File Nos. 333-18639 and 811-7985
As Filed With The Securities and Exchange Commission on Feburary 21, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. 1 / X /
Post-Effective Amendment No. / /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 1 / X /
(Check appropriate box or boxes)
PIONEER MICRO-CAP FUND
(Exact name of registrant as specified in charter)
60 State Street, Boston, Massachusetts 02109
(Address of principal executive office) Zip Code
Registrant's Telephone Number, including Area Code: (617) 742-7825
Joseph P. Barri, Hale and Dorr, 60 State Street, Boston, MA 02109
(Name and address of agent for service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective of the registration statement under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
The Registrant has registered an indefinite number of shares of Registrant and
any series thereof hereinafter created pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. The Registrant has not yet completed
its initial fiscal year and has therefore not filed a Rule 24f-2 Notice.
<PAGE>
PIONEER MICRO-CAP FUND
Cross-Reference Sheet Showing Location in Prospectus
and Statement of Additional Information of
Information Required by Items of the Registration Form
Location in
Prospectus or
Statement of
Additional
Form N-1A Item Number and Caption Information
- --------------------------------- -----------
1. Cover Page........................................Prospectus - Cover Page
2. Synopsis..........................................Prospectus - Expense
Information
3. Condensed Financial Information...................Not Applicable
4. General Description of Registrant.................Prospectus - Investment
Objective and Policies;
Management of the Fund;
Fund Share Alternatives;
Share Price; How to Buy
Fund Shares; How to
Sell Fund Shares; How to
Exchange Fund Shares;
The Fund
5. Management of the Fund............................Prospectus - Management
of the Fund
6. Capital Stock and Other Securities................Prospectus - Investment
Objective and Policies;
Management of the Fund;
Fund Share Alternatives;
Share Price; How to Buy
Fund Shares; How to Sell
Fund Shares; How to
Exchange Fund Shares;
Dividends, Distributions
and Taxation; The Fund
7. Purchase of Securities Being
Offered.....................................Prospectus - Fund Share
Alternatives; Share
Price; How to Buy Fund
Shares; How to Sell Fund
Shares; How to Exchange
Fund Shares; Distribution
Plans; Shareholder
Services; The Fund
8. Redemption or Repurchase..........................Prospectus - Fund Share
Alternatives; Share
Price; How to Buy Fund
<PAGE>
Location in
Prospectus or
Statement of
Additional
Form N-1A Item Number and Caption Information
- --------------------------------- -----------
Shares; How to Sell Fund
Shares; How to Exchange
Fund Shares; Shareholder
Services; The Fund
9. Pending Legal Proceedings.........................Not Applicable
10. Cover Page........................................Statement of Additional
Information - Cover Page
11. Table of Contents.................................Statement of Additional
Information - Cover Page
12. General Information and History...................Statement of Additional
Information - Description
of Shares
13. Investment Objectives and Policies................Statement of Additional
Information - Investment
Policies and Restrictions
14. Management of the Fund............................Statement of Additional
Information - Management
of the Fund; Investment
Adviser
15. Control Persons and Principle Holders
of Securities...............................Statement of Additional
Information - Management
of the Fund
16. Investment Advisory and Other
Services....................................Statement of Additional
Information - Management
of the Fund; Investment
Adviser; Underwriting
Agreement and
Distribution Plans;
Shareholder Servicing/
Transfer Agent;Custodian;
Principal Underwriter;
Independent Public
Accountants
17. Brokerage Allocation and Other
Practices...................................Statement of Additional
Information - Portfolio
Transactions
18. Capital Stock and Other Securities................Statement of Additional
Information - Description
of Shares
-2-
<PAGE>
Location in
Prospectus or
Statement of
Additional
Form N-1A Item Number and Caption Information
- --------------------------------- -----------
19. Purchase, Redemption and Pricing of
Securities Being Offered....................Statement of Additional
Information - Letter of
Intention; Systematic
Withdrawal Plan;
Determination of Net
Asset Value
20. Tax Status........................................Statement of Additional
Information - Tax Status
and Dividends
21. Underwriters......................................Statement of Additional
Information -Underwriting
Agreement andDistribution
Plans; Principal
Underwriter
22. Calculation of Performance Data...................Statement of Additional
Information - Investment
Results
23. Financial Statements..............................To be supplied
-3-
<PAGE>
<PAGE>
[Pioneer logo]
Pioneer
Micro-Cap
Fund
Class A and Class B Shares
Prospectus
February 28, 1997
Pioneer Micro-Cap Fund (the "Fund") seeks capital appreciation by investing
in a diversified portfolio of securities consisting primarily of common stocks.
Any current income generated from these securities is incidental to the
investment objective of the Fund.
In seeking to achieve its investment objective, the Fund will invest at least
80% of its total assets in common stocks and common stock equivalents (such as
convertible bonds and preferred stock) of companies with a market capitalization
of $300 million or less. See "Investment Objective and Policies" in this
Prospectus. There is no assurance that the Fund will achieve its investment
objective.
Prospective investors should be aware that management intends to close the
Fund to new investments after the Fund reaches $150 million in total assets.
Management reserves the right to modify or eliminate restrictions on the sale of
Fund shares. A number of factors will be considered in making such decisions
including, but not limited to, total assets under management. See "How to Buy
Fund Shares--Special Restrictions" for more information.
FUND RETURNS AND SHARE PRICES FLUCTUATE AND THE VALUE OF YOUR ACCOUNT UPON
REDEMPTION MAY BE MORE OR LESS THAN YOUR PURCHASE PRICE. SHARES IN THE FUND ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER
DEPOSITORY INSTITUTION, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENTS IN THE SECURITIES OF MICRO-CAPITALIZATION ("MICRO-CAP")
COMPANIES MAY OFFER GREATER CAPITAL APPRECIATION POTENTIAL THAN INVESTMENTS IN
SECURITIES OF LARGER COMPANIES, BUT MAY BE SUBJECT TO GREATER SHORT-TERM PRICE
FLUCTUATIONS. THE FUND IS INTENDED FOR INVESTORS WHO CAN ACCEPT THE RISKS
ASSOCIATED WITH ITS INVESTMENTS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. SEE
"INVESTMENT OBJECTIVES AND POLICIES" FOR A DISCUSSION OF THESE RISKS.
This Prospectus provides information about the Fund that you should know
before investing. Please read and retain it for future reference. More
information about the Fund is included in the Statement of Additional
Information, also dated February 28, 1997, which is incorporated into this
Prospectus by reference. A copy of the Statement of Additional Information may
be obtained free of charge by calling Shareholder Services at 1-800-225-6292 or
by written request to the Fund at 60 State Street, Boston, Massachusetts 02109.
Additional information about the Fund has been filed with the Securities and
Exchange Commission (the "SEC") and is available upon request and without
charge.
TABLE OF CONTENTS PAGE
- ------------------------------------------------------------------------------
I. EXPENSE INFORMATION ............................................. 2
II. INVESTMENT OBJECTIVE AND POLICIES ................................ 3
III. MANAGEMENT OF THE FUND .......................................... 4
IV. FUND SHARE ALTERNATIVES .......................................... 5
V. SHARE PRICE ..................................................... 5
VI. HOW TO BUY FUND SHARES .......................................... 5
VII. HOW TO SELL FUND SHARES .......................................... 7
VIII. HOW TO EXCHANGE FUND SHARES ...................................... 8
IX. DISTRIBUTION PLANS ............................................... 9
X. DIVIDENDS, DISTRIBUTIONS AND TAXATION ........................... 10
XI. SHAREHOLDER SERVICES ............................................. 10
Account and Confirmation Statements ............................. 10
Additional Investments .......................................... 11
Financial Reports and Tax Information ........................... 11
Distribution Options ............................................ 11
Direct Deposit .................................................. 11
Voluntary Tax Withholding ....................................... 11
Telephone Transactions and Related Liabilities .................. 11
FactFone(SM) ................................................... 11
Retirement Plans ............................................... 11
Telecommunications Device for the Deaf (TDD) ................... 12
Systematic Withdrawal Plans .................................... 12
XII. THE FUND ........................................................ 12
XIII. INVESTMENT RESULTS ............................................... 12
APPENDIX--CERTAIN INVESTMENT PRACTICES ........................... 13
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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I. EXPENSE INFORMATION
This table is designed to help you understand the charges and expenses that
you, as a shareholder, will bear directly or indirectly when you invest in the
Fund. The table reflects shareholder transaction and annual operating expenses.
"Other Expenses" are based on estimates for the fiscal period ending November
30, 1997.
Shareholder Transaction Expenses Class A Class B
Maximum Initial Sales Charge on Purchases
as a percentage of offering price) .................... 5.75% None
Maximum Sales Charge on Reinvestment of Dividends ....... None None
Maximum Deferred Sales Charge (as a percentage of
purchase price or redemption proceeds, as
applicable) ........................................... None 4.00%
Redemption fee1 ......................................... None None
Exchange fee ............................................ None None
Annual Operating Expenses
(as a percentage of average net assets)
Management fee (after fee reduction)2 .................. 0.85% 0.85%
12b-1 fees .............................................. 0.25%3 1.00%
Other Expenses (including accounting and transfer
agent fees, custodian fees and printing expenses)2 .... 0.65% 0.65%
----- -----
Total Operating Expenses (after fee reduction)2 ......... 1.75% 2.50%
===== =====
- ----------------
1 Separate fees (currently $10 and $20, respectively) apply to domestic and
international wire transfers of redemption proceeds.
2 Pioneering Management Corporation ("PMC") has agreed not to impose all or a
portion of its management fee and to make other arrangements, if necessary, to
limit the operating expenses of the Class A shares of the Fund to 1.75% of the
average daily net assets attributable to the Class A Shares; the portion of
fund-wide expenses attributable to Class B shares will be reduced only to the
extent they are reduced for Class A shares. This agreement is voluntary and
temporary and may be revised or terminated at any time. The agreement is
expected to remain in effect for the current fiscal year.
Annual Operating Expenses Absent Fee Reduction Class A Class B
(as a percentage of average net assets)
Management Fee ......................................... 1.10% 1.10%
Total Operating Expenses .............................. 2.00% 2.75%
3 This is the maximum annual fee rate and assumes that the Plan of Distribution
is in effect for an entire year; actual expenses are expected to be lower.
Example:
You would pay the following expenses on a $1,000 investment in the Fund,
assuming 5% annual return and the reinvestment of all dividends and
distributions and that the percentage amounts listed under "Annual Operating
Expenses" remain the same each year:
1 Year 3 Years
Class A Shares .......................................... $74 $109
Class B Shares*
- --Assuming complete redemption at end of
period ................................................ $65 $108
- --Assuming no redemption ................................. $25 $ 78
- ----------------
* Class B shares convert to Class A shares eight years after purchase;
therefore, Class A share expenses are used after year eight.
THE EXAMPLE IS DESIGNED FOR INFORMATION PURPOSES ONLY, AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF FUTURE EXPENSES OR RETURN. ACTUAL FUND EXPENSES
AND RETURN WILL VARY FROM YEAR TO YEAR AND MAY BE HIGHER OR LOWER THAN THOSE
SHOWN.
For further information regarding management fees, 12b-1 fees and other
expenses of the Fund, see "Management of the Fund," "Distribution Plans" and
"How To Buy Fund Shares" in this Prospectus and "Management of the Fund" and
"Underwriting Agreement and Distribution Plans" in the Statement of Additional
Information. The Fund's payment of a Rule 12b-1 fee may result in long-term
shareholders paying more than the economic equivalent of the maximum sales
charge permitted under the Conduct Rules of the National Association of
Securities Dealers, Inc. ("NASD").
The maximum initial sales charge is reduced on purchases of specified larger
amounts of Class A shares and the value of shares owned in other Pioneer mutual
funds is taken into account in determining the applicable initial sales charge.
See "How to Buy Fund Shares." No sales charge is applied to exchanges of shares
of the Fund for shares of other publicly available Pioneer mutual funds. See
"How to Exchange Shares."
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II. INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek capital appreciation by
investing in a diversified portfolio of securities consisting primarily of
common stocks. Any current income produced by a security is not a primary factor
in the selection of investments.
Under normal circumstances, at least 80% of the Fund's total assets are
invested in common stocks and common stock equivalents of companies with a
market capitalization of $300 million or less determined at the time the
security is purchased ("micro-cap companies"). The typical capitalization of
issuers of securities purchased by the Fund is expected to be approximately $100
million. While micro-cap company securities may offer a greater capital
appreciation potential than investments in securities of larger companies, they
may also present greater risks. Micro-cap companies may have limited product
lines, market and financial resources, or may be dependent on small or less
experienced management groups. In addition, the trading volume of micro-cap
companies may be limited. Historically, the market price for securities of
micro-cap companies has been more volatile than for securities of companies with
greater capitalization.
The Fund is managed in accordance with the value investment philosophy of
PMC, the investment adviser to the Fund. This approach consists of developing a
diversified portfolio of securities consistent with the Fund's investment
objective and selected primarily on the basis of PMC's judgment that the
securities have an underlying value, or potential value, which exceeds their
current prices. The analysis and quantification of the economic worth, or basic
value, of individual companies reflects PMC's assessment of a company's assets
and the company's prospects for earnings growth over the next 1-1/2-to-3 years.
PMC relies primarily on the knowledge, experience and judgment of its own
research staff, but also receives and uses information from a variety of outside
sources, including brokerage firms, electronic data bases, specialized research
firms and technical journals.
The Fund's investments in common stocks may include common stock equivalents,
that is, securities with common stock characteristics such as convertible bonds
and preferred stocks. The Fund may invest in the securities of real estate
investment trusts ("REITs"). While there is no requirement to do so, the Fund
currently intends to limit its investments in REITs to 15% of total assets. For
more information on REITs see the Appendix.
The Fund intends to be substantially fully invested at all times. If suitable
investments are not immediately available, the Fund may hold a portion of its
investments in cash and cash-equivalents. For temporary defensive purposes,
however, the Fund may invest up to 100% of its assets in short-term
investments. The Fund will assume a defensive posture only when political and
economic factors affect common stock markets to such an extent that PMC believes
there to be extraordinary risks in being substantially invested in common
stocks. A short-term investment is considered to be an investment with a
maturity of one year or less from the date of issuance. Short-term investments
will not normally represent more than 10% of the Fund's total assets.
It is the policy of the Fund not to engage in trading for short-term profits.
Nevertheless, changes in the portfolio will be made promptly when determined to
be advisable by reason of developments not foreseen at the time of the initial
investment decision, and usually without reference to the length of time a
security has been held. Accordingly, portfolio turnover rate is not considered a
limiting factor in the execution of investment decisions. The Fund's portfolio
often includes a number of securities which are owned by other equity mutual
funds managed by PMC. See "Investment Policies and Restrictions" in the
Statement of Additional Information for more information.
Portfolio turnover is not expected to exceed 150% in the coming year. A high
rate of portfolio turnover (100% or more) involves correspondingly greater
transaction costs which must be borne by the Fund and its shareholders. Under
certain circumstances, a high turnover rate may make it more difficult for the
Fund to qualify as a regulated investment company under the Internal Revenue
Code of 1986, as amended (the "Code"). See "Dividends, Distributions and
Taxation."
The Fund may enter into repurchase agreements, not to exceed seven days, with
broker-dealers and any member bank of the Federal Reserve System. The Board of
Trustees of the Fund will review and monitor the creditworthiness of any
institution which enters into a repurchase agreement with the Fund. Such
repurchase agreements will be fully collateralized with United States ("U.S.")
Treasury and/or agency obligations with a market value of not less than 100% of
the obligations, valued daily. Collateral will be held by the Fund's custodian
in a segregated, safekeeping account for the benefit of the Fund. Repurchase
agreements afford the Fund an opportunity to earn income on temporarily
available cash at low risk. In the event that a repurchase agreement is not
fulfilled, the Fund could suffer a loss to the extent that the value of the
collateral falls below the repurchase price.
The Fund may lend portfolio securities to member firms of the New York Stock
Exchange (the "Exchange"). As with other extensions of credit, there are risks
of delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. The Fund will lend portfolio
securities only to firms which have been approved in advance by the Board of
Trustees, which will monitor the creditworthiness of any such firms. At no time
would the value of the securities loaned exceed 30% of the value of the Fund's
total assets. These investment strategies are also described in the Statement of
Additional Information.
In pursuit of its objective, the Fund may employ certain active investment
management techniques including options contracts on securities and securities
indices, futures contracts on securities indices and options on such futures
contracts. These techniques may be employed in an attempt to hedge risks
associated with the Fund's portfolio securities. See the Appendix to this
Prospectus and the Statement of Additional Information for a description of
these investment practices and associated risks. The Fund may invest in
restricted and illiquid securities as described in the Statement of Additional
Information.
3
<PAGE>
The Fund's fundamental investment objective and the fundamental investment
restrictions set forth in the Statement of Additional Information may not be
changed without shareholder approval. Certain other investment policies,
strategies and restrictions on investment are noted throughout the Prospectus
and are set forth in the Statement of Additional Information. These
non-fundamental investment policies, strategies and restrictions may be changed
at any time by a vote of the Board of Trustees.
III. MANAGEMENT OF THE FUND
The Board of Trustees of the Fund has overall responsibility for management
and supervision of the Fund. There are currently eight Trustees, six of whom are
not "interested persons" of the Fund as defined in the Investment Company Act of
1940, as amended (the "1940 Act"). The Board meets at least quarterly. By virtue
of the functions performed by PMC as investment adviser, the Fund requires no
employees other than its executive officers, all of whom receive their
compensation from PMC or other sources. The Statement of Additional Information
contains the names and general business and professional background of each
Trustee and executive officer of the Fund.
Investment advisory services are provided to the Fund by PMC pursuant to a
management contract between PMC and the Fund. PMC serves as investment
adviser to the Fund and is responsible for the overall management of the
Fund's business affairs, subject only to the authority of the Board of
Trustees. PMC is a wholly-owned subsidiary of The Pioneer Group, Inc.
("PGI"), a publicly-traded Delaware corporation. Pioneer Funds Distributor,
Inc. ("PFD"), an indirect wholly-owned subsidiary of PGI, is the principal
underwriter of the Fund.
Mr. David Tripple, President and Chief Investment Officer of PMC and
Executive Vice President of each Pioneer mutual fund, has general
responsibility for PMC's investment operations and chairs a committee of
PMC's domestic equity managers which reviews PMC's research and portfolio
operations, including those of the Fund. Mr. Tripple joined PMC in 1974.
Research and management for the Fund is the responsibility of a team of
portfolio managers and analysts focusing on special equities and smaller
companies. Members of the team meet regularly to discuss holdings, prospective
investments and portfolio composition.
Day-to-day management of the Fund has been the responsibility of Mr.
William Taussig, Vice President of PMC, since the Fund's inception. Mr.
Taussig joined PMC in 1991 and has 13 years of investment experience.
In addition to the Fund, PMC also manages and serves as the investment
adviser for other mutual funds and is an investment adviser to certain other
institutional accounts. PMC's and PFD's executive offices are located at 60
State Street, Boston, Massachusetts 02109. In an effort to avoid conflicts of
interest with the Fund, the Fund and PMC have adopted a Code of Ethics that is
designed to maintain a high standard of personal conduct by directing that all
personnel defer to the interests of the Fund and its shareholders in making
personal securities transactions.
Under the terms of its contract with the Fund, PMC assists in the management
of the Fund and is authorized in its discretion to buy and sell securities for
the account of the Fund. PMC pays all the expenses, including executive salaries
and the rental of certain office space, related to its services for the Fund,
with the exception of the following which are to be paid by the Fund: (a)
charges and expenses for Fund accounting, pricing and appraisal services and
related overhead, including, to the extent such services are performed by
personnel of PMC or its affiliates, office space and facilities and personnel
compensation, training and benefits; (b) the charges and expenses of auditors;
(c) the charges and expenses of any custodian, transfer agent, plan agent,
dividend disbursing agent and registrar appointed by the Fund; (d) issue and
transfer taxes, chargeable to the Fund in connection with securities
transactions to which the Fund is a party; (e) insurance premiums, interest
charges, dues and fees for membership in trade associations, and all taxes and
corporate fees payable by the Fund to federal, state or other governmental
agencies; (f) fees and expenses involved in registering and maintaining
registrations of the Fund and/or its shares with regulatory agencies, individual
states or blue sky securities agencies, territories and foreign countries,
including the preparation of Prospectuses and Statements of Additional
Information for filing with the SEC; (g) all expenses of shareholders' and
Trustees' meetings and of preparing, printing and distributing prospectuses,
notices, proxy statements and all reports to shareholders and to governmental
agencies; (h) charges and expenses of legal counsel to the Fund and the
Trustees; (i) distribution fees paid by the Fund in accordance with Rule 12b-1
promulgated by the SEC pursuant to the 1940 Act; (j) compensation of those
Trustees of the Fund who are not affiliated with or interested persons of PMC,
the Fund (other than as Trustees), PGI or PFD; (k) the cost of preparing and
printing share certificates; and (l) interest on borrowed money, if any. In
addition to the expenses described above, the Fund shall pay all brokers' and
underwriting commissions chargeable to the Fund in connection with securities
transactions to which the Fund is a party.
Orders for the Fund's portfolio securities transactions are placed by PMC,
which strives to obtain the best price and execution for each transaction. In
circumstances in which two or more broker-dealers are in a position to offer
comparable prices and execution, consideration may be given to whether the
broker-dealer provides investment research or brokerage services or sells shares
of any Pioneer mutual fund or other funds for which PMC or any affiliate or
subsidiary serves as investment adviser or manager. See the Statement of
Additional Information for a further description of PMC's brokerage allocation
practices.
As compensation for its management services and certain expenses which PMC
incurs, PMC is entitled to a management fee equal to 1.10% per annum of the
Fund's average daily net assets. The fee is normally computed daily and paid
monthly.
John F. Cogan, Jr., Chairman and President of the Fund, Chairman of PFD,
President and a Director of PGI and Chairman and a Director of PMC, owned
approximately 14% of the outstanding capital stock of PGI as of the date of this
Prospectus.
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<PAGE>
IV. FUND SHARE ALTERNATIVES
The Fund offers two Classes of shares designated as Class A and Class B
shares, as described more fully in "How to Buy Fund Shares." If you do not
specify in your instructions to the Fund which Class of shares you wish to
purchase, exchange or redeem, the Fund will assume that your instructions apply
to Class A shares. You may not buy Fund shares if the value of your Fund account
(alone or in combination with any related accounts) is $500,000 or more. See
"How to Buy Fund Shares--Special Restrictions" for more information.
