,
that such fee shall in no event be less than 0.15% of the Trust's average daily
managed assets. The fee is paid monthly in arrears. The Sub-adviser receives no
compensation directly from the Trust.
Also, PIM has agreed for the first three years of the Trust's investment
operations to limit the Trust's total annual expenses excluding offering costs
for common shares, interest expense, the cost of defending or prosecuting any
claim or litigation to which the Trust is a party (together with any amount in
judgment or settlement), indemnification expense or taxes incurred due to the
failure of the Trust to qualify as a regulated investment company under the
Code or any other non-recurring or non-operating expenses to 0.90% of the
Trust's average daily managed assets in year 1, 0.95% of the Trust's average
daily managed assets in year 2 and 1.00% of the Trust's average daily managed
assets in year 3. This is a contractual limit and may not be terminated by the
adviser for three years. There can be no assurance that it will be continued
after that time. For the period ended October 31, 2007, the expense reduction
under such arrangements was $114,059.
39
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 10/31/07 (unaudited) (continued)
--------------------------------------------------------------------------------
3. Forward Foreign Currency Contracts
The Trust may enter into contracts that obligate the Trust to deliver
currencies at specified future dates. At the maturity of a contract, the Trust
must make delivery of the foreign currency. Alternatively, prior to the
settlement date of a portfolio hedge, the Trust may close out such contracts by
entering into an offsetting hedge contract. At October 31, 2007, the Trust had
no outstanding portfolio hedges or forward currency settlement contracts.
4. Unfunded Loan Commitments
As of October 31, 2007, the Trust had unfunded loan commitments of
approximately $1,159,000 which extended at the option of the borrower, pursuant
to the following loan agreements:
--------------------------------------------------------------------------------
Unfunded
Commitment
Borrower (in thousands)
--------------------------------------------------------------------------------
CHS/Community Health Systems, Inc., Delayed Draw
Term Loan $ 62
Fontainebleau Las Vegas, LLC/Fontainebleau
Las Vegas II, LLC, Delayed Draw Term Loan $ 500
HUB International Holdings, Inc., Delayed Draw
Term Loan $ 63
New World Gaming Partners, Delayed Draw
Term Loan $ 166
NRG Holdings, Inc., Term Loan $ 322
Sun Healthcare Group, Inc., Delayed Draw Term Loan $ 46
--------------------------------------------------------------------------------
5. Transfer Agents
Pioneer Investment Management Shareholder Services, Inc. ("PIMSS"), a wholly
owned indirect subsidiary of UniCredito Italiano, 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.
40
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
6. Trust Shares
There are an unlimited number of common shares of beneficial interest
authorized. Of the 8,154,188 common shares of beneficial interest outstanding
at October 31, 2007, PIM owned 4,188 shares.
Transactions in common shares of beneficial interest for the period May 30,
2007 (commencement of investment operation) to October 31, 2007 were as
follows:
--------------------------------------------------------------------------------
Shares issued in connection with initial
public offering 7,300,000
Shares issued from underwriters' over-allotment
option exercised 850,000
Shares at beginning of period 4,188
---------
Shares outstanding at end of period 8,154,188
=========
--------------------------------------------------------------------------------
Offering costs of $407,500 incurred in connection with the Trust's
offering of common shares have been charged to paid-in capital.
7. New Pronouncements
In September 2006, Statement of Financial Accounting Standards No. 157 Fair
Value Measurements ("SFAS 157") was issued and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. At this time, management is currently evaluating the implications
of SFAS 157 and its impact on the Trust's financial statement disclosures, if
any, has not been determined.
8. Subsequent Event
Subsequent to October 31, 2007, the Board of Trustees of the Trust declared a
dividend from undistributed net investment income of $0.198 per common share
payable November 30, 2007, to common shareowners of record on November 15,
2007.
41
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 10/31/07 (unaudited) (continued)
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (unaudited)
During the period, there were no material changes in the Trust's investment
objective or fundamental policies that were not 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 have not been approved by the
shareowners. There were no changes in the principal risk factors associated
with investment in the Trust. There were no changes in the persons who are
primarily responsible for the day-to-day management of the Trust's portfolio.
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.
