File Nos. 333-18639 and 811-7985
As Filed With The Securities and Exchange Commission on March 30, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 2 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 3 [ 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)
It is proposed that this filing will become effective (check
appropriate box):
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursaunt to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on [date] pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a) (2)
[ ] on [date] pursuant to paragraph (a)(2) of Rule 485
Title of Securities: Shares of beneficial interest, no par value
<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 Prospectus -
Financial Highlights
4. General Description of Registrant Prospectus- Investment
Objective and
Policies; Management of
the Fund
5. Management of the Fund Prospectus -
Management of the Fund
6. Capital Stock and Other Securities Prospectus -
Dividends,
Distributions
and Taxation; Management of
the Fund; The Fund
7. Purchase of Securities Being
Offered Prospectus - How to Buy Fund
Shares; How to
Exchange Fund Shares;
Dividends,
Distributions
and Taxation
8. Redemption or Repurchase Prospectus -
How to Sell Fund Shares; How to
Exchange Fund Shares
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
Location in
Prospectus or
Statement of
Additional
Form N-1A Item Number and Caption Information
- --------------------------------- -----------
12. General Information and History Statement of
Additional Information -
Cover Page;
Description of Shares
13. Investment Objectives and Policy 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 Principal 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;
Shareholder
Servicing/Transfer Agent;
Custodian; 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; Certain
Liabilities
19. Purchase, Redemption and Pricing of
Securities Being Offered Statement of
Additional Information -
Determination of Net Asset
Value; Systematic Withdrawal
Plan
20. Tax Status Statement of
Additional Information -
Tax Status
21. Underwriters Statement of
Additional Information -
Underwriting Agreement and
Distribution Plans;
Principal Underwriter
<PAGE>
Location in
Prospectus or
Statement of
Additional
Form N-1A Item Number and Caption Information
- --------------------------------- -----------
22. Calculation of Performance Data Statement of
Additional Information -
Investment Results
23. Financial Statements Statement of
Additional Information -
Financial
Statements
<PAGE>
PART A
PIONEER MICRO-CAP FUND
PROSPECTUS
<PAGE>
[PIONEER LOGO]
Pioneer
Micro-Cap
Fund
Class A and Class B Shares
Prospectus
March 30, 1998
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 of
companies with a market capitalization of $300 million or less ("micro-cap
companies"). 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-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
1998, as supplemented or revised from time to time, 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. Other information about the Fund has been filed with the
Securities and Exchange Commission (the "SEC") and is available upon request
and without charge by calling 1-800-225-6292 or through the SEC's Internet
website (http://www.sec.gov).
TABLE OF CONTENTS PAGE
- ------------------------------------------------------------------------
I. EXPENSE INFORMATION .................................. 2
II. FINANCIAL HIGHLIGHTS ................................. 3
III. INVESTMENT OBJECTIVE AND POLICIES .................... 4
IV. MANAGEMENT OF THE FUND ............................... 5
V. FUND SHARE ALTERNATIVES .............................. 6
VI. SHARE PRICE .......................................... 6
VII. HOW TO BUY FUND SHARES ............................... 6
VIII. HOW TO SELL FUND SHARES .............................. 9
IX. HOW TO EXCHANGE FUND SHARES .......................... 10
X. DISTRIBUTION PLANS ................................... 11
XI. DIVIDENDS, DISTRIBUTIONS AND TAXATION ................ 11
XII. SHAREHOLDER SERVICES ................................. 12
Account and Confirmation Statements ................. 12
Additional Investments .............................. 12
Financial Reports and Tax Information ............... 12
Distribution Options ................................ 12
Direct Deposit ...................................... 13
Voluntary Tax Withholding ........................... 13
Telephone Transactions .............................. 13
FactFoneSM .......................................... 13
Retirement Plans .................................... 13
Telecommunications Device for the Deaf (TDD) ........ 13
Systematic Withdrawal Plans ......................... 13
XIII. THE FUND ............................................. 14
XIV. INVESTMENT RESULTS ................................... 14
APPENDIX--CERTAIN INVESTMENT PRACTICES ............... 14
--------------------
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
<PAGE>
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 based on actual expenses incurred 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(1) 4.00%
Redemption fee(2) ............................... None None
Exchange fee .................................... None None
Annual Operating Expenses+3
(as a percentage of average net assets):
Management fee .................................. 1.10% 1.10%
12b-1 fees ...................................... 0.23% 1.00%
Other expenses (including accounting and transfer
agent fees, custodian fees and printing
expenses)(4) .................................. 0.39% 0.35%
----- -----
Total Operating Expenses: ....................... 1.72% 2.45%
===== =====
- --------------------
(1) Purchases of $1 million or more and purchases by participants in certain
group plans are not subject to an initial sales charge but may be subject
to a contingent deferred sales charge ("CDSC") as further described under
"How to Sell Fund Shares."
(2) Separate fees (currently $10 and $20, respectively) apply to United States
("U.S.") and international wire transfers of redemption proceeds.
(3) Management fee and other expenses have been restated to reflect the
termination of a management fee waiver and expense reimbursement by
Pioneering Management Corporation ("PMC") in effect during the fiscal year
ended November 30, 1997.
(4) Expenses are net amounts paid in connection with certain expense offset
arrangements. See "Financial Highlights."
+ Annualized
Example:
You would pay the following expenses on a $1,000 investment, with or
without redemption at the end of each time period, assuming 5% annual return,
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 5 Years 10 Years
Class A Shares .................... $74 $109 $145 $249
Class B Shares*
- --Assuming complete redemption
at end of period ................ $65 $106 $151 $261
- --Assuming no redemption .......... $25 $ 76 $131 $261
- --------------------
* 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, Rule 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.
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."
2
<PAGE>
II. FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP,
independent public accountants. Arthur Andersen LLP's report on the Fund's
financial statements as of November 30, 1997 appears in the Fund's Annual
Report which is incorporated by reference in the Fund's Statement of Additional
Information. The information listed below should be read in conjunction with
those financial statements. The Annual Report includes more information about
the Fund's performance and is available free of charge by calling Shareholder
Services at 1-800-225-6292.
Pioneer Micro-Cap Fund
Selected Data for a Class A Share Outstanding for the Period Presented:
<TABLE>
<CAPTION>
February 28, 1997
to November 30, 1997 (a)
-------------------------
<S> <C>
Net asset value, beginning of period ............................ $ 15.00
-------
Increase (decrease) from investment operations:
Net investment income (loss) ................................... $ (0.07)
Net realized and unrealized gain (loss) on investments ......... $ 2.91
-------
Net increase (decrease) 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 income (loss) to average net assets ..... (0.60)%**+
Portfolio turnover rate ......................................... 55%**
Average brokerage commission per share .......................... $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 income (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 income (loss) ................................ (0.54)%**
</TABLE>
Selected Data for a Class B Share Outstanding for the Period Presented:
<TABLE>
<CAPTION>
February 28, 1997
to November 30, 1997(a)
------------------------
<S> <C>
Net asset value, beginning of period ............................ $ 15.00
-------
Increase (decrease) from investment operations:
Net investment income (loss) ................................... $ (0.16)
Net realized and unrealized gain (loss) on investments ......... $ 2.93
-------
Net increase (decrease) 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 income (loss) to average net assets ..... (1.32)%**+
Portfolio turnover rate ......................................... 55%**
Average brokerage commission per share .......................... $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 reduction for fees paid indirectly:
Net expenses ................................................ 2.81%**
Net investment income (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 income (loss) ................................ (1.26)%**
</TABLE>
- ---------
(a) The per share data 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 all 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.
3
<PAGE>
III. 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 (such as convertible
bonds and preferred stock) of micro-cap companies with a market capitalization
of $300 million or less determined at the time the security is purchased. The
typical capitalization of issuers of securities purchased by the Fund is
expected to be approximately $175 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 databases, 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. Up to 5% of the
Fund's assets may be invested in securities that are rated below investment
grade (i.e., Ba and below by Moody's Investors Service, Inc. or BB and below by
Standard & Poor's Ratings Group, or their equivalents). For a description of
the ratings, see the Statement of Additional Information.
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. See
"Financial Highlights" for actual turnover rates. 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.
Not more than 5% of the Fund's assets may be invested in foreign
securities, provided that purchases of Canadian securities are not subject to
the limitations in this paragraph. Investments in foreign securities may be
subject to risks including, but not limited to, foreign taxes and restrictions,
illiquidity and fluctuations in currency values. In addition, the financial
information available on issuers of foreign debt securities is frequently not
as accurate or complete as would be available for a comparable domestic issuer.
See "Investment Policies and Restrictions" in the Statement of Additional
Information.
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 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
4
<PAGE>
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.
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.
IV. MANAGEMENT OF THE FUND
The Board of Trustees of the Fund has overall responsibility for
management and supervision of the Fund. 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 name 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. 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 and the Fund, since the Fund's
inception. Mr. Taussig joined PMC in 1991 and has 14 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 the SEC, state or
blue sky securities agencies 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
Investment Company Act of 1940, as amended (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. The Fund also pays 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. See "Expense Information" in the Prospectus and "Investment Adviser"
in the Statement of Additional Information.
