[Pioneer Logo]
Pioneer
Micro-Cap
Fund
ANNUAL REPORT 11/30/97
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter from the Chairman 1
Portfolio Summary 2
Performance Update 3
Portfolio Management Discussion 5
Schedule of Investments 8
Financial Statements 13
Notes to Financial Statements 18
Report of Independent Public Accountants 22
Trustees, Officers and Service Providers 23
The Pioneer Family of Mutual Funds 25
Programs and Services for Pioneer Shareowners 26
Retirement Plans from Pioneer 28
</TABLE>
<PAGE>
Pioneer Micro-Cap Fund
LETTER FROM THE CHAIRMAN 11/30/97
Dear Shareowner,
- ----------------------------------------------------------------------------
Welcome to the first annual report to shareowners of Pioneer Micro-Cap Fund. On
behalf of the Fund's investment management team, I thank you for your interest
in Pioneer.
Pioneer Micro-Cap Fund is designed to participate in the fortunes of the
smallest publicly held companies, with the goal of long-term capital
appreciation. Your management team depends on their own detailed research to
uncover stocks that fit our "aggressive value" profile - trading for
significantly less than their true worth or business potential and ripe for a
turnaround, takeover or other significant catalyst. During the Fund's short
fiscal year this strategy worked, and the Fund outperformed
micro-capitalization stocks as a whole and generated a solid total return in
fiscal 1997.
The year ended with the world's stock markets in a whirl. Asian markets plunged
dramatically as they digested currency and economic changes. European and Latin
American markets bounced around in a chain reaction. In the United States, the
Dow Jones Industrial Average of large-company stocks experienced - in the space
of two days in late October - both its biggest one-day point drop and its
biggest one-day point gain. Importantly for you, small-company stocks also sold
off, but rebounded to march forward at a faster pace than large issues. While
these market swings were extreme, they didn't distract us, and shouldn't
distract you, from long-term strategies designed to pursue long-term goals.
I encourage you to read on to learn more about your Fund and our efforts to
build a solid foundation for long-term success. If you have questions about
Pioneer Micro-Cap Fund, please contact your investment professional, or Pioneer
at 1-800-225-6292. Thank you for your support.
Respectfully,
/s/ John F. Cogan, Jr.
John F. Cogan, Jr.,
Chairman and President
1
<PAGE>
Pioneer Micro-Cap Fund
PORTFOLIO SUMMARY 11/30/97
Portfolio Diversification
- ----------------------------------------------------------------------------
(As a percentage of total investment portfolio)
[pie chart]
U.S. Common Stocks 87%
International Common Stocks 7%
Short-Term Cash Equivalents 3%
U.S. Convertible Securities 2%
Depositary Receipts for International Stocks 1%
Sector Distribution
- ----------------------------------------------------------------------------
(As a percentage of equity holdings)
[pie chart]
Technology 37%
Services 14%
Financial 11%
Capital Goods 10%
Basic Industries 9%
Consumer Non-Durables 9%
Energy 7%
Transportation 2%
Consumer Durables 1%
10 Largest Holdings
- ----------------------------------------------------------------------------
(As a percentage of equity holdings)
1. Dura Products International Inc. 4.42%
2. Glenborough Realty Trust 3.62
3. Bedford Property Investors, Inc. 3.43
4. Proxim, Inc. 3.02
5. CML Group, Inc. 2.93
6. SystemSoft Corp. 2.65
7. ArQule, Inc. 2.51
8. Arakis Energy Corp. 2.46
9. Premier Laser Systems, Inc. 2.42
10. Centigram Communications Corp. 2.39
Fund holdings will vary for other periods.
2
<PAGE>
Pioneer Micro-Cap Fund
PERFORMANCE UPDATE 11/30/97 CLASS A SHARES
Share Prices and Distributions
- ----------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Net Asset Value
per Share 11/30/97 2/28/97
$17.84 $15.00
Distributions per Share Income Short-Term Long-Term
(2/28/97 - 11/30/97) Dividends Capital Gains Capital Gains
- - -
</TABLE>
Investment Returns
- ----------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000 investment in
Pioneer Micro-Cap Fund at public offering price, compared to the growth of the
Merrill Lynch Micro-Cap Index.
[boxed text]
<TABLE>
Cumulative Total Returns
(As of November 30, 1997)
Net Asset Public Offering
Period Value Price*
<S> <C> <C>
Life-of-Fund 18.93% 12.06%
(2/28/97)
</TABLE>
* Reflects deduction of the maximum
5.75% sales charge at the beginning of
the period and assumes reinvestment
of distributions at net asset value.
[mountain chart]
Growth of $10,000
Date Pioneer Micro-Cap Fund* Merrill Lynch Micro-Cap Index
2/28/97 9,425 10,000
3/31/97 8,957 9,574
4/30/97 8,650 9,235
5/31/97 9,874 9,797
6/30/97 9,994 10,242
7/31/97 10,685 10,703
8/31/97 11,099 11,053
9/30/97 11,935 12,161
10/31/97 11,357 11,938
11/30/97 11,206 11,627
Source: The Merrill Lynch Micro-Cap Index measures the performance of 2,148
stocks ranging in market capitalization from $5 million to $60 million.
Index returns are calculated monthly, assume reinvestment of dividends
and, unlike Fund returns, do not reflect any sales charges, fees or
expenses. You cannot invest directly in the Index.
Past performance does not guarantee future results. Returns and share prices
fluctuate, and your shares, when redeemed, may be worth more or less than their
original cost.