42
Pioneer Diversified High Income Trust
--------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
--------------------------------------------------------------------------------
Trustees Officers
John F. Cogan, Jr., Chairman John F. Cogan, Jr., President
David R. Bock Daniel K. Kingsbury, Executive
Mary K. Bush Vice President
Margaret B.W. Graham Vincent Nave, Treasurer
Daniel K. Kingsbury Dorothy E. Bourassa, Secretary
Thomas J. Perna
Marguerite A. Piret
Stephen K. West
John Winthrop
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Legal Counsel
Bingham McCutchen LLP
Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
Shareowner Services and Sub-Transfer Agent
American Stock Transfer & Trust Company
Investment Sub-Adviser
Montpelier Capital Advisors, Ltd.
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 (1-800-225-6292). 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 www.pioneerinvestments.com. This information is also available
on the Securities and Exchange Commission's web site at http://www.sec.gov.
43
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This page for your notes.
44
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HOW TO CONTACT PIONEER
--------------------------------------------------------------------------------
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 1-800-710-0935
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
6201 15th Ave.
Brooklyn, NY 11219
Dividend reinvestment plan (DRIP) American Stock
Transfer & Trust
Wall Street Station
P.O. Box 922
New York, NY 10269-0560
Website www.amstock.com
For additional information, please contact your investment advisor or visit our
web site www.pioneerinvestments.com.
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 http://www.sec.gov. 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.
ITEM 2. CODE OF ETHICS.
(a) Disclose whether, as of the end of the period covered by the report, the
registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, regardless of
whether these individuals are employed by the registrant or a third party. If
the registrant has not adopted such a code of ethics, explain why it has not
done so.
The registrant has adopted, as of the end of the period covered by this report,
a code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer and controller.
(b) For purposes of this Item, the term "code of ethics" means written standards
that are reasonably designed to deter wrongdoing and to promote:
(1) Honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
(2) Full, fair, accurate, timely, and understandable disclosure in
reports and documents that a registrant files with, or submits to, the
Commission and in other public communications made by the registrant;
(3) Compliance with applicable governmental laws, rules, and
regulations;
(4) The prompt internal reporting of violations of the code to an
appropriate person or persons identified in the code; and
(5) Accountability for adherence to the code.
(c) The registrant must briefly describe the nature of any amendment, during the
period covered by the report, to a provision of its code of ethics that applies
to the registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, and that relates to any element of the code of
ethics definition enumerated in paragraph (b) of this Item. The registrant must
file a copy of any such amendment as an exhibit pursuant to Item 10(a), unless
the registrant has elected to satisfy paragraph (f) of this Item by posting its
code of ethics on its website pursuant to paragraph (f)(2) of this Item, or by
undertaking to provide its code of ethics to any person without charge, upon
request, pursuant to paragraph (f)(3) of this Item.
The registrant has made no amendments to the code of ethics during the period
covered by this report.
(d) If the registrant has, during the period covered by the report, granted a
waiver, including an implicit waiver, from a provision of the code of ethics to
the registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, that relates to one or more of the items set forth
in paragraph (b) of this Item, the registrant must briefly describe the nature
of the waiver, the name of the person to whom the waiver was granted, and the
date of the waiver.
Not applicable.
(e) If the registrant intends to satisfy the disclosure requirement under
paragraph (c) or (d) of this Item regarding an amendment to, or a waiver from,
a provision of its code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions and that relates to any
element of the code of ethics definition enumerated in paragraph (b) of this
Item by posting such information on its Internet website, disclose the
registrant's Internet address and such intention.
Not applicable.
(f) The registrant must:
(1) File with the Commission, pursuant to Item 10(a), a copy of its code
of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller,
or persons performing similar functions, as an exhibit to its annual
report on this Form N-CSR;
(2) Post the text of such code of ethics on its Internet website and
disclose, in its most recent report on this Form N-CSR, its Internet
address and the fact that it has posted such code of ethics on its
Internet website; or
(3) Undertake in its most recent report on this Form N-CSR to provide to
any person without charge, upon request, a copy of such code of ethics
and explain the manner in which such request may be made.
See Item 10(2)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a) (1) Disclose that the registrant's board of trustees has determined that
the registrant either:
(i) Has at least one audit committee financial expert serving on its audit
committee; or
(ii) Does not have an audit committee financial expert serving on its audit
committee.