Class A Shares. If you invest in Class A shares, you will pay an initial
sales charge. Certain purchases may qualify for reduced initial sales charges.
Class A shares are subject to distribution and service fees at a combined annual
rate of up to 0.25% of the Fund's average daily net assets attributable to Class
A shares.
Class B Shares. If you plan to invest up to $250,000, Class B shares are
available to you. Class B shares are sold without an initial sales charge, but
are subject to a contingent deferred sales charge ("CDSC") of up to 4% if
redeemed within six years. Class B shares are subject to distribution and
service fees at a combined annual rate of 1% of the Fund's average daily net
assets attributable to Class B shares. Your entire investment in Class B shares
is available to work for you from the time you make your investment, but the
higher distribution fee paid by Class B shares will cause your Class B shares
(until conversion) to have a higher expense ratio and to pay lower dividends, to
the extent dividends are paid, than Class A shares. Class B shares will
automatically convert to Class A shares, based on relative net asset value,
eight years after the initial purchase.
Purchasing Class A or Class B Shares. The decision as to which Class to
purchase depends on the amount you invest, the intended length of the investment
and your personal situation. Consult your financial representative for more
information.
Investment dealers or their representatives may receive different
compensation depending on which Class of shares they sell. Shares sold outside
the U.S. to persons who are not U.S. citizens may be subject to different sales
charges, CDSCs and dealer compensation arrangements in accordance with local
laws and business practices.
V. SHARE PRICE
Shares of the Fund are sold at the public offering price, which is the net
asset value per share plus any applicable sales charge. Net asset value per
share of a Class of the Fund is determined by dividing the value of its assets,
less liabilities attributable to that Class, by the number of shares of that
Class outstanding. The net asset value is computed once daily, on each day the
Exchange is open, as of the close of regular trading on the Exchange.
Securities are valued at the last sale price on the principal exchange or
market where they are traded. Securities which have not traded on the date of
valuation or securities for which sales prices are not generally reported are
valued at the mean between the current bid and asked prices. All assets of the
Fund for which there is no other readily available valuation method are valued
at their fair value as determined in good faith by the Trustees.
VI. HOW TO BUY FUND SHARES
You may buy Fund shares, unless the purchase of Fund shares has been
restricted by management as described below in "Special Restrictions," from any
securities broker-dealer which has a sales agreement with PFD. If you do not
have a securities broker-dealer, please call 1-800-225-6292. Shares will be
purchased at the public offering price, that is, the net asset value per share
plus any applicable sales charge, next computed after receipt of a purchase
order, except as set forth below.
The minimum initial investment is $5,000, except as specified below. The
minimum initial investment is $2,000 for IRA accounts. The minimum subsequent
investment is $1,000.
Special Restrictions
Prospective investors should be aware that management intends to close the
Fund to new investments at the end of the fifteenth calendar day after the Fund
reaches $150 million in total assets. No new investments will be accepted in the
ninety-day period immediately after such closure. Subsequent to the end of this
ninety-day period, and depending upon market conditions and the availability of
suitable investments for the Fund, additional investments may be accepted from
existing shareholders, subject to the maximum purchase limitation described
below. The time period for any such subsequent investments will be determined by
management based primarily on its ability to effectively invest the Fund's
available cash. There is no limitation on purchases of Fund shares through the
reinvestment of dividends and capital gains distributions paid by the Fund.
As a result of the Fund's intention to close the Fund to new investments,
the Fund is not appropriate for investors who make periodic investments such
as 401(k) and 403(b) plans. Certain IRA accounts will be accepted. See
"Retirement Plans."
You may not buy Fund shares if your account (alone or in combination with any
related accounts) is valued at $500,000 or more. You may not buy Fund shares by
exchanging shares from any other Pioneer mutual funds that you currently own.
You may not buy Fund shares by exercising the Reinstatement Privilege available
on certain other Pioneer mutual funds.
Management reserves the right to modify or eliminate restrictions on the sale
of Fund shares if such action is in the interest of Fund shareholders.
Telephone Purchases. Your account is automatically authorized to have the
telephone purchase privilege unless you indicate otherwise on your Account
Application or by writing to Pioneering Services Corporation ("PSC"). The
telephone purchase option may be used to purchase additional shares for an
existing fund account, assuming the purchase of shares is not restricted; it may
not be used to establish a new account. Proper account identification will be
required for each telephone purchase. A maximum of $25,000 per account may be
purchased by telephone each day. The tele-
5
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phone purchase privilege is available to IRA accounts but may not be available
to other types of retirement plan accounts. Call PSC for more information.
You are strongly urged to consult with your financial representative prior to
requesting a telephone purchase. To purchase shares by telephone, you must
establish your bank account of record by completing the appropriate section of
your Account Application or an Account Options Form. PSC will electronically
debit the amount of each purchase from this predesignated bank account.
Telephone purchases may not be made for 30 days after the establishment of your
bank of record or any change to your bank information.
Telephone purchases will be priced at the net asset value plus any
applicable sales charge next determined after PSC's acceptance of a telephone
purchase instruction and receipt of good funds (usually three days after the
purchase instruction). See "Telephone Transactions and Related Liabilities"
for additional information.
Class A Shares
You may buy Class A shares at the public offering price, including a sales
charge, as follows. Although your purchase may not exceed $500,000, you may
qualify for a reduced sales charge in connection with a Right of Accumulation or
Letter of Intention with respect to other Pioneer mutual funds. Call PSC for
more information.
Sales Charge as a % of
----------------------
Dealer
Allowance
Net as a % of
Offering Amount Offering
Amount of Purchase Price Invested Price
- --------------------------------- ---------- ---------- ----------
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.50 4.71 4.00
$100,000 but less than $250,000 3.50 3.63 3.00
$250,000 but less than $500,000 2.50 2.56 2.00
$500,000 2.00 2.04 1.75
The schedule of sales charges above is applicable to purchases of Class A
shares of the Fund by (i) an individual, (ii) an individual and his or her
spouse and children under the age of 21 and (iii) a trustee or other fiduciary
of a trust estate or fiduciary account or related trusts or accounts including
pension, profit-sharing and other employee benefit trusts qualified under
Section 401 or 408 of the Code, although more than one beneficiary is involved.
The sales charges applicable to a current purchase of Class A shares of the Fund
by a person listed above is determined by adding the value of shares to be
purchased to the aggregate value (at the then current offering price) of shares
of any of the other Pioneer mutual funds previously purchased and then owned,
provided PFD is notified by such person or his or her broker-dealer each time a
purchase is made which would qualify. Pioneer mutual funds include all mutual
funds for which PFD serves as principal underwriter. At the sole discretion of
PFD, holdings of fund domiciled outside the U.S., but which are managed by
affiliates of PMC, may be included for this purpose.
In connection with PGI's acquisition of Mutual of Omaha Fund Management
Company and contingent upon the achievement of certain sales objectives, PFD
pays to Mutual of Omaha Investor Services, Inc. 50% of PFD's retention of any
sales commission on sales of the Fund's Class A shares through such dealer. From
February 28, 1997 through April 30, 1997, the dealer concession will consist of
the entire sales charge. In the future, PFD may again elect to reallow the
entire initial sales charge to participating dealers for all Class A sales with
respect to which orders are placed during a particular period. Dealers to whom
substantially the entire sales charge is reallowed may be deemed to be
underwriters under the federal securities laws.
Qualifying for a Reduced Sales Charge. Class A shares of the Fund may be sold
at net asset value per share without a sales charge to: (a) current or former
Trustees and officers of the Fund and partners and employees of its legal
counsel; (b) current or former directors, officers, employees or sales
representatives of PGI or its subsidiaries; (c) current or former directors,
officers, employees or sales representatives of any subadviser or predecessor
investment adviser to any investment company for which PMC serves as investment
adviser, and the subsidiaries or affiliates of such persons; (d) current or
former officers, partners, employees or registered representatives of
broker-dealers which have entered into sales agreements with PFD; (e) members of
the immediate families of any of the persons above; (f) any trust, custodian,
pension, profit-sharing or other benefit plan of the foregoing persons; (g)
insurance company separate accounts; (h) certain "wrap accounts" for the benefit
of clients of financial planners adhering to standards established by PFD; (i)
other funds and accounts for which PMC or any of its affiliates serves as
investment adviser or manager; and (j) certain unit investment trusts. Shares so
purchased are purchased for investment purposes and may not be resold except
through redemption or repurchase by or on behalf of the Fund. The availability
of this privilege is conditioned upon the receipt by PFD of written notification
of eligibility. Class A shares of the Fund may also be sold at net asset value
without a sales charge in connection with certain reorganization, liquidation or
acquisition transactions involving other investment companies or personal
holding companies.
Reduced sales charges for Class A shares may be available through an
agreement to purchase a specified quantity of Fund shares over a designated
13-month period through a "Letter of Intention." Any investor planning to use a
Letter of Intention should call PSC for more information.
Class B Shares
You may buy Class B shares at net asset value without the imposition of an
initial sales charge; however, Class B shares redeemed within six years of
purchase will be subject to a CDSC at the rates shown in the table below. The
charge will be assessed on the amount equal to the lesser of the current market
value or the original purchase cost of the shares being redeemed. No CDSC will
be imposed on increases in account value above the initial purchase price,
including shares derived from the reinvestment of dividends or capital gains
distributions.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of purchase until the time of redemption of Class B shares. For
the purpose of determining the number of years from the time of any purchase,
all payments during a quarter will be aggregated and deemed to
6
<PAGE>
have been made on the first day of that quarter. In processing redemptions of
Class B shares, the Fund will first redeem shares not subject to any CDSC, and
then shares held longest during the six-year period. As a result, you will pay
the lowest possible CDSC.
The CDSC for Class B shares subject to a CDSC upon redemption will be
determined as follows:
CDSC as a Percentage
Year Since of Dollar Amount
Purchase Subject to CDSC
--------- --------------------
First 4.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
Proceeds from the CDSC are paid to PFD and are used in whole or in part to
defray PFD's expenses related to providing distribution-related services to the
Fund in connection with the sale of Class B shares, including the payment of
compensation to broker-dealers.
Class B shares will automatically convert into Class A shares at the end of
the calendar quarter that is eight years after the purchase date, except as
noted below. Class B shares acquired through reinvestment of distributions will
convert into Class A shares based on the date of the initial purchase to which
such shares relate. For this purpose, Class B shares acquired through
reinvestment of distributions will be attributed to particular purchases of
Class B shares in accordance with such procedures as the Trustees may determine
from time to time. The conversion of Class B shares to Class A shares is subject
to the continuing availability of a ruling from the Internal Revenue Service
("IRS"), for which the Fund is applying, or an opinion of counsel that such
conversions will not constitute taxable events for federal tax purposes. There
can be no assurance that such ruling will be available. The conversion of Class
B shares to Class A shares will not occur if such ruling is not available and,
therefore, Class B shares would continue to be subject to higher expenses than
Class A shares for an indeterminate period.
Waiver or Reduction of Contingent Deferred Sales Charge. The CDSC on Class B
shares may be waived or reduced for non-retirement accounts if: (a) the
redemption results from the death of all registered owners of an account (in the
case of UGMAs, UTMAs and trust accounts, waiver applies upon the death of all
beneficial owners) or a total and permanent disability (as defined in Section 72
of the Code) of all registered owners occurring after the purchase of the shares
being redeemed or (b) the redemption is made in connection with limited
automatic redemptions as set forth in "Systematic Withdrawal Plans" (limited in
any year to 10% of the value of the account in the Fund at the time the
withdrawal plan is established).
The CDSC on Class B shares may be waived or reduced for Individual Retirement
Accounts ("IRAs") if: (a) the redemption results from the death or a total and
permanent disability (as defined in Section 72 of the Code) occurring after the
purchase of the shares being redeemed; (b) the distribution is part of a series
of substantially equal payments made over the life expectancy of the shareholder
or the joint life expectancy of the shareholder and his or her beneficiary or as
scheduled periodic payments to a shareholder (limited in any year to 10% of the
value of the account at the time the distribution amount is established; a
required minimum distribution due to the shareholder's attainment of age 70-1/2
may exceed the 10% limit only if the distribution amount is based on assets held
by Pioneer); (c) the distribution is a return of excess employee contributions;
(d) the distribution is to be rolled over to or reinvested in the same class of
shares in a Pioneer mutual fund and which will be subject to any applicable CDSC
upon redemption.
The CDSC on any shares subject to a CDSC may be waived or reduced if: (a) the
redemption is made by any state, county, or city, or any instrumentality,
department, authority, or agency thereof, which is prohibited by applicable laws
from paying a CDSC in connection with the acquisition of shares of any
registered investment management company; or (b) the redemption is made pursuant
to the Fund's right to liquidate or involuntarily redeem shares in a
shareholder's account. The CDSC on any shares subject to a CDSC will not be
applicable if the selling broker-dealer elects, with PFD's approval, to waive
receipt of the commission normally paid at the time of the sale.
Broker-Dealers. An order for either Class of Fund shares received by PFD from
a broker-dealer prior to the close of regular trading on the Exchange is
confirmed at the price appropriate for that Class as determined at the close of
regular trading on the Exchange on the day the order is received, provided the
order is received by PFD prior to PFD's close of business (usually, 5:30 p.m.
Eastern Time). It is the responsibility of broker-dealers to transmit orders so
that they will be received by PFD prior to its close of business. PFD or its
affiliates may provide additional compensation to certain dealers or such
dealers' affiliates based on certain objective criteria established from time to
time by PFD. All such payments are made out of PFD's or the affiliate's own
assets. These payments will not change the price an investor will pay for shares
or the amount that the Fund will receive from such sale.
General. The Fund reserves the right in its sole discretion to withdraw all
or any part of the offering of shares when, in the judgment of the Fund's
management, such withdrawal is in the best interest of the Fund. An order to
purchase shares is not binding on, and may be rejected by, PFD until it has been
confirmed in writing by PFD and payment has been received.
VII. HOW TO SELL FUND SHARES
You can arrange to sell (redeem) fund shares on any day the Exchange is open
by selling either some or all of your shares to the Fund.
You may sell your shares either through your broker-dealer or directly to the
Fund. Please note the following:
(bullet) If you are selling shares from a retirement account , other than an
IRA, you must make your request in writing (except for exchanges to
other Pioneer mutual funds which can be requested by phone or in
writing). Call 1-800-622-0176 for more information.
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<PAGE>
(bullet) If you are selling shares from a non-retirement account or an IRA,
you may use any of the methods described below.
Your shares will be sold at the share price next calculated after your order
is received and accepted less any applicable CDSC. Sale proceeds generally will
be sent to you in cash, normally within seven days after your order is accepted.
The Fund reserves the right to withhold payment of the sale proceeds until
checks received by the Fund in payment for the shares being sold have cleared,
which may take up to 15 calendar days from the purchase date.
In Writing. You may sell your shares by delivering a written request, signed
by all registered owners, in good order to PSC, however, you must use a written
request, including a signature guarantee, to sell your shares if any of the
following situations applies:
(bullet) you wish to sell over $50,000 worth of shares,
(bullet) your account registration or address has changed within the last
30 days,
(bullet) the check is not being mailed to the address on your account
(address of record),
(bullet) the check is not being made out to the account owners, or
(bullet) the sale proceeds are being transferred to a Pioneer mutual fund
account with a different registration.
Your request should include your name, the Fund's name, your fund account
number, the Class of shares to be redeemed, the dollar amount or number of
shares to be redeemed, and any other applicable requirements as described below.
Unless instructed otherwise, Pioneer will send the proceeds of the sale to the
address of record. Fiduciaries and corporations are required to submit
additional documents. For more information, contact PSC at 1-800-225-6292.
Written requests will not be processed until they are received in good order
by PSC. Good order means that there are no outstanding claims or requests to
hold redemptions on the account, and any certificates are endorsed by the record
owner(s) exactly as the shares are registered and the signature(s) are
guaranteed by an eligible guarantor. You should be able to obtain a signature
guarantee from a bank, broker, dealer, credit union (if authorized under state
law), securities exchange or association, clearing agency or savings
association. A notary public cannot provide a signature guarantee. Signature
guarantees are not accepted by facsimile ("fax"). For additional information
about the necessary documentation for redemption by mail, please contact PSC at
1-800-225-6292.
By Telephone or by Fax. Your account is automatically authorized to have the
telephone redemption privilege unless you indicate otherwise on your Account
Application or by writing to PSC. Proper account identification will be required
for each telephone redemption. The telephone redemption option is not available
to retirement plan accounts, except IRAs. A maximum of $50,000 per account per
day may be redeemed by telephone or fax and the proceeds may be received by
check or by bank wire or electronic funds transfer. To receive the proceeds by
check: the check must be made payable exactly as the account is registered and
the check must be sent to the address of record which must not have changed in
the last 30 days. To receive the proceeds by bank wire or by electronic funds
transfer: the proceeds must be sent to the bank address of record which must
have been properly pre-designated either on your Account Application or on an
Account Options Form and which must not have changed in the last 30 days. To
redeem by fax, send your redemption request to 1-800-225-4240. You may always
elect to deliver redemption instructions to PSC by mail. See "Telephone
Transactions and Related Liabilities" below. Telephone and fax redemptions will
be priced as described above. You are strongly urged to consult with your
financial representative prior to requesting a telephone redemption.
Selling Shares Through Your Broker-Dealer. The Fund has authorized PFD to act
as its agent in the repurchase of shares of the Fund from qualified
broker-dealers and reserves the right to terminate this procedure at any time.
Your broker-dealer must receive your request before the close of business on the
Exchange and transmit it to PFD before PFD's close of business to receive that
day's redemption price. Your broker-dealer is responsible for providing all
necessary documentation to PFD and may charge you for its services.
Small Accounts. The minimum account value is $500. If you hold shares of the
Fund in an account with a net asset value of less than the minimum required
amount due to redemptions or exchanges, the Fund may redeem the shares held in
this account at net asset value if you have not increased the net asset value of
the account to at least the minimum required amount within six months of notice
by the Fund to you of the Fund's intention to redeem the shares.
General. Redemptions may be suspended or payment postponed during any period
in which any of the following conditions exist: the Exchange is closed or
trading on the Exchange is restricted; an emergency exists as a result of which
disposal by the Fund of securities owned by it is not reasonably practicable or
it is not reasonably practicable for the Fund to fairly determine the value of
the net assets of its portfolio; or the SEC, by order, so permits. Redemptions
and repurchases are taxable transactions to shareholders. The net asset value
per share received upon redemption or repurchase may be more or less than the
cost of shares to an investor, depending on the market value of the portfolio at
the time of redemption or repurchase.
VIII. HOW TO EXCHANGE FUND SHARES
At this time, you may not open a new account in the Fund or purchase shares
of the Fund by exchanging shares from any other Pioneer mutual fund that you
already own. You may, however, exchange shares of the Fund for shares of other
Pioneer mutual funds. Such shares may not be exchanged back to this Fund.
Exchanges must be at least $1,000.
Written Exchanges. You may exchange your Fund shares by sending a letter of
instruction to PSC. Your letter should include your name, the Fund's name and
the name of the Pioneer mutual fund into which you wish to exchange, your fund
account number(s), the Class of shares to be exchanged and the dollar amount or
number of shares to be exchanged.
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<PAGE>
Written exchange requests must be signed by all record owner(s) exactly as the
shares are registered.
Telephone Exchanges. Your account is automatically authorized to have the
telephone exchange privilege unless you indicated otherwise on your Account
Application or by writing to PSC. Proper account identification will be required
for each telephone exchange. Telephone exchanges may not exceed $500,000 per
account per day. Each telephone exchange request, whether by voice or by
FactFone(SM), will be recorded. You are strongly urged to consult with your
financial representative prior to requesting a telephone exchange. See
"Telephone Transactions and Related Liabilities" below.
Automatic Exchanges. You may automatically exchange shares from the Fund for
shares of the same Class in another Pioneer mutual fund account on a monthly or
quarterly basis. The accounts must have identical registrations and the
originating account must have a minimum balance of $5,000. The exchange will be
effective on the day of the month designated on your Account Application or
Account Options Form.
General. You may exchange your shares of the Fund at net asset value, without
a sales charge, for shares of the same Class of any other Pioneer mutual fund.
Not all Pioneer mutual funds offer more than one Class of shares. A new Pioneer
account opened in another Pioneer mutual fund through an exchange must have a
registration identical to that on the original account. Shares which would
normally be subject to a CDSC upon redemption will not be charged the applicable
CDSC at the time of an exchange; the applicable CDSC will carry over to the
shares purchased by exchange.
Exchange requests received by PSC before 4:00 p.m. Eastern Time will be
effective on that day if the requirements above have been met, otherwise, they
will be effective on the next business day. PSC will process exchanges only
after receiving an exchange request in good order. There are currently no fees
or sales charges imposed at the time of an exchange. An exchange of shares may
be made only in states where legally permitted. For federal and (generally)
state income tax purposes, an exchange is considered to be a sale of the shares
of the Fund exchanged and a purchase of shares in another Pioneer mutual fund.
Therefore, an exchange could result in a gain or loss on the shares sold,
depending on the tax basis of these shares and the timing of the transaction,
and special tax rules may apply.
You should consider the differences in objectives and policies of the Pioneer
mutual funds, as described in each fund's current prospectus, before making any
exchange. For the protection of the Fund's performance and shareholders, the
Fund and PFD reserve the right to refuse any exchange request or restrict, at
any time without notice, the number and/or frequency of exchanges to prevent
abuses of the exchange privilege. Such abuses may arise from frequent trading in
response to short-term market fluctuations, a pattern of trading by an
individual or group that appears to be an attempt to "time the market," or any
other exchange request which, in the view of management, will have a detrimental
effect on the Fund's portfolio management strategy or its operations. In
addition, the Fund and PFD reserve the right to charge a fee for exchanges or to
modify, limit, suspend or discontinue the exchange privilege with notice to
shareholders as required by law.
IX. DISTRIBUTION PLANS
The Fund, has adopted a Plan of Distribution for both Class A shares ("Class
A Plan") and Class B shares ("Class B Plan") in accordance with Rule 12b-1 under
the 1940 Act pursuant to which certain distribution and service fees are paid.
Expenditures of the Fund for continuing service fees to broker-dealers pursuant
to the Class A Plan will be accrued daily beginning July 1, 1997; other expenses
pursuant to the Class A Plan will be paid as accrued.