5
<PAGE>
John F. Cogan, Jr., Chairman and President of the Fund, President and a
Director of PGI and Chairman and a Director of PMC and PFD, owned approximately
14% of the outstanding capital stock of PGI as of the date of this Prospectus.
Certain information technology experts currently predict the possibility
of a widespread failure of computer systems and certain other equipment which
will be triggered on or after certain dates--primarily January 1, 2000--due to
a systemic inability to process date-related information. This scenario,
commonly known as the "Year 2000 Problem," could have an adverse impact on
individuals and businesses, including the Fund and other mutual funds and
financial organizations. PMC and its affiliates are taking steps believed to be
adequate to address the Year 2000 Problem with respect to the systems and
equipment controlled by the Fund's investment adviser, broker-dealer and
transfer agent. In addition, other entities providing services to the Fund and
its shareholders are being asked to provide assurances that they have
undertaken similar measures with respect to their systems and equipment. There
can be no assurance that these steps will be sufficient to avoid any adverse
impact on the Fund.
V. 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.
Class A Shares. If you invest less than $1 million in Class A shares, you
will pay an initial sales charge. Certain purchases may qualify for reduced
initial sales charges. If you invest $1 million or more in Class A shares, no
sales charge will be imposed at the time of purchase; however, shares redeemed
within 12 months of purchase may be subject to a CDSC. 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 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. If you are making an investment that
qualifies for reduced sales charges, you might consider Class A shares. If you
prefer not to pay an initial sales charge on an investment of $250,000 or less
and you plan to hold the investment for at least six years, you might consider
Class B shares. 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 may be
exchanged only for shares of the same Class of another Pioneer mutual fund, and
shares acquired in the exchange will continue to be subject to any CDSC
applicable to the shares of the Pioneer mutual fund originally purchased.
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.
VI. 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. Securities quoted
in foreign currencies are converted to U.S. dollars utilizing foreign exchange
rates employed by the Fund's independent pricing services. Generally, trading
in securities on foreign exchanges is substantially completed each day at
various times prior to the close of regular trading on the Exchange. The values
of such securities used in computing the net asset value of the Fund's shares
are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of regular trading on the Exchange.
Occasionally, events which affect the values of such securities and such
exchange rates may occur between the times at which they are determined and the
close of regular trading on the Exchange and will therefore not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
are valued at their fair value as determined in good faith in accordance with
procedures approved by the Trustees. 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.
VII. 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
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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 Individual Retirement Accounts
("IRAs"). 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. 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 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 Pioneer mutual 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 telephone
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 receipt of a telephone
purchase instruction and receipt of good funds (usually three days after the
purchase instruction). See "Telephone Transactions" for additional information.
Class A Shares
You may buy Class A shares at the public offering price, including a sales
charge, as follows.
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 but less than $1 million 2.00 2.04 1.75
$1 million or more -0- -0- see below
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 Internal Revenue Code of 1986, as amended ("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 funds domiciled outside the U.S., but which are managed by
affiliates of PMC, may be included for this purpose.
No sales charge is payable at the time of purchase on Class A share
investments of $1 million or more subject to a CDSC of 1% which may be imposed
in the event of a redemption of such shares within 12 months of purchase. See
"How to Sell Fund Shares." PFD may, in its discretion, pay a commission to
broker-dealers who initiate and are responsible for such purchases as follows:
1% on the first $5 million invested; 0.50% on the next $45 million; and 0.25%
on the excess over $50 million. These commissions will not be paid if the
purchaser is affiliated with the broker-dealer or if the purchase represents
the reinvestment of a redemption made during the previous 12 calendar months.
In connection with PGI's acquisition of Mutual of Omaha Fund Management
Company and contingent upon the achievement of certain sales objectives, PFD
may pay 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 time to time, PFD may 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.
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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 are available for purchases of $50,000 or more of
Class A shares (excluding any reinvestments of dividends and capital gains
distributions) made within a 13-month period pursuant to a Letter of Intent
("LOI") which may be established by completing the Letter of Intent section of
the Account Application. The reduced sales charge will be the charge that would
be applicable to the purchase of the specified amount of Class A shares as if
the shares had all been purchased at the same time. A purchase not made
pursuant to an LOI may be included if the LOI is submitted to PSC within 90
days of such purchase. You may also obtain the reduced sales charge by
including the value (at current offering price) of all your Class A shares in
the Fund and all other Pioneer mutual funds held of record as of the date of
your LOI in the amount used to determine the applicable sales charge for the
Class A shares to be purchased under the LOI. Five percent of your total
intended purchase amount will be held in escrow by PSC, registered in your
name, until the terms of the LOI are fulfilled.
You are not obligated to purchase the amount specified in your LOI. If,
however, the amount actually purchased during the 13-month period is more or
less than that indicated in your LOI, an adjustment in the sales charge will be
made. If a payment to cover actual sales charges is due, it must be paid to PFD
within 20 days after PFD or your dealer sends you a written request; otherwise
PFD will direct PSC to liquidate sufficient shares from your escrow account to
cover the amount due. See the Statement of Additional Information for more
information.
Class B Shares
You may buy Class B shares at the net asset value per share next computed
after receipt of a purchase order 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 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 availability of a ruling from the Internal Revenue Service (the
"IRS"), 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 or such an opinion 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
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<PAGE>
reduced for non-retirement accounts if: (a) the redemption results from the
death of all registered owners of an account (in the case of an UGMA, an UTMA
or a trust account, 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 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 701/2 may
exceed the 10% limit only if the distribution amount is based on assets held in
Pioneer mutual funds); (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 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 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.
VIII. 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.
[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 in good order less any applicable CDSC. Sale proceeds
generally will be sent to you by check, bank wire or electronic funds transfer,
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 applies:
[bullet] you wish to sell over $100,000 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, PSC 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 fac-
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<PAGE>
simile ("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 $100,000 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 predesignated 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" 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.
CDSC on Class A Shares. Purchases of Class A shares of $1 million or more
which were not subject to an initial sales charge, may be subject to a CDSC
upon redemption. A CDSC is payable to PFD on these investments in the event of
a share redemption within 12 months following the share purchase, at the rate
of 1% of the lesser of the value of the shares redeemed (exclusive of
reinvested dividend and capital gain distributions) or the total cost of such
shares. Shares subject to the CDSC which are exchanged into another Pioneer
mutual fund will continue to be subject to the CDSC until the original 12-month
period expires.
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.
IX. 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. 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 indicate 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 FactFoneSM, will be recorded. You are strongly urged to consult with your
financial representative prior to requesting a telephone exchange. See
"Telephone Transactions" 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 mutual fund account opened 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
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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.
X. 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 are accrued daily; 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
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 sales 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.
XI. DIVIDENDS, DISTRIBUTIONS AND TAXATION
The Fund has elected to be treated, and has qualified, and intends to
continue 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 ordinary
11
<PAGE>
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, usually 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 other 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. The Fund's distributions of long-term capital gains
to individuals or other noncorporate taxpayers are subject to different maximum
tax rates (which will be indicated in the annual tax information the Fund
provides to shareholders), depending generally upon the sources of, and the
Fund's holding period for the assets that produce, the 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 to shareholders 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 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, including the effect of recent federal tax legislation, in
their particular circumstances.
XII. 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 Shareholder Services, 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 the
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.
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
12
<PAGE>
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
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 mutual fund shareholders by dialing 1-800-225-4321.
FactFone(SM) allows you to obtain current information on your Pioneer mutual
fund 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 mutual fund accounts if you have activated your 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." 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").
You should contact the Retirement Plans Department of PSC at
1-800-622-0176 for information relating to tax-deferred retirement plans for
individuals, businesses and tax-exempt organizations. The Account Application
accompanying this Prospectus should not be used to establish an IRA account. A
separate application is required.
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
payments 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
13
<PAGE>
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.
XIII. 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 less any
applicable CDSC. 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.
XIV. 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 each Class 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 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.
14
<PAGE>
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 1940 Act.
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.
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.
15
<PAGE>
[PIONEER LOGO]
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 M. TAUSSIG, 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.
0398-4970
[Copyright] 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
Visit our website:....................................... www.pioneerfunds.com
<PAGE>
PART B
PIONEER MICRO-CAP FUND
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
PIONEER MICRO-CAP FUND
60 State Street
Boston, Massachusetts 02109
STATEMENT OF ADDITIONAL INFORMATION
CLASS A AND CLASS B SHARES
March 30, 1998
This Statement of Additional Information is not a Prospectus , but should be
read in conjunction with the Prospectus, dated March 30, 1998 (the "Prospectus)
of the Pioneer Micro-Cap Fund (the "Fund"), as amended and/or supplemented from
time to TIME. 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 the Fund at 60
State Street, Boston, Massachusetts 02109. The most recent Annual Report to
Shareholders is attached to this Statement of Additional Information and is
hereby incorporated in this Statement of Additional Information by reference.