The registrant's Board of Trustees has determined that the registrant has at
least one audit committee financial expert.
(2) If the registrant provides the disclosure required by paragraph
(a)(1)(i) of this Item, it must disclose the name of the audit committee
financial expert and whether that person is "independent." In order to be
considered "independent" for purposes of this Item, a member of an audit
committee may not, other than in his or her capacity as a member of the audit
committee, the board of trustees, or any other board committee:
(i) Accept directly or indirectly any consulting, advisory, or other
compensatory fee from the issuer; or
(ii) Be an "interested person" of the investment company as defined in
Section 2(a)(19) of the Act (15 U.S.C. 80a-2(a)(19)).
Ms. Marguerite A. Piret, an independent trustee, is such an audit committee
financial expert.
(3) If the registrant provides the disclosure required by paragraph (a)(1)
(ii) of this Item, it must explain why it does not have an audit committee
financial expert.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Disclose, under the caption AUDIT FEES, the aggregate fees billed for each
of the last two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial statements or
services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal years.
N/A
(b) Disclose, under the caption AUDIT-RELATED FEES, the aggregate fees billed in
each of the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported under
paragraph (a) of this Item. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
N/A
(c) Disclose, under the caption TAX FEES, the aggregate fees billed in each of
the last two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning. Registrants shall
describe the nature of the services comprising the fees disclosed under this
category.
N/A
(d) Disclose, under the caption ALL OTHER FEES, the aggregate fees billed in
each of the last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) of this Item. Registrants shall describe the nature of the services
comprising the fees disclosed under this category.
N/A
(e) (1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
PIONEER FUNDS
APPROVAL OF AUDIT, AUDIT-RELATED, TAX AND OTHER SERVICES
PROVIDED BY THE INDEPENDENT AUDITOR
SECTION I - POLICY PURPOSE AND APPLICABILITY
The Pioneer Funds recognize the importance of maintaining the independence of
their outside auditors. Maintaining independence is a shared responsibility
involving Pioneer Investment Management, Inc ("PIM"), the audit committee and
the independent auditors.
The Funds recognize that a Fund's independent auditors: 1) possess knowledge of
the Funds, 2) are able to incorporate certain services into the scope of the
audit, thereby avoiding redundant work, cost and disruption of Fund personnel
and processes, and 3) have expertise that has value to the Funds. As a result,
there are situations where it is desirable to use the Fund's independent
auditors for services in addition to the annual audit and where the potential
for conflicts of interests are minimal. Consequently, this policy, which is
intended to comply with Rule 210.2-01(C)(7), sets forth guidelines and
procedures to be followed by the Funds when retaining the independent audit firm
to perform audit, audit-related tax and other services under those
circumstances, while also maintaining independence.
Approval of a service in accordance with this policy for a Fund shall also
constitute approval for any other Fund whose pre-approval is required pursuant
to Rule 210.2-01(c)(7)(ii).
In addition to the procedures set forth in this policy, any non-audit services
that may be provided consistently with Rule 210.2-01 may be approved by the
Audit Committee itself and any pre-approval that may be waived in accordance
with Rule 210.2-01(c)(7)(i)(C) is hereby waived.
Selection of a Fund's independent auditors and their compensation shall be
determined by the Audit Committee and shall not be subject to this policy.
SECTION II - POLICY
---------------- -------------------------------- -------------------------------------------------
SERVICE SERVICE CATEGORY DESCRIPTION SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES
CATEGORY
---------------- -------------------------------- -------------------------------------------------
I. AUDIT Services that are directly o Accounting research assistance
SERVICES related to performing the o SEC consultation, registration
independent audit of the Funds statements, and reporting
o Tax accrual related matters
o Implementation of new accounting
standards
o Compliance letters (e.g. rating agency
letters)
o Regulatory reviews and assistance
regarding financial matters
o Semi-annual reviews (if requested)
o Comfort letters for closed end
offerings
---------------- -------------------------------- -------------------------------------------------
II. Services which are not o AICPA attest and agreed-upon procedures
AUDIT-RELATED prohibited under Rule o Technology control assessments
SERVICES 210.2-01(C)(4) (the "Rule") o Financial reporting control assessments
and are related extensions of o Enterprise security architecture
the audit services support the assessment
audit, or use the
knowledge/expertise gained
from the audit procedures as a
foundation to complete the
project. In most cases, if
the Audit-Related Services are
not performed by the Audit
firm, the scope of the Audit
Services would likely
increase. The Services are
typically well-defined and
governed by accounting
professional standards (AICPA,
SEC, etc.)