Pursuant to the Class A Plan, the Fund reimburses PFD for its actual
expenditures to finance any activity primarily intended to result in the sale of
Class A shares or to provide services to holders of Class A shares, provided the
categories of expenses for which reimbursement is made are approved by the
Fund's Board of Trustees. As of the date of this Prospectus, the Board of
Trustees has approved the following categories of expenses for Class A shares of
the Fund: (i) a service fee to be paid to qualified broker-dealers in an amount
not to exceed 0.25% per annum of the Fund's daily net assets attributable to
Class A shares; (ii) reimbursement to PFD for its expenditures for broker-
dealer commissions and employee compensation on certain sales of the Fund's
Class A shares with no initial sales charge (See "How to Buy Fund Shares"); and
(iii) reimbursement to PFD for expenses incurred in providing services to Class
A shareholders and supporting broker-dealers and other organizations (such as
banks and trust companies) in their efforts to provide such services. Banks are
currently prohibited under the Glass-Steagall Act from providing certain
underwriting or distribution services. If a bank was prohibited from acting in
any capacity or providing any of the described services, management would
consider what action, if any, would be appropriate.
Expenditures of the Fund pursuant to the Class A Plan are accrued daily and
may not exceed 0.25% of the Fund's average daily net assets attributable to
Class A shares. Distribution expenses of PFD are expected to substantially
exceed the distribution fees paid by the Fund in a given year. The Class A Plan
does not provide for the carryover of reimbursable expenses beyond 12 months
from the time the Fund is first invoiced for an expense. In the event of
termination or non-continuance of the Class A Plan, the Fund has 12 months to
reimburse any expense which it incurs prior to such event, provided that
payments by the Fund during such 12-month period shall not exceed 0.25% of the
Fund's average daily net assets during such period. The Class A Plan may not be
amended to increase materially the annual percentage limitation of average net
assets which may be spent for the services described therein without approval of
the shareholders of the Fund.
The Class B Plan provides that the Fund compensates PFD through the payment
of a distribution fee at the annual rate of 0.75% of the Fund's average daily
net assets attributable to Class B shares and a service fee at the annual rate
of 0.25% of the Fund's average daily net assets attributable to Class B
9
<PAGE>
shares. The distribution fee is intended to compensate PFD for its distribution
services to the Fund. The service fee is intended to be additional compensation
for personal services and/or account maintenance services with respect to Class
B shares. PFD also receives the proceeds of any CDSC imposed on the redemption
of Class B shares.
Commissions of 4%, equal to 3.75% of the amount invested and a first year's
service fee equal to 0.25% of the amount invested in Class B shares, are paid to
broker-dealers who have selling agreements with PFD. PFD may advance to dealers
the first year service fee at a rate up to 0.25% of the purchase price of such
shares and, as compensation therefore, PFD may retain the service fee paid by
the Fund with respect to such shares for the first year after purchase. Dealers
will become eligible for additional service fees with respect to such shares
commencing in the 13th month following the purchase.
When a broker-dealer sells Class B shares and elects, with PFD's approval, to
waive its right to receive the commission normally paid at the time of sale, PFD
may cause all or a portion of the distribution fees described above to be paid
to the broker-dealer.
Dealers may from time to time be required to meet certain criteria in order
to receive service fees. PFD or its affiliates are entitled to retain all
service fees payable under the Class B Plan for which there is no dealer of
record or for which qualification standards have not been met as partial
consideration for personal services and/or account maintenance services
performed by PFD or its affiliates for shareholder accounts.
X. DIVIDENDS, DISTRIBUTIONS AND TAXATION
The Fund intends to elect to be treated, and to qualify each year as a
"regulated investment company" under Subchapter M of the Code, so that it will
not pay federal income tax on income and capital gains distributed to
shareholders as required under the Code.
Under the Code, the Fund will be subject to a nondeductible 4% excise tax on
a portion of its undistributed income and capital gains if it fails to meet
certain distribution requirements with respect to each calendar year. The Fund
intends to make distributions in a timely manner and accordingly does not expect
to be subject to the excise tax.
The Fund's policy is to pay to shareholders dividends from net investment
income, if any, and to make distributions from net long-term capital gains, if
any, in December. Distributions from net short-term capital gains, if any, may
be paid with such dividends; dividends from income and/or capital gains may also
be paid at such times as may be necessary for the Fund to avoid federal income
or excise tax. Generally, dividends from the Fund's net investment income,
market discount income, net short-term capital gains, and certain net foreign
exchange gains are taxable under the Code as ordinary income, and dividends from
the Fund's net long-term capital gains are taxable as long-term capital gains.
Unless shareholders specify otherwise, all distributions will be
automatically reinvested in additional full and fractional shares of the Fund.
For federal income tax purposes, all dividends are taxable as described above
whether a shareholder takes them in cash or reinvests them in additional shares
of the Fund. Information as to the federal tax status of dividends and
distributions will be provided annually. For further information on the
distribution options available to shareholders, see "Distribution Options"
below.
Distributions by the Fund of the dividend income it receives from U.S.
domestic corporations, if any, may qualify for the dividends-received
deduction for corporate shareholders, subject to holding-period requirements
and debt-financing restrictions under the Code.
Dividends and other distributions and the proceeds of redemptions, exchanges
or repurchases of Fund shares paid to individuals and other non-exempt payees
will be subject to a 31% backup withholding of federal income tax if the Fund is
not provided with the shareholder's correct taxpayer identification number and
certification that the number is correct and that the shareholder is not subject
to backup withholding or if the Fund receives notice from the IRS or a broker
that such withholding applies. Please refer to the Account Application for
additional information.
The description above relates only to U.S. federal income tax consequences
for shareholders who are U.S. persons, i.e., U.S. citizens or residents or
U.S. corporations, partnerships, trusts or estates and who are subject to
U.S. federal income tax. Non-U.S. shareholders and tax-exempt shareholders
are subject to a tax treatment different than that described above.
Shareholders should consult their own tax advisers regarding state, local and
other applicable tax laws.
XI. SHAREHOLDER SERVICES
PSC is the shareholder services and transfer agent for shares of the Fund.
PSC, a Massachusetts corporation, is a wholly-owned subsidiary of PGI. PSC's
offices are located at 60 State Street, Boston, Massachusetts 02109, and
inquiries to PSC should be mailed to Pioneering Services Corporation, P.O. Box
9014, Boston, Massachusetts 02205-9014. Brown Brothers Harriman & Co. (the
"Custodian") serves as custodian of the Fund's portfolio securities and other
assets. The principal business address of the mutual fund division of the
Custodian is 40 Water Street, Boston, Massachusetts 02109.
Account and Confirmation Statements
PSC maintains an account for each shareholder and all transactions of the
shareholder are recorded in this account. Confirmation statements showing
details of transactions are sent to shareholders as transactions occur. The
Pioneer Combined Account Statement, mailed quarterly, is available to
shareholders who have more than one Pioneer mutual fund account.
Shareholders whose shares are held in the name of an investment broker-dealer
or other party will not normally have an account with the Fund and might not be
able to utilize some of the services available to shareholders of record.
Examples of services which might not be available are purchases, exchanges or
redemptions of shares by mail or telephone, automatic reinvestment of dividends
and capital gains distributions, withdrawal plans, and newsletters.
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Additional Investments
You may add to your account, unless the Fund is closed to new investments, by
sending a check (minimum of $1,000) to PSC (account number and Class of shares
should be clearly indicated). The bottom portion of a confirmation statement may
be used as a remittance slip to make additional investments.
Additions to your account are invested in full and fractional shares of the
Fund at the applicable offering price in effect as of the close of regular
trading on the Exchange on the day of receipt.
Financial Reports and Tax Information
As a shareholder, you will receive financial reports at least semiannually.
In January of each year, the Fund will mail you information about the tax status
of dividends and distributions.
Distribution Options
Dividends and capital gains distributions, if any, will automatically be
invested in additional shares of the Fund, at the applicable net asset value per
share, unless you indicate another option on the Account Application. Two other
options available are (a) dividends in cash and capital gains distributions in
additional shares; and (b) all dividends and capital gains distributions in
cash. These two options are not available, however, for retirement plans or for
an account with a net asset value of less than $500. Changes in your
distribution options may be made by written request to PSC.
If you elect to receive either dividends or capital gains or both in cash and
a distribution check issued to you is returned by the U.S. Postal Service as not
deliverable or a distribution check remains uncashed for six months or more, the
amount of the check may be reinvested in your account. Such additional shares
will be purchased at the then current net asset value. Furthermore, the
distribution option on the account will automatically be changed to the
reinvestment option until such time as you request a different option by writing
to PSC.
Direct Deposit
If you have elected to take distributions, whether dividends or dividends and
capital gains, in cash, or have established a Systematic Withdrawal Plan, you
may choose to have those cash payments deposited directly into your savings,
checking or NOW bank account. You may establish this service by completing the
appropriate section on the Account Application when opening a new account or the
Account Options Form for an existing account.
Voluntary Tax Withholding
You may request (in writing) that PSC withhold 28% of the dividends and
capital gains distributions paid from your account (before any reinvestment) and
forward the amount withheld to the IRS as a credit against your federal income
taxes. This option is not available for retirement plan accounts or for accounts
subject to backup withholding.
Telephone Transactions and Related Liabilities
Your account is automatically authorized to have telephone transaction
privileges unless you indicate otherwise on your Account Application or by
writing to PSC. You may purchase, sell or exchange Fund shares by telephone. For
personal assistance, call 1-800-225-6292 between 8:00 a.m. and 9:00 p.m. Eastern
time on weekdays. See "How to Buy Fund Shares," "How to Sell Fund Shares" and
"How to Exchange Fund Shares" for more information. Computer-assisted
transactions are available to shareholders who have pre-recorded certain bank
information (see "FactFone(SM)"). You are strongly urged to consult with your
financial representative prior to requesting any telephone transaction.
To confirm that each transaction instruction received by telephone is
genuine, PSC will record each telephone transaction, require the caller to
provide the personal identification number (PIN) for the account and send you a
written confirmation of each telephone transaction. Different procedures may
apply to accounts that are registered to non-U.S. citizens or that are held in
the name of an institution or in the name of an investment broker-dealer or
other third-party. If reasonable procedures, such as those described above, are
not followed, the Fund may be liable for any loss due to unauthorized or
fraudulent instructions. The Fund may implement other procedures from time to
time. In all other cases, neither the Fund, PSC or PFD will be responsible for
the authenticity of instructions received by telephone; therefore, you bear the
risk of loss for unauthorized or fraudulent telephone transactions.
During times of economic turmoil or market volatility or as a result of
severe weather or a natural disaster, it may be difficult to contact the Fund by
telephone to institute a redemption or exchange. You should communicate with the
Fund in writing if you are unable to reach the Fund by telephone.
FactFone(SM)
FactFone(SM) is an automated inquiry and telephone transaction system
available to Pioneer shareholders by dialing 1-800-225-4321. FactFone(SM) allows
you to obtain current information on your Pioneer accounts and to inquire about
the prices and yields of all publicly available Pioneer mutual funds. In
addition, you may use FactFone(SM) to make computer-assisted telephone
purchases, exchanges and redemptions from your Pioneer accounts if you have
activated your personal identification number ("PIN"). Telephone purchases and
redemptions require the establishment of a bank account of record. You are
strongly urged to consult with your financial representative prior to requesting
any telephone transaction. Shareholders whose accounts are registered in the
name of a broker-dealer or other third party may not be able to use
FactFone(SM). See "How to Buy Fund Shares," "How to Sell Fund Shares," "How to
Exchange Fund Shares" and "Telephone Transactions and Related Liabilities." Call
PSC for assistance.
Retirement Plans
Rollover and contributory IRA accounts may invest in the Fund. The minimum
initial investment for IRA accounts is $2,000. Retirement plans that must make
periodic investments may not invest in the Fund because periodic investments
will not be allowed after management closes the Fund to new investments (see
"How to Buy Fund Shares--Special Restrictions"). The Account Application
accompanying this Prospectus should not be used to establish an IRA account. A
separate application is required.
11
<PAGE>
Contact the Retirement Plans Department of PSC at 1-800-622-0176 for
information relating to retirement plans for businesses, age-weighted profit
sharing plans, Simplified Employee Pension Plans, IRAs, and Section 403(b)
retirement plans for employees of certain non-profit organizations and public
school systems, all of which are available in conjunction with investments in
most other Pioneer mutual funds.
Telecommunications Device for the Deaf (TDD)
If you have a hearing disability and access to TDD keyboard equipment, you
can call our TDD number toll-free at 1-800-225-1997, weekdays from 8:30 a.m. to
5:30 p.m. Eastern Time, to contact our telephone representatives with questions
about your account.
Systematic Withdrawal Plans
If your account has a total value of at least $10,000 you may establish a
Systematic Withdrawal Plan ("SWP") providing for fixed payments at regular
intervals. Withdrawals from Class B share accounts are limited to 10% of the
value of the account at the time the SWP is implemented. See "Waiver or
Reduction of Contingent Deferred Sales Charge" for more information. Periodic
checks of $50 or more will be sent to you, or any person designated by you,
monthly or quarterly, and your periodic redemptions of shares may be taxable to
you. Payments can be made either by check or electronic transfer to a bank
account designated by you. If you direct that withdrawal checks be paid to
another person after you have opened your account, a signature guarantee must
accompany your instructions. Purchases of Class A shares of the Fund at a time
when you have a SWP in effect may result in the payment of unnecessary sales
charges and may therefore be disadvantageous. You may obtain additional
information by calling PSC at 1-800-225-6292 or by referring to the Statement of
Additional Information.
The options and services available to shareholders, including the terms of
the Exchange Privilege, may be revised, suspended or terminated at any time by
PFD or by the Fund. You may establish the services described in this section
when you open your account. You may also establish or revise many of them on an
existing account by completing an Account Options Form, which you may request by
calling 1-800-225-6292.
XII. THE FUND
The Fund is a diversified open-end management investment company (commonly
referred to as a mutual fund) organized as a Delaware business trust on December
3, 1996. The Fund has authorized an unlimited number of shares of beneficial
interest. As an open-end management investment company, the Fund continuously
offers its shares, subject to the restrictions described above, to the public
and under normal conditions must redeem its shares upon the demand of any
shareholder at the then current net asset value per share. See "How to Sell Fund
Shares." The Fund is not required, and does not intend, to hold annual
shareholder meetings although special meetings may be called for the purpose of
electing or removing Trustees, changing fundamental investment restrictions or
approving a management contract.
The Fund reserves the right to create and issue additional series of shares.
The Trustees have the authority, without further shareholder approval, to
classify and reclassify the shares of the Fund, or any additional series of the
Fund, into one or more classes. As of the date of this Prospectus, the Trustees
have authorized the issuance of two classes of shares, designated Class A and
Class B. The shares of each class represent an interest in the same portfolio of
investments of the Fund. Each class has equal rights as to voting, redemption,
dividends and liquidation, except that each class bears different distribution
and transfer agent fees and may bear other expenses properly attributable to the
particular class. Class A and Class B shareholders have exclusive voting rights
with respect to the Rule 12b-1 distribution plans adopted by holders of those
shares in connection with the distribution of shares.
In addition to the requirements under Delaware law, the Declaration of Trust
provides that a shareholder of the Fund may bring a derivative action on behalf
of the Fund only if the following conditions are met: (a) shareholders eligible
to bring such derivative action under Delaware law who hold at least 10% of the
outstanding shares of the Fund, or 10% of the outstanding shares of the series
or class to which such action relates, shall join in the request for the
Trustees to commence such action; and (b) the Trustees must be afforded a
reasonable amount of time to consider such shareholder request and investigate
the basis of such claim. The Trustees shall be entitled to retain counsel or
other advisers in considering the merits of the request and shall require an
undertaking by the shareholders making such request to reimburse the Fund for
the expense of any such advisers in the event that the Trustees determine not to
bring such action.
When issued and paid for in accordance with the terms of the Prospectus and
Statement of Additional Information, shares of the Fund are fully-paid and
non-assessable. Shares will remain on deposit with the Fund's transfer agent and
certificates will not normally be issued. The Fund reserves the right to charge
a fee for the issuance of Class A share certificates; certificates will not be
issued for Class B shares. In order to supply the Fund with capital, PFD
beneficially owned 100% of the Fund's issued and outstanding shares immediately
prior to effectiveness of the Fund's registration statement. The Fund expects to
have significant assets in comparison to PFD's initial investment soon after
effectiveness and therefore PFD may no longer control the Fund.
XIII. INVESTMENT RESULTS
The average annual total return (for a designated period of time) on an
investment in the Fund may be included in advertisements, and furnished to
existing or prospective shareholders. The average annual total return for each
Class is computed in accordance with the SEC's standardized formula. The
calculation for all Classes assumes the reinvestment of all dividends and
distributions at net asset value and does not reflect the impact of federal or
state income taxes. In addition, for Class A shares the calculation assumes the
deduction of the maximum sales charge of 5.75%; for Class B shares the
calculation reflects the deduction of any applicable CDSC. The periods
illustrated would normally include
12
<PAGE>
one, five and ten years (or since the commencement of the public offering of the
shares of a Class, if shorter) through the most recent calendar quarter.
One or more additional measures and assumptions, including but not limited to
historical total returns; distribution returns; results of actual or
hypothetical investments; changes in dividends, distributions or share values;
or any graphic illustration of such data may also be used. These data may cover
any period of the Fund's existence and may or may not include the impact of
sales charges, taxes or other factors.
Other investments or savings vehicles and/or unmanaged market indices,
indicators of economic activity or averages of mutual fund results may be cited
or compared with the investment results of the Fund. Rankings or listings by
magazines, newspapers or independent statistical or rating services, such as
Lipper Analytical Services, Inc., may also be referenced.
The Fund's investment results will vary from time to time depending on market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. All quoted investment results are historical and should not be
considered representative of what an investment in the Fund may earn in any
future period. For further information about the calculation methods and uses of
the Fund's investment results, see the Statement of Additional Information.
APPENDIX--CERTAIN INVESTMENT PRACTICES
This Appendix provides a brief description of certain investment techniques
that the Fund may employ. For a more complete discussion of these and other
practices, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
Real Estate Investment Trusts and Associated Risk Factors
REITs are pooled investment vehicles which invest primarily in income
producing real estate or real estate related loans or interests. REITs are
generally classified as equity REITs, mortgage REITs or a combination of equity
and mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that have appreciated
in value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to the risks of financing projects. REITs are subject to heavy cash
flow dependency, default by borrowers, self-liquidation, and the possibilities
of failing to qualify for the exemption from tax for distributed income under
the Code and failing to maintain their exemptions from the Investment Company
Act of 1940, as amended.
REITs (especially mortgage REITs) are also subject to interest rate risks.
When interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline.
Investing in REITs involves risks similar to those associated with investing
in small capitalization companies. Historically, REITs, like small
capitalization stocks, have been more volatile in price than the larger
capitalization stocks included in the Standard & Poor's Index of 500 Common
Stocks.
Options on Securities and Securities Indices
The Fund may purchase put and call options on securities in which the Fund
may invest and securities indices that are based on securities in which it may
invest to manage cash flow and to manage its exposure to stocks or stock markets
instead of, or in addition to, buying and selling stock. The Fund may also
purchase options in order to hedge against risks of market-wide price
fluctuations.
The Fund may purchase put options in order to hedge against an anticipated
decline in securities prices that might adversely affect the value of the Fund's
portfolio securities. If the Fund purchases a put option on a security or
securities index, the amount of the payment it would receive upon exercising the
option would depend on the extent of any decline in the value of the security or
the securities index below the exercise price. Such payments would tend to
offset a decline in the value of the Fund's portfolio securities. However, if
the value of the security or securities index increases and remains above the
exercise price while the put option is outstanding, the Fund will not be able to
profitably exercise the option and will lose the amount of the premium and any
transaction costs. Such loss may be partially offset by an increase in the value
of the Fund's portfolio securities.
The Fund may purchase call options on securities and securities indices in
order to remain fully invested in a particular stock market or to lock in a
favorable price on securities that it intends to buy in the future. If the Fund
purchases a call option on a security or securities index, the amount of the
payment it receives upon exercising the option depends on the extent of an
increase in the value of the security or securities index above the exercise
price. Such payments would in effect allow the Fund to benefit from securities
market appreciation even though it may not have had sufficient cash to purchase
the underlying securities. Such payments may also offset increases in the price
of securities that the Fund intends to purchase. If, however, the value of the
security or securities index declines and remains below the exercise price while
the call option is outstanding, the Fund will not be able to exercise the option
profitably and will lose the amount of the premium and transaction costs. Such
loss may be partially offset by a reduction in the price the Fund pays to buy
additional securities for its portfolio.
The Fund may sell an option it has purchased or a similar option prior to the
expiration of the purchased option in order to close out its position in an
option which it has purchased. The Fund may also allow options to expire
unexercised, which would result in the loss of the premium paid.
13
<PAGE>
Futures Contracts and Options on Futures Contracts
To hedge against changes in securities prices, the Fund may purchase and sell
various kinds of futures contracts, and purchase and write call and put options
on any of such futures contracts. When the Fund enters into a futures contract,
it agrees to purchase or sell the underlying security at a given price on a
specified future date. When the Fund enters into an option on a futures
contract, it has the right--but not the obligation--to purchase or sell the
related futures contract at a given price on a specified future date. The Fund
may also enter into closing purchase and sale transactions with respect to any
of such contracts and options. The futures contracts may be based on various
securities indices. The Fund will engage in futures and related options
transactions for hedging purposes only. These transactions involve brokerage
costs and require margin deposits.
Limitations and Risks Associated with Transactions in Options and Futures
Contracts
Transactions involving options on securities and securities indices, futures
contracts and options on futures involve: (1) liquidity risk that contractual
positions cannot be easily closed out in the event of market changes or
generally in the absence of a liquid secondary market, (2) correlation risk that
changes in the value of hedging positions may not match the securities market
intended to be hedged and (3) market risk that an incorrect prediction of
securities prices by the Fund's investment adviser may cause the Fund to perform
less favorably than if such positions had not been entered. The Fund will
purchase and sell options that are traded only in a regulated market which is
open to the public. Options and futures contracts are highly specialized
activities which involve investment techniques and risks that are different from
those associated with ordinary portfolio transactions. The Fund may not enter
into futures contracts and options on futures contracts for speculative
purposes. All of the Fund's assets may be subject to futures contracts and
options on such contracts entered into for bona fide hedging purposes. The loss
that may be incurred by the Fund in entering into future contracts and written
options thereon is potentially unlimited. The Fund may not invest more than 5%
of its total assets in financial instruments that are used for non-hedging
purposes.
The Fund's transactions in options, futures contracts and options on futures
contracts may be limited by the requirements for qualification of the Fund as a
regulated investment company for tax purposes. See "Tax Status" in the Statement
of Additional Information.