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.................................................... 18
11. Description of Shares......................................... 21
12. Certain Liabilities........................................... 21
13. Letter of Intent.............................................. 22
14. Systematic Withdrawal Plan.................................... 23
15. Determination of Net Asset Value.............................. 23
16. Investment Results............................................ 24
17. Financial Statements.......................................... 26
Appendix A - Description of Short-Term Debt and
Corporate Bond Ratings............................... 27
Appendix B - Performance Statistics...................... 38
Appendix C - Other Pioneer Information................... 46
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 Prospectus presents the investment objective 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. This Statement
of Additional Information should be read in conjunction with the Prospectus.
Capitalized terms not otherwise defined herein have the meaning given to them in
the Prospectus.
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 objective and policies.
LENDING OF PORTFOLIO SECURITIES
The Fund may lend portfolio securities to member firms of the Exchange under
agreements which would require that the loans be secured continuously by
collateral in cash, cash equivalents or 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.
LOWER-RATED DEBT SECURITIES AND ASSOCIATED RISKS
As described in the Prospectus, the Fund may make a variety of
investments, including corporate debt obligations of companies which may be
unrated or rated in the lowest rating categories by Standard & Poor's Ratings
Group ("Standard & Poor's") or by Moody's Investor Services, Inc. ("Moody's")
(i.e., ratings of BB or lower by Standard & Poor's or Ba or lower by Moody's).
Bonds rated BB or Ba or below (or comparable unrated securities) are commonly
referred to as "junk bonds" and are considered speculative and may be
questionable as to principal and interest payments. In some cases, such bonds
may be highly speculative, have poor prospects for reaching investment standing
and be in default. As a result, investment in such bonds will entail greater
speculative risks than those associated with investment in investment-grade
bonds (i.e., bonds rated BBB or better by Standard & Poor's or Baa or better by
Moody's). The Fund will limit its investment in non-investment grade corporate
debt obligations, and comparable unrated debt obligations, to less than 5% of
its net assets. See Appendix A for a description of the ratings issued by
investment rating services.
The amount of junk bond securities outstanding has proliferated in
conjunction with the increase in merger and acquisition and leveraged buyout
activity. An economic downturn could severely affect the ability of highly
leveraged issuers to service their debt obligations or to repay their
obligations upon maturity. Factors having an adverse impact on the market value
of lower rated securities will have an adverse effect on the Fund's net asset
value to the extent it invests in such securities. In addition, the Fund may
incur additional expenses to the extent it is required to seek recovery upon a
default in payment of principal or interest on its portfolio holdings.
The secondary market for junk bond securities, which is concentrated in
relatively few market makers, may not be as liquid as the secondary market for
more highly rated securities, a factor which may have an adverse effect on the
Fund's ability to dispose of a particular security when necessary to meet its
liquidity needs. Under adverse market or economic conditions, the secondary
market for junk bond securities could contract further, independent of any
specific adverse changes in the condition of a particular issuer. As a result,
Pioneering Management Corporation ("PMC"), the Fund's investment adviser, could
find it more difficult to sell these securities or may be able to sell the
securities only at prices lower than if such securities were widely traded.
Prices realized upon the sale of such lower rated or unrated securities, under
these circumstances, may be less than the prices used in calculating the Fund's
net asset value.
Proposed federal laws designed to limit the use, or tax and other
advantages, of junk bond securities could adversely affect the Fund's net asset
value to the extent that the Fund invests in lower-rated debt securities. Such
proposals could also adversely affect the secondary market for junk bond
securities, the financial condition of issuers of these securities and the value
of outstanding junk bond securities.
Since investors generally perceive that there are greater risks
associated with the medium to lower rated securities of the type in which the
Fund may invest, the yields and prices of such securities may tend to fluctuate
more than those for higher rated securities. In the lower quality segments of
the fixed-income securities market, changes in perceptions of issuers'
creditworthiness tend to occur more frequently and in a more pronounced manner
than do changes in higher quality segments of the fixed-income securities market
resulting in greater yield and price volatility.
Another factor which causes fluctuations in the prices of fixed-income
securities is the supply and demand for similarly rated securities. In addition,
the prices of fixed-income securities fluctuate in response to the general level
of interest rates. Fluctuations in the prices of portfolio securities subsequent
to their acquisition will not affect cash income from such securities but will
be reflected in the Fund's net asset value.
Medium to lower rated and comparable unrated securities tend to offer higher
yields than higher rated securities with the same maturities because the
historical financial condition of the issuers of such securities may not have
been as strong as that of other issuers. Since medium to lower rated securities
generally involve greater risks of loss of income and principal than higher
rated securities, investors should consider carefully the relative risks
associated with investment in securities which carry medium to lower ratings and
in comparable unrated securities. In addition to the risk of default, there are
the related costs of recovery on defaulted issues. PMC will attempt to reduce
these risks through diversification of the Fund's portfolio and by analysis of
each issuer and its ability to make timely payments of income and principal, as
well as broad economic trends in corporate developments.
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. REAL ESTATE INVESTMENT TRUSTS
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 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 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 S&P 500.
INVESTMENT IN FOREIGN SECURITIES
The Fund may invest up to 5% of its net assets in securities of foreign issuers,
provided that purchases of Canadian securities are not subject to the
limitations in this paragraph. Such investments involve certain risks which are
not typically associated with investing in securities of U.S. companies. Foreign
companies are not subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to U.S. companies.
There may also be less government supervision and regulation of foreign
securities exchanges, brokers and listed companies than exists in the United
States. Interest and dividends, or in some cases capital gains, from foreign
investments may be subject to withholding or other foreign taxes which will
decrease the net return on such investments as compared to the income or return
of the Fund from investments issued by the U.S. government or by U.S. companies.
In addition, the value of securities denominated or quoted in international
currencies may also be adversely affected by fluctuations in the relative rates
of exchange between the currencies of different nations and exchange control
regulations. To the extent that the Fund has invested in foreign securities, the
Fund's investment performance may be affected, either positively or negatively,
by currency exchange rates because the U.S. dollar value of securities
denominated or quoted in another currency will increase or decrease in response
to changes in the value of such currency in relation to the U.S. dollar. There
may be less publicly available information about foreign companies compared to
reports and ratings published about U.S. companies. Foreign securities markets
have substantially less trading volume than U.S. markets and securities of some
foreign companies are less liquid and more volatile than securities of
comparable U.S. companies. Transaction costs on foreign securities exchanges are
generally higher than in the United States.
In addition, there may be the possibility of expropriation, confiscatory
taxation, political, economic or social instability, or diplomatic developments
which could affect assets of the Fund invested in foreign securities. PMC will
take these and other factors into consideration in managing the Fund's
investments.
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 in a regulated
market which is open to the public. Currently, options on stock indices are
traded on national securities exchanges or over the counter, both in the U.S.
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.
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 its 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 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.
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 such futures contracts. The Fund may also enter into closing purchase
and sale transactions with respect to such futures contracts and options. The
futures contracts may be based on various securities in which the Fund may
invest, securities indices that are 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 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 its 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.
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 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 Code
for maintaining its qualification as a regulated investment company for federal
income tax purposes.
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, 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 no 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 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 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 an
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 SEC, 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 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 SEC 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.
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"); Pioneer Real
Estate Advisors, Inc., Pioneer Forest, Inc., Pioneer Explorer, Inc., Pioneer
Management (Ireland) Ltd. ("PMIL") and Closed Joint Stock Company
"Forest-Starma"; President and Director of 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
First Polish Trust Fund Joint Stock Company, S.A. and Pioneer Czech Investment
Company, A.S.; Chairman, President and Trustee of all of the Pioneer mutual
funds; Director of Pioneer Global Equity Fund Plc, Pioneer Global Bond Fund Plc,
Pioneer DM Cashfonds Plc, Pioneer European Equity Fund Plc, Pioneer Central &
Eastern Europe Fund Plc and Pioneer U.S. Real Estate Fund Plc; and Partner, Hale
and Dorr LLP (counsel to PGI and the Fund).
MARY K. BUSH, TRUSTEE, DOB: APRIL 1948
4201 CATHEDRAL AVENUE, NW, WASHINGTON, DC 20016
President, Bush & Co., an international financial advisory firm;
Director and Trustee of Mortgage Guaranty Insurance Corporation, Novecon
Management Company, Hoover Institution, Folger Shakespeare Library, March of
Dimes, Project 2000, Inc. (a not-for-profit educational organization), Small
Enterprise Assistance Fund and Wilberforce University; Advisory Board Member,
Washington Mutual Investors Fund, a registered investment company; and Trustee
of all the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
RICHARD H. EGDAHL, M.D., TRUSTEE, DOB: DECEMBER 1926
BOSTON UNIVERSITY HEALTH POLICY INSTITUTE, 53 BAY STATE ROAD, 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 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, The 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 and Associate
Dean, Boston University School of Management from 1989 to 1993; and Trustee of
all 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, George Washington University; Director, American
Productivity and Quality Center; Adjunct Scholar, American Enterprise Institute;
Economic Consultant; and Trustee of all of the Pioneer mutual funds, except
Pioneer Variable Contracts Trust.