---------------- -------------------------------- -------------------------------------------------
------------------------------------- ------------------------------------
AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE
REPORTING POLICY
------------------------------------- ------------------------------------
o "One-time" pre-approval o A summary of all such
for the audit period for all services and related fees
pre-approved specific service reported at each regularly
subcategories. Approval of the scheduled Audit Committee
independent auditors as meeting.
auditors for a Fund shall
constitute pre approval for
these services.
------------------------------------- ------------------------------------
o "One-time" pre-approval o A summary of all such
for the fund fiscal year within services and related fees
a specified dollar limit (including comparison to
for all pre-approved specified dollar limits)
specific service subcategories reported quarterly.
o Specific approval is
needed to exceed the
pre-approved dollar limit for
these services (see general
Audit Committee approval policy
below for details on obtaining
specific approvals)
o Specific approval is
needed to use the Fund's
auditors for Audit-Related
Services not denoted as
"pre-approved", or
to add a specific service
subcategory as "pre-approved"
------------------------------------- ------------------------------------
SECTION III - POLICY DETAIL, CONTINUED
----------------------- --------------------------- -----------------------------------------------
SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES
DESCRIPTION
----------------------- --------------------------- -----------------------------------------------
III. TAX SERVICES Services which are not o Tax planning and support
prohibited by the Rule, o Tax controversy assistance
if an officer of the Fund o Tax compliance, tax returns, excise
determines that using the tax returns and support
Fund's auditor to provide o Tax opinions
these services creates
significant synergy in
the form of efficiency,
minimized disruption, or
the ability to maintain a
desired level of
confidentiality.
----------------------- --------------------------- -----------------------------------------------
------------------------------------- -------------------------
AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE
REPORTING POLICY
------------------------------------- -------------------------
------------------------------------- -------------------------
o "One-time" pre-approval o A summary of
for the fund fiscal year all such services and
within a specified dollar limit related fees
(including comparison
to specified dollar
limits) reported
quarterly.
o Specific approval is
needed to exceed the
pre-approved dollar limits for
these services (see general
Audit Committee approval policy
below for details on obtaining
specific approvals)
o Specific approval is
needed to use the Fund's
auditors for tax services not
denoted as pre-approved, or to add a specific
service subcategory as
"pre-approved"
------------------------------------- -------------------------
SECTION III - POLICY DETAIL, CONTINUED
----------------------- --------------------------- -----------------------------------------------
SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES
DESCRIPTION
----------------------- --------------------------- -----------------------------------------------
IV. OTHER SERVICES Services which are not o Business Risk Management support
prohibited by the Rule, o Other control and regulatory
A. SYNERGISTIC, if an officer of the Fund compliance projects
UNIQUE QUALIFICATIONS determines that using the
Fund's auditor to provide
these services creates
significant synergy in
the form of efficiency,
minimized disruption,
the ability to maintain a
desired level of
confidentiality, or where
the Fund's auditors
posses unique or superior
qualifications to provide
these services, resulting
in superior value and
results for the Fund.
----------------------- --------------------------- -----------------------------------------------
--------------------------------------- ------------------------
AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE
REPORTING POLICY
------------------------------------- --------------------------
o "One-time" pre-approval o A summary of
for the fund fiscal year within all such services and
a specified dollar limit related fees
(including comparison
to specified dollar
limits) reported
quarterly.