14
<PAGE>
THE PIONEER FAMILY OF MUTUAL FUNDS [PIONEER LOGO]
Growth Funds
Global/International
Pioneer Emerging Markets Fund
Pioneer Europe Fund
Pioneer Gold Shares
Pioneer India Fund
Pioneer International Growth Fund
Pioneer World Equity Fund
United States
Pioneer Capital Growth Fund
Pioneer Growth Shares
Pioneer Mid-Cap Fund
Pioneer Small Company Fund
Pioneer Micro-Cap Fund*
Growth and Income Funds
Pioneer Balanced Fund
Pioneer Equity-Income Fund
Pioneer Fund
Pioneer Real Estate Shares
Pioneer II
Income Funds
Taxable
Pioneer America Income Trust
Pioneer Bond Fund
Pioneer Short-Term Income Trust*
Tax-Exempt
Pioneer Intermediate Tax-Free Fund**
Pioneer Tax-Free Income Fund**
Money Market Fund
Pioneer Cash Reserves Fund
*Offers Class A and B Shares only
**Not suitable for retirement accounts
15
<PAGE>
Pioneer
Micro-Cap Fund
60 State Street
Boston, Massachusetts 02109
OFFICERS
JOHN F. COGAN, JR., Chairman and President
DAVID D. TRIPPLE, Executive Vice President
WILLIAM H. KEOUGH, Treasurer
JOSEPH P. BARRI, Secretary
INVESTMENT ADVISER
PIONEERING MANAGEMENT CORPORATION
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP
LEGAL COUNSEL
HALE AND DORR LLP
PRINCIPAL UNDERWRITER
Pioneer Funds DIstributor, Inc.
SHAREHOLDER SERVICES AND TRANSFER AGENT
PIONEERING SERVICES CORPORATION
60 State Street
Boston, Massachusetts 02109
Telephone: 1-800-225-6292
SERVICES INFORMATION
If you would like information on the following, please call:
Existing and new accounts, prospectuses,
applications, service forms and
telephone transactions ...................................... 1-800-225-6292
FactFone(SM)
Automated fund yields and prices,
account information .......................................... 1-800-225-4321
Retirement plans .............................................. 1-800-622-0176
Toll-free fax ................................................. 1-800-225-4240
Telecommunications Device for the Deaf (TDD) .................. 1-800-225-1997
0297-3898
(C)Pioneer Funds Distributor, Inc.
<PAGE>
PIONEER MICRO-CAP FUND
60 State Street
Boston, Massachusetts 02109
STATEMENT OF ADDITIONAL INFORMATION
CLASS A AND CLASS B SHARES
February 28, 1997
This Statement of Additional Information is not a Prospectus ("Prospectus"), but
should be read in conjunction with the Prospectus, dated February 28, 1997. A
copy of the Prospectus can be obtained free of charge by calling Shareholder
Services at 1- 800-225-6292 or by written request to Pioneer Micro-Cap Fund (the
"Fund") at 60 State Street, Boston, Massachusetts 02109.
TABLE OF CONTENTS
Page
1. Investment Policies and Restrictions............................. 2
2. Management of the Fund........................................... 9
3. Investment Adviser............................................... 13
4. Underwriting Agreement and Distribution Plans.................... 14
5. Shareholder Servicing/Transfer Agent............................. 16
6. Custodian........................................................ 16
7. Principal Underwriter............................................ 16
8. Independent Public Accountants................................... 17
9. Portfolio Transactions........................................... 17
10. Tax Status and Dividends......................................... 18
11. Description of Shares............................................ 21
12. Certain Liabilities.............................................. 22
13. Letter of Intention.............................................. 23
14. Systematic Withdrawal Plan....................................... 23
15. Determination of Net Asset Value................................. 24
16. Investment Results............................................... 25
17. Financial Statements............................................. 25
Appendix A....................................................... 28
Appendix B....................................................... 38
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A
PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
1. INVESTMENT POLICIES AND RESTRICTIONS
The Fund's current Prospectus presents the investment objectives and the
principal investment policies of the Fund. Additional investment policies and a
further description of some of the policies described in the Prospectus appear
below.
The following policies and restrictions supplement those discussed in the
Prospectus. Whenever an investment policy or restriction states a maximum
percentage of the Fund's assets that may be invested in any security or presents
a policy regarding quality standards, this standard or other restrictions shall
be determined immediately after and as a result of the Fund's investment.
Accordingly, any later increase or decrease resulting from a change in values,
net assets or other circumstances will not be considered in determining whether
the investment complies with the Fund's investment objectives and policies.
LENDING OF PORTFOLIO SECURITIES
The Fund may lend portfolio securities to member firms of the New York Stock
Exchange, under agreements which would require that the loans be secured
continuously by collateral in cash, cash equivalents or United States ("U.S.")
Treasury Bills maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned as well as the benefit of an increase in the market value of the
securities loaned and would also receive compensation based on investment of the
collateral. The Fund would not, however, have the right to vote any securities
having voting rights during the existence of the loan, but would call the loan
in anticipation of an important vote to be taken among holders of the securities
or of the giving or withholding of consent on a material matter affecting the
investment.
As with other extensions of credit there are risks of delay in recovery or even
loss of rights in the collateral should the borrower of the securities fail
financially. The Fund will lend portfolio securities only to firms which have
been approved in advance by the Board of Trustees, which will monitor the
creditworthiness of any such firms. At no time would the value of the securities
loaned exceed 30% of the value of the Fund's total assets.
RISK FACTORS ASSOCIATED WITH THE REAL ESTATE INDUSTRY
Although the Fund does not invest directly in real estate, it may invest in real
estate equity securities. To the extent that the Fund invests in real estate
equity securities, an investment in the Fund may be subject to certain risks
generally associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible declines
in the value of real estate; risks related to general and local economic
conditions; possible lack of availability of mortgage funds; overbuilding;
extended vacancies of properties; increases in competition, property taxes and
operating expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties for damages resulting from, environmental
problems; casualty or condemnation losses; uninsured damages from floods,
earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates. Investments by the Fund in securities of
companies providing mortgage servicing may be subject to the risks associated
with refinancings and their impact on servicing rights.
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<PAGE>
REAL ESTATE INVESTMENT TRUSTS AND ASSOCIATED RISK FACTORS
The Fund may invest in shares of REITs as described in the Prospectus. REITs are
pooled investment vehicles which invest primarily in income producing real
estate or real estate related loans or interests. REITs are generally classified
as equity REITs, mortgage REITs or a combination of equity and mortgage REITs.
Equity REITs invest the majority of their assets directly in real property and
derive income primarily from the collection of rents. Equity REITs can also
realize capital gains by selling properties that have appreciated in value.
Mortgage REITs invest the majority of their assets in real estate mortgages and
derive income from the collection of interest payments. Like investment
companies such as the Fund, REITs are not taxed on income distributed to
shareholders provided they comply with several requirements of the Internal
Revenue Code of 1986, as amended (the "Code"). The Fund will indirectly bear its
proportionate share of any expenses paid by REITs in which it invests in
addition to the expenses paid by the Fund.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to the risks of financing projects. REITs are subject to heavy cash
flow dependency, default by borrowers, self-liquidation, and the possibilities
of failing to qualify for the exemption from tax for distributed income under
the Code and failing to maintain their exemptions from the Investment Company
Act of 1940, as amended (the "1940 Act"). REITs whose underlying assets include
long-term health care properties, such as nursing, retirement and assisted
living homes, may be impacted by federal regulations concerning the health care
industry.
REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the Standard & Poor's Index of 500
Common Stocks.
OPTIONS ON SECURITIES AND SECURITIES INDICES
The Fund may purchase call and put options on securities and securities indices
for the purpose of hedging against the risk of unfavorable price movements
adversely affecting the value of the Fund's securities or securities which the
Fund intends to buy. Securities index options will not be used for speculative
purposes.
The Fund may only purchase and sell options that are traded only in a regulated
market which is open to the public. Currently, options on stock indices are
traded only on national securities exchanges or over-the-counter, both in the
United States and in foreign countries. A securities index fluctuates with
changes in the market values of the securities included in the index. For
example, some stock index options are based on a broad market index such as the
S&P 500 or the Value Line Composite Index in the U.S., the Nikkei in Japan or
the FTSE 100 in the United Kingdom. Index options may also be based on a
narrower market index such as the S&P 100 or on an industry or market segment
such as the AMEX Oil and Gas Index or the Computer and Business Equipment Index.
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<PAGE>
The Fund may purchase put options in order to hedge against an anticipated
decline in securities prices that might adversely affect the value of the Fund's
portfolio securities. If the Fund purchases a put option on a security or
securities index, the amount of the payment it would receive upon exercising the
option would depend on the extent of any decline in the value of the security or
securities index below the exercise price. Such payments would tend to offset a
decline in the value of the Fund's portfolio securities. However, if the value
of the security or securities index increases and remains above the exercise
price while the put option is outstanding, the Fund will not be able to
profitably exercise the option and will lose the amount of the premium and any
transaction costs. Such loss may be partially offset by an increase in the value
of the Fund's portfolio securities.
The Fund may purchase call options on securities and securities indices in order
to remain fully invested in the stock market or to lock in a favorable price on
securities that it intends to buy in the future. If the Fund purchases a call
option on a security or securities index, the amount of the payment it receives
upon exercising the option depends on the extent of an increase in the value of
other securities and securities indices above the exercise price. Such payments
would in effect allow the Fund to benefit from securities market appreciation
even though it may not have had sufficient cash to purchase the underlying
securities. Such payments may also offset increases in the price of securities
that the Fund intends to purchase. If, however, the value of the security or
securities index declines and remains below the exercise price while the call
option is outstanding, the Fund will not be able to exercise the option
profitably and will lose the amount of the premium and transaction costs. Such
loss may be partially offset by a reduction in the price the Fund pays to buy
additional securities for its portfolio.
The Fund may sell the security or securities index option it has purchased or
write a similar offsetting option in order to close out a position in an option
which it has purchased. These closing sale transactions enable the Fund to
immediately realize gains or minimize losses on their respective options
positions. However, there is no assurance that a liquid secondary market on an
options exchange will exist for any particular option, or at any particular
time, and for some options no secondary market may exist. In addition, security
or securities index prices may be distorted by interruptions in the trading of
securities of certain companies or of issuers in certain industries, or by
restrictions that may be imposed by an exchange on opening or closing
transactions, or both, which would disrupt trading in options on such security
or securities indices and preclude the Fund from closing out its options
positions. If the Fund is unable to effect a closing sale transaction with
respect to options that it has purchased, it would have to exercise the options
in order to realize any profit.
The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price movements
can take place in the underlying markets that can not be reflected in the
options markets. The purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions.
In addition to the risks of imperfect correlation between the Fund's respective
portfolio and the security or securities index underlying the option, the
purchase of options involves the risk that the premium and transaction costs
paid by the Fund in purchasing an option will be lost. This could occur as a
result of unanticipated movements in the price of the security or the prices of
the securities comprising the securities index on which the option is based.
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<PAGE>
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
To hedge against changes in securities prices, the Fund may purchase and sell
various kinds of futures contracts, and purchase and write (sell) call and put
options on any of such futures contracts. The Fund may also enter into closing
purchase and sale transactions with respect to any of such contracts and
options. The futures contracts may be based on various securities in which the
Fund may invest, securities indices that composed of securities in which the
Fund may invest, and other financial instruments and indices. The Fund will
engage in futures and related options transactions for bona fide hedging and
non-hedging purposes as described below. All futures contracts entered into by
the Fund are traded on U.S. exchanges or boards of trade that are licensed and
regulated by the Commodity Futures Trading Commission (the "CFTC").
FUTURES CONTRACTS. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments for an
agreed price during a designated month (or to deliver the final cash settlement
price, in the case of a contract relating to an index or otherwise not calling
for physical delivery at the end of trading in the contract).
When securities prices are falling, the Fund can seek to offset a decline in the
value of its current portfolio securities through the sale of futures contracts.
When securities prices are rising, the Fund, through the purchase of futures
contracts, can attempt to secure better prices than might later be available in
the market when it effects anticipated purchases.
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities will usually be liquidated in
this manner, the Fund may instead make, or take, delivery of the underlying
securities whenever it appears economically advantageous to do so. A clearing
corporation associated with the exchange on which futures on securities are
traded guarantees that, if still open, the sale or purchase will be performed on
the settlement date.
HEDGING STRATEGIES. Hedging, by use of futures contracts, seeks to establish
with more certainty the effective price of portfolio securities and securities
that the Fund owns or proposes to acquire. The Fund may, for example, take a
"short" position in the futures market by selling futures contracts in order to
hedge against an anticipated decline in market prices that would adversely
affect the value of the Fund's portfolio securities. Such futures contracts may
include contracts for the future delivery of securities held by the Fund or
securities with characteristics similar to those of the Fund's portfolio
securities. If, in the opinion of Pioneering Management Corporation ("PMC"),
there is a sufficient degree of correlation between price trends for the Fund's
portfolio securities and futures contracts based on securities and securities
indices or other indices, the Fund may also enter into such futures contracts as
part of their hedging strategies. Although under some circumstances prices of
securities in the Fund's portfolio may be more or less volatile than prices of
such futures contracts, PMC will attempt to estimate the extent of this
volatility difference based on historical patterns and compensate for any such
differential by having the Fund enter into a greater or lesser number of futures
contracts or by attempting to achieve only a partial hedge against price changes
affecting the Fund's portfolio securities. When hedging of this character is
successful, any depreciation in the value of portfolio securities will be
substantially offset by appreciation in the value of the futures position. On
the other hand, any unanticipated appreciation in the value of the Fund's
portfolio securities would be substantially offset by a decline in the value of
the futures position.
On other occasions, the Fund may take a "long" position by purchasing futures
contracts. This may be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices then available in the applicable market to be less favorable
than prices that are currently available.
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OPTIONS ON FUTURES CONTRACTS. The acquisition of put and call options on futures
contracts will give the Fund the right (but not the obligation) for a specified
price to sell or to purchase, respectively, the underlying futures contract at
any time during the option period. As the purchaser of an option on a futures
contract, the Fund obtains the benefit of the futures position if prices move in
a favorable direction but limits its risk of loss in the event of an unfavorable
price movement to the loss of the premium and transaction costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of the Fund's assets. By writing a call
option, the Fund becomes obligated, in exchange for the premium, to sell a
futures contract (if the option is exercised), which may have a value higher
than the exercise price. Conversely, the writing of a put option on a futures
contract generates a premium which may partially offset an increase in the price
of securities that the Fund intends to purchase. However, the Fund becomes
obligated to purchase a futures contract (if the option is exercised) which may
have a value lower than the exercise price. Thus, the loss incurred by the Fund
in writing options on futures is potentially unlimited and may exceed the amount
of the premium received. The Fund will incur transaction costs in connection
with the writing of options on futures.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same series. There
is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
The Fund may use options on futures contracts for bona fide hedging or
non-hedging purposes as discussed below.
OTHER CONSIDERATIONS. The Fund will engage in futures and related options
transactions only for bona fide hedging or non-hedging purposes in accordance
with CFTC regulations which permit principals of an investment company
registered under the Investment Company Act of 1940, as amended (the "1940 Act")
to engage in such transactions without registering as commodity pool operators.
The Fund is not permitted to engage in speculative futures trading. The Fund
will determine that the price fluctuations in the futures contracts and options
on futures used for hedging purposes are substantially related to price
fluctuations in securities held by the Fund or which the Fund expects to
purchase. Except as stated below, the Fund's futures transactions will be
entered into for traditional hedging purposes -- i.e., futures contracts will be
sold to protect against a decline in the price of securities that the Fund owns,
or futures contracts will be purchased to protect the Fund against an increase
in the price of securities it intends to purchase. As evidence of this hedging
intent, the Fund expects that on 75% or more of the occasions on which it takes
a long futures or option position (involving the purchase of futures contracts),
the Fund will have purchased, or will be in the process of purchasing,
equivalent amounts of related securities at the time when the futures or option
position is closed out. However, in particular cases, when it is economically
advantageous for the Fund to do so, a long futures position may be terminated or
an option may expire without the corresponding purchase of securities or other
assets.
As an alternative to literal compliance with the bona fide hedging definition, a
CFTC regulation permits the Fund to elect to comply with a different test, under
which the sum of the amounts of initial margin deposits on the Fund's existing
non-hedging futures contracts and premiums paid for options on futures entered
into for non-hedging purposes (net of the amount the positions are "in the
money") would not exceed 5% of the market value of the Fund's total assets. The
Fund will engage in transactions in futures contracts and related options only
to the extent such transactions are consistent with the requirements of the
Internal Revenue Code of 1986, as amended (the "Code"), for maintaining its
qualifications as a regulated investment company for federal income tax
purposes.
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<PAGE>
Transaction costs associated with futures contracts and related options involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating the Fund to purchase securities or currencies, require the
Fund to segregate assets to cover such contracts and options.
While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
while the Fund may benefit from the use of futures and options on futures,
unanticipated changes in securities prices may result in a poorer overall
performance for the Fund than if it had not entered into any futures contracts
or options transactions. In the event of an imperfect correlation between a
futures position and a portfolio position which is intended to be protected, the
desired protection may not be obtained and the Fund may be exposed to risk of
loss.
RESTRICTED AND ILLIQUID SECURITIES
With respect to liquidity determinations generally, the Board of Trustees has
the ultimate responsibility for determining whether specific securities,
including Rule 144A securities, are liquid or illiquid. The Board has delegated
the function of making day to day determinations of liquidity to PMC, pursuant
to guidelines reviewed by the Trustees. PMC takes into account a number of
factors in reaching liquidity decisions. These factors may include but are not
limited to: (i) the frequency of trading in the security; (ii) the number of
dealers who make quotes in the securities; (iii) the number of dealers who have
undertaken to make a market in the security; (iv) the number of potential
purchasers; and (v) the nature of the security and how trading is effected
(e.g., the time needed to sell the security, how offers are solicited and the
mechanics of transfer). PMC will monitor the liquidity of securities in the
Fund's portfolio and report periodically on such decisions to the Trustees.
Since it is not possible to predict with assurance exactly how the market for
restricted securities sold and offered under Rule 144A will develop, the Board
will carefully monitor the Fund's investments in these securities, focusing on
such important factors, among others, as valuation, liquidity and availability
of information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that qualified institutional
buyers become for a time uninterested in purchasing these restricted securities.
Although there is not requirement to do so, the Fund currently intends to limit
its investments in illiquid securities, including certain restricted securities,
to 5% of total assets and to limit its investments in restricted securities
determined not to be illiquid to 5% of total assets.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS. The Fund has adopted certain additional
investment restrictions which may not be changed without the affirmative vote of
the holders of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding voting securities. The Fund may not:
(1)......Issue senior securities, except as permitted by the Fund's
borrowing, lending and commodity restrictions and, for purposes of this
restriction, the issuance of shares of beneficial interest in multiple classes
or series, the purchase or sale of options, futures contracts and options on
futures contracts, forward commitments, forward foreign exchange contracts,
repurchase agreements, fully covered reverse repurchase agreements, dollar
rolls, swaps and any other financial transaction entered into pursuant to the
Fund's investment policies as described in the Prospectus and this Statement of
Additional Information and in accordance with applicable SEC pronouncements, as
well as the pledge, mortgage or hypothecation of the
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<PAGE>
Fund's assets within the meaning of the fundamental investment restriction
regarding pledging, are not deemed to be senior securities.
(2)......Borrow money, except from banks as a temporary measure to
facilitate the meeting of redemption requests or for extraordinary emergency
purposes and except pursuant to reverse repurchase agreements and dollar rolls
and then only in amounts not to exceed 33 1/3% of the Fund's total assets
(including the amount borrowed) taken at market value.
The Fund will not use leverage to attempt to increase income.
(3)......Guarantee the securities of any other company, or mortgage,
pledge, hypothecate or assign or otherwise encumber as security for indebtedness
its securities or receivables in an amount exceeding the amount of the borrowing
thereby secured.
(4)......Act as an underwriter, except as it may be deemed to be on
underwriter in a sale of restricted securities held in its portfolio.
(5)......Invest in real estate, commodities or commodity contracts,
except that the Fund may invest in financial futures contracts and related
options and in any other financial instruments which may be deemed to be
commodities or commodity contracts in which the Fund is not prohibited from
investing by the Commodity Exchange Act and the rules and regulations
thereunder.
(6)......Make loans, except by the purchase of debt obligations in
which the Fund may invest consistent with its investment policies, by entering
into repurchase agreements or through the lending of portfolio securities, in
each case only to the extent permitted by the Prospectus and this Statement of
Additional Information.
(7)......With respect to 75% of its total assets, purchase securities
of an issuer (other than the U.S. Government, its agencies or
instrumentalities), if
(a) such purchase would cause more than 5% of the Fund's total
assets, taken at market value, to be invested in the securities of such
issuer, or
(b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held by the
Fund.
It is the fundamental policy of the Fund not to concentrate its investments in
securities of companies in any particular industry. Following the current
opinion of the staff of the Securities and Exchange Commission (the
"Commission"), the Fund's investments are concentrated in a particular industry
if such investments aggregate 25% or more of the Fund's total assets. The Fund's
policy does not apply to investments in U.S. Government Securities.
The Fund does not intend to enter into any reverse repurchase agreements or
dollar rolls, lend portfolio securities or invest in foreign securities, forward
currency contracts, options or futures on foreign currencies or securities index
put and call warrants, as described in fundamental investment restrictions (1),
(2) and (6) above, during the coming year. In addition, in compliance with an
informal position taken by the staff of the Commission regarding leverage, the
Fund will not purchase securities during the coming year at any time that
outstanding borrowings exceed 5% of the Fund's total assets.
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<PAGE>
2. MANAGEMENT OF THE FUND
The Fund's Board of Trustees provides broad supervision over the affairs of the
Fund. The officers of the Fund are responsible for the Fund's operations. The
Trustees and executive officers of the Fund are listed below, together with
their principal occupations during the past five years. An asterisk indicates
those Trustees who are interested persons of the Fund within the meaning of the
1940 Act.
JOHN F. COGAN, JR.*, CHAIRMAN OF THE BOARD, PRESIDENT AND TRUSTEE, DOB: JUNE
1926
President, Chief Executive Officer and a Director of The Pioneer Group,
Inc. ("PGI"); Chairman and a Director of Pioneering Management Corporation
("PMC") and Pioneer Funds Distributor, Inc. ("PFD"); Director of Pioneering
Services Corporation ("PSC"), Pioneer Capital Corporation ("PCC") and
Forest-Starma (a Russian corporation); President and Director of Pioneer Plans
Corporation ("PPC"), Pioneer Investment Corp. ("PIC"), Pioneer Metals and
Technology, Inc. ("PMT"), Pioneer International Corp. ("PIntl"), Pioneer First
Russia, Inc. ("First Russia") and Pioneer Omega, Inc. ("Omega"); Chairman of the
Board and Director of Pioneer Goldfields Limited ("PGL") and Teberebie
Goldfields Limited; Chairman of the Supervisory Board of Pioneer Fonds
Marketing, GmbH ("Pioneer GmbH"); Member of the Supervisory Board of Pioneer
First Polish Trust Fund Joint Stock Company ("PFPT"); Chairman, President and
Trustee of all of the Pioneer mutual funds; and Partner, Hale and Dorr LLP
(counsel to the Fund).