MARGUERITE A. PIRET, TRUSTEE, DOB: MAY 1948
ONE BOSTON PLACE, SUITE 2635, BOSTON, MA 02108
President, Newbury, Piret & Company, Inc. (merchant banking firm);
Trustee of Boston Medical Center; Member of the Board of Governors of the
Investment Company Institute; 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, PIntl, First
Russia, Omega, Pioneer SBIC Corporation ("Pioneer SBIC"), PMIL, Pioneer Global
Equity Fund Plc, Pioneer Global Bond Fund Plc, Pioneer DM Cashfonds Plc, Pioneer
European Equity Fund Plc, Pioneer Central and Eastern Europe Fund Plc and
Pioneer U.S. Real Estate Fund Plc; 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
Of counsel to 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. (energy sales, services and distribution); and Trustee of
all of the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
WILLIAM M. TAUSSIG, VICE PRESIDENT, DOB: AUGUST 1952
Vice President of PMC.
WILLIAM H. KEOUGH, TREASURER, DOB: APRIL 1937
Senior Vice President, Chief Financial Officer and Treasurer of PGI;
Treasurer of PFD, PMC, PSC, PCC, PIntl, PMT, PGL, First Russia, Omega and
Pioneer SBIC; and Treasurer of all of the Pioneer mutual funds.
JOSEPH P. BARRI, SECRETARY, DOB: AUGUST 1946
Corporate Secretary of PGI and most of its subsidiaries; Secretary of
all of the Pioneer mutual funds; and Partner, Hale and Dorr LLP.
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 junior partner of Hale and Dorr LLP
prior to 1995.
The Fund's Agreement and Declaration of Trust (the "Declaration") dated December
3, 1996, 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.
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 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 Independence 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 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 ten 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.
- ------------------------------------
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 as of t date of this Statement of
Additional Information, except Mr. Cogan who then owned approximately 14% of
such shares. At February 28, 1998, the Trustees and officers of the Fund owned
in the aggregate, less than 1% of the outstanding securities of the Fund. As of
such date, Merrill Lynch Pierce Fenner & Smith for the sole benefit of its
customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246-6484 owned
approximately 7.90% (265,032 shares) of the outstanding Class A shares of the
Fund and approximately 18.51% (860,394 shares) of the outstanding Class B shares
of the Fund.
<PAGE>
COMPENSATION OF OFFICERS AND TRUSTEES
The Fund pays no salaries or compensation to any of its officers, however, the
Fund pays an annual trustees' fee to each Trustee who is not affiliated with
PGI, PMC, PFD or PSC consisting of two components: (a) a base fee of $500 and
(b) a variable fee, calculated on the basis of the Fund's average net assets of
the Fund. In addition, the Fund pays a per meeting fee of $100 to each Trustee
who is not affiliated with PGI, PMC, PFD or PSC and pays an annual Trustee's fee
of $500 plus expenses to each Trustee affiliated with PGI, PMC, PFD and PSC. The
Fund also pays an annual committee participation fee to each Trustee who serves
as a member of any committees established to act on behalf of one or more of the
of Pioneer mutual funds. Committee fees are allocated to the Fund on the basis
of the Fund's average net assets. Each Trustee who is a member of the Audit
Committee for the Pioneer mutual funds receives an annual fee equal to 10% of
the aggregate annual trustees' fee, except the Committee Chairperson who
receives an annual trustees' fee equal to 20% of the aggregate annual trustees'
fee. Members of the Pricing Committee for the Pioneer mutual funds, as well as
any other committee which renders material functional services to the Boards of
Trustees for the Pioneer mutual funds, receives an annual fee equal to 5% of the
annual trustees' fee, except the Committee Chairperson who receives an annual
trustees' fee equal to 10% of the annual trustees' fee. Each Trustee who is not
affiliated with PGI, PMC, PFD or PSC also receives $375 per meeting for
attendance at meetings of the Non-Interested Trustees Committee, except for the
Committee Chairperson who will receive an additional $375 per meeting. Any such
fees paid to affiliated or interested persons of PGI, PMC, PFD or PSC 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:
Pension or
Retirement Total Compensation
Aggregate Benefits from Fund and Other
Compensation Accrued Part of Pioneer Mutual
Name of Trustee from the Fund* Fund Expenses Funds**
John F. Cogan, Jr. $ 333 $ 0 $ 12,000
Mary K. Bush 740 0 30,000
Richard H. Egdahl, M.D. 1,177 0 62,000
Margaret B.W. Graham 1,177 0 60,000
John W. Kendrick 1,177 0 55,800
Marguerite A. Piret 1,337 0 80,000
David D. Tripple 333 0 12,000
Stephen K. West 1,251 0 63,800
John Winthrop 1,319 0 69,000
TOTAL $ 8,844 0 $444,600
- ------------------------------------------------------------------------------
* For the period ended November 30, 1997.
** For the calendar year ended December 31, 1997
3. INVESTMENT ADVISER
The Fund has contracted with PMC, 60 State Street, Boston, Massachusetts, 02109
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) cast in person at a meeting called for the purpose of
voting on such renewal. The contract terminates if assigned and may be
terminated without penalty by either party upon 60 days' written notice by vote
of the Board of Directors or Trustees or a majority of the Fund's outstanding
voting securities. Pursuant to the management contract, PMC will not be liable
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 the
Fund's average daily net assets. The fee is normally computed and accrued daily
and paid monthly.
PMC has agreed not to impose all or a portion of its 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 revised or terminated at any time by PMC. See "Expense
Information" in the Prospectus.
During the period of February 28, 1997 (commencement of operations) through
November 30, 1997, the Fund incurred management fees to PMC of $407,068. If
PMC's fee reduction and expense limitation had not been in effect, the Fund
would have incurred management fees of $592,206 for the period.
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 distribution plan (discussed below). 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 plans 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 Class A
shares of the Fund. 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 shares.
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
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 with respect to Class B shares of
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
"Distribution 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 Plans 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 the Fund and its 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.
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 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).
During the period February 28, 1997 (commencement of operations) through
November 30,, 1997, the Fund incurred total distribution fees of $54,056 and
$303,301 pursuant to the Fund's Class A Plan and Class B Plan, respectively.
Redemptions of each Class of shares may be subject to a CDSC. A CDSC of 1.00%
may be imposed on certain net asset purchases of Class A shares that are
redeemed within one year of purchase. 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. See " How
to Buy Fund Shares" in the Prospectus. During the period February 28, 1997
(commencement of operations) through November 30, 1997, CDSCs in the amount of
$39,681 were paid to PFD. Such CDSCs are paid to PFD in reimbursement of
expenses related to servicing of shareholders accounts and compensation paid to
dealers and sales personnel.
5. SHAREHOLDER SERVICING/TRANSFER AGENT
The Fund has contracted with PSC, 60 State Street, Boston, Massachusetts 02109,
to act as shareholder servicing and transfer agent for the Fund. This contract
may be terminated without penalty by either party upon 90 days' written notice.
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 and 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. 40 Water Street, Boston, Massachusetts 02109, is
the custodian (the "Custodian") of the Fund's assets. The Custodian's
responsibilities include safekeeping and controlling the Fund's cash and
securities in the U.S. as well as in foreign countries, handling the receipt and
delivery of securities, and collecting interest and dividends on the Fund's
investments. The Custodian fulfills its function in foreign countries through a
network of subcustodian banks located around the world.
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 in the U.S. or in recognized
central depositories in foreign countries.
7. PRINCIPAL UNDERWRITER
PFD, 60 State Street, Boston, Massachusetts 02109, 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. During the period February 28, 1997
(commencement of operations) through November 30, 1997, net underwriting
commissions retained by PFD in connection with its offering of the Class A
shares of the Fund were $155,470. Commissions reallowed to dealers by PFD in
such period were $1,903,050. See "Underwriting Agreement and Distribution Plans"
above for a description of the terms of the Underwriting Agreement with PFD.
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 an acquisition of portfolio
securities or a merger or other reorganization.
8. INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, 225 Franklin Street, Boston, Massachusetts 02110, 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 SEC.
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 broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any broker-dealer spreads.
PMC may select broker-dealers which provide brokerage and/or research services
to the Fund and/or other investment companies or other accounts 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 and other investment companies or
other accounts 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. As such, securities may 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 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.
For the period from February 28, 1997 through November 30, 1997, the Fund paid
or accrued aggregate brokerage and underwriting commissions of $246,192.
10. TAX STATUS
It is the Fund's policy to meet the requirements of Subchapter M of 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
distribution of its income to shareholders. If the Fund meets all such
requirements and distributes to its shareholders, in accordance with the Code's
timing requirements, all investment company taxable income and net capital gain,
if any, which it earns, the Fund will be relieved of the necessity of paying
federal income tax.