o Specific approval is
needed to exceed the
pre-approved dollar limits for
these services (see general
Audit Committee approval policy
below for details on obtaining
specific approvals)
o Specific approval is
needed to use the Fund's
auditors for "Synergistic" or
"Unique Qualifications" Other
Services not denoted as
pre-approved to the left, or to
add a specific service
subcategory as "pre-approved"
------------------------------------- --------------------------
SECTION III - POLICY DETAIL, CONTINUED
----------------------- ------------------------- -----------------------------------------------
SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PROHIBITED SERVICE SUBCATEGORIES
DESCRIPTION
----------------------- ------------------------- -----------------------------------------------
PROHIBITED SERVICES Services which result 1. Bookkeeping or other services
in the auditors losing related to the accounting records or
independence status financial statements of the audit
under the Rule. client*
2. Financial information systems design
and implementation*
3. Appraisal or valuation services,
fairness* opinions, or
contribution-in-kind reports
4. Actuarial services (i.e., setting
actuarial reserves versus actuarial
audit work)*
5. Internal audit outsourcing services*
6. Management functions or human
resources
7. Broker or dealer, investment
advisor, or investment banking services
8. Legal services and expert services
unrelated to the audit
9. Any other service that the Public
Company Accounting Oversight Board
determines, by regulation, is
impermissible
----------------------- ------------------------- -----------------------------------------------
------------------------------------------- ------------------------------
AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE
REPORTING POLICY
------------------------------------------- ------------------------------
o These services are not to be o A summary of all
performed with the exception of the(*) services and related
services that may be permitted fees reported at each
if they would not be subject to audit regularly scheduled
procedures at the audit client (as Audit Committee meeting
defined in rule 2-01(f)(4)) level will serve as continual
the firm providing the service. confirmation that has
not provided any
restricted services.
------------------------------------------- ------------------------------
--------------------------------------------------------------------------------
GENERAL AUDIT COMMITTEE APPROVAL POLICY:
o For all projects, the officers of the Funds and the Fund's auditors will each
make an assessment to determine that any proposed projects will not impair
independence.
o Potential services will be classified into the four non-restricted service
categories and the "Approval of Audit, Audit-Related, Tax and Other
Services" Policy above will be applied. Any services outside the specific
pre-approved service subcategories set forth above must be specifically
approved by the Audit Committee.
o At least quarterly, the Audit Committee shall review a report summarizing the
services by service category, including fees, provided by the Audit firm as
set forth in the above policy.
--------------------------------------------------------------------------------
(2) Disclose the percentage of services described in each of paragraphs (b)
through (d) of this Item that were approved by the audit committee pursuant
to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
N/A
(f) If greater than 50 percent, disclose the percentage of hours expended on the
principal accountant's engagement to audit the registrant's financial statements
for the most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent employees.
N/A
(g) Disclose the aggregate non-audit fees billed by the registrant's accountant
for services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the adviser that provides ongoing services to the registrant for each of
the last two fiscal years of the registrant.
N/A
(h) Disclose whether the registrant's audit committee of the board of trustees
has considered whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
N/A
Item 5. Audit Committee of Listed Registrants
(a) If the registrant is a listed issuer as defined in Rule 10A-3
under the Exchange Act (17 CFR 240.10A-3), state whether
or not the registrant has a separately-designated standing
audit committee established in accordance with Section
3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)).
If the registrant has such a committee, however designated,
identify each committee member. If the entire board of directors
is acting as the registrants audit committee as specified in
Section 3(a)(58)(B) of the Exchange Act (15 U.S.C. 78c(a)(58)(B)),
so state.
N/A
(b) If applicable, provide the disclosure required by Rule 10A-3(d)
under the Exchange Act (17 CFR 240.10A-3(d)) regarding an exemption
from the listing standards for audit committees.
N/A
Item 6. Schedule of Investments.
File Schedule I Investments in securities of unaffiliated issuers
as of the close of the reporting period as set forth in 210.12-
12 of Regulation S-X [17 CFR 210.12-12], unless the schedule is
included as part of the report to shareholders filed under Item
1 of this Form.
Included in Item 1
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
A closed-end management investment company that is filing an annual report on
this Form N-CSR must, unless it invests exclusively in non-voting securities,
describe the policies and procedures that it uses to determine how to vote
proxies relating to portfolio securities, including the procedures that the
company uses when a vote presents a conflict between the interests of its
shareholders, on the one hand, and those of the company's investment adviser;
principal underwriter; or any affiliated person (as defined in Section 2(a)(3)
of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules
thereunder) of the company, its investment adviser, or its principal
underwriter, on the other. Include any policies and procedures of the company's
investment adviser, or any other third party, that the company uses, or that are
used on the company's behalf, to determine how to vote proxies relating to
portfolio securities.
N/A
Item 8. Portfolio Managers of Closed-End Management Investment
Companies.