3
<PAGE>
Pioneer Micro-Cap Fund
PERFORMANCE UPDATE 11/30/97 CLASS B SHARES
Share Prices and Distributions
- ----------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Net Asset Value
per Share 11/30/97 2/28/97
$17.77 $15.00
Distributions per Share Income Short-Term Long-Term
(2/28/97 - 11/30/97) Dividends Capital Gains Capital Gains
- - -
</TABLE>
Investment Returns
- ----------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000 investment in
Pioneer Micro-Cap Fund compared to the growth of the Merrill Lynch Micro-Cap
Index.
[boxed text]
<TABLE>
Cumulative Total Returns
(As of November 30, 1997)
If If
Period Held Redeemed*
<S> <C> <C>
Life-of-Fund 18.47% 14.47%
(2/28/97)
</TABLE>
* Reflects deduction of the maximum applicable contingent deferred sales
charge (CDSC) at the end of the period and assumes reinvestment of
distributions. The maximum CDSC of 4% declines over six years.
[mountain chart]
Growth of $10,000
Date Pioneer Micro-Cap Fund* Merrill Lynch Micro-Cap Index
2/28/97 10,000 10,000
3/31/97 9,507 9,574
4/30/97 9,173 9,235
5/31/97 10,473 9,797
6/30/97 10,593 10,242
7/31/97 11,320 10,703
8/31/97 11,753 11,053
9/30/97 12,633 12,161
10/31/97 12,007 11,938
11/30/97 11,447 11,627
Source: The Merrill Lynch Micro-Cap Index measures the performance of 2,148
stocks ranging in market capitalization from $5 million to $60 million.
Index returns are calculated monthly, assume reinvestment of dividends
and, unlike Fund returns, do not reflect any sales charges, fees or
expenses. You cannot invest directly in the Index.
Past performance does not guarantee future results. Returns and share prices
fluctuate, and your shares, when redeemed, may be worth more or less than their
original cost.
4
<PAGE>
Pioneer Micro-Cap Fund
PORTFOLIO MANAGEMENT DISCUSSION 11/30/97
Dear Shareowner,
- ----------------------------------------------------------------------------
I am pleased to present Pioneer Micro-Cap Fund's first annual report, covering
the period from February 28, 1997 through November 30, 1997. Designed
specifically for long-term growth of capital, your Fund focuses on small
companies we think have big potential. We look for companies with a market
capitalization - the value of outstanding shares - of $300 million or less. Our
"aggressive value" style of investing means we search the small-cap universe
for companies trading below what we see as their true value. Often this means
they are overlooked by Wall Street analysts, and may be in turnaround,
transition or unique situations. Ideally, companies we favor bring the
potential for "double-barreled" improvement - robust and reaccelerating sales
growth and expanding profit margins.
Small Stocks Post Positive Results
Small company stocks outperformed their larger counterparts over the Fund's
short fiscal year. The Merrill Lynch Micro Cap Index (a measure of small
companies) returned 16.27%, while bigger "blue chip" stocks measured by the Dow
Jones Industrial Average suffered from a case of the "Asian Flu" and posted a
15.31% total return. Pioneer Micro-Cap Fund finished ahead of the Merrill Lynch
Index and the Dow with an 18.93% total return for Class A Shares at net asset
value.
A Year of Change in Stock Markets
In February and March, financial markets braced for an imminent interest rate
hike by the Federal Reserve. Historically low unemployment rates had ignited
concerns over wage increases and the threat of increased operating costs, which
could be passed along to consumers as higher prices. The Fed moved in mid-March
to clamp down on these inflationary pressures and increased the federal funds
rate by 0.25 percentage points, exactly as anticipated. As inflation concerns
abated, U.S. stock markets gained momentum. Smaller, less-known companies led
the way as investors became concerned about the effects slower economic growth
could have on large companies. Favorable conditions continued through the third
fiscal quarter, and small company stocks picked up more steam.
5
<PAGE>
Pioneer Micro-Cap Fund
PORTFOLIO MANAGEMENT DISCUSSION 11/30/97 (continued)
Toward fiscal year end, investors began adjusting to severe economic setbacks
in Southeast Asia. These burgeoning crises bruised stocks of all sizes, all
around the globe. Currency devaluations in Thailand and South Korea, along with
continued weakness in Japan's economy sent many companies and investors
backpedaling out of the Pacific Rim. In the United States, the Dow dropped a
record-setting 554 points on October 27 as investors abandoned large companies
with significant overseas exposure; instead, they turned to smaller stocks like
those favored by your Fund. The Dow was able to recoup 337 points the next day,
while small stocks kept their edge through November.
Structuring a Portfolio Focused on Value
Our aggressive value style of investing led us to a variety of companies
involved in technology and financial services; as groups, they experienced both
vigorous growth and increasing competition. Not surprisingly then, the Fund's
biggest gains came June through August in the midst of the rally in small
technology stocks. DSP Communications, developer of chip sets for cellular
phone systems, and Mercury Interactive, software designer of web site
development tools, were among technology holdings leading the Fund higher.
After tech stocks surged, we reduced holdings in that broad group, leaving it
at a still hefty 37% of equity holdings by the close of the fiscal year.
Our research also led us to Dura Products International, which uses cutting
edge technology to produce composite material from recycled plastics and waste,
and enjoys significant competitive advantages. Currently, the Fund owns 9% of
the company, which also makes it the portfolio's largest holding at 4.42% of
equities.
We further diversified the portfolio with real estate investment trusts
(REITs), including Glenborough Realty Trust and Bedford Property Investors.
These holdings generate dividends that provide a form of "downside protection"
in swinging markets. Also, both are good sized, now with market capitalizations
above $300 million. Although we rarely invest in any company whose market
capitalization is above $300 million, we will selectively hold those that
appreciate to a larger size.