In order to qualify as a regulated investment company 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 or securities or
foreign currencies 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") 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, and
certain net foreign exchange gains, are taxable as ordinary income, whether
received in cash or reinvested in additional shares. Dividends from net
long-term capital gain in excess of net short-term capital loss ("net capital
gain"), if any, whether received in cash or reinvested in additional shares, are
taxable to the Fund's shareholders as capital gains for federal income tax
purposes without regard to the length of time shares of the Fund have been held.
As a result of the enactment of the Taxpayer Relief Act of 1997 (the "1997 TRA")
on August 5, 1997, gain recognized after May 6, 1997 from the sale of a capital
asset is taxable to individual (noncorporate) investors at different maximum
federal income tax rates, depending generally upon the tax holding period for
the asset, the federal income tax bracket of the taxpayer, and the dates the
asset was acquired and/or sold. The Treasury Department has issued guidance
under the 1997 TRA that (subject to possible modification by future "technical
corrections" legislation) enables the Fund to pass through to its shareholders
the benefits of the capital gains tax rates enacted in the 1997 TRA. The Fund
will provide appropriate information to its shareholders about its
distributions, including the tax rate(s) applicable to its distributions from
long-term capital gains, in accordance with this and any future guidance.
Shareholders should consult their own tax advisers on the correct application of
these new rules in their particular circumstances.
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 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 for any year to offset net capital gains, if any, during the eight
years following the year of the loss. To the extent subsequent capital gains are
offset by such losses, they would not result in federal income tax liability to
the Fund and therefore 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 may be attributable to realized or unrealized appreciation in the Fund's
portfolio or undistributed taxable income of the Fund. Consequently, subsequent
distributions by the Fund on these shares 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 economically represent a return of a portion of the
investment.
Redemptions and exchanges are taxable events for shareholders that are subject
to tax. Shareholders should consult their own tax advisers with reference to
their individual circumstances to determine whether any particular transaction
in Fund shares is properly treated as a sale for tax purposes, as the following
discussion assumes, and the character of and tax rate applicable to any gains or
losses recognized in such transactions under the new rate structure enacted in
the 1997 TRA. Any loss realized by a shareholder upon the redemption, exchange
or other disposition 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 in the Fund at net asset value
pursuant to the exchange privilege, 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
redemptions or other dispositions of shares may be disallowed under "wash sale"
rules in the event of other investments in the Fund (including those made
pursuant to reinvestment of dividends and/or capital gain distributions) within
a period of 61 days beginning 30 days before and ending 30 days after a
redemption or other disposition 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 indices may cause the Fund to recognize gains
or losses from marking-to-market even though such options may not have lapsed,
been closed out, or exercised or such futures 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. Additionally, the Fund may be required to recognize gain
if an option, futures contract or other transaction that is not subject to the
mark to market rules is treated as a "constructive sale" of an "appreciated
financial position" held by the Fund under Section 1259 of the Code. Any net
mark to market gains and/or gains from constructive sales may also have to be
distributed to satisfy the distribution requirements referred to above even
though no corresponding cash amounts may concurrently be received, possibly
requiring the disposition of portfolio securities or borrowing to obtain the
necessary cash. Losses on certain options or futures contracts 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 or
futures 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.
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. 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) extending before and after each dividend
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, and, to the extent such basis would be
reduced below zero, current recognition of income may be required. 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 or otherwise incur debt attributable to 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
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
foreign currencies, or payables or receivables denominated in a foreign currency
are subject to Section 988 of the Code, which generally causes such gains and
losses to be treated as ordinary income and losses and may affect the amount,
timing and character of distributions to shareholders. Under future regulations,
any transactions in foreign currencies that are not directly related to the
Fund's investments in stock or securities (or its options or futures contracts
with respect to stock or securities) may need to be limited in order to enable
the Fund to satisfy the 90% income test. If the net foreign exchange loss for a
year were to exceed the Fund's investment company taxable income (computed
without regard to such loss), the resulting ordinary loss for such year would
not be deductible by the Fund or its shareholders in future years.
The Fund may invest in debt obligations that are in the lowest rating categories
or are unrated, including debt obligations of issuers not currently paying
interest or who are in default. Investments in debt obligations that are at risk
of or in default present special tax issues for the Fund. Tax rules are not
entirely clear about issues such as when the Fund may cease to accrue interest,
original issue discount, or market discount, when and to what extent deductions
may be taken for bad debts or worthless securities, how payments received on
obligations in default should be allocated between principal and income, and
whether exchanges of debt obligations in a workout context are taxable. These
and other issues will be addressed by the Fund, in the evet it invests in such
securities, in order to seek to ensure that it distributes sufficient income to
preserve its status as a regulated investment company and does not become
subject to federal income or excise tax.
If the Fund acquires any equity interest (under proposed regulations, generally
including not only stock but also an option to acquire stock such as is inherent
in a convertible bond) in certain foreign corporations that receive at least 75%
of their annual gross income from passive sources (such as interest, dividends,
certain rents and royalties, or capital gains) or hold at least 50% of their
assets in investments producing such passive income ("passive foreign investment
companies"), the Fund could be subject to federal income tax and additional
interest charges on "excess distributions" received from such companies or gain
from the sale of stock in such companies, even if all income or gain actually
received by the Fund is timely distributed to its shareholders. The Fund would
not be able to pass through to its shareholders any credit or deduction for such
a tax. An election may generally be available that would ameliorate these
adverse tax consequences, but any such election could require the Fund to
recognize taxable income or gain (subject to tax distribution requirements)
without the concurrent receipt of cash. These investments could also result in
the treatment of associated capital gains as ordinary income. The Fund may limit
and/or manage its holdings in passive foreign investment companies to minimize
its tax liability or maximize its return from these investments.
The Fund may be subject to withholding and other taxes imposed by foreign
countries, including taxes on interest, dividends and capital gains, with
respect to its investments in those countries. Tax conventions between certain
countries and the U.S. may reduce or eliminate such taxes in some cases. The
Fund does not expect to satisfy the requirements for passing through to its
shareholders their pro rata shares of qualified foreign taxes paid by the Fund,
with the result that shareholders will not include such taxes in their gross
incomes and will not be entitled to a tax deduction or credit for such taxes on
their own tax returns.
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 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 continues to qualify 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 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% nonresident alien U.S. withholding tax (or non-resident alien
withholding tax at a lower treaty rate) on amounts treated as ordinary dividends
from the Fund and, unless an effective IRS Form W-8 or authorized substitute for
Form W-8 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 Declaration 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, 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 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. 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 shareholder of a
Delaware business trust shall be entitled to the same limitation of liability
extended to shareholders of private for-profit corporations. The Declaration
expressly provides that the Fund is organized under the Delaware Act and that
the Declaration 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 (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 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 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.
An LOI may, however, be used in connection with the purchases of shares of other
Pioneer mutual funds. See "How to Purchase Fund Shares - Letter of Intent" in
the Prospectus for more information.
An LOI may be established by completing the LOI 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. An LOI is not a binding
obligation upon the investor to purchase, or the Fund to sell, the full amount
indicated.
If the 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 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.
14. SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan ("SWP") is designed to provide a convenient
method of receiving fixed payments at regular intervals from the Fund by the
applicant under the 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
payments 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 the applicant. A designation of a third
party to receive payments subsequent to opening an account requires an
acceptable signature guarantee. Class B accounts must meet the minimum initial
investment requirement prior to establishing a SWP Withdrawals under a SWP 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 potentially taxable transactions
to shareholders. In addition, the amounts received 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 Exchange (normally 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, Martin Luther King,
Jr. 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 the result 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 (including 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 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 Exchange or the RUSSELL U.S. EQUITY INDEXES
or the WILSHIRE TOTAL MARKET VALUE INDEX , which are recognized unmanaged
indexes of broad based common stocks.
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, CONSUMER'S DIGEST, CONSUMER REPORTS, FINANCIAL
WORLD, FORBES, FORTUNE, INVESTORS BUSINESS DAILY, KIPLINGER'S PERSONAL FINANCE
MAGAZINE, MONEY MAGAZINE, THE 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 SYSTEMS, CDA/WIESENBERGER INVESTMENT COMPANIES SERVICE, DONOGHUE'S
MUTUAL FUND ALMANAC, INVESTMENT COMPANY DATA, INC., JOHNSON'S CHARTS, KANON
BLOCH CARRE & 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 Prospectus, this Statement of Additional
Information or in advertising are calculated by standard methods prescribed by
the SEC.
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:
n
P(1+T) = 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.
The average annual total returns for each Class of Fund shares as of November
30, 1997, are as follows:
Average Total Return (%)
Since Inception
Class A Shares 12.06%
Class B Shares 14.47%
*INCEPTION WAS FEBRUARY 28, 1997.
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 Cash Reserves Fund; and
o dividends and capital gains distributions on all Pioneer mutual
funds.