RICHARD H. EGDAHL, M.D., TRUSTEE, DOB: DECEMBER 1926
Boston University Health Policy Institute, 53 Bay State Rd., Boston, MA 02115
Professor of Management, Boston University School of Management;
Professor of Public Health, Boston University School of Public Health; Professor
of Surgery, Boston University School of Medicine; Director, Boston University
Health Policy Institute and Boston University Medical Center; Executive Vice
President and Vice Chairman of the Board, University Hospital; Academic Vice
President for Health Affairs, Boston University; Director, Essex Investment
Management Company, Inc. (investment adviser), Health Payment Review, Inc.
(health care containment software firm), Mediplex Group, Inc. (nursing care
facilities firm), Peer Review Analysis, Inc. (health care facilities firm) and
Springer-Verlag New York, Inc. (publisher); Honorary Trustee, Franciscan
Children's Hospital; and Trustee of all of the Pioneer mutual funds.
MARGARET B.W. GRAHAM, TRUSTEE, DOB: MAY 1947
The Keep, P.O. Box 110. Little Deer Isle, ME 04650
Founding Director, Winthrop Group, Inc. (consulting firm); Manager of
Research Operations, Xerox Palo Alto Research Center, from 1991 to 1994;
Professor of Operations Management and Management of Technology, Boston
University School of Management ("BUSM"), from 1989 to 1993; and Trustee of all
of the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
JOHN W. KENDRICK, TRUSTEE, DOB: JULY 1917
6363 Waterway Drive, Falls Church, VA 22044
Professor Emeritus and Adjunct Scholar, George Washington University;
Economic Consultant and Director, American Productivity and Quality Center;
American Enterprise Institute; and Trustee of all of the Pioneer mutual funds,
except Pioneer Variable Contracts Trust.
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<PAGE>
MARGUERITE A. PIRET, TRUSTEE, DOB: MAY 1948
One Boston Place, Suite 2635, Boston, MA 02108
President, Newbury, Piret & Company, Inc. (merchant banking firm) and
Trustee of all of the Pioneer mutual funds.
DAVID D. TRIPPLE*, TRUSTEE AND EXECUTIVE VICE PRESIDENT, DOB: FEBRUARY 1944
Executive Vice President and a Director of PGI; President, Chief
Investment Officer and a Director of PMC; Director of PFD, PCC, PIC, PIntl,
First Russia, Omega and Pioneer SBIC Corporation; and Executive Vice President
and Trustee of all of the Pioneer mutual funds.
STEPHEN K. WEST, TRUSTEE, DOB: SEPTEMBER 1928
125 Broad Street, New York, NY 10004
Partner, Sullivan & Cromwell (law firm); Trustee, The Winthrop Focus
Funds (mutual funds) and Trustee of all of the Pioneer mutual funds.
JOHN WINTHROP, TRUSTEE, DOB: JUNE 1936
One North Adgers Wharf, Charleston, SC 29401
President, John Winthrop & Co., Inc. (private investment firm);
Director of NUI Corp.; Trustee of Alliance Capital Reserves, Alliance Government
Reserves and Alliance Tax Exempt Reserves; and Trustee of all of the Pioneer
mutual funds, except Pioneer Variable Contracts Trust.
WILLIAM H. KEOUGH, TREASURER, DOB: APRIL 1937
Senior Vice President, Chief Financial Officer and Treasurer of PGI;
Treasurer of PFD, PMC, PSC, PCC, PIC, PIntl, PMT, PGL, First Russia, Omega and
Pioneer SBIC Corporation; Treasurer and Director of PPC; and Treasurer of all of
the Pioneer mutual funds.
JOSEPH P. BARRI, SECRETARY, DOB: AUGUST 1946
Secretary of PGI, PMC, PPC, PIC, PIntl, PMT, First Russia, Omega and PCC;
Clerk of PFD and PSC; Partner, Hale and Dorr LLP (counsel to the Fund); and
Secretary of all of the Pioneer mutual funds.
ERIC W. RECKARD, ASSISTANT TREASURER, DOB: JUNE 1956
Manager of Fund Accounting of PMC since May 1994; Manager of Auditing,
Compliance and Business Analysis for PGI prior to May 1994; and Assistant
Treasurer of all of the Pioneer mutual funds.
ROBERT P. NAULT, ASSISTANT SECRETARY, DOB: MARCH 1964
General Counsel and Assistant Secretary of PGI since 1995; Assistant
Secretary of PMC, PIntl, PGL, First Russia, Omega and all of the Pioneer mutual
funds; Assistant Clerk of PFD and PSC; and formerly of Hale and Dorr LLP
(counsel to the Fund) where he most recently served as junior partner.
WILLIAM M. TAUSSIG, VICE PRESIDENT, DOB: AUGUST 1952
Vice President of PMC.
The Fund's Declaration of Trust (the "Declaration of Trust") provides that the
holders of two-thirds of its outstanding shares may vote to remove a Trustee of
the Fund at any meeting of shareholders. See "Description of Shares" below. The
business address of all officers is 60 State Street, Boston, Massachusetts
02109.
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The expense of organizing the Fund and initially registering its shares under
federal and state securities laws are being charged to the Fund's operations, as
an expense, over a period not to exceed 60 months from the Fund's inception
date. If any of the original shares are redeemed by any holder thereof prior to
the end of the amortization period, the redemption proceeds will be decreased by
the pro rata share of the unamortized expenses as of the date of redemption. The
pro rata shares is derived by dividing the number of original shares redeemed by
the total number of original shares outstanding at the time of redemption.
All of the outstanding capital stock of PFD, PMC and PSC is owned, directly or
indirectly, by PGI, a publicly-owned Delaware corporation. PMC, the Fund's
investment adviser, serves as the investment adviser for the Pioneer mutual
funds listed below and manages the investments of certain institutional
accounts.
The table below lists all the Pioneer U.S. mutual funds currently
offered to the public and the investment adviser and principal underwriter for
each fund.
Investment Principal
Fund Name Adviser Underwriter
Pioneer International Growth Fund PMC PFD
Pioneer Europe Fund PMC PFD
Pioneer World Equity Fund PMC PFD
Pioneer Emerging Markets Fund PMC PFD
Pioneer India Fund PMC PFD
Pioneer Capital Growth Fund PMC PFD
Pioneer Mid-Cap Fund PMC PFD
Pioneer Growth Shares PMC PFD
Pioneer Small Company Fund PMC PFD
Pioneer Micro-Cap Fund PMC PFD
Pioneer Gold Shares PMC PFD
Pioneer Equity-Income Fund PMC PFD
Pioneer Fund PMC PFD
Pioneer II PMC PFD
Pioneer Real Estate Shares PMC PFD
Pioneer Balanced Fund PMC PFD
Pioneer Short-Term Income Trust PMC PFD
Pioneer America Income Trust PMC PFD
Pioneer Bond Fund PMC PFD
Pioneer Intermediate Tax-Free Fund PMC PFD
Pioneer Tax-Free Income Fund PMC PFD
Pioneer Cash Reserves Fund PMC PFD
Pioneer Interest Shares, Inc. PMC Note 1
Pioneer Variable Contracts Trust PMC Note 2
- ------------------------------------
Note 1 This fund is a closed-end fund.
Note 2 This is a series of eight separate portfolios designed to provide
investment vehicles for the variable annuity and variable life insurance
contracts of various insurance companies or for certain qualified pension plans.
- ------------------------------------
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<PAGE>
To the knowledge of the Fund, no officer or trustee of the Fund owned 5% or more
of the issued and outstanding shares of PGI on the date of this Statement of
Additional Information, except Mr. Cogan who then owned approximately 14% of
such shares.
COMPENSATION OF OFFICERS AND TRUSTEES
The Fund pays no salaries or compensation to any of its officers. The Fund pays
an annual trustees' fee of $500 plus $120 per meeting attended to each Trustee
who is not affiliated with PMC, PFD or PGI and pays an annual trustees' fee of
$500 plus expenses to each Trustee affiliated with PMC, PFD or PGI. Any such
fees and expenses paid to affiliates or interested persons of PMC, PFD or PGI
are reimbursed to the Fund under its Management Contract.
The following table sets forth certain information with respect to the estimated
compensation of each Trustee of the Fund for the fiscal year ending November 30,
1997:
Pension or
Retirement Total
Benefits Compensation
Compensation Accrued as from Fund and
Aggregate Part of Pioneer Family
Name of Trustee from the Fund* Fund's Expenses of Funds**
John F. Cogan, Jr. $ 500 $0 $11,083
Richard H. Egdahl, M.D. 1,940 0 $59,858
Margaret B.W. Graham 1,940 0 $59,858
John W. Kendrick 1,940 0 $59,858
Marguerite A. Piret 2,040 0 $79,842
David D. Tripple 500 0 $11,083
Stephen K. West 2,040 0 $67,850
John Winthrop 2,040 0 $66,442
----- -
$12,940 0 $415,874
- -------------------------------------------------------------------------------
* As of Fund's fiscal year ending November 30, 1997 (estimated).
** As of December 31, 1996 (calendar year end for all Pioneer mutual funds).
3. INVESTMENT ADVISER
The Fund has contracted with PMC, 60 State Street, Boston, Massachusetts, to act
as its investment adviser. A description of the services provided to the Fund
under its management contract and the expenses paid by the Fund under the
contract is set forth in the Prospectus under the caption "Management of the
Fund."
The term of the management contract is one year and is renewable annually by the
vote of a majority of the Board of Trustees of the Fund (including a majority of
the Board of Trustees who are not parties to the contract or interested persons
of any such parties). The vote must be cast in person at a meeting called for
the purpose of voting on such renewal. This contract terminates if assigned and
may be terminated without penalty by either party upon sixty days' written
notice by vote of the Board of Directors or Trustees or a majority of the
outstanding voting securities. Pursuant to the management contract, PMC will not
be liable
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<PAGE>
for any error of judgment or mistake of law or for any loss sustained by reason
of the adoption of any investment policy or the purchase, sale or retention of
any securities on the recommendation of PMC. PMC, however, is not protected
against liability by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under the respective management
contract.
As compensation for its management services and expenses incurred, PMC is
entitled to a management fee from the Fund at the rate of 1.10% per annum of he
Fund's average daily net assets. The fee is normally computed and accrued daily
and paid monthly.
PMC has agreed not to impose any management fees and make other arrangements, if
necessary, to limit expenses for the Fund's Class A shares to not more than
1.75% of such Class's average net assets. The management fee attributable to the
Fund's Class B shares will not be imposed to the same extent that it is not
imposed for Class A shares. This agreement is temporary and voluntary and may be
terminated at any time by PMC. See "Expense Information" in the Prospectus.
4. UNDERWRITING AGREEMENT AND DISTRIBUTION PLANS
The Fund entered into an Underwriting Agreement with PFD. The Underwriting
Agreement will continue from year to year if annually approved by the Trustees.
The Underwriting Agreement provides that PFD will bear expenses for the
distribution of the Fund's shares, except for expenses incurred by PFD for which
it is reimbursed by the Fund under the Plan. PFD bears all expenses it incurs in
providing services under the Underwriting Agreement. Such expenses include
compensation to its employees and representatives and to securities dealers for
distribution related services performed for the Fund. PFD also pays certain
expenses in connection with the distribution of the Fund's shares, including the
cost of preparing, printing and distributing advertising or promotional
materials, and the cost of printing and distributing prospectuses and
supplements to prospective shareholders. The Fund bears the cost of registering
its shares under federal and state securities law and the laws of certain
foreign countries. The Fund and PFD have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended. Under the Underwriting Agreement, PFD will use its best efforts in
rendering services to the Fund.
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 under the
1940 Act with respect to both its Class A shares (the "Class A Plan") and its
Class B shares (the "Class B Plan") (together, the "Plans").
CLASS A PLAN
Pursuant to the Class A Plan the Fund may reimburse PFD for its expenditures in
financing any activity primarily intended to result in the sale of Fund shares.
Certain categories of such expenditures have been approved by the Board of
Trustees and are set forth in the Prospectus. See "Distribution Plans" in each
Prospectus. The expenses of the Fund pursuant to the Class A Plan are accrued on
a fiscal year basis and may not exceed, with respect to Class A shares, the
annual rate of 0.25% of the Fund's average annual net assets attributable to
Class A.
CLASS B PLAN
The Class B Plan provides that the Fund shall pay PFD, as the Fund's distributor
for its Class B shares, a daily distribution fee equal on an annual basis to
0.75% of the Fund's average daily net assets attributable to Class B shares and
will pay PFD a service fee equal to 0.25% of the Fund's average daily net assets
-13-
<PAGE>
attributable to Class B shares (which PFD will in turn pay to securities dealers
which enter into a sales agreement with PFD at a rate of up to 0.25% of the
Fund's average daily net assets attributable to Class B shares owned by
investors for whom that securities dealer is the holder or dealer of record).
This service fee is intended to be in consideration of personal services and/or
account maintenance services rendered by the dealer with respect to Class B
shares. PFD will advance to dealers the first-year service fee at a rate equal
to 0.25% of the amount invested. As compensation therefor, PFD may retain the
service fee paid by the Fund with respect to such shares for the first year
after purchase. Dealers will become eligible for additional service fees with
respect to such shares commencing in the thirteenth month following purchase.
Dealers may from time to time be required to meet certain other criteria in
order to receive service fees. PFD or its affiliates are entitled to retain all
service fees payable under the Class B Plan for which there is no dealer of
record or for which qualification standards have not been met as partial
consideration for personal services and/or account maintenance services
performed by PFD or its affiliates for shareholder accounts. When a
broker-dealer sells Class B shares and elects, with PFD's approval, to waive its
right to receive the commission normally paid at the time of the sale, PFD may
cause all of a portion of the distribution fees described above to be paid to
the broker-dealer.
The purpose of distribution payments to PFD under the Class B Plan is to
compensate PFD for its distribution services to the Fund. PFD pays commissions
to dealers as well as expenses of printing prospectuses and reports used for
sales purposes, expenses with respect to the preparation and printing of sales
literature and other distribution-related expenses, including, without
limitation, the cost necessary to provide distribution-related services, or
personnel, travel office expenses and equipment. The Class B Plan also provides
that PFD will receive all contingent deferred sales charges ("CDSCs")
attributable to Class B shares. (See "Distributions Plans" in the Prospectus.)
GENERAL
In accordance with the terms of the Plans, PFD provides to the Fund for review
by the Trustees a quarterly written report of the amounts expended under the
respective Plan and the purpose for which such expenditures were made. In the
Trustees' quarterly review of the Plans, they will consider the continued
appropriateness and the level of reimbursement or compensation the Plans
provide.
No interested person of the Fund, nor any Trustee of the Fund who is not an
interested person of the Fund, has any direct or indirect financial interest in
the operation of the Plans except to the extent that PFD and certain of its
employees may be deemed to have such an interest as a result of receiving a
portion of the amounts expended under the Plans by the Fund and except to the
extent certain officers may have an interest in PFD's ultimate parent, PGI.
The Plans were adopted by a majority vote of the Board of Trustees, including
all of the Trustees who are not, and were not at the time they voted, interested
persons of the Fund, as defined in the 1940 Act (none of whom had or have any
direct or indirect financial interest in the operation of the Plans), cast in
person at a meeting called for the purpose of voting on the Plans. In approving
the Plans, the Trustees identified and considered a number of potential benefits
which the Plans may provide. The Board of Trustees believes that there is a
reasonable likelihood that the Plans will benefit each Fund and their current
and future shareholders. Under their terms, the Plans remain in effect from year
to year provided such continuance is approved annually by vote of the Trustees
in the manner described above. The Plans may not be amended to increase
materially the annual percentage limitation of average net assets which may be
spent for the services described therein without approval of the shareholders of
the Fund affected thereby, and material amendments of the Plans must also be
approved by the Trustees in the manner described above. A Plan may be terminated
at any time, without payment of any penalty, by vote of the majority of the
Trustees who are
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not interested persons of the Fund and have no direct or indirect financial
interest in the operations of the Plan, or by a vote of a majority of the
outstanding voting securities of the respective Class of the Fund (as defined in
the 1940 Act). A Plan will automatically terminate in the event of its
assignment (as defined in the 1940 Act).
5. SHAREHOLDER SERVICING/TRANSFER AGENT
The Fund has contracted with PSC, 60 State Street, Boston, Massachusetts, to act
as shareholder servicing and transfer agent for the Fund. This contract
terminates if assigned and may be terminated without penalty by either party
upon ninety days' written notice by vote of its Board of Directors or Trustees
or a majority of its outstanding voting securities.
Under the terms of its contract with the Fund, PSC services shareholder
accounts, and its duties include: (i) processing sales, redemptions and
exchanges of shares of the Fund; (ii) distributing dividends and capital gains
associated with Fund portfolio accounts; and (iii) maintaining account records
and responding to shareholder inquiries.
PSC receives an annual fee of $22.75 for each Class A and Class B shareholder
account from the Fund as compensation for the services described above. PSC is
also reimbursed by the Fund for its cash out-of-pocket expenditures. The annual
fee is set at an amount determined by vote of a majority of the Trustees
(including a majority of the Trustees who are not parties to the contract with
PSC or interested persons of any such parties) to be comparable to fees for such
services being paid by other investment companies. The Fund may compensate
entities which have agreed to provide certain sub-accounting services, such as
specific transaction processing or recordkeeping services. Any such payments by
the Fund would be in lieu of the per account fee which would otherwise be paid
by the Fund to PSC.
6. CUSTODIAN
Brown Brothers Harriman & Co. (the "Custodian") is the custodian of the Fund's
assets. The Custodian's responsibilities include safekeeping and controlling the
Fund's cash and securities, handling the receipt and delivery of securities, and
collecting interest and dividends on the Fund's investments. The Custodian does
not determine the investment policies of the Fund or decide which securities the
Fund will buy or sell. The Fund may, however, invest in securities, including
repurchase agreements, issued by the Custodian and may deal with the Custodian
as a principal in securities transactions. Portfolio securities may be deposited
into the Federal Reserve-Treasury Department Book Entry System or the Depository
Trust Company.
7. PRINCIPAL UNDERWRITER
PFD serves as the principal underwriter for the Fund in connection with the
continuous offering of the Class A and Class B shares of the Fund.
The Fund will not generally issue Fund shares for consideration other than cash.
At the Fund's sole discretion, however, it may issue Fund shares for
consideration other than cash in connection with a bona fide reorganization,
statutory merger, or other acquisition of portfolio securities (other than
municipal debt securities issued by state political subdivisions or their
agencies or instrumentalities).
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8. INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, 225 Franklin Street, Boston, Massachusetts is the Fund's
independent public accountants, providing audit services, tax return review, and
assistance and consultation with respect to the preparation of filings with the
Commission.
9. PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on behalf
of the Fund by PMC pursuant to authority contained in the Fund's management
contract. In selecting brokers or dealers, PMC will consider various relevant
factors, including, but not limited to, the size and type of the transaction;
the nature and character of the markets for the security to be purchased or
sold; the execution efficiency, settlement capability, and financial condition
of the dealer; the dealer's execution services rendered on a continuing basis;
and the reasonableness of any dealer spreads.
PMC may select broker-dealers which provide brokerage and/or research services
to the Fund and/or other investment companies managed by PMC. In addition, if
PMC determines in good faith that the amount of commissions charged by a
broker-dealer is reasonable in relation to the value of the brokerage and
research services provided by such broker, the Fund may pay commissions to such
broker-dealer in an amount greater than the amount another firm may charge. Such
services may include advice concerning the value of securities; the advisability
of investing in, purchasing or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement). PMC maintains a listing of broker-dealers who provide such services
on a regular basis. However, because it is anticipated that many transactions on
behalf of the Fund and other investment companies managed by PMC are placed with
broker-dealers (including broker-dealers on the listing) without regard to the
furnishing of such services, it is not possible to estimate the proportion of
such transactions directed to such dealers solely because such services were
provided.
The research received from broker-dealers may be useful to PMC in rendering
investment management services to the Fund as well as other investment companies
managed by PMC, although not all such research may be useful to the Fund.
Conversely, such information provided by brokers or dealers who have executed
transaction orders on behalf of such other PMC clients may be useful to PMC in
carrying out its obligations to the Fund. The receipt of such research has not
reduced PMC's normal independent research activities; however, it enables PMC to
avoid the additional expenses which might otherwise be incurred if it were to
attempt to develop comparable information through its own staff.
In circumstances where two or more broker-dealers offer comparable prices and
executions, preference may be given to a broker-dealer which has sold shares of
the Fund as well as shares of other investment companies or accounts managed by
PMC. This policy does not imply a commitment to execute all portfolio
transactions through all broker-dealers that sell shares of the Fund.
The Trustees periodically review PMC's performance of its responsibilities in
connection with the placement of portfolio transactions on behalf of the Fund.
In addition to the Fund, PMC acts as investment adviser to other Pioneer mutual
funds and certain private accounts with investment objectives similar to those
of the Fund. Securities frequently meet the investment objectives of the Fund,
such other funds and such private accounts. In such cases, the decision to
recommend a purchase to one fund or account rather than another is based on a
number of factors. The determining factors in most cases are the amount of
securities of the issuer then outstanding, the value of those securities
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and the market for them. Other factors considered in the investment
recommendations include other investments which each fund or account presently
has in a particular industry and the availability of investment funds in each
fund or account.
It is possible that at times identical securities will be held by more than one
fund and/or account. However, positions in the same issue may vary and the
length of time that any fund or account may choose to hold its investment in the
same issue may likewise vary. To the extent that the Fund, another mutual fund
in the Pioneer group or a private account managed by PMC may not be able to
acquire as large a position in such security as it desires, it may have to pay a
higher price for the security. Similarly, the Fund may not be able to obtain as
large an execution of an order to sell or as high a price for any particular
portfolio security if PMC decides to sell on behalf of another account the same
portfolio security at the same time. On the other hand, if the same securities
are bought or sold at the same time by more than one fund or account, the
resulting participation in volume transactions could produce better executions
for the Fund or the account. In the event more than one account purchases or
sells the same security on a given date, the purchases and sales will normally
be made as nearly as practicable on a pro rata basis in proportion to the
amounts desired to be purchased or sold by each.