6
<PAGE>
Pioneer Micro-Cap Fund
We use the Fund's cash as a holding tank - expanding and contracting it as we
sift through buying opportunities and seek profits in various securities that
hit our price targets. Over the course of the year, the Fund's cash position
ranged from 30% to 3% of assets as we worked to build the portfolio. During
October's volatile market, for instance, we were able to buy stocks we liked at
relatively inexpensive prices, and by fiscal year end, the Fund's holdings in
short-term cash equivalents had shrunk to 3%. We expect cash to usually hover
around 5% of assets.
A Glance Ahead
Similar to the companies in the portfolio, your Fund is in its early stages of
development. It now has over 9,000 shareowners and approximately $123 million
in assets. To keep the portfolio at an effective and manageable size, the Fund
will close 15 days after it has $150 million in assets, and investors will not
be able to open new accounts. Additions to existing accounts will also be
restricted, however, such additions may be permitted in the future. This
strategy will allow us to focus our whole attention on monitoring and selecting
small companies we believe show good long-term growth or turnaround potential.
Investing in micro-cap stocks can be extremely volatile, although a long-term
objective provides the opportunity for rewarding returns. The past nine months
were positive for your Fund, and we continue to look favorably on the long-term
potential of small stocks, despite turbulent market conditions in Asia and
record-setting price changes here in the United States. We look for reasonable
U.S. economic growth to continue, but other financial markets remain volatile,
and Asia's short-term outlook is hazy at best. Until firm action is taken to
bring stability to Asia, stock prices are likely to remain volatile around the
globe, particularly for large multinational companies. This could shape a
relatively good environment for smaller, U.S.-based companies such as those in
Pioneer Micro-Cap Fund's portfolio.
Respectfully,
/s/ William M. Taussig
William "Pete" Taussig,
Portfolio Manager
7
<PAGE>
Pioneer Micro-Cap Fund
SCHEDULE OF INVESTMENTS 11/30/97
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
INVESTMENT IN SECURITIES - 96.9%
CONVERTIBLE PREFERRED STOCK - 1.5%
12,000 Riviera Tool Co., 8.00% $ 1,886,496
-----------
Total Convertible Preferred Stock
(Cost $1,200,000) $ 1,886,496
-----------
COMMON STOCKS - 95.4%
Basic Industries - 9.0%
Chemicals - 2.2%
60,000 McWhorter Technologies, Inc.* $ 1,425,000
178,500 Triple S Plastic, Inc.* 1,249,500
-----------
$ 2,674,500
-----------
Iron & Steel - 2.1%
48,800 Atchinson Casting Corp.* $ 841,800
577,000 Ocal, Inc.*+ 1,803,125
-----------
$ 2,644,925
-----------
Metals & Mining - 3.5%
537,300 Geomaque Explorations Ltd.* $ 754,555
120,000 Imco Recycling, Inc. 1,890,000
611,500 TVX Gold Inc.* 1,605,188
-----------
$ 4,249,743
-----------
Pollution/Waste - 1.2%
57,800 Tetra Tech, Inc.* $ 1,477,513
-----------
Total Basic Industries $11,046,681
-----------
Capital Goods - 8.8%
Aerospace/Defense - 1.6%
168,465 Talley Industries, Inc.* $ 1,989,993
-----------
Construction & Engineering - 1.0%
86,000 Coastcast Corp.* $ 1,209,375
-----------
Producer Goods - 6.2%
45,500 Brunswick Technologies, Inc.* $ 790,562
1,950,265 Dura Products International Inc.* 5,272,282
2,000 Gleason Corp. 51,875
175,000 N N Ball & Roller, Inc. 1,487,500
-----------
$ 7,602,219
-----------
Total Capital Goods $10,801,587
-----------
</TABLE>
8 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Micro-Cap Fund
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Consumer Durables - 1.3%
Misc. Consumer Durables - 1.3%
40,000 National Presto Industries, Inc. $ 1,567,500
-----------
Total Consumer Durables $ 1,567,500
-----------
Consumer Non-Durables - 8.3%
Agriculture & Food - 0.8%
40,000 Alico, Inc. $ 980,000
-----------
Retail Non-Food - 6.9%
69,400 Brown Group, Inc. $ 1,123,412
1,000,000 CML Group, Inc.* 3,500,000
53,000 Jan Bell Marketing, Inc.* 149,062
83,000 Koala Corp.* 1,312,437
38,500 MicroAge, Inc.* 774,813
255,600 Transmedia Network Inc. 1,597,500
-----------
$ 8,457,224
-----------
Textiles/Clothes - 0.6%
160,000 Marisa Christina, Inc.* $ 740,000
-----------
Total Consumer Non-Durables $10,177,224
-----------
Energy - 6.4%
Oil Refining & Drilling - 3.5%
575,000 Abacan Resources* $ 1,329,687
1,000,000 Arakis Energy Corp.* 2,937,500
-----------
$ 4,267,187
-----------
Oil-Well Equipment & Services - 2.9%
115,000 Continental Natural Gas, Inc.* $ 1,336,875
140,000 Eagle Geophysical, Inc.* 2,275,000
-----------
$ 3,611,875
-----------
Total Energy $ 7,879,062
-----------
Financial - 10.9%