Yields are calculated in accordance with SEC 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 Cash Reserves Fund, which seeks to maintain 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 Fund's Annual Report, filed with the SEC on January 28, 1998 (Accession No.
0001025187-98-000003), is incorporated by reference into this Statement of
Additional Information. The financial statements therein, including the
financial highlights, for the period ended November 30, 1997, included or
incorporated by reference into the Prospectus and this Statement of Additional
Information, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
in reliance upon the authority of said firm as experts in accounting and
auditing in giving said report.
<PAGE>
APPENDIX A
DESCRIPTION OF SHORT-TERM DEBT AND CORPORATE BOND RATINGS1
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM PRIME RATING SYSTEM -
TAXABLE DEBT AND DEPOSITS GLOBALLY
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
Leading market positions in well-established industries. High rates of
return on funds employed.
Conservative capitalization structure with moderate reliance on debt
and ample asset protection. Broad margins in earnings coverage of fixed
financial charges and high internal cash generation. Well-established
access to a range of financial markets and assured sources of alternate
liquidity.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Obligations of a branch of a bank are considered to be domiciled in the country
in which the branch is located. Unless noted as an exception, Moody's rating on
a bank's ability to repay senior obligations extends only to branches located in
countries which carry a Moody's Sovereign Rating for Bank Deposits. Such branch
obligations are rated at the lower of the bank's rating or Moody's Sovereign
Rating for Bank Deposits for the country in which the branch is located.
When the currency in which an obligation is denominated is not the same as the
currency of the country in which the obligation is domiciled, Moody's ratings do
not incorporate an opinion as to whether payment of the obligation will be
affected by actions of the government controlling the currency of denomination.
In addition, risks associated with bilateral conflicts between an investor's
home country and either the issuer's home country or the country where an
issuer's branch is located are not incorporated into Moody's short-term debt
ratings.
If an issuer represents to Moody's that its short-term debt obligations are
supported by the credit of another entity or entities, then the name or names of
such supporting entity or entities are listed within the parenthesis beneath the
name of the issuer, or there is a footnote referring the reader to another page
for the name or names of the supporting entity or entities. In assigning ratings
to such issuers, Moody's evaluates the financial strength of the affiliated
corporations, commercial banks, insurance companies, foreign governments or
other entities, but only as one factor in the total rating assessment.
MOODY'S CORPORATE BOND RATINGS
AAA: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
NOTE: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicated that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicated
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
STANDARD & POOR'S SHORT-TERM ISSUE CREDIT RATINGS
A-1: A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B: A short-term obligation rated B is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C: A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
STANDARD & POOR'S CORPORATE BOND RATINGS
AAA: An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA: An obligation rated AA differs from the highest-rated obligations only in a
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to the
obligor's capacity to meet its financial commitment on the obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial or economic conditions, the obligor is not likely to
have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.
D: An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments are jeopardized.
PLUS (+) OR MINUS (-): The rating from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major categories.
R: This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk, such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
<PAGE>
APPENDIX B
PERFORMANCE STATISTICS
PIONEER MICRO-CAP FUND
CLASS A SHARES
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NET ASSET INITIAL NET
INITIAL OFFERING SALES CHARGE SHARES VALUE ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
---- ---------- ----- -------- --------- --------- -----
2/28/97 $10,000 $15.92 5.75% 628.141 $15.00 $9,425
------ ----- ------- ------ ------
</TABLE>
VALUE OF SHARES
DIVIDENDS AND CAPITAL GAINS REINVESTED
<TABLE>
<S> <C> <C> <C> <C>
FROM FROM CAPITAL FROM DIVIDENDS REINVESTED TOTAL
DATE INVESTMENT GAINS REINVESTED VALUE
12/31/97 $10,245 $685 0 $10,930
</TABLE>
<PAGE>
PIONEER MICRO-CAP FUND
CLASS B SHARES
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NET ASSET INITIAL NET
INITIAL OFFERING SALES CHARGE SHARES VALUE ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
---- ---------- ----- -------- --------- --------- -----
2/28/97 $10,000 $15.00 N/A 666.667 $15.00 $10,000
</TABLE>
VALUE OF SHARES
DIVIDENDS AND CAPITAL GAINS REINVESTED
<TABLE>
<S> <C> <C> <C> <C> <C>
CONTINGENT
DEFERRED
FROM FROM CAPITAL FROM DIVIDENDS SALES CHARGE TOTAL CDSC
DATE INVESTMENT GAINS REINVESTED REINVESTED IF REDEEMED VALUE PERCENTAGE
12/31/97 $10,813 $727 $0 $400 $11,140 4.00%
</TABLE>
<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 also be used, if appropriate. The
indices are not available for direct investment. The data presented are not
meant to be indicative of the performance of the Fund, do not reflect past
performance and do 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 500 includes 500 of
the largest stocks (in terms of stock market value) in the U.S.
DOW JONES INDUSTRIAL AVERAGE
This is a total return index based on the performance of stocks of 30 blue chip
companies widely held by individuals and institutional investors. The 30 stocks
represent about a fifth of the $8 trillion-plus market value of all U.S. stocks
and about a fourth of the value of stocks listed on the New York Stock Exchange
(NYSE).
U.S. SMALL STOCK INDEX
This index is a market value weighted index of the ninth and tenth deciles of
the NYSE, plus stocks listed on the American Stock Exchange and over the counter
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 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.
MERRILL LYNCH MICRO-CAP INDEX
The MERRILL LYNCH MICRO-CAP INDEX represents the performance of 2,036 stocks
ranging in market capitalization from $50 million to $220 million. Index returns
are calculated monthly.
LONG-TERM U.S. GOVERNMENT BONDS
The total returns on long-term government bonds after 1977 are constructed with
data from The Wall Street Journal and are calculated as the change in the flat
price or and-interest price. From 1926 to 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.
INTERMEDIATE-TERM U.S. GOVERNMENT BONDS
Total returns of intermediate-term government bonds after 1987 are calculated
from The Wall Street Journal prices, using the change in flat price. Returns
from 1934 to 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 five 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 to 1942, almost all bonds
with maturities near five years were partially or fully 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 to 1933, there are few bonds suitable for construction
of a series with a five-year maturity. For this period, five-year bond yield
estimates are used.
MORGAN STANLEY CAPITAL INTERNATIONAL ("MSCI")
MSCI's international indices are based on the share prices of approximately
1,700 companies listed on stock exchanges in the 22 countries that make up the
MSCI World Index. MSCI's emerging market indices are comprised of approximately
1000 stocks from 26 countries.
Countries in the MSCI EAFE INDEX are: Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and
United Kingdom.
Countries in the MSCI EMERGING MARKETS FREE INDEX are: Argentina, Brazil, Chile,
China Free, Czech Republic, Colombia, Greece, Hungary, India, Indonesia Free,
Israel, Jordan, Korea (at 50%), Malaysia Free, Mexico Free, Pakistan, Peru,
Philippines Free, Poland, Portugal, South Africa, Sri Lanka, Taiwan (at 50%),
Thailand Free, Turkey and Venezuela.
6-MONTH CDS
Data sources include the Federal Reserve Bulletin and The Wall Street Journal.
LONG-TERM U.S. CORPORATE BONDS
Since 1969, corporate bond total returns are represented by the Salomon Brothers
Long-Term High-Grade Corporate Bond Index. As 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 with at
least 10 years to maturity. 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.
From 1926 to 1968 the total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946 to 1968,
Ibbotson and Sinquefield backdated the Salomon Brothers' index, using Salomon
Brothers' monthly yield data with a methodology similar to that used by Salomon
Brothers for 1969 to 1995. 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 to 1945, Standard & Poor's
monthly high-grade corporate composite yield data were used, assuming a 4%
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 Westerfield, Randolph W. 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
after 1977; the CRSP 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.
NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT TRUSTS
("NAREIT")EQUITY REIT INDEX
All of the data are based upon the last closing price of the month for all
tax-qualified REITs listed on the NYSE, AMEX and NASDAQ. The data are
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 weighting at the beginning of the period.
Only those REITs listed for the entire period are 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 U.S. EQUITY INDEXES
The RUSSELL 3000(R) INDEX (the "Russell 3000") is comprised of the 3,000 largest
U.S. companies as determined by market capitalization representing approximately
98% of the U.S. equity market. The average market capitalization is
approximately $2.8 billion. The RUSSELL 2500TM INDEX measures performance of the
2,500 smallest companies in the Russell 3000. The average market capitalization
is approximately $733.4 million, and the largest company in the index has an
approximate market capitalization of $2.9 billion. The RUSSELL 2000(R) INDEX
measures performance of the 2,000 smallest stocks in the Russell 3000; the
largest company in the index has a market capitalization of approximately $1.1
billion. The RUSSELL 1000(R) INDEX (the "Russell 1000") measures the performance
of the 1,000 largest companies in the Russell 3000. The average market
capitalization is approximately $7.6 billion. The smallest company in the index
has an approximate market capitalization of $1.1 billion. The RUSSELL MIDCAPTM
INDEX measures performance of the 800 smallest companies in the Russell 1000.