10. TAX STATUS AND DIVIDENDS
It is the Fund's policy to meet the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated
investment company. These requirements relate to the sources of the Fund's
income, the diversification of its assets, and the timing of its distributions.
If the Fund meets all such requirements and distributes to its shareholders at
least annually all investment company taxable income and net capital gain, if
any, which it receives, the Fund will be relieved of the necessity of paying
federal income tax.
In order to qualify under Subchapter M, the Fund must, among other things,
derive at least 90% of its gross income for each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities, or other income (including gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies (the "90% income test"), limit
its gains from the sale of stock, securities and certain other investments held
for less than three months to less than 30% of its annual gross income (the "30%
test") and satisfy certain diversification and income distribution requirements.
Dividends from investment company taxable income, which includes net investment
income, net short-term capital gain in excess of net long-term capital loss are
taxable as ordinary income, whether received in cash or in additional shares.
Dividends from net long-term capital gain in excess of net short-term capital
loss, if any, whether received in cash or additional shares, are taxable to the
Fund's shareholders as long-term capital gains for federal income tax purposes
without regard to the length of time shares of the Fund have been held. The
federal income tax status of all distributions will be reported to shareholders
annually.
Any dividend declared by the Fund in October, November or December as of a
record date in such a month and paid during the following January will be
treated for federal income tax purposes as received by shareholders on December
31 of the calendar year in which it is declared.
If the Fund invests in certain pay-in-kind securities ("PIKs"), zero coupon
securities, deferred interest securities or, in general, any other securities
with original issue discount (or with market discount if the Fund elects to
include market discount in income currently), the Fund must accrue income on
such investments for each taxable year, which generally will be prior to the
receipt of the
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corresponding cash payments. However, the Fund must distribute, at least
annually, all or substantially all of its net income, including such accrued
income, to shareholders to qualify as a regulated investment company under the
Code and avoid Federal income and excise taxes. Therefore, the Fund may have to
dispose of its portfolio securities under disadvantageous circumstances to
generate cash, or may have to leverage itself by borrowing the cash, to satisfy
distribution requirements.
For federal income tax purposes, the Fund is permitted to carry forward a net
capital loss in any year to offset net capital gains, if any, during the eight
years following the year of the loss. To the extent subsequent net capital gains
are offset by such losses, they would not result in federal income tax liability
to such Fund and are not expected to be distributed as such to shareholders.
At the time of an investor's purchase of Fund shares, a portion of the purchase
price is often attributable to realized or unrealized appreciation in the Fund's
portfolio or undistributed taxable income of the Fund. Consequently, subsequent
distributions from such appreciation or income may be taxable to such investor
even if the net asset value of the investor's shares is, as a result of the
distributions, reduced below the investor's cost for such shares and the
distributions in reality represent a return of a portion of the investment.
Any loss realized upon the redemption of shares with a tax holding period of six
months or less will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain with respect to such
shares.
In addition, if Class A shares redeemed or exchanged have been held for less
than 91 days, (1) in the case of a reinvestment at net asset value, the sales
charge paid on such shares is not included in their tax basis under the Code and
(2) in the case of an exchange, all or a portion of the sales charge paid on
such shares is not included in their tax basis under the Code, to the extent a
sales charge that would otherwise apply to the shares received is reduced
pursuant to the exchange privilege. In either case, the portion of the sales
charge not included in the tax basis of the shares redeemed or surrendered in an
exchange is included in the tax basis of the shares acquired in the reinvestment
or exchange. Losses on certain redemptions may be disallowed under "wash sale"
rules in the event of other investments in the same Fund within a period of 61
days beginning 30 days before and ending 30 days after a redemption or other
sale of shares. In such a case, the disallowed portion of any loss would be
included in the federal tax basis of the shares acquired in the other
investments.
Options written or purchased and futures contracts entered into by the Fund on
certain securities and securities and securities indices may cause the Fund to
recognize gains or losses from marking-to-market at the end of its taxable year
even though such options may not have lapsed, been closed out, or exercised or
such futures or forward contracts may not have been performed or closed out. The
tax rules applicable to these contracts may affect the characterization as
long-term or short-term of some capital gains and losses realized by the Fund.
Losses on certain options, futures and/or offsetting positions (portfolio
securities or other positions with respect to which the Fund's risk of loss is
substantially diminished by one or more options, futures or forward contracts)
may also be deferred under the tax straddle rules of the Code, which may also
affect the characterization of capital gains or losses from straddle positions
and certain successor positions as long-term or short-term.
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Certain tax elections may be available that would enable the Fund to ameliorate
some adverse effects of the tax rules described in this paragraph. The tax rules
applicable to options, futures, and straddles may affect the amount, timing and
character of the Fund's income and loss and hence of its distributions to
shareholders.
For purposes of the 70% dividends-received deduction available to corporations
under the Code, dividends received by the Fund from U.S. domestic corporations
in respect of any share of stock with a tax holding period of at least 46 days
(91 days in the case of certain preferred stock) held in an unleveraged position
and distributed and designated by the Fund may be treated as qualifying
dividends. Any corporate shareholder should consult its tax adviser regarding
the possibility that its tax basis in its shares may be reduced, for federal
income tax purposes, by reason of "extraordinary dividends" received with
respect to the shares. In order to qualify for the deduction, corporate
shareholders must meet the minimum holding period requirement stated above with
respect to their Fund shares, taking into account any holding period reductions
from certain hedging or other transactions that diminish risk of loss, with
respect to their Fund shares and, if they borrow to acquire Fund shares, may be
denied a portion of the dividends-received deduction. The entire qualifying
dividend, including the otherwise deductible amount, will be included in
determining the excess (if any) of a corporation's adjusted current earnings
over its alternative minimum taxable income, which may increase a corporation's
alternative minimum tax liability.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions, and certain
prohibited transactions is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
Federal law requires that the Fund withhold (as "backup withholding") 31% of
reportable payments, including dividends, capital gain dividends, and the
proceeds of redemptions (including exchanges) and repurchases, to shareholders
who have not complied with Internal Revenue Service ("IRS") regulations. In
order to avoid this withholding requirement, shareholders must certify on their
Account Applications, or on separate W-9 Forms, that their Social Security or
other Taxpayer Identification Number is correct and that they are not currently
subject to backup withholding, or that they are exempt from backup withholding.
The Fund may nevertheless be required to withhold if it receives notice from the
IRS or a broker that the number provided is incorrect or backup withholding is
applicable as a result of previous underreporting of interest or dividend
income.
If, as anticipated, the Fund qualifies as a regulated investment company under
the Code, it will not be required to pay any Massachusetts income, corporate
excise or franchise taxes or any Delaware corporation income tax.
The description of certain federal tax provisions above relates only to U.S.
federal income tax consequences for shareholders who are U.S. persons, i.e.,
U.S. citizens or residents and U.S. domestic corporations, partnerships, trusts
or estates, and who are subject to U.S. federal income tax. The description does
not address the special tax rules applicable to particular types of investors,
such as financial institutions, insurance companies, securities dealers, or
tax-exempt or tax-deferred plans, accounts or entities. Investors other than
U.S. persons may be subject to different U.S. tax treatment, including a
possible 30% U.S. withholding tax (or withholding tax at a lower treaty rate) on
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amounts treated as ordinary dividends from the Fund and, unless an effective IRS
Form W-8 or authorized substitute is on file, to 31% backup withholding on
certain other payments from the Fund. Shareholders should consult their own tax
advisers on these matters and on state, local and other applicable tax laws.
11. DESCRIPTION OF SHARES
The Fund's Declaration of Trust permits the Board of Trustees to authorize the
issuance of an unlimited number of full and fractional shares of beneficial
interest which may be divided into such separate series as the Trustees may
establish. Currently, the Fund consists of only one series. The Trustees may,
however, establish additional series of shares in the future, and may divide or
combine the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interests in the Fund. The Declaration of
Trust further authorizes the Trustees to classify or reclassify any series of
the shares into one or more classes. Pursuant thereto, the Trustees have
authorized the issuance of two classes of shares of the Fund, designated as
Class A shares and Class B shares. Each share of a class of the Fund represents
an equal proportionate interest in the assets of the Fund allocable to that
class. Upon liquidation of the Fund, shareholders of each class of the Fund are
entitled to share pro rata in the Fund's net assets allocable to such class
available for distribution to shareholders. The Fund reserves the right to
create and issue additional series or classes of shares, in which case the
shares of each class of a series would participate equally in the earnings,
dividends and assets allocable to that class of the particular series.
Shareholders are entitled to one vote for each share held and may vote in the
election of Trustees and on other matters submitted to a meeting of
shareholders. Although Trustees are not elected annually by the shareholders,
shareholders have, under certain circumstances, the right to remove one or more
Trustees.
The shares of the Fund are entitled to vote separately to approve investment
advisory agreements or changes in investment restrictions, but shareholders of
all series vote together in the election and selection of Trustees and
accountants. Shares of all series of the Fund vote together as a class on
matters that affect all series of the Fund in substantially the same manner. As
to matters affecting a single series or class, shares of such series or class
will vote separately. No amendment adversely affecting the rights of
shareholders may be made to the Fund's Declaration of Trust without the
affirmative vote of a majority of its shares. Shares have no preemptive or
conversion rights. Shares are fully paid and non-assessable by the Fund, except
as stated below.
12. CERTAIN LIABILITIES
As a Delaware business trust, the Fund's operations are governed by its
Declaration of Trust dated December 3, 1996. A copy of the Fund's Certificate of
Trust, also dated December 3, 1996, is on file with the office of the Secretary
of State of Delaware. Generally, Delaware business trust shareholders are not
personally liable for obligations of the Delaware business trust under Delaware
law. The Delaware Business Trust Act (the "Delaware Act") provides that a
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shareholder of a Delaware business trust shall be entitled to the same
limitation of liability extended to shareholders of private for-profit
corporations. The Fund's Declaration of Trust expressly provides that the Fund
is organized under the Delaware Act and that the Declaration of Trust is to be
governed by Delaware law. It is nevertheless possible that a Delaware business
trust, such as the Fund, might become a party to an action in another state
whose courts refused to apply Delaware law, in which case the trust's
shareholders could become subject to personal liability.
To guard against this risk, the Declaration of Trust (i) contains an express
disclaimer of shareholder liability for acts or obligations of the Fund and
provides that notice of such disclaimer may be given in each agreement,
obligation or instrument entered into or executed by the Fund or its Trustees,
(ii) provides for the indemnification out of Fund property of any shareholders
held personally liable for any obligations of the Fund or any series of the Fund
and (iii) provides that the Fund shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the Fund and
satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss beyond his or her investment because of shareholder liability is
limited to circumstances in which all of the following factors are present: (1)
a court refused to apply Delaware law; (2) the liability arose under tort law
or, if not, no contractual limitation of liability was in effect; and (3) the
Fund itself would be unable to meet its obligations. In light of Delaware law,
the nature of the Fund's business and the nature of its assets, the risk of
personal liability to a Fund shareholder is remote.
The Declaration of Trust further provides that the Fund shall indemnify each of
its Trustees and officers against liabilities and expenses reasonably incurred
by them, in connection with, or arising out of, any action, suit or proceeding,
threatened against or otherwise involving such Trustee or officer, directly or
indirectly, by reason of being or having been a Trustee or officer of the Fund.
The Declaration of Trust does not authorize the Fund to indemnify any Trustee or
officer against any liability to which he or she would otherwise be subject by
reason of or for willful misfeasance, bad faith, gross negligence or reckless
disregard of such person's duties.
13. LETTER OF INTENT (CLASS A SHARES ONLY)
The use of the Letter of Intent ("LOI") procedure may be limited for this Fund.
A Letter of Intent may, however, be used in connection with the purchases of
shares of other Pioneer mutual funds.
Purchases in the Class A shares of the Fund of $50,000 or more (excluding any
reinvestments of dividends and capital gains distributions) made within a
13-month period pursuant to a LOI provided by PFD will qualify for a reduced
sales charge. Such reduced sales charge will be the charge that would be
applicable to the purchase of all Class A shares purchased during such 13-month
period pursuant to a LOI had such shares been purchased all at once. See "How to
Buy Fund Shares" in each Prospectus.
For example, a person who signs a LOI providing for a total investment in Class
A shares of $50,000 over a 13-month period would be charged at the 4.50% sales
charge rate with respect to all purchases during that period. Should the amount
actually purchased during the 13-month period be more or less than that
indicated in the LOI, an adjustment in the sales charge will be made. A purchase
not made pursuant to a LOI may be included thereafter if the LOI is filed within
90 days of such purchase. Any shareholder may also obtain the reduced sales
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charge by including the value (at current offering price) of all the shares of
record he holds in the Fund and in all other Pioneer mutual funds as of the date
of the LOI as a credit toward determining the applicable scale of sales charge
for the Class A shares to be purchased under the LOI.
A LOI may be established by completing the Letter of Intent section of the
Account Application. When you sign the Account Application, you agree to
irrevocably appoint PSC your attorney-in-fact to surrender for redemption any or
all shares held in escrow with full power of substitution. A Letter of Intent is
not a binding obligation upon the investor to purchase, or the Fund to sell, the
full amount indicated.
If the 13-month total purchases less redemptions, exceed the amount specified
under the LOI and are in an amount which would qualify for a further quantity
discount, all transactions will be recomputed on the expiration date of the LOI
to effect the lower sales charge. Any difference in the sales charge resulting
from such recomputation will be either delivered to you in cash or invested in
additional shares at the lower sales charge. The dealer, by signing the Account
Application, agrees to return to PFD, as part of such retroactive adjustment,
the excess of the commission previously reallowed or paid to the dealer over
that which is applicable to the actual amount of the total purchases under the
LOI.
If the 13-month total purchases less redemptions, are less than the amount
specified under the LOI, you must remit to PFD any difference between the sales
charge on the amount actually purchased and the amount originally specified in
the LOI section of the Account Application. When the difference is paid, the
shares held in escrow will be deposited to your account. If you do not pay the
difference in sales charge within 20 days after written request from PFD or your
dealer, PSC, after receiving instructions from PFD, will redeem the appropriate
number of shares held in escrow to realize the difference and release any
excess.
See "How to Purchase Fund Shares - Letter of Intent" in the Prospectus for more
information.
14. SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan ("SWP") is designed to provide a convenient
method of receiving fixed payments at regular intervals from Class A shares of
the Fund deposited by the applicant under this SWP. The applicant must deposit
or purchase for deposit with PSC shares of the Fund having a total value of not
less than $10,000. Periodic checks of $50 or more will be deposited monthly or
quarterly directly into a bank account designated by the applicant or will be
sent by check to the applicant, or any person designated by him monthly or
quarterly. Withdrawals from Class B share accounts are limited to 10% of the
value of the account at the time the SWP is implemented.
Any income dividends or capital gains distributions on shares under the SWP will
be credited to the SWP account on the payment date in full and fractional shares
at the net asset value per share in effect on the record date.
SWP payments are made from the proceeds of the redemption of shares deposited
under the SWP in a SWP account. To the extent that such redemptions for periodic
withdrawals exceed dividend income reinvested in the SWP account, such
redemptions will reduce and may ultimately exhaust the number of shares
deposited in the SWP account. Redemptions are taxable transactions to
shareholders. In addition, the amounts received
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by a shareholder cannot be considered as yield or income on his or her
investment because part of such payments may be a return of his or her
investment.
The SWP may be terminated at any time (1) by written notice to PSC or from PSC
to the shareholder; (2) upon receipt by PSC of appropriate evidence of the
shareholder's death; or (3) when all shares under the SWP have been redeemed.
15. DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of the Fund is determined as of the
close of regular trading on the New York Stock Exchange (the "Exchange")
(currently 4:00 p.m., Eastern Time) on each day on which the Exchange is open
for trading. As of the date of this Statement of Additional Information, the
Exchange is open for trading every weekday except for the following holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share of
each class of the Fund is also determined on any other day in which the level of
trading in its portfolio securities is sufficiently high that the current net
asset value per share might be materially affected by changes in the value of
its portfolio securities. The Fund is not required to determine its net asset
value per share on any day in which no purchase orders for the shares of the
Fund become effective and no shares are tendered for redemption.
The net asset value per share of each class of the Fund is computed by taking
the value of all of the Fund's assets attributable to a class, less the Fund's
liabilities attributable to a class, and dividing it by the number of
outstanding shares of the class. For purposes of determining net asset value,
expenses of the classes of the Fund are accrued daily.
Securities that have not traded on the date of valuation or securities for which
sales prices are not generally reported are valued at the mean between the last
bid and asked prices. Securities for which no market quotations are readily
available (excluding those whose trading has been suspended) will be valued at
fair value as determined in good faith by the Board of Trustees, although the
actual computations may be made by persons acting pursuant to the direction of
the Board of Trustees.
The Fund's maximum offering price per Class A share is determined by adding the
maximum sales charge to the net asset value per Class A share. Class B shares
are offered at net asset value without the imposition of an initial sales
charge.
16. INVESTMENT RESULTS
QUOTATIONS, COMPARISONS, AND GENERAL INFORMATION
From time to time, in advertisements, in sales literature, or in reports to
shareholders, the past performance of the Fund may be illustrated and/or
compared with that of other mutual funds with similar investment objectives, and
to stock or other relevant indices. For example, total return of the Fund's
classes may be compared to rankings prepared by Lipper Analytical Services,
Inc., a widely recognized independent service which monitors mutual fund
performance; the Standard & Poor's 500 Stock Index ("S&P 500"), an index of
unmanaged groups of common stock; the Dow Jones Industrial Average, a recognized
unmanaged index of common stocks of 30 industrial companies listed on the New
York Stock Exchange; or The Frank Russell Indexes ("Russell 1000," "2000,"
"2500," "3000,") or the Wilshire Total Market Value Index ("Wilshire 5000"), two
recognized unmanaged indexes of broad based common stocks.
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In addition, the performance of the classes of the Fund may be compared to
alternative investment or savings vehicles and/or to indices or indicators of
economic activity, e.g., inflation or interest rates. Performance rankings and
listings reported in newspapers or national business and financial publications,
such as Barron's, Business Week, Consumers Digest, Consumer Reports, Financial
World, Forbes, Fortune, Investors Business Daily, Kiplinger's Personal Finance
Magazine, Money Magazine, New York Times, Smart Money, USA Today, U.S. News and
World Report, The Wall Street Journal, and Worth may also be cited (if the Fund
is listed in any such publication) or used for comparison, as well as
performance listings and rankings from various other sources including Bloomberg
Financial Markets, CDA/Wiesenberger, Donoghue's Mutual Fund Almanac, Investment
Company Data, Inc., Johnson's Charts, Kanon Bloch Carre and Co., Lipper
Analytical Services, Inc., Micropal, Inc., Morningstar, Inc., Schabacker
Investment Management and Towers Data Systems, Inc.
In addition, from time to time, quotations from articles from financial
publications such as those listed above may be used in advertisements in sales
literature, or in reports to shareholders of the Fund.
The Fund may also present, from time to time, historical information depicting
the value of a hypothetical account in one or more classes of the Fund since
such Fund's inception.
In presenting investment results, the Fund may also include references to
certain financial planning concepts, including (a) an investor's need to
evaluate his financial assets and obligations to determine how much to invest;
(b) his need to analyze the objectives of various investments to determine where
to invest; and (c) his need to analyze his time frame for future capital needs
to determine how long to invest. The investor controls these three factors, all
of which affect the use of investments in building assets.
One of the primary methods used to measure the performance of a class of the
Fund is "total return." "Total return" will normally represent the percentage
change in value of an account, or of a hypothetical investment in a class of the
Fund, over any period up to the lifetime of that class of the Fund. Total return
calculations will usually assume the reinvestment of all dividends and capital
gains distributions and will be expressed as a percentage increase or decrease
from an initial value, for the entire period or for one or more specified
periods within the entire period. Total return percentages for periods of less
than one year will usually be annualized; total return percentages for periods
longer than one year will usually be accompanied by total return percentages for
each year within the period and/or by the average annual compounded total return
for the period. The income and capital components of a given return may be
separated and portrayed in a variety of ways in order to illustrate their
relative significance. Performance may also be portrayed in terms of cash or
investment values, without percentages. Past performance cannot guarantee any
particular future result.
The Fund's average annual total return quotations for each of its classes as
that information may appear in the Fund's Prospectus, this Statement of
Additional Information or in advertising are calculated by standard methods
prescribed by the Commission.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS
Average annual total return quotations for Class A and Class B shares are
computed by finding the average annual compounded rates of return that would
cause a hypothetical investment in the class made on the first day of a
designated period (assuming all dividends and distributions are reinvested) to
equal the ending redeemable value of such hypothetical investment on the last
day of the designated period in accordance with the following formula:
-24-
<PAGE>
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000, less the
maximum sales load of $57.50 for Class A shares or the
deduction of the CDSC for Class B shares at the end of
the period.
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1000
initial payment made at the beginning of the
designated period (or fractional portion thereof)
For purposes of the above computation, it is assumed that all dividends and
distributions made by the Fund are reinvested at net asset value during the
designated period. The average annual total return quotation is determined to
the nearest 1/100 of 1%.
In determining the average annual total return (calculated as provided above),
recurring fees, if any, that are charged to all shareholder accounts of a
particular class are taken into consideration. For any account fees that vary
with the size of the account, the account fee used for purposes of the above
computation is assumed to be the fee that would be charged to a class's mean
account size.
AUTOMATED INFORMATION LINE
FactFoneSM, Pioneer's 24-hour automated information line, allows shareholders to
dial toll-free 1-800-225-4321 and hear recorded fund information, including:
o net asset value prices for all Pioneer mutual funds;
o annualized 30-day yields on Pioneer's fixed income funds;
o annualized 7-day yields and 7-day effective (compound) yields
for Pioneer's money market fund; and
o dividends and capital gains distributions on all Pioneer mutual
funds.
Yields are calculated in accordance with Commission mandated standard formulas.
In addition, by using a personal identification number ("PIN"), shareholders may
enter purchases, exchanges and redemptions, access their account balance and
last three transactions and may order a duplicate statement. See "FactFoneSM" in
the Prospectus for more information.
All performance numbers communicated through FactFoneSM represent past
performance, and figures for all quoted bond funds include the maximum
applicable sales charge. A shareholder's actual yield and total return will vary
with changing market conditions. The value of Class A and Class B shares (except
for Pioneer money market funds, which seek a stable $1.00 share price) will also
vary, and such shares may be worth more or less at redemption than their
original cost.