Commercial Bank - 1.5%
105,000 Century Bancorp, Inc. $ 1,890,000
-----------
Misc. Finance - 1.1%
75,000 Ocwen Asset Investment Corp. $ 1,364,063
-----------
Real Estate Investment Trust - 6.8%
200,000 Bedford Property Investors, Inc. $ 4,087,500
160,000 Glenborough Realty Trust 4,320,000
-----------
$ 8,407,500
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements. 9
<PAGE>
Pioneer Micro-Cap Fund
SCHEDULE OF INVESTMENTS 11/30/97 (continued)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Savings & Loan - 1.5%
89,000 Litchfield Financial Corp. $ 1,791,125
-----------
Total Financial $13,452,688
-----------
Services - 13.3%
Broadcasting & Media - 0.3%
106,500 National Media Corp.* $ 439,313
-----------
Health & Personal Care - 5.5%
260,000 General Surgical Innovations* $ 1,202,500
80,000 Hologic, Inc.* 2,070,000
300,000 Premier Laser Systems, Inc.* 2,887,500
38,000 Young Innovations, Inc.* 565,250
-----------
$ 6,725,250
-----------
Misc. Services - 1.7%
160,000 First Service Corp.* $ 1,300,000
112,700 PIA Merchandising Services, Inc.* 788,900
-----------
$ 2,088,900
-----------
Pharmaceuticals - 5.8%
145,000 ArQule, Inc.* $ 2,990,625
100,000 ChiRex Inc.* 2,437,500
80,000 National Dentex Corp.* 1,720,000
-----------
$ 7,148,125
-----------
Total Services $16,401,588
-----------
Technology - 35.8%
BioTechnology - 5.5%
305,000 Aronex Pharmaceuticals, Inc.* $ 1,525,000
196,000 Genzyme Transgenics Corp.* 1,984,500
170,000 ImClone Systems, Inc.* 1,136,875
245,000 Immulogic Pharmaceutical Corp.* 551,250
250,000 Texas Biotechnology Corp.* 1,515,625
-----------
$ 6,713,250
-----------
Business Machines - 1.3%
120,000 Nashua Corp.* $ 1,567,500
-----------
Computer Hardware - 0.1%
10,000 Proxima Corp.* $ 73,125
-----------
</TABLE>
10 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Micro-Cap Fund
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Computer Services - 12.6%
175,000 Broadway & Seymour, Inc.* $ 1,662,500
83,500 CMG Information Services, Inc.* 1,753,500
10,000 Creative Computers, Inc.* 122,500
75,000 FileNet Corp.* 2,057,812
85,000 Hypercom Corp.* 1,360,000
125,000 Jetfax, Inc.* 875,000
25,000 Mercury Interactive Corp.* 609,375
62,000 Meridian Data, Inc.* 263,500
87,500 Omega Research, Inc.* 448,438
300,000 Proxim, Inc.* 3,600,000
265,000 Segue Software, Inc.* 2,848,750
-----------
$15,601,375
-----------
Computer Software - 7.9%
239,800 Mortice Kern Systems Inc.* $ 1,187,087
247,500 Platinum Software Corp.* 1,933,594
60,000 Progress Software Corp.* 1,237,500
300,000 Puma Technology, Inc.* 2,175,000
440,000 SystemSoft Corp.* 3,162,500
-----------
$ 9,695,681
-----------
Electronics - 3.2%
130,000 C.P. Clare Corp.* $ 1,738,750
40,000 Helix Technology Corp. 942,500
181,000 Information Storage Devices, Inc.* 1,289,625
-----------
$ 3,970,875
-----------
Telecommunications - 5.2%
175,000 Centigram Communications Corp.* $ 2,854,687
125,000 DSP Communications, Inc.* 2,000,000
22,600 France Telecom SA (Sponsored A.D.R.)* 819,250
80,000 Mosaix, Inc.* 725,000
-----------
$ 6,398,937
-----------
Total Technology $44,020,743
-----------
Transportation - 1.6%
Air Transport - 1.6%
300,000 First Aviation Services, Inc.* $ 2,025,000
-----------
Total Transportation $ 2,025,000
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements. 11
<PAGE>
Pioneer Micro-Cap Fund
SCHEDULE OF INVESTMENTS 11/30/97 (continued)
<TABLE>
<CAPTION>
Value
<S> <C>
Total Common Stocks
(Cost $114,828,472) $117,372,073
------------
TOTAL INVESTMENT IN SECURITIES
(Cost $116,028,472) $119,258,569
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<S> <C> <C>
TEMPORARY CASH INVESTMENT - 3.1%
Commercial Paper - 3.1%
$3,858,000 Household Finance Corp., 5.70%, 12/1/97 $ 3,858,000
------------
TOTAL TEMPORARY CASH INVESTMENT
(Cost $3,858,000) $ 3,858,000
------------
TOTAL INVESTMENT IN SECURITIES AND
TEMPORARY CASH INVESTMENT - 100%
(Cost $119,886,472) (a) $123,116,569
============
</TABLE>
* Non-income producing security.
+ Investment held by the Fund representing 5% or more of the outstanding
voting stock of such company.
(a) At November 30, 1997, the net unrealized gain on investments based on cost
for federal income tax purposes of $119,886,472 was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized gain for all investments
in which there is an excess of value over tax cost $ 13,297,316
Aggregate gross unrealized loss for all investments
in which there is an excess of tax cost over value (10,067,219)
------------
Net unrealized gain $ 3,230,097
============
</TABLE>
Purchases and sales of securities (excluding temporary cash investments) for
the period ended November 30, 1997, aggregated $135,795,642 and $27,708,931,
respectively.