The largest company in the index has an approximate market capitalization of
$8.0 billion.
The Russell indexes are reconstituted annually as of July 1, based on May 31
market capitalization rankings.
WILSHIRE REAL ESTATE SECURITIES INDEX
The WILSHIRE REAL ESTATE SECURITIES INDEX is a market capitalization weighted
index of 120 publicly traded real estate securities, such as REITs, real estate
operating companies ("REOCs") and partnerships.
The index contains performance data on five major categories of property:
office, retail, industrial, apartment and miscellaneous. The companies in the
index are 91.66% equity and hybrid REITs and 8.33% REOCs.
STANDARD & POOR'S MIDCAP 400 INDEX
The S&P 400 is a market-capitalization-weighted index. The performance data for
the index were calculated by taking the stocks presently in the index and
tracking them backward in time as long as there were prices reported. No attempt
was made to determine what stocks "might have been" in the S&P 400 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.
LIPPER BALANCED FUNDS INDEX
This index represents equally weighted performance, 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%.
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 to 1987; and The Wall Street Journal thereafter.
Sources: Ibbotson Associates, Towers Data Systems, Lipper Analytical Services,
Inc. Merrill Lynch and PGI
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Dow S&P/ S&P/
S&P Jones U.S. Small BARRA BARRA Merrill Lynch
500 Industrial Stock U.S. 500 500 Micro-Cap
Average Index Inflation Growth Value Index
- ----------------------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 11.62 N/A 0.28 -1.49 N/A N/A N/A
Dec 1927 37.49 N/A 22.10 -2.08 N/A N/A N/A
Dec 1928 43.61 55.38 39.69 -0.97 N/A N/A N/A
Dec 1929 -8.42 -13.64 -51.36 0.20 N/A N/A N/A
Dec 1930 -24.90 -30.22 -38.15 -6.03 N/A N/A N/A
Dec 1931 -43.34 -49.02 -49.75 -9.52 N/A N/A N/A
Dec 1932 -8.19 -16.88 -5.39 -10.30 N/A N/A N/A
Dec 1933 53.99 73.72 142.87 0.51 N/A N/A N/A
Dec 1934 -1.44 8.08 24.22 2.03 N/A N/A N/A
Dec 1935 47.67 43.77 40.19 2.99 N/A N/A N/A
Dec 1936 33.92 30.23 64.80 1.21 N/A N/A N/A
Dec 1937 -35.03 -28.88 -58.01 3.10 N/A N/A N/A
Dec 1938 31.12 33.16 32.80 -2.78 N/A N/A N/A
Dec 1939 -0.41 1.31 0.35 -0.48 N/A N/A N/A
Dec 1940 -9.78 -7.96 -5.16 0.96 N/A N/A N/A
Dec 1941 -11.59 -9.88 -9.00 9.72 N/A N/A N/A
Dec 1942 20.34 14.13 44.51 9.29 N/A N/A N/A
Dec 1943 25.90 19.06 88.37 3.16 N/A N/A N/A
Dec 1944 19.75 17.19 53.72 2.11 N/A N/A N/A
Dec 1945 36.44 31.60 73.61 2.25 N/A N/A N/A
Dec 1946 -8.07 -4.40 -11.63 18.16 N/A N/A N/A
Dec 1947 5.71 7.61 0.92 9.01 N/A N/A N/A
Dec 1948 5.50 4.27 -2.11 2.71 N/A N/A N/A
Dec 1949 18.79 20.92 19.75 -1.80 N/A N/A N/A
Dec 1950 31.71 26.40 38.75 5.79 N/A N/A N/A
Dec 1951 24.02 21.77 7.80 5.87 N/A N/A N/A
Dec 1952 18.37 14.58 3.03 0.88 N/A N/A N/A
Dec 1953 -0.99 2.02 -6.49 0.62 N/A N/A N/A
Dec 1954 52.62 51.25 60.58 -0.50 N/A N/A N/A
Dec 1955 31.56 26.58 20.44 0.37 N/A N/A N/A
Dec 1956 6.56 7.10 4.28 2.86 N/A N/A N/A
Dec 1957 -10.78 -8.63 -14.57 3.02 N/A N/A N/A
Dec 1958 43.36 39.31 64.89 1.76 N/A N/A N/A
Dec 1959 11.96 20.21 16.40 1.50 N/A N/A N/A
Dec 1960 0.47 -6.14 -3.29 1.48 N/A N/A N/A
Dec 1961 26.89 22.60 32.09 0.67 N/A N/A N/A
Dec 1962 -8.73 -7.43 -11.90 1.22 N/A N/A N/A
Dec 1963 22.80 20.83 23.57 1.65 N/A N/A N/A
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Dow S&P/ S&P/
S&P Jones U.S. Small BARRA 500 BARRA Merrill Lynch
500 Industrial Stock U.S. Growth 500 Micro-Cap
Average Index Inflation Value Index
- ----------------------------------------------------------------------------------------------------------------------
Dec 1964 16.48 18.85 23.52 1.19 N/A N/A N/A
Dec 1965 12.45 14.39 41.75 1.92 N/A N/A N/A
Dec 1966 -10.06 -15.78 -7.01 3.35 N/A N/A N/A
Dec 1967 23.98 19.16 83.57 3.04 N/A N/A N/A
Dec 1968 11.06 7.93 35.97 4.72 N/A N/A N/A
Dec 1969 -8.50 -11.78 -25.05 6.11 N/A N/A N/A
Dec 1970 4.01 9.21 -17.43 5.49 N/A N/A N/A
Dec 1971 14.31 9.83 16.50 3.36 N/A N/A N/A
Dec 1972 18.98 18.48 4.43 3.41 N/A N/A N/A
Dec 1973 -14.66 -13.28 -30.90 8.80 N/A N/A N/A
Dec 1974 -26.47 -23.58 -19.95 12.20 N/A N/A N/A
Dec 1975 37.20 44.75 52.82 7.01 31.72 43.38 N/A
Dec 1976 23.84 22.82 57.38 4.81 13.84 34.93 N/A
Dec 1977 -7.18 -12.84 25.38 6.77 -11.82 -2.57 N/A
Dec 1978 6.56 2.79 23.46 9.03 6.78 6.16 27.76
Dec 1979 18.44 10.55 43.46 13.31 15.72 21.16 43.18
Dec 1980 32.42 22.17 39.88 12.40 39.40 23.59 32.32
Dec 1981 -4.91 -3.57 13.88 8.94 -9.81 0.02 9.18
Dec 1982 21.41 27.11 28.01 3.87 22.03 21.04 33.62
Dec 1983 22.51 25.97 39.67 3.80 16.24 28.89 42.44
Dec 1984 6.27 1.31 -6.67 3.95 2.33 10.52 -14.97
Dec 1985 32.16 33.55 24.66 3.77 33.31 29.68 22.89
Dec 1986 18.47 27.10 6.85 1.13 14.50 21.67 3.45
Dec 1987 5.23 5.48 -9.30 4.41 6.50 3.68 -13.84
Dec 1988 16.81 16.14 22.87 4.42 11.95 21.67 22.76
Dec 1989 31.49 32.19 10.18 4.65 36.40 26.13 8.06
Dec 1990 -3.17 -0.56 -21.56 6.11 0.20 -6.85 -29.55
Dec 1991 30.55 24.19 44.63 3.06 38.37 22.56 57.44
Dec 1992 7.67 7.41 23.35 2.90 5.07 10.53 36.62
Dec 1993 9.99 16.94 20.98 2.75 1.68 18.60 31.32
Dec 1994 1.31 5.06 3.11 2.67 3.13 -0.64 1.81
Dec 1995 37.43 36.84 34.46 2.54 38.13 36.99 30.70
Dec 1996 23.07 28.84 17.62 3.32 23.96 21.99 13.88
Dec 1997 33.36 24.88 22.78 1.92 36.52 29.98 24.61
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Long- Intermediate- MSCI Long-
Term Term U.S. EAFE 6- Term U.S. U.S.
U.S. Gov't Government (Net of Month Corporate T-Bill
Bonds Bonds Taxes) CDs Bonds (30-Day)
- ------------------------------------------------------------------------------------------------------
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 0.10 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
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Long- Intermediate- MSCI Long-
Term Term U.S. EAFE 6- Term U.S. U.S.