17. FINANCIAL STATEMENTS
The Form of Balance Sheet and the Form of Report of Independent Public
Accountants included in this Statement of Additional Information have been
included in reliance upon the report of Arthur Andersen, independent public
accountants, as experts in accounting and auditing.
-25-
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
The following securities indices are well-known, unmanaged measures of market
performance. Advertisements and sales literature for the Fund may refer to these
indices or may present comparisons between the performance of the Fund and one
or more of the indices. Other indices may be used, if appropriate. The indices
are not available for direct investment. The data presented is not meant to be
indicative of the performance of the Fund, reflects past performance and does
not guarantee future results.
S&P 500
This index is a readily available, carefully constructed, market value weighted
benchmark of common stock performance. Currently, the S&P Composite Index
includes 500 of the largest stocks (in terms of stock market value) in the
United States; prior to March 1957 it consisted of 90 of the largest stocks.
DOW JONES INDUSTRIAL AVERAGE
This is a total return index based on the performance of 30 blue chip stocks.
U.S. SMALL STOCK INDEX
This index is a market value weighted index of the ninth and tenth deciles of
the New York Stock Exchange (NYSE), plus stocks listed on the American Stock
Exchange (AMEX) and over-the-counter (OTC) with the same or less capitalization
as the upper bound of the NYSE ninth decile.
U.S. INFLATION
The Consumer Price Index for All Urban Consumers (CPI-U), not seasonally
adjusted, is used to measure inflation, which is the rate of change of consumer
goods prices. Unfortunately, the inflation rate as derived by the CPI is not
measured over the same period as the other asset returns. All of the security
returns are measured from one month-end to the next month-end. CPI commodity
prices are collected during the month. Thus, measured inflation rates lag the
other series by about one-half month. Prior to January 1978, the CPI (as
compared with CPI-U) was used. Both inflation measures are constructed by the
U.S. Department of Labor, Bureau of Labor Statistics, Washington, DC.
S&P/BARRA INDEXES
The S&P/BARRA Growth and Value Indexes are constructed by dividing the stocks in
the S&P 500 Index according to price-to-book ratios. The Growth Index contains
stocks with higher price-to-book ratios, and the Value Index contains stocks
with lower price-to-book ratios. Both indexes are market capitalization
weighted.
-26-
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
LONG-TERM U.S. GOVERNMENT BONDS
The total returns on long-term government bonds from 1977 to 1991 are
constructed with data from The Wall Street Journal. Over 1926-1976, data are
obtained from the Government bond file at the Center for Research in Security
Prices (CRSP), Graduate School of Business, University of Chicago. Each year, a
one-bond portfolio with a term of approximately 20 years and a reasonably
current coupon was used, and whose returns did not reflect potential tax
benefits, impaired negotiability, or special redemption or call privileges.
Where callable bonds had to be used, the term of the bond was assumed to be a
simple average of the maturity and first call dates minus the current date. The
bond was "held" for the calendar year and returns were computed. Total returns
for 1977-1991 are calculated as the change in the flat price or and-interest
price.
INTERMEDIATE-TERM U.S. GOVERNMENT BONDS
Total returns of the intermediate-term government bonds for 1977-1991 are
calculated from The Wall Street Journal prices, using the change in flat price.
Returns from 1934-1986 are obtained from the CRSP Government Bond File.
Each year, one-bond portfolios are formed, the bond chosen is the shortest
noncallable bond with a maturity not less than 5 years, and this bond is "held"
for the calendar year. Monthly returns are computed. (Bonds with impaired
negotiability or special redemption privileges are omitted, as are partially or
fully tax-exempt bonds starting with 1943.) From 1934-1942, almost all bonds
with maturities near 5 years were partially or full tax-exempt and were selected
using the rules described above. Personal tax rates were generally low in that
period, so that yields on tax-exempt bonds were similar to yields on taxable
bonds. From 1926-1933, there are few bonds suitable for construction of a series
with a 5-year maturity. For this period, five year bond yield estimates are
used.
MSCI
Morgan Stanley Capital International Indices, developed by the Capital
International S.A., are based on share prices of some 1470 companies listed on
the stock exchanges around the world.
Countries in the MSCI EAFE Portfolio are:
Australia; Austria; Belgium; Denmark; Finland; France; Germany; Hong Kong;
Italy; Japan; Netherlands; N. Zealand; Norway; Singapore/Malaysia; Spain;
Sweden; Switzerland; United Kingdom.
Countries in the MSCI EMERGING MARKET FREE INDEX are: Argentina, Brazil, Chile,
China, Czech Republic, Colombia, Greece, Hungary, India, Indonesia, Israel,
Jordan, Korea Free (at 50%), Malaysia, Mexico Free, Pakistan, Peru, Philippines
Free, Poland, Portugal, South Africa, Sri Lanka, Taiwan, Thailand, Turkey,
Venezuela Free
-27-
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
6 MONTH CDs
Data sources include the Federal Reserve Bulletin and The Wall Street Journal.
LONG-TERM U.S. CORPORATE BONDS
For 1969-1991, corporate bond total returns are represented by the Salomon
Brothers Long-Term High-Grade Corporate Bond Index. Since most large corporate
bond transactions take place over the counter, a major dealer is the natural
source of these data. The index includes nearly all Aaa- and Aa-rated bonds. If
a bond is downgraded during a particular month, its return for the month is
included in the index before removing the bond from future portfolios.
Over 1926-1968 the total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946-1968, Ibbotson
and Sinquefield backdated the Salomon Brothers' index, using Salomon Brothers'
monthly yield data with a methodology similar to that used by Salomon for
1969-1991. Capital appreciation returns were calculated from yields assuming (at
the beginning of each monthly holding period) a 20-year maturity, a bond price
equal to par, and a coupon equal to the beginning-of-period yield. For the
period 1926-1945, the Standard and Poor's monthly High-Grade Corporate Composite
yield data were used, assuming a 4 percent coupon and a 20-year maturity. The
conventional present-value formula for bond price for the beginning and
end-of-month prices was used. (This formula is presented in Ross, Stephen A.,
and Randolph W. Westerfield, Corporate Finance, Times Mirror/Mosby, St. Louis,
1990, p. 97 ["Level-Coupon Bonds"].) The monthly income return was assumed to be
one-twelfth the coupon.
U.S. (30 DAY) TREASURY BILLS
For the U.S. Treasury bill index, data from The Wall Street Journal are used for
1977-1991; the CRSP U.S. Government Bond File is the source until 1976. Each
month a one-bill portfolio containing the shortest-term bill having not less
than one month to maturity is constructed. (The bill's original term to maturity
is not relevant.) To measure holding period returns for the one-bill portfolio,
the bill is priced as of the last trading day of the previous month-end and as
of the last trading day of the current month.
NAREIT-EQUITY INDEX
All of the data is based upon the last closing price of the month for all
tax-qualified REITs listed on the NYSE, AMSE and the NASDAQ. The data is
market-value-weighted. Prior to 1987 REITs were added to the index the January
following their listing. Since 1987 Newly formed or listed REITs are added to
the total shares outstanding figure in the month that the shares are issued.
Only common shares issued by the REIT are included in the index. The total
return calculation is based upon the weighing at the beginning of the period.
Only those REITs listed for the entire period are
-28-
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
used in the total return calculation. Dividends are included in the month based
upon their payment date. There is no smoothing of income. Liquidating dividends,
whether full or partial, are treated as income.
RUSSELL 2000 SMALL STOCK INDEX
Index of the 2,000 smallest stocks in the Russell 3000 Index (TM); the smallest
company has a market capitalization of approximately $13 million. The Russell
3000 is comprised of the 3,000 largest US companies as determined by market
capitalization representing approximately 98% of the US equity market. The
largest company in the index has a market capitalization of $67 billion. The
Russell Indexes (TM) are reconstituted annually as of June 1st, based on May 31
market capitalization rankings.
WILSHIRE REAL ESTATE SECURITIES INDEX
The Wilshire Real Estate Securities Index is a market capitalization-weighted
index which measures the performance of more than 85 securities.
The index contains performance data on five major categories of property;
office, retail, industrial, apartment and miscellaneous. Additionally, the Index
has real estate portfolio encumbered by 16% third party mortgages. The companies
in the WRESEC are 79% equity and hybrid REIT's and 21% real estate operating
companies. The capitalization is 47% NYSE, 33% AMEX and 20% OTC."
STANDARD & POOR'S MIDCAP 400 INDEX
The Standard and Poor's MidCap 400 Index is a market-value-weighted index. The
performance data for the MidCap 400 Index were calculated by taking the stocks
presently in the MidCap 400 Index and tracking them backwards in time as long as
there were prices reported. No attempt was made to determine what stocks "might
have been" in the MidCap 400 Index five or ten years ago had it existed.
Dividends are reinvested on a monthly basis prior to June 30, 1991, and are
reinvested daily thereafter.
The S&P MidCap 400 Index and the S&P 500 together represent approximately 85% of
the total market capitalization of stocks traded in the United States.
LIPPER BALANCED FUNDS INDEX
Equally-weighted performance indices, adjusted for capital gains distributions
and income dividends of approximately 30 of the largest funds with a primary
objective of conserving principal by maintaining at all times a balanced
portfolio of stocks and bonds. Typically, the stock/bond ratio ranges around
60%/40%.
-29-
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
BANK SAVINGS ACCOUNT
Data sources include the U.S. League of Savings Institutions Sourcebook; average
annual yield on savings deposits in FSLIC [FDIC] insured savings institutions
for the years 1963-1987 and The Wall Street Journal for the years 1988-1994.
Source: Ibbotson Associates
-30-
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
S&P 500 Dow U.S. Small S&P/ S&P/
Jones Stock U.S. BARRA BARRA
Industrials Index Inflation Growth Value
- --------------------------------------------------------------------------------
Dec 1928 43.61 55.38 39.69 -0.97 N/A N/A
Dec 1929 -8.42 -13.64 -51.36 0.20 N/A N/A
Dec 1930 -24.90 -30.22 -38.15 -6.03 N/A N/A
Dec 1931 -43.34 -49.03 -49.75 -9.52 N/A N/A
Dec 1932 -8.19 -16.88 -5.39 -10.30 N/A N/A
Dec 1933 53.99 73.71 142.87 0.51 N/A N/A
Dec 1934 -1.44 8.07 24.22 2.03 N/A N/A
Dec 1935 47.67 43.77 40.19 2.99 N/A N/A
Dec 1936 33.92 30.23 64.80 1.21 N/A N/A
Dec 1937 -35.03 -28.88 -58.01 3.10 N/A N/A
Dec 1938 31.12 33.16 32.80 -2.78 N/A N/A
Dec 1939 -0.41 1.31 0.35 -0.48 N/A N/A
Dec 1940 -9.78 -7.96 -5.16 0.96 N/A N/A
Dec 1941 -11.59 -9.88 -9.00 9.72 N/A N/A
Dec 1942 20.34 14.12 44.51 9.29 N/A N/A
Dec 1943 25.90 19.06 88.37 3.16 N/A N/A
Dec 1944 19.75 17.19 53.72 2.11 N/A N/A
Dec 1945 36.44 31.60 73.61 2.25 N/A N/A
Dec 1946 -8.07 -4.40 -11.63 18.16 N/A N/A
Dec 1947 5.71 7.61 0.92 9.01 N/A N/A
Dec 1948 5.50 4.27 -2.11 2.71 N/A N/A
Dec 1949 18.79 20.92 19.75 -1.80 N/A N/A
Dec 1950 31.71 26.40 38.75 5.79 N/A N/A
Dec 1951 24.02 21.77 7.80 5.87 N/A N/A
Dec 1952 18.37 14.58 3.03 0.88 N/A N/A
Dec 1953 -0.99 2.02 -6.49 0.62 N/A N/A
Dec 1954 52.62 51.25 60.58 -0.50 N/A N/A
Dec 1955 31.56 26.58 20.44 0.37 N/A N/A
Dec 1956 6.56 7.10 4.28 2.86 N/A N/A
Dec 1957 -10.78 -8.63 -14.57 3.02 N/A N/A
Dec 1958 43.36 39.31 64.89 1.76 N/A N/A
Dec 1959 11.96 20.21 16.40 1.50 N/A N/A
Dec 1960 0.47 -6.14 -3.29 1.48 N/A N/A
Dec 1961 26.89 22.60 32.09 0.67 N/A N/A
Dec 1962 -8.73 -7.43 -11.90 1.22 N/A N/A
Dec 1963 22.80 20.83 23.57 1.65 N/A N/A
Dec 1964 16.48 18.85 23.52 1.19 N/A N/A
Dec 1965 12.45 14.39 41.75 1.92 N/A N/A
Dec 1966 -10.06 -15.78 -7.01 3.35 N/A N/A
Dec 1967 23.98 19.16 83.57 3.04 N/A N/A
Dec 1968 11.06 7.93 35.97 4.72 N/A N/A
-31-
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
S&P 500 Dow U.S. Small S&P/ S&P/
Jones Stock U.S. BARRA BARRA
Industrials Index Inflation Growth Value
- --------------------------------------------------------------------------------
Dec 1969 -8.50 -11.78 -25.05 6.11 N/A N/A
Dec 1970 4.01 9.21 -17.43 5.49 N/A N/A
Dec 1971 14.31 9.83 16.50 3.36 N/A N/A
Dec 1972 18.98 18.48 4.43 3.41 N/A N/A
Dec 1973 -14.66 -13.28 -30.90 8.80 N/A N/A
Dec 1974 -26.47 -23.58 -19.95 12.20 N/A N/A
Dec 1975 37.20 44.75 52.82 7.01 31.72 43.38
Dec 1976 23.84 22.82 57.38 4.81 13.84 34.93
Dec 1977 -7.18 -12.84 25.38 6.77 -11.82 -2.57
Dec 1978 6.56 2.79 23.46 9.03 6.78 6.16
Dec 1979 18.44 10.55 43.46 13.31 15.72 21.16
Dec 1980 32.42 22.17 39.88 12.40 39.40 23.59
Dec 1981 -4.91 -3.57 13.88 8.94 -9.81 0.02
Dec 1982 21.41 27.11 28.01 3.87 22.03 21.04
Dec 1983 22.51 25.97 39.67 3.80 16.24 28.89
Dec 1984 6.27 1.31 -6.67 3.95 2.33 10.52
Dec 1985 32.16 33.55 24.66 3.77 33.31 29.68
Dec 1986 18.47 27.10 6.85 1.13 14.50 21.67
Dec 1987 5.23 5.48 -9.30 4.41 6.50 3.68
Dec 1988 16.81 16.14 22.87 4.42 11.95 21.67
Dec 1989 31.49 32.19 10.18 4.65 36.40 26.13
Dec 1990 -3.17 -0.56 -21.56 6.11 0.20 -6.85
Dec 1991 30.55 24.19 44.63 3.06 38.37 22.56
Dec 1992 7.67 7.41 23.35 2.90 5.07 10.53
Dec 1993 9.99 16.94 20.98 2.75 1.68 18.60
Dec 1994 1.31 5.06 3.11 2.78 3.13 -0.64
Dec 1995 37.43 36.84 34.46 2.74 38.13 36.99
Dec 1996 23.07 28.84 17.62 3.58 23.96 21.99
-32-
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
Intermediate MSCI Long-
Long-Term -Term U.S. EAFE 6 Term U.S. U.S.
U.S. Gov't Government - Net of MONTH Corporate (30 Day)
Bonds Bonds Taxes CDs Bonds T- Bill
- --------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A
Dec 1926 7.77 5.38 N/A N/A 7.37 3.27
Dec 1927 8.93 4.52 N/A N/A 7.44 3.12
Dec 1928 0.1 0.92 N/A N/A 2.84 3.56
Dec 1929 3.42 6.01 N/A N/A 3.27 4.75
Dec 1930 4.66 6.72 N/A N/A 7.98 2.41
Dec 1931 -5.31 -2.32 N/A N/A -1.85 1.07
Dec 1932 16.84 8.81 N/A N/A 10.82 0.96
Dec 1933 -0.07 1.83 N/A N/A 10.38 0.30
Dec 1934 10.03 9.00 N/A N/A 13.84 0.16
Dec 1935 4.98 7.01 N/A N/A 9.61 0.17
Dec 1936 7.52 3.06 N/A N/A 6.74 0.18
Dec 1937 0.23 1.56 N/A N/A 2.75 0.31
Dec 1938 5.53 6.23 N/A N/A 6.13 -0.02
Dec 1939 5.94 4.52 N/A N/A 3.97 0.02
Dec 1940 6.09 2.96 N/A N/A 3.39 0.00
Dec 1941 0.93 0.50 N/A N/A 2.73 0.06
Dec 1942 3.22 1.94 N/A N/A 2.60 0.27
Dec 1943 2.08 2.81 N/A N/A 2.83 0.35
Dec 1944 2.81 1.80 N/A N/A 4.73 0.33
Dec 1945 10.73 2.22 N/A N/A 4.08 0.33
Dec 1946 -0.10 1.00 N/A N/A 1.72 0.35
Dec 1947 -2.62 0.91 N/A N/A -2.34 0.50
Dec 1948 3.40 1.85 N/A N/A 4.14 0.81
Dec 1949 6.45 2.32 N/A N/A 3.31 1.10
Dec 1950 0.06 0.70 N/A N/A 2.12 1.20
Dec 1951 -3.93 0.36 N/A N/A -2.69 1.49
Dec 1952 1.16 1.63 N/A N/A 3.52 1.66
Dec 1953 3.64 3.23 N/A N/A 3.41 1.82
Dec 1954 7.19 2.68 N/A N/A 5.39 0.86
Dec 1955 -1.29 -0.65 N/A N/A 0.48 1.57
Dec 1956 -5.59 -0.42 N/A N/A -6.81 2.46
Dec 1957 7.46 7.84 N/A N/A 8.71 3.14
Dec 1958 -6.09 -1.29 N/A N/A -2.22 1.54
Dec 1959 -2.26 -0.39 N/A N/A -0.97 2.95
Dec 1960 13.78 11.76 N/A N/A 9.07 2.66
Dec 1961 0.97 1.85 N/A N/A 4.82 2.13
Dec 1962 6.89 5.56 N/A N/A 7.95 2.73
Dec 1963 1.21 1.64 N/A N/A 2.19 3.12
Dec 1964 3.51 4.04 N/A 4.18 4.77 3.54
Dec 1965 0.71 1.02 N/A 4.68 -0.46 3.93
-33-
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
Intermediate MSCI Long-
Long-Term -Term U.S. EAFE 6 Term U.S. U.S.