12 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Micro-Cap Fund
BALANCE SHEET 11/30/97
<TABLE>
<S> <C>
ASSETS:
Investment in securities (including temporary cash investment of
$3,858,000) (cost $119,886,472) $123,116,569
Receivables -
Fund shares sold 1,454,559
Interest 611
Organizational costs - net 33,225
Other 4,735
------------
Total assets $124,609,699
------------
LIABILITIES:
Payables -
Investment securities purchased $ 1,035,053
Fund shares repurchased 64,045
Due to bank 399,280
Due to affiliates 230,897
Accrued expenses 84,915
------------
Total liabilities $ 1,814,190
------------
NET ASSETS:
Paid-in capital $112,045,930
Accumulated undistributed net realized gain 7,519,482
Net unrealized gain on investments 3,230,097
------------
Total net assets $122,795,509
============
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized)
Class A (based on $51,824,504/2,904,412 shares) $ 17.84
============
Class B (based on $70,971,005/3,994,127 shares) $ 17.77
============
MAXIMUM OFFERING PRICE:
Class A $ 18.93
============
</TABLE>
The accompanying notes are an integral part of these financial statements. 13
<PAGE>
Pioneer Micro-Cap Fund
STATEMENT OF OPERATIONS
For the Period from 2/28/97 (Commencement of Operations) to 11/30/97
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Dividends $212,794
Interest 414,890
--------
Total investment income $ 627,684
-----------
EXPENSES:
Management fees $592,206
Transfer agent fees
Class A 67,367
Class B 73,186
Distribution fees
Class A 54,056
Class B 303,301
Accounting 55,097
Custodian fees 22,723
Registration fees 71,440
Professional fees 45,844
Printing 21,540
Organization costs 30,627
Fees and expenses of nonaffiliated trustees 10,510
Miscellaneous 10,601
--------
Total expenses $ 1,358,498
Less management fees waived and expenses
reimbursed by Pioneering Management
Corporation (185,138)
Less fees paid indirectly (31,222)
-----------
Net expenses $ 1,142,138
-----------
Net investment loss $ (514,454)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments $ 7,941,761
Net unrealized gain on investments 3,230,097
-----------
Net gain on investments $11,171,858
-----------
Net increase in net assets resulting from operations $10,657,404
===========
</TABLE>
14 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Micro-Cap Fund
STATEMENT OF CHANGES IN NET ASSETS
For the Period from 2/28/97 (Commencement of Operations) to 11/30/97
<TABLE>
<CAPTION>
Period
Ended
11/30/97
<S> <C>
FROM OPERATIONS:
Net investment loss $ (514,454)
Net realized gain on investments 7,941,761
Net unrealized gain on investments 3,230,097
------------
Net increase in net assets resulting from operations $ 10,657,404
------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $117,365,612
Cost of shares repurchased (5,327,507)
------------
Net increase in net assets resulting from fund share
transactions $112,038,105
------------
Net increase in net assets $122,695,509
NET ASSETS:
Beginning of period (initial capitalization - 6,666 shares) 100,000
------------
End of period (including accumulated undistributed net
investment income of $0) $122,795,509
============
</TABLE>
<TABLE>
<CAPTION>
CLASS A '97 Shares '97 Amount
<S> <C> <C>
Shares sold 3,093,613 $ 50,077,252
Less shares repurchased (192,534) (3,283,449)
--------- ------------
Net increase 2,901,079 $ 46,793,803
--------- ------------
CLASS B
Shares sold 4,105,789 $ 67,288,360
Less shares repurchased (114,995) (2,044,058)
--------- ------------
Net increase 3,990,794 $ 65,244,302
========= ============
</TABLE>
The accompanying notes are an integral part of these financial statements. 15
<PAGE>
Pioneer Micro-Cap Fund
FINANCIAL HIGHLIGHTS 11/30/97
<TABLE>
<CAPTION>
2/28/97
to
11/30/97(a)
<S> <C>
CLASS A
Net asset value, beginning of period $15.00
------
Increase (decrease) from investment operations:
Net investment loss $(0.07)
Net realized and unrealized gain on investments 2.91
------
Net increase in net asset value $ 2.84
------
Net asset value, end of period $17.84
======
Total return* 18.93%
Ratio of net expenses to average net assets 1.76%**+
Ratio of net investment loss to average net assets (0.60)%**+
Portfolio turnover rate 55%**
Average commission rate paid(1) $0.0430
Net assets, end of period (in thousands) $51,825
Ratios assuming no waiver of management fees and
assumption of expenses by PMC and no reduction
for fees paid indirectly:
Net expenses 2.12%**
Net investment loss (0.96)%**
Ratios assuming waiver of management fees and
assumption of expenses by PMC and reduction for
fees paid indirectly:
Net expenses 1.70%**
Net investment loss (0.54)%**
</TABLE>
(a) The per share data presented above is based upon the average shares
outstanding for the period presented.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of distributions, the complete redemption of the
investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized.
+ Ratio assuming no reduction for fees paid indirectly.
(1) Amount represents the rate of commission paid per share on the Fund's
exchange listed security transactions.
16 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer Micro-Cap Fund
FINANCIAL HIGHLIGHTS 11/30/97
<TABLE>
<CAPTION>
2/28/97
to
11/30/97(a)
<S> <C>
CLASS B
Net asset value, beginning of period $15.00
------
Increase (decrease) from investment operations:
Net investment loss $(0.16)
Net realized and unrealized gain on investments 2.93
------
Net increase in net asset value $2.77
------
Net asset value, end of period $17.77
------
Total return* 18.47%
Ratio of net expenses to average net assets 2.48%**+
Ratio of net investment loss to average net assets (1.32)%**+
Portfolio turnover rate 55%**
Average commission rate paid(1) $0.0430
Net assets, end of period (in thousands) $70,971
Ratios assuming no waiver of management fees and
assumption of expenses by PMC and no reduction
for fees paid indirectly:
Net expenses 2.81%**
Net investment loss (1.65)%**
Ratios assuming waiver of management fees and
assumption of expenses by PMC and reduction for
fees paid indirectly:
Net expenses 2.42%**
Net investment loss (1.26)%**
</TABLE>
(a) The per share data presented above is based upon the average shares
outstanding for the period presented.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of distributions, the complete redemption of the
investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized.