(a) If the registrant is a closed-end management investment company that
is filing an annual report on this Form N-CSR,provide the following
information:
(1) State the name, title, and length of service of the person or persons
employed by or associated with the registrant or an investment adviser
of the registrant who are primarily responsible for the day-to-day management
of the registrants portfolio (Portfolio Manager). Also state each Portfolio
Managers business experience during the past 5 years.
Information not required in semi annual reports on form NCSR.
Item 9. Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers.
(a) If the registrant is a closed-end management investment company,
in the following tabular format, provide the information specified in
paragraph (b) of this Item with respect to any purchase made by or on
behalf of the registrant or any affiliated purchaser, as defined in
Rule 10b-18(a)(3) under the Exchange Act (17 CFR 240.10b-18(a)(3)), of
shares or other units of any class of the registrants equity securities
that is registered by the registrant pursuant to Section 12 of the
Exchange Act (15 U.S.C. 781). Instruction to paragraph (a). Disclose
all purchases covered by this Item, including purchases that do not
satisfy the conditions of the safe harbor of Rule 10b-18 under the
Exchange Act (17 CFR 240.10b-18), made in the period covered by the
report. Provide disclosures covering repurchases made on a monthly basis.
For example, if the reporting period began on January 16 and ended on
July 15, the chart would show repurchases for the months from January 16
through February 15, February 16 through March 15, March 16 through
April 15, April 16 through May 15, May 16 through June 15, and June 16
through July 15.
During the period covered by this report, there were no purchases
made by or on behalf of the registrant or any affiliated purchaser
as defined in Rule 10b-18(a)(3) under the Securities Exchange Act
of 1934 (the Exchange Act), of shares of the registrants equity
securities that are registered by the registrant pursuant to
Section 12 of the Exchange Act.
Item 10. Submission of Matters to a Vote of Security Holders.
Describe any material changes to the procedures by which shareholders
may recommend nominees to the registrants board of directors, where
those changes were implemented after the registrant last provided
disclosure in response to the requirements of Item 7(d)(2)(ii)(G)
of Schedule 14A (17 CFR 240.14a-101), or this Item.
There have been no material changes to the procedures by which the
shareholders may recommend nominees to the registrants board of
directors since the registrant last provided disclosure in response
to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14(A) in
its definitive proxy statement, or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Disclose the conclusions of the registrant's principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, about the effectiveness of the registrant's disclosure
controls and procedures (as defined in Rule 30a-2(c) under the Act (17 CFR
270.30a-2(c))) based on their evaluation of these controls and procedures as of
a date within 90 days of the filing date of the report that includes the
disclosure required by this paragraph.
The registrant's principal executive officer
and principal financial officer have
concluded that the registrant's disclosure
controls and procedures are effective based
on their evaluation of these controls and
procedures as of a date within 90 days of the
filing date of this report.
(b) Disclose whether or not there were significant changes in the registrant's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
There were no significant changes in the
registrant's internal control over financial
reporting that occurred during the second
fiscal quarter of the period covered by this
report that have materially affected, or are
reasonably likely to materially affect, the
registrant's internal control over financial
reporting.
The registrant's principal executive officer and principal financial
officer, however, voluntarily are reporting the following information:
In August of 2006 the registrant's investment adviser
enhanced its internal procedures for reporting performance
information required to be included in prospectuses.
Those enhancements involved additional internal controls
over the appropriateness of performance data
generated for this purpose. Such enhancements were made
following an internal review which identified
prospectuses relating to certain classes of shares of
a limited number of registrants where, inadvertently,
performance information not reflecting the deduction of
applicable sales charges was included. Those prospectuses
were revised, and the revised prospectuses were distributed to
shareholders.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2 under the Act
(17 CFR 270.30a-2).
Filed herewith.
SIGNATURES
[See General Instruction F]
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Pioneer Diversified High Income Trust
By (Signature and Title)* /s/ John F. Cogan, Jr.
John F. Cogan, Jr, President
Date December 28, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ John F. Cogan, Jr.
John F. Cogan, Jr., President
Date December 28, 2007
By (Signature and Title)* /s/ Vincent Nave
Vincent Nave, Treasurer
Date December 28, 2007
* Print the name and title of each signing officer under his or her signature.