U.S. Gov't Government - Net of MONTH Corporate (30 Day)
Bonds Bonds Taxes CDs Bonds T- Bill
- --------------------------------------------------------------------------------
Dec 1966 3.65 4.69 N/A 5.75 0.20 4.76
Dec 1967 -9.18 1.01 N/A 5.48 -4.95 4.21
Dec 1968 -0.26 4.54 N/A 6.44 2.57 5.21
Dec 1969 -5.07 -0.74 N/A 8.71 -8.09 6.58
Dec 1970 12.11 16.86 -11.66 7.06 18.37 6.52
Dec 1971 13.23 8.72 29.59 5.36 11.01 4.39
Dec 1972 5.69 5.16 36.35 5.38 7.26 3.84
Dec 1973 -1.11 4.61 -14.92 8.60 1.14 6.93
Dec 1974 4.35 5.69 -23.16 10.20 -3.06 8.00
Dec 1975 9.20 7.83 35.39 6.51 14.64 5.80
Dec 1976 16.75 12.87 2.54 5.22 18.65 5.08
Dec 1977 -0.69 1.41 18.06 6.12 1.71 5.12
Dec 1978 -1.18 3.49 32.62 10.21 -0.07 7.18
Dec 1979 -1.23 4.09 4.75 11.90 -4.18 10.38
Dec 1980 -3.95 3.91 22.58 12.33 -2.76 11.24
Dec 1981 1.86 9.45 -2.28 15.50 -1.24 14.71
Dec 1982 40.36 29.1 -1.86 12.18 42.56 10.54
Dec 1983 0.65 7.41 23.69 9.65 6.26 8.80
Dec 1984 15.48 14.02 7.38 10.65 16.86 9.85
Dec 1985 30.97 20.33 56.16 7.82 30.09 7.72
Dec 1986 24.53 15.14 69.44 6.30 19.85 6.16
Dec 1987 -2.71 2.90 24.63 6.58 -0.27 5.47
Dec 1988 9.67 6.10 28.27 8.15 10.70 6.35
Dec 1989 18.11 13.29 10.54 8.27 16.23 8.37
Dec 1990 6.18 9.73 -23.45 7.85 6.78 7.81
Dec 1991 19.3 15.46 12.13 4.95 19.89 5.60
Dec 1992 8.05 7.19 -12.17 3.27 9.39 3.51
Dec 1993 18.24 11.24 32.56 2.88 13.19 2.90
Dec 1994 -7.77 -5.14 7.78 5.40 -5.76 3.90
Dec 1995 31.67 16.8 11.21 5.21 26.39 5.60
Dec 1996 -0.93 2.10 6.05 5.21 1.40 5.21
-34-
<PAGE>
<TABLE>
<CAPTION>
RUSSELL LIPPER MSCI EMERGING
2000 WILSHIRE REAL S&P MIDCAP BALANCED MARKETS FREE BANK
NAREIT-EQUITY INDEX ESTATE 400 FUND INDEX SAVINGS ACCOUNT
SECURITIES INDEX INDEX
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 N/A N/A N/A N/A N/A N/A N/A
Dec 1927 N/A N/A N/A N/A N/A N/A N/A
Dec 1928 N/A N/A N/A N/A N/A N/A N/A
Dec 1929 N/A N/A N/A N/A N/A N/A N/A
Dec 1930 N/A N/A N/A N/A N/A N/A 5.30
Dec 1931 N/A N/A N/A N/A N/A N/A 5.10
Dec 1932 N/A N/A N/A N/A N/A N/A 4.10
Dec 1933 N/A N/A N/A N/A N/A N/A 3.40
Dec 1934 N/A N/A N/A N/A N/A N/A 3.50
Dec 1935 N/A N/A N/A N/A N/A N/A 3.10
Dec 1936 N/A N/A N/A N/A N/A N/A 3.20
Dec 1937 N/A N/A N/A N/A N/A N/A 3.50
Dec 1938 N/A N/A N/A N/A N/A N/A 3.50
Dec 1939 N/A N/A N/A N/A N/A N/A 3.40
Dec 1940 N/A N/A N/A N/A N/A N/A 3.30
Dec 1941 N/A N/A N/A N/A N/A N/A 3.10
Dec 1942 N/A N/A N/A N/A N/A N/A 3.00
Dec 1943 N/A N/A N/A N/A N/A N/A 2.90
Dec 1944 N/A N/A N/A N/A N/A N/A 2.80
Dec 1945 N/A N/A N/A N/A N/A N/A 2.50
Dec 1946 N/A N/A N/A N/A N/A N/A 2.20
Dec 1947 N/A N/A N/A N/A N/A N/A 2.30
Dec 1948 N/A N/A N/A N/A N/A N/A 2.30
Dec 1949 N/A N/A N/A N/A N/A N/A 2.40
Dec 1950 N/A N/A N/A N/A N/A N/A 2.50
Dec 1951 N/A N/A N/A N/A N/A N/A 2.60
Dec 1952 N/A N/A N/A N/A N/A N/A 2.70
Dec 1953 N/A N/A N/A N/A N/A N/A 2.80
Dec 1954 N/A N/A N/A N/A N/A N/A 2.90
Dec 1955 N/A N/A N/A N/A N/A N/A 2.90
Dec 1956 N/A N/A N/A N/A N/A N/A 3.00
Dec 1957 N/A N/A N/A N/A N/A N/A 3.30
Dec 1958 N/A N/A N/A N/A N/A N/A 3.38
Dec 1959 N/A N/A N/A N/A N/A N/A 3.53
Dec 1960 N/A N/A N/A N/A 5.77 N/A 3.86
Dec 1961 N/A N/A N/A N/A 20.59 N/A 3.90
Dec 1962 N/A N/A N/A N/A -6.80 N/A 4.08
Dec 1963 N/A N/A N/A N/A 13.10 N/A 4.17
Dec 1964 N/A N/A N/A N/A 12.36 N/A 4.19
Dec 1965 N/A N/A N/A N/A 9.80 N/A 4.23
Dec 1966 N/A N/A N/A N/A -5.86 N/A 4.45
Dec 1967 N/A N/A N/A N/A 15.09 N/A 4.67
Dec 1968 N/A N/A N/A N/A 13.97 N/A 4.68
Dec 1969 N/A N/A N/A N/A -9.01 N/A 4.80
Dec 1970 N/A N/A N/A N/A 5.62 N/A 5.14
Dec 1971 N/A N/A N/A N/A 13.90 N/A 5.30
-35-
<PAGE>
RUSSELL LIPPER MSCI EMERGING
2000 WILSHIRE REAL S&P MIDCAP BALANCED MARKETS FREE BANK
NAREIT-EQUITY INDEX ESTATE 400 FUND INDEX SAVINGS ACCOUNT
SECURITIES INDEX INDEX
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dec 1972 8.01 N/A N/A N/A 11.13 N/A 5.37
Dec 1973 -15.52 N/A N/A N/A -12.24 N/A 5.51
Dec 1974 -21.40 N/A N/A N/A -18.71 N/A 5.96
Dec 1975 19.30 N/A N/A N/A 27.10 N/A 6.21
Dec 1976 47.59 N/A N/A N/A 26.03 N/A 6.23
Dec 1977 22.42 N/A N/A N/A -0.72 N/A 6.39
Dec 1978 10.34 N/A 13.04 N/A 4.80 N/A 6.56
Dec 1979 35.86 43.09 70.81 N/A 14.67 N/A 7.29
Dec 1980 24.37 38.58 22.08 N/A 19.70 N/A 8.78
Dec 1981 6.00 2.03 7.18 N/A 1.86 N/A 10.71
Dec 1982 21.60 24.95 24.47 22.68 30.63 N/A 11.19
Dec 1983 30.64 29.13 27.61 26.10 17.44 N/A 9.71
Dec 1984 20.93 -7.30 20.64 1.18 7.46 N/A 9.92
Dec 1985 19.10 31.05 22.20 35.58 29.83 N/A 9.02
Dec 1986 19.16 5.68 20.30 16.21 18.43 N/A 7.84
Dec 1987 -3.64 -8.77 -7.86 -2.03 4.13 N/A 6.92
Dec 1988 13.49 24.89 24.18 20.87 11.18 40.43 7.20
Dec 1989 8.84 16.24 2.37 35.54 19.70 64.96 7.91
Dec 1990 -15.35 -19.51 -33.46 -5.12 0.66 10.55 7.80
Dec 1991 35.70 46.05 20.03 50.10 25.83 59.91 4.61
Dec 1992 14.59 18.41 7.36 11.91 7.46 11.40 2.89
Dec 1993 19.65 18.91 15.24 13.96 11.95 74.83 2.73
Dec 1994 3.17 -1.82 1.64 -3.57 -2.05 7.32 4.96
Dec 1995 15.27 28.44 13.65 30.94 24.89 5.21 5.24
Dec 1996 35.26 16.53 36.87 19.20 13.01 6.03 4.95
</TABLE>
Source: Lipper
-36-
<PAGE>
APPENDIX B
ADDITIONAL PIONEER INFORMATION
The Pioneer group of mutual funds was established in 1928 with the
creation of Pioneer Fund. Pioneer is one of the oldest and most experienced
money managers in the United States.
As of December 31, 1996, PMC employed a professional investment staff
of 53, with a combined average of twelve years' experience in the financial
services industry.
Total assets of all Pioneer mutual funds at December 31, 1996, were
approximately $15.8 billion representing 1,086,554 shareholder accounts, 722,661
non-retirement accounts and 363,893 retirement accounts.
-37-
<PAGE>
PIONEER MICRO-CAP FUND
BALANCE SHEET
FEBRUARY 18, 1997
ASSETS:
Cash $ 100,000
Deferred organization costs 58,000
---------------
Total assets $ 158,000
---------------
LIABILITIES:
Due to affiliates $ 55,500
Accrued expenses 2,500
---------------
$ 58,000
---------------
NET ASSETS:
Total net assets (consisting of
paid-in capital for 6,666 shares outstanding) $ 100,000
---------------
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized with no par value)
Class A (based on $50,000/3,333 shares) $ 15.00
---------------
Class B (based on $50,000/3,333 shares) $ 15.00
---------------
<PAGE>
PIONEER MICRO-CAP FUND
NOTES TO BALANCE SHEET
FEBRUARY 18, 1997
1. ORGANIZATION
Pioneer Micro-Cap Fund (the Fund), organized as a Delaware business trust on
December 3, 1996, is being registered with the Securities and Exchange
Commission under the Investment Company Act of 1940 (the 1940 Act) as a
diversified, open-end management investment company. Since December 3, 1996, the
Fund's activities have been limited to organizational matters with no operating
activities. The Fund intends to qualify under Subchapter M of the Internal
Revenue Code of 1986, as amended. All of the initial Fund shares outstanding at
February 18, 1997 are owned by The Pioneer Group, Inc. (PGI). The investment
objective of the Fund is to seek long-term growth of capital.
2. ORGANIZATIONAL COSTS
As of February 18, 1997, the Fund deferred organization-related costs of $58,052
which will be amortized on a straight-line basis over a period of up to five
years. Included in due to affiliates are approximately $35,000 and $20,000 of
such costs payable to Pioneer Funds Distributor, Inc. (PFD) and Pioneering
Management Corporation (PMC), respectively.
If any of the original shares are redeemed by any holder thereof prior to the
end of the amortization period, the redemption proceeds will be decreased by the
pro rata share of the unamortized expenses as of the date of redemption. The pro
rata shares will be derived by dividing the number of original shares redeemed
by the total number of original shares outstanding at the time of redemption.
3. FUND SHARES
The Board of Trustees has authorized the issuance of two classes of shares,
designated as Class A and Class B shares. Shares of each class represent an
interest in the same portfolio of investments of the Fund and have equal rights
as to voting, redemptions, dividends and liquidation, except that each class of
shares can bear different transfer agent and distribution fees and have
exclusive voting rights with respect to the distribution plans that have been
adopted by the Fund on behalf of each class (see Note 6).
The Fund will record sales and repurchases of its fund shares on trade date. Net
losses, if any, as a result of cancellations will be absorbed by PFD, the
principal underwriter for the Fund and an indirect subsidiary of PGI.
<PAGE>
4. MANAGEMENT AGREEMENT
PMC, the Fund's investment adviser, will manage the Fund's portfolio and is a
wholly owned subsidiary of PGI. Management fees will be calculated daily at the
annual rate of 1.10% of the Fund's average daily net assets Under the management
agreement, the cost of certain usual and customary expenses, including
accounting, regulatory reporting and insurance premiums, will be paid by the
Fund.
PMC has agreed not to impose all or a portion of its management fee and to
assume other operating expenses of the Fund to the extent necessary to limit
Class A expenses to 1.75% of the average daily net assets attributable to Class
A shares; the portion of the Fund-wide expenses attributable to Class B shares
will be reduced only to the extent that such expenses are reduced for Class A
shares. PMC's agreement is voluntary and temporary and may be revised or
terminated at any time.
5. TRANSFER AGENT
Pioneering Services Corporation, a wholly owned subsidiary of PGI, will provide
substantially all transfer agent and shareholder services to the Fund at
negotiated rates.
6. DISTRIBUTION PLANS
The Fund adopted a Plan of Distribution for each class of shares (Class A Plan
and Class B Plan) in accordance with Rule 12b-1 of the 1940 Act. Pursuant to the
Class A Plan, the Fund will pay PFD a service fee of up to 0.25% of the Fund's
average daily net assets in reimbursement of its actual expenditures to finance
activities primarily intended to result in the sale of Class A shares. Pursuant
to the Class B Plan, the Fund will pay PFD 1.00% of the average daily net assets
attributable to each class of shares. The fee consists of a 0.25% service fee
and a 0.75% distribution fee paid as compensation for personal services and/or
account maintenance services or distribution services with regard to Class B
shares.
In addition, redemptions of each class of shares may be subject to a contingent
deferred sales charge (CDSC). A CDSC of 1.00% may be imposed on redemptions of
certain net asset value purchases of Class A shares within one year of purchase.
Class B shares that are redeemed within six years of purchase will be subject to
a CDSC at declining rates beginning at 4.0%, based on the lower of cost or
market value of shares being redeemed.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder and the Board of Trustees of
Pioneer Micro-Cap Fund:
We have audited the accompanying balance sheet of Pioneer Micro-Cap Fund (a
Delaware business trust) as of February 18, 1997. This balance sheet is the
responsibility of the Trust's management. Our responsibility is to express an
opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Pioneer Micro-Cap Fund as of
February 18, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 18, 1997
<PAGE>
PIONEER MICRO-CAP FUND
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Statement of Assets and Liabilities
Report of Independent Accountants
(b) Exhibits:
1.1 Agreement and Declaration of Trust*
1.2 Certificate of Trust*
2. By-Laws*
3. None
4.1 Specimen Class A Share Certificate*
5. Form of Management Contract*
6.1. Form of Underwriting Agreement*
6.2. Form of Dealer Sales Agreement*
7. None
8.2. Form of Custodian Agreement with Brown
Brothers Harriman & Co.*
9. Form of Investment Company Service
Agreement*
10. Opinion of Counsel**
11. Consent of Arthur Andersen LLP
12. None
13. Form of Share Purchase Agreement
14. None
15.1 Class A Distribution Plan*
15.2 Class B Distribution Plan*
16. Not Applicable
<PAGE>
17. Not Applicable
18. Multiclass Plan Pursuant to Rule 18f-3*
19. Powers of Attorney
* Filed with the initial Registration Statement on December 23, 1996
and incorporated herein by reference. To be filed by amendment.
** To be filed with Registrant's initial Rule 24f-2 notification on
Form 24f-2.
Item 25. Persons Controlled By or Under Common Control with Registrant.
Percent State/Country
of of
Company Owned By Shares Incorporation
Pioneering Management Corp. (PMC) PGI 100% DE
Pioneering Services Corp. (PSC) PGI 100% MA
Pioneer Capital Corp. (PCC) PGI 100% MA
Pioneer Fonds Marketing GmbH (GmbH) PGI 100% MA
Pioneer SBIC Corp. (SBIC) PGI 100% MA
Pioneer Associates, Inc. (PAI) PGI 100% MA
Pioneer International Corp. (PInt) PGI 100% MA
Pioneer Plans Corp. (PPC) PGI 100% MA
Pioneer Goldfields Ltd (PGL) PGI 100% MA
Pioneer Investments Corp. (PIC) PGI 100% MA
Pioneer Metals and Technology,
Inc. (PMT) PGI 100% DE
Pioneer First Polish Trust Fund
Joint Stock Co. (First Polish) PGI 100% Poland
Teberebie Goldfields Ltd. (TGL) PGI 90% Ghana
Pioneer Funds Distributor, Inc.
(PFD) PMC 100% MA
SBIC's outstanding capital stock PCC 100% MA
THE FUNDS: All are parties to management contracts with PMC.
BUSINESS
FUND TRUST
Pioneer International Growth Fund MA
Pioneer Europe Fund MA
Pioneer Emerging Markets Fund DE
Pioneer India Fund DE
Pioneer Growth Trust MA
Pioneer Mid-Cap Fund DE
Pioneer Growth Shares DE
Pioneer Small Company Fund DE
C-2
<PAGE>
Pioneer World Equity Fund DE
Pioneer II DE
Pioneer Real Estate Shares DE
Pioneer Short-Term Income Fund MA
Pioneer America Income Trust MA
Pioneer Bond Fund MA
Pioneer Balanced Fund DE
Pioneer Intermediate Tax-Free Fund MA
Pioneer Tax-Free Income Fund DE
Pioneer Money Market Trust DE
Pioneer Variable Contracts Trust DE
Pioneer Interest Shares DE
OTHER:
. SBIC is the sole general partner of Pioneer Ventures Limited Partnership, a
Massachusetts limited partnership.
. ITI Pioneer AMC Ltd. (ITI Pioneer) (Indian Corp.), is a joint venture
between PMC and Investment Trust of India Ltd. (ITI) (Indian Corp.)
. ITI and PMC own approximately 54% and 45%, respectively, of the total equity
capital of ITI Pioneer.
JOHN F. COGAN, JR.
Owns approximately 14% of the outstanding shares of PGI.
TRUSTEE/
ENTITY CHAIRMAN PRESIDENT DIRECTOR OTHER
------ -------- --------- -------- -----
Pioneer Family of
Mutual Funds X X X
PGL X X X
PGI X X X
PPC X X
PIC X X
Pintl X X
PMT X X
PCC X
PSC X
PMC X X
PFD X X
C-3
<PAGE>
TGL X X
First Polish X Member of
Supervisory Board
Hale and Dorr Partner
GmbH Chairman of
Supervisory Board
Item 26. Number of Holders of Securities
Immediately prior to the effect date of this Registration Statement, it
is expected that there will be one record holder of Registrant's shares of
beneficial interest.
Item 27. Indemnification
Except for the Agreement and Declaration of Trust, dated December 3,
1996, establishing the Registrant as a trust under Delaware law, there is no
contract, arrangement or statute under which any director, officer, underwriter
or affiliated person of the Registrant is insured or indemnified. The
Declaration of Trust provides that no Trustee or officer will be indemnified
against any liability of which the Registrant would otherwise be subject by
reason of or for willful misfeasance, bad faith, gross negligence or reckless
disregard of such person's duties.
Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended (the "Act"), may be available to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment of the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
C-4
<PAGE>
Item 28. Business and other Connections of Investment Adviser
All of the information required by this item is set forth in the Form
ADV, as amended, of Pioneering Management Corporation. The following sections of
such Form ADV are incorporated herein by reference:
(a) Items 1 and 2 of Part 2;
(b) Section 6, Business Background, of each Schedule D.
Item 29. Principal Underwriter
(a) See Item 25 above.
(b) Directors and Officers of PFD:
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
John F. Cogan, Jr. Director and Chairman Chairman of the Board,
President and Trustee
Robert L. Butler Director and President None
David D. Tripple Director Executive Vice
President and Trustee
Steven M. Graziano Senior Vice President None
Stephen W. Long Senior Vice President None
John C. Drachman Vice President None
Barry C. Knight Vice President None
William A. Misata Vice President None
Anne W. Patenaude Vice President None
Elizabeth B. Rice Vice President None
Mary Kleeman Vice President None
Gail A. Smyth Vice President None
Constance S. Spiros Vice President None
Marcy Supovitz Vice President None
Steven R. Berke Assistant Vice None
President
C-5
<PAGE>
Mary Sue Hoban Assistant Vice None
President
William H. Keough Treasurer Treasurer
Roy P. Rossi Assistant Treasurer None
Joseph P. Barri Clerk Secretary
Robert P. Nault Assistant Clerk Assistant Secretary
<PAGE>
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts and records are maintained at the Registrant's
office at 60 State Street, Boston, Massachusetts; contact the Treasurer.
Item 31. Management Services
The Registrant is not a party to any management-related
service contract, except as described in the Prospectus and the Statement of
Additional Information.
Item 32. Undertakings
(a) Not Applicable.
(b) The Registrant undertakes to file a post-effective
amendment, using financial statements which need not be certified, within four
to six months from the later of the effective date of this Registration
Statement or the commencement of operations.
(c) The Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent or
given, a copy of the Registrant's report to shareholders furnished pursuant to
and meeting the requirements of Rule 30d-1 from which the specified information
is incorporated by reference, unless such person currently holds securities of
the Registrant and otherwise has received a copy of such report, in which case
the Registrant shall state in the Prospectus that it will furnish, without
charge, a copy of such report on request, and the name, address and telephone
number of the person to whom such a request should be directed.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this this
Pre-Effective Amendment No. 1 to its Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boston and The Commonwealth of Massachusetts, on the 20th day of February,
1997.
PIONEER MICRO-CAP FUND
By: /s/Joseph P. Barri
Joseph P. Barri
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to its Registration Statement on Form N-1A has
been signed below by the following persons in the capacities and on the date
indicated:
Signature Title
--------- -----
/s/John F. Cogan, Jr.* Chairman of the Board )
John F. Cogan, Jr. and President (Principal )
Executive Officer )
)
/s/William H. Keough* Principal Financial )
William H. Keough and Accounting Officer )
)
Trustees:
/s/John F. Cogan, Jr.* )
John F. Cogan, Jr. Trustee )
)
Richard H. Egdahl* )
Richard H. Egdahl Trustee )
)
/s/Margaret B.W. Graham* )
Margaret B.W. Graham Trustee )
)
/s/John W. Kendrick* )
John W. Kendrick Trustee )
C-7
<PAGE>
)
/s/Marguerite A. Piret* )
Marguerite A. Piret Trustee )
)
/s/David D. Tripple* )
David D. Tripple Trustee )
)
/s/Stephen K. West* )
Stephen K. West Trustee )
)
/s/John Winthrop* )
John Winthrop Trustee )
*By: /s/Joseph P. Barri Dated: February 20, 1997
Joseph P. Barri.
Attorney-in-Fact
C-8
<PAGE>
Exhibit Index
Exhibit Page
Number Document Title Number
11. Consent of Independent Public Accountants.
13. Form of Share Purchase Agreement
19. Powers of Attorney.
C-9
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report on Pioneer Micro-Cap Fund dated February 18, 1997 (and to all references
to our firm) included in or made a part of Pre-Effective Amendment No. 1 and
Amendment No. 1 to Registration Statement File Nos. 33-18639 and 811-7985,
respectively.
/s/ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 18, 1997
SHARE PURCHASE AGREEMENT
This Agreement is made as of the 1st day of March, 1997 between Pioneer
Funds Distributor, Inc., a Delaware corporation ("PFD"), and Pioneer Micro-Cap
Fund, a Delaware business trust (the "Trust").
WHEREAS, the Trust wishes to sell to PFD, and PFD wishes to purchase
from the Trust, $100,000 of shares of beneficial interest of the Trust
(3,333.333 shares) at a purchase price of $15.00 per share (collectively, the
"Shares"); and
WHEREAS, PFD is purchasing the Shares for the purpose of providing the
initial capitalization of the Trust as required by the Investment Company Act of
1940;
NOW, THEREFORE, the parties hereto agree as follows:
1. Simultaneously with the execution of this Agreement, PFD is
delivering to the Trust a check in the amount of $100,000 in full payment for
the Shares.
2. PFD agrees that it is purchasing the Shares for investment and has
no present intention of redeeming or reselling the Shares.
3. PFD further agrees that it may not withdraw the Shares from the
Trust at a rate, which at any time during the Trust's first five years of
operations, exceeds in the aggregate $1,666.67 per month.
Executed as of the date first set forth above.
PIONEER FUNDS DISTRIBUTOR, INC.
/s/Robert Butler
Robert Butler
President
PIONEER MICRO-CAP FUND
/s/Joseph P. Barri
Joseph P. Barri
Secretary
POWER OF ATTORNEY
Dated December 3, 1996
We, the undersigned Trustees and/or Officers of Pioneer Micro-Cap Fund
(the "Fund"), a Delaware business trust, do hereby severally constitute and
appoint John F. Cogan, Jr., David D. Tripple, and Joseph P. Barri, and each of
them acting singly, to be our true, sufficient and lawful attorneys, with full
power to each of them, and each of them acting singly, to sign for each of us,
in the name of each of us and in the capacity as trustee, any and all amendments
to the Registration Statement on Form N-1A to be filed by the Fund under the
Investment Company Act of 1940, as amended (the "1940 Act"), and under the
Securities Act of 1933, as amended (the "1933 Act"), with respect to the
offering of its shares of beneficial interest and any and all other documents
and papers relating thereto, and generally to do all such things in the name of
each of us and on behalf of each of us in the capacity as trustee to enable the
Fund to comply with the 1940 Act and the 1933 Act, and all requirements of the
Securities and Exchange Commission thereunder, hereby ratifying and confirming
the signature of each of us as it may be signed by said attorneys or each of
them to any and all amendments to said Registration Statement.
<PAGE>
IN WITNESS WHEREOF, we have hereunder set our hands on this Instrument
as of the date first written above.
/s/John W. Kendrick /s/Marguerite A. Piret
John W. Kendrick, Trustee Marguerite A. Piret, Trustee
/s/Richard H. Eghahl /s/Stephen K. West
Richard H. Egdahl, M.D., Trustee Stephen K. West, Trustee
/s/Margaret B.W. Graham /s/John Winthrop
Margaret B.W. Graham, Trustee John Winthrop, Trustee
/s/John F. Cogan, Jr. /s/David D. Tripple
John F. Cogan, Jr., Chairman David D. Tripple, Trustee
of the Board, President and and Executive Vice President
Principal Executive Officer
/s/William H. Keough
William H. Keough, Principal Financial
and Accounting Officer