+ Ratio assuming no reduction for fees paid indirectly.
(1) Amount represents the rate of commission paid per share on the Fund's
exchange listed security transactions.
The accompanying notes are an integral part of these financial statements. 17
<PAGE>
Pioneer Micro-Cap Fund
NOTES TO FINANCIAL STATEMENTS 11/30/97
1. Organization and Significant Accounting Policies
Pioneer Micro-Cap Fund (the Fund) is a Delaware business trust registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company. The Fund was organized on December 3, 1997 and commenced
operations on February 28, 1997. Prior to February 28, the Fund had no
operations other than those relating to organizational matters and the initial
capitalization of the Fund by Pioneer Funds Distributor, Inc. (PFD). The
investment objective of the Fund is to seek long-term growth of capital.
The Fund offers two classes of shares - Class A and Class B shares. Shares of
Class A and Class B each represent an interest in the same portfolio of
investments of the Fund and have equal rights 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 Class A and Class B
shareholders, respectively.
The Fund's financial statements have been prepared in conformity with generally
accepted accounting principles that require the management of the Fund to,
among other things, make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts
of revenues and expenses during the reporting periods. Actual results could
differ from those estimates. The following is a summary of significant
accounting policies consistently followed by the Fund, which are in conformity
with those generally accepted in the investment company industry:
A. Security Valuation
Security transactions are recorded on trade date. Each day, securities are
valued at the last sale price on the principal exchange where they are
traded. Securities that have not traded on the date of valuation, or
securities for which sale prices are not generally reported, are valued at
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available are valued at their fair values as
determined by, or under the direction of, the Board of Trustees. Dividend
income is recorded on the ex-dividend date and interest income is recorded on
the accrual basis. Temporary cash investments are valued at amortized cost.
18
<PAGE>
Pioneer Micro-Cap Fund
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes. It
is the Fund's practice to first select for sale those securities that have
the highest cost and also qualify for long-term capital gain or loss
treatment for tax purposes.
B. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareholders. Therefore, no federal income tax provision is required.
At November 30, 1997, the Fund reclassified $422,279 and $92,175 from
accumulated undistributed net realized gain on investments and paid-in
capital, respectively, to accumulated net investment loss. The
reclassification has no impact on the net asset value of the Fund and is
designed to present the Fund's capital accounts on a tax basis.
C. Fund Shares
The Fund records sales and repurchases of its shares on trade date. Net
losses, if any, as a result of cancellations are absorbed by PFD, the
principal underwriter for the Fund and an indirect subsidiary of The Pioneer
Group, Inc. (PGI). PFD earned $155,470 in underwriting commissions on the
sale of fund shares during the period ended November 30, 1997.
D. Class Allocations
Distribution fees are calculated based on the average daily net asset value
attributable to Class A and Class B shares of the Fund, respectively.
Shareholders of each class share all expenses and fees paid to the transfer
agent, Pioneering Services Corporation (PSC), for their services, which are
allocated based on the number of accounts in each class and the ratable
allocation of related out-of-pocket expense (see Note 3). Income, common
expenses and realized and unrealized gains and losses are calculated at the
Fund level and allocated daily to each class of shares based on the
respective percentage of adjusted net assets at the beginning of the day.
Distributions to shareholders are recorded as of the ex-dividend date.
Distributions paid by the Fund with respect to each class of shares are
calculated in the same manner, at the same time, and in the same amount,
except that Class A and Class B shares can bear different transfer agent and
distribution fees.
19
<PAGE>
Pioneer Micro-Cap Fund
NOTES TO FINANCIAL STATEMENTS 11/30/97 (continued)
E. Repurchase Agreement
With respect to repurchase agreements entered into by the Fund, the value of
the underlying securities (collateral), including accrued interest received
from counterparties, is required to be at least equal to or in excess of the
value of the repurchase agreement at the time of purchase. The collateral for
all repurchase agreements is held in safekeeping in the customer-only account
of the Fund's custodian, or subcustodians. The Fund's investment adviser,
Pioneering Management Corporation (PMC), is responsible for determining that
the value of the collateral remains at least equal to the repurchase price.
F. Deferred Organization Costs
The costs incurred by the Fund in connection with its organization have been
deferred and are amortized on a straight-line basis over a period of up to
five years. If PMC redeems any of its initial investment 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 share is derived by dividing the number of original shares redeemed by
the total number of original shares outstanding at the time of redemption.
2. Management Agreement
PMC manages the Fund's portfolio and is a wholly owned subsidiary of PGI.
Management fees are calculated daily at the annual rate of 1.10% of the Fund's
average daily net assets.
PMC has agreed not to impose 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.
In addition, under the management agreement, certain other services and costs,
including accounting, regulatory reporting and insurance premiums, are paid by
the Fund. At November 30, 1997, $101,451 was payable to PMC related to
management fees and certain other services.
3. Transfer Agent
PSC, a wholly owned subsidiary of PGI, provides substantially all transfer
agent and shareholder services to the Fund at negotiated rates. Included
20
<PAGE>
Pioneer Micro-Cap Fund
in due to affiliates is $54,318 in transfer agent fees payable to PSC at
November 30, 1997.
4. 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 Investment Company Act
of 1940. Pursuant to the Class A Plan, the Fund pays 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 pays PFD 1.00% of the
average daily net assets attributable to Class B 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. Included in due to affiliates is $75,128 in
distribution fees payable to PFD at November 30, 1997.
Class B shares that are redeemed within six years of purchase are subject to a
CDSC at declining rates beginning at 4.0%, based on the lower of cost or market
value of shares being redeemed. Proceeds from the CDSC are paid to PFD. For the
period ended November 30, 1997, CDSCs in the amount of $39,681 were paid to
PFD.
5. Expense Offsets
The Fund has entered into certain expense offset arrangements resulting in a
reduction in the Fund's total expenses. For the period ended November 30, 1997,
the Fund's expenses were reduced by $31,222 under such arrangements.
6. Affiliated Companies
The Fund primarily invests in smaller capitalized company securities that tend
to be more sensitive to changes in earnings expectations and have lower trading
volumes than mid to large capitalized company securities, and as a result, they
may experience more abrupt and erratic price movements. The Fund's investment
in these smaller capitalized companies may exceed 5% of the outstanding voting
stock. Such companies are deemed affiliates of the Fund for financial reporting
purposes. The following summarizes transactions with affiliates of the Fund as
of November 30, 1997:
<TABLE>
<CAPTION>
Dividend
Affiliates Purchases Sales Income Value
- ---------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Ocal, Inc. $1,980,469 $ - $ - $1,803,125
Dura Products
International Inc. 4,161,738 - - 5,272,282
---------- ------------ ------------ ------------
$6,142,207 $ - $ - $7,075,407
========== ============ ============ ============
</TABLE>
21
<PAGE>
Pioneer Micro-Cap Fund
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Shareholders And The Board Of Trustees Of Pioneer Micro-Cap Fund:
We have audited the accompanying balance sheet, including the schedule of
investments, of Pioneer Micro-Cap Fund as of November 30, 1997, and the related
statement of operations, the statement of changes in net assets, and the
financial highlights for the period from February 28, 1997 (commencement of
operations) to November 30, 1997. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
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 financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Micro-Cap Fund as of November 30, 1997, the results of its operations,
the changes in its net assets, and the financial highlights for the period
presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 5, 1998
22
<PAGE>
Pioneer Micro-Cap Fund
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
Trustees Officers
John F. Cogan, Jr. John F. Cogan, Jr., Chairman and
Mary K. Bush President
Richard H. Egdahl, M.D. David D. Tripple, Executive Vice
Margaret B.W. Graham President
John W. Kendrick William Taussig, Vice President
Marguerite A. Piret William H. Keough, Treasurer
David D. Tripple Joseph P. Barri, Secretary
Stephen K. West
John Winthrop
Investment Adviser
Pioneering Management Corporation
Custodian
Brown Brothers Harriman & Co.
Independent Public Accountants
Arthur Andersen LLP
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Hale and Dorr LLP
Shareowner Services and Transfer Agent
Pioneering Services Corporation
23
<PAGE>
This page for your notes.
24
<PAGE>
THE PIONEER FAMILY OF MUTUAL FUNDS
For information about any Pioneer mutual fund, please contact your investment
representative, or call Pioneer at 1-800-225-6292. Ask for a free fund
information kit, which includes a fund prospectus. Please read the prospectus
carefully before you invest or send money.
Growth Funds Income Funds
Global/International Taxable
Pioneer Emerging Markets Fund Pioneer America Income Trust
Pioneer Europe Fund Pioneer Bond Fund
Pioneer Gold Shares Pioneer Short-Term Income Trust*
Pioneer India Fund
Pioneer International Growth Fund Tax-Exempt
Pioneer World Equity Fund Pioneer Intermediate Tax-Free Fund
Pioneer Tax-Free Income Fund
United States
Pioneer Capital Growth Fund Money Market Fund
Pioneer Cash Reserves Fund
Pioneer Growth Shares
Pioneer Micro-Cap Fund*
Pioneer Mid-Cap Fund
Pioneer Small Company Fund
Growth and Income Funds
Pioneer Balanced Fund
Pioneer Equity-Income Fund
Pioneer Fund
Pioneer Real Estate Shares
Pioneer II
*Offers Class A and B Shares only
25
<PAGE>
PROGRAMS AND SERVICES FOR PIONEER SHAREOWNERS
Your investment representative can give you additional information on Pioneer's
programs and services. If you want to order literature on any of the following
items directly, simply call Pioneer at 1-800-225-6292.
FactFoneSM
Our automated account information service, available to you 24 hours a day,
seven days a week. FactFone gives you a quick and easy way to check fund share
prices, yields, dividends and distributions, as well as information about your
own account. Simply call 1-800-225-4321. For specific account information, have
your 13-digit account number and four-digit personal identification number at
hand.
90-Day Reinstatement Privilege (for Class A Shares)
Enables you to reinvest all or a portion of the money you redeem from your
Pioneer account - without paying a sales charge - within 90 days of your
redemption. You have the choice of investing in any Pioneer fund, as long as
you meet its minimum investment requirement.
Investomatic Plan
An easy and convenient way for you to invest on a regular basis. All you need
to do is authorize a set amount of money to be moved out of your bank account
into the Pioneer fund of your choice. Investomatic also allows you to change
the dollar amount, frequency and investment date right over the phone. By
putting aside affordable amounts of money regularly, you can build a long-term
investment - without sacrificing your current standard of living.
Payroll Investment Program (PIP)
Lets you invest in a Pioneer fund directly through your paycheck. All that's
involved is for your employer to fill out an authorization form allowing
Pioneer to deduct from participating employees' paychecks. You specify the
dollar amount you want to invest into the Pioneer fund(s) of your choice.
26
<PAGE>
Automatic Exchange Program
A simple way to move money from a money market or bond fund into a stock fund
over a period of time. Just invest a lump sum in a Pioneer money market fund or
bond fund. Then, select the Pioneer equity fund or funds you wish to invest in,
and choose the amounts and dates for Pioneer to sell shares of your money
market or bond fund and use the proceeds to buy shares of the Pioneer equity
fund you have chosen. Over time, your original investment will be shifted to
your Pioneer equity fund.
Directed Dividends
Lets you invest cash dividends from one Pioneer fund to an account in another
Pioneer fund with no sales charge or fee. Simply fill out the applicable
information on a Pioneer Account Options Form. (This program is available for
dividend payments only; capital gains distributions are not eligible at this
time.)
Direct Deposit
Lets you move money into your bank account using electronic funds transfer
(EFT). EFT moves your money faster than you would receive a check, eliminates
unnecessary paper and mail, and avoids lost checks. Simply fill out a Pioneer
Direct Deposit Form, giving your instructions.
Systematic Withdrawal Plan (SWP)
Lets you establish automatic withdrawals from your account at set intervals.
You decide the frequency and the day of the month you want. Pioneer will send
the proceeds by check to the address you designate, or electronically to your
bank account. You also can authorize Pioneer to make the redemptions payable to
someone else. (SWPs are available only for accounts with a value of $10,000 or
more.)
27
<PAGE>
RETIREMENT PLANS FROM PIONEER
Pioneer has a long history of helping people work toward their retirement
goals, offering plans suited to the individual investor and businesses of all
sizes. For more information on Pioneer retirement plans, contact your
investment professional, or call Pioneer at 1-800-622-0176.
Individual Retirement Account (IRA)
An IRA is a tax-favored account that allows anyone under age 701/2 with earned
income to contribute up to $2,000 annually. Spouses may contribute up to $2,000
annually into a separate IRA, for a total of $4,000 per year for a married
couple. Earnings are tax-deferred, and contributions may be tax-deductible.
Roth IRA
The Roth IRA came about as part of the Taxpayer Relief Act of 1997 and is
available to investors in 1998. Contributions, up to $2,000 a year, are not
tax-deductible, but earnings are tax-free for qualified withdrawals.
401(k) Plan
The traditional 401(k) plan allows employees to make pre-tax contributions
through payroll deduction, up to $9,500 per year or 25% of pay, whichever is
less. Employers may contribute.
SIMPLE (Savings Incentive Match PLan for Employees)
401(k) or IRA Plan
Businesses with 100 or fewer eligible employees can establish either plan; both
resemble the traditional 401(k), but with less testing and lower administration
costs. Employees can make pre-tax contributions of up to $6,000 per year, and
an employer contribution is required.
Most retirement plan withdrawals must meet specific conditions to avoid
penalties.
28
<PAGE>
403(b) Plan
Also known as a Tax-Sheltered Account (TSA), a 403(b) plan is available only to
employees of public schools, not-for-profit hospitals and other tax-exempt
organizations. A 403(b) plan lets employees set aside a portion of their
salary, before taxes, through payroll deduction.
Simplified Employee Pension Plan (SEP)
SEPs let self-employed people and small-business owners make tax-deductible
contributions of up to 15% of their income. Generally, employers must
contribute the same percentage of pay for themselves and any eligible
employees; contributions are made directly to employees' IRAs. SEPs are easy to
administer and can be an especially good choice for firms with few or no
employees.
Profit Sharing Plan
Profit sharing plans offer companies considerable flexibility, allowing them to
decide each year whether a contribution will be made and how much, up to 15% of
each participant's pay. These plans can include provisions for loans and
vesting schedules.
Age-Weighted Profit Sharing Plan
Like traditional profit sharing plans, employer contributions are flexible, but
age-weighted plans allocate contributions based on both age and salary.
Age-weighted plans are designed for employers who want to maximize their own
contributions while keeping contributions to employees affordable.
Money Purchase Pension Plan (MPP)
Money purchase plans are similar to profit-sharing plans, but allow for higher
annual contributions - up to 25% of pay. MPPs aren't as flexible as profit
sharing plans; a fixed percentage of pay must be contributed each year,
determined when the plan is established. Businesses often set up both MPPs and
profit sharing plans.
Most retirement plan withdrawals must meet specific conditions to avoid
penalties.
29
<PAGE>
HOW TO CONTACT PIONEER
We are pleased to offer a variety of convenient ways for you to contact us for
assistance or information.
Call us for:
Account information, including existing accounts,
new accounts, prospectuses, applications
and service forms 1-800-225-6292
FactFoneSM for automated fund yields, prices,
account information and transactions 1-800-225-4321
Retirement plans information 1-800-622-0176
Telecommunications Device for the Deaf (TDD) 1-800-225-1997
Write to us:
Pioneering Services Corporation
60 State Street
Boston, Massachusetts 02109
Our toll-free fax 1-800-225-4240
Our Internet e-mail address [email protected]
(for general questions about Pioneer only)
Visit our web site: www.pioneerfunds.com
This report must be preceded or accompanied by a current
Fund prospectus.
[Pioneer Logo]
Pioneer Funds Distributor, Inc.
60 State Street 0198 - 4679
Boston, Massachusetts 02109 (C) Pioneer Funds Distributor, Inc.
www.pioneerfunds.com (Recycle logo) Printed on Recycled Paper