U.S. Gov't Government (Net of Month Corporate T-Bill
Bonds Bonds Taxes) CDs Bonds (30-Day)
- ------------------------------------------------------------------------------------------------------
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 4.17 4.77 3.54
Dec 1965 0.71 1.02 N/A 4.68 -0.46 3.93
Dec 1966 3.65 4.69 N/A 5.76 0.20 4.76
Dec 1967 9.18 1.01 N/A 5.47 -4.95 4.21
Dec 1968 0.26 4.54 N/A 6.45 2.57 5.21
Dec 1969 -5.07 -0.74 N/A 8.70 -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 5.39 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 6.11 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 29.10 -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 6.59 -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 19.30 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 16.80 11.21 5.21 27.20 5.60
Dec 1996 -0.93 2.10 6.05 5.21 1.40 5.21
Dec 1997 15.85 8.38 1.78 5.71 12.95 5.26
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
NAREIT Lipper MSCI
Equity Russell Wilshire Balanced Emerging Bank
REIT 2000 Real Estate S&P Fund Markets Savings
Index Index Securities 400 Index Free Index Account
- -----------------------------------------------------------------------------------------------------------------------
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
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
NAREIT Lipper MSCI
Equity Russell Wilshire Balanced Emerging Bank
REIT 2000 Real Estate S&P Fund Markets Savings
Index Index Securities 400 Index Free Index Account
- -----------------------------------------------------------------------------------------------------------------------
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
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
Dec 1997 20.29 22.36 19.80 32.26 20.05 -11.59 5.17
</TABLE>
Source: Lipper Analytical Services. Inc.
<PAGE>
APPENDIX C
OTHER 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, 1997, PMC employed a professional investment staff of 58,
with a combined average of 12 years' experience in the financial services
industry.
Total assets of all Pioneer mutual funds at December 31, 1997, were
approximately $19.8 billion representing 1,177,148 shareholder accounts, 791,468
non-retirement accounts and 385,680 retirement accounts.
- --------
1 The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such ratings,
they undertake no obligation to do so, and the ratings indicated do not
necessarily represent ratings which will be given to these securities on the
date of the Fund's fiscal year-end.
<PAGE>
PIONEER MICRO-CAP FUND
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
The financial highlights of the Registrant for the
fiscal period ended November 30, 1997 are included in
Part A of the Registration Statement and the
financial statements of the Registrant are
incorporated by reference into Part B of the
Registration Statement from the 1997 Annual Report to
Shareholders for the period ended November 30, 1997
(filed electronically on January 28, 1998, file no.
811-7985; accession number 0001025187-98-000003)(the
"Annual Report").
(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. Description of Average Annual Total Return
Calculation
17. Financial Data Schedule+
18. Multiclass Plan Pursuant to Rule 18f-3*
19. Powers of Attorney***
19.1 Power of Attorney for Mary K. Bush+
+ Filed herewith.
* Filed with the initial Registration Statement on December 23, 1996 and
incorporated herein by reference.
** To be filed by amendment.
*** Filed with Pre-Effective Amendment No. 1 to the Registration Statement on
February 21, 1997 and incorporated herein by reference.
Item 25. Persons Controlled By or Under Common Control with Registrant.
No person is controlled by the Registrant. A common control
relationship could exist from a management perspective because the Chairman and
President of the Registrant owns approximately 14% of the outstanding shares of
The Pioneer Group, Inc. (PGI), the parent company of the Registrant's investment
adviser, and certain Trustees or officers of the Registrant (i) hold similar
positions with other investment companies advised by PGI and (ii) are directors
or officers of PGI and/or its direct or indirect subsidiaries. The following
lists all U.S. and the principal non-U.S. subsidiaries of PGI and those
registered investment companies with a common or similar Board of Trustees
advised by PGI.
<TABLE>
<S> <C> <C> <C>
Owned By Percent of Shares State/Country of
Company Incorporation
Pioneering Management Corp. (PMC) PGI 100% DE
Pioneer Funds Distributor, Inc. (PFD) PMC 100% MA
Pioneer Explorer, Inc. (PEI) PMC 100% DE
Pioneer Fonds Marketing GmbH (GmbH) PFD 100% Germany
Pioneer Forest, Inc. (PFI) PGI 100% DE
CJSC "Forest-Starma" (Forest-Starma) PFI 95% Russia
Pioneer Metals and Technology, Inc. (PMT) PGI 100% DE
Pioneer Capital Corp. (PCC) PGI 100% DE
Pioneer SBIC Corp. PCC 100% MA
Pioneer Real Estate Advisors, Inc. (PREA) PGI 100% DE
Pioneer Management (Ireland) Ltd. (PMIL) PGI 100% Ireland
Pioneer Plans Corporation (PPC) PGI 100% DE
PIOGlobal Corp. (PIOGlobal) PGI 100% DE
Pioneer Investments Corp. (PIC) PGI 100% MA
Pioneer Goldfields Holdings, Inc. (PGH) PGI 100% DE
Pioneer Goldfields Ltd. (PGL) PGH 100% Guernsey
Teberebie Goldfields Ltd. (TGL) PGL 90% Ghana
Pioneer Omega, Inc. (Omega) PGI 100% DE
Pioneer First Russia, Inc. (First Russia) Omega 81.65% DE
Pioneering Services Corp. (PSC) PGI 100% MA
Pioneer International Corp. (PIntl) PGI 100% DE
Pioneer First Polish Trust Fund JSC, S.A. (First
Polish) PIntl 100% Poland
Pioneer Czech Investment Company, A.S.
(Pioneer Czech) PIntl 100% Czech Republic
</TABLE>
Registered investment companies that are parties to management contracts with
PMC:
Funds Business Trust
Pioneer International Growth Fund MA
Pioneer World Equity Fund DE
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
Pioneer Fund DE
Pioneer II DE
Pioneer Real Estate Shares DE
Pioneer Short-Term Income Trust 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
Pioneer Micro-Cap Fund DE
The following table lists John F. Cogan, Jr.'s positions with the
investment companies, PGI and principal direct or indirect PGI subsidiaries
referenced above and the Registrant's counsel.
Trustee/
Entity Chairman President Director Other
Pioneer 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
Omega
X X
PIOGlobal
X X
First Russia
X X
PCC
X
PSC
X
PMIL
X
PEI
X
PFI
X
PREA
X
Forest-Starma
X
PMC
X X
PFD
X X
TGL
X X
First Polish
Chairman of
Supervisory Board
GmbH Chairman of
Supervisory Board
Pioneer Czech Chairman of
Supervisory Board
Hale and Dorr LLP Partner
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of February 28, 1998
-------------- ---------------------
Class A Shares 4,536
Class B Shares 5,577
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.
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 IV, Business Background, of each Schedule D.
Item 29. Principal Underwriter
(a) See Item 25 above.
(b) Directors and Officers of PFD:
<PAGE>
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
Barry G. Knight Vice President None
William A. Misata Vice President None
Anne W. Patenaude Vice President None
Elizabeth B. Bennett Vice President None
Gail A. Smyth Vice President None
Constance D. Spiros Vice President None
Marcy L. Supovitz Vice President None
Mary Kleeman Vice President None
Steven R. Berke Assistant Vice President None
Steven H. Forss Assistant Vice President None
Mary Sue Hoban Assistant Vice President None
Debra A. Levine Assistant Vice President None
Junior Roy McFarland Assistant Vice President None
Marie E. Moynihan Assistant Vice President None
William H. Keough Treasurer Treasurer
Roy P. Rossi Assistant Treasurer None
Joseph P. Barri Clerk Secretary
Robert P. Nault Assistant Clerk Assistant Secretary
The principal business address of each of these individuals is 60 State Street,
Boston, Massachusetts 02109-1820.
(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) Not Applicable.
(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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment No. 2 to the
Registration Statement (the "Amendment") to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Boston and The Commonwealth
of Massachusetts, on the 30th day of March, 1998.
PIONEER MICRO-CAP FUND
By: /s/John F. Cogan, Jr.
------------------------
John F. Cogan, Jr.
Chairman and President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated:
<PAGE>
Signature Title
/s/John F. Cogan, Jr. )
- ------------------------ )
John F. Cogan, Jr. Chairman of the Board )
and President )
(Principal Executive )
Officer) )
)
)
William H. Keough* )
- ------------------------ Principal )
William H. Keough Financial and )
Accounting )
Officer )
)
Trustees: )
)
)
)
/s/John F. Cogan, Jr. )
- ------------------------ )
John F. Cogan, Jr. )
)
Mary K. Bush* )
Mary K. Bush )
)
Richard H. Egdahl, M.D.* )
Richard H. Egdahl, M.D. )
Margaret B.W. Graham* )
Margaret B.W. Graham )
)
John W. Kendrick* )
John W. Kendrick )
)
)
Marguerite A. Piret* )
Marguerite A. Piret )
)
)
David D. Tripple* )
David D. Tripple )
)
)
Stephen K. West* )
Stephen K. West )
)
John Winthrop* )
John Winthrop )
*By: /s/John F. Cogan, Jr. Dated: March 30, 1998
-------------------------
John F. Cogan, Jr.
Attorney-in-Fact
<PAGE>
Exhibit Index
Exhibit
Number Document Title
11. Consent of Independent Public Accountants
17. Financial Data Schedule
(Filed as Exhibit 27)
19. Power of Attorney for Mary K. Bush
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 5, 1998 for
Pioneer Micro-Cap Fund and to all references to our firm included in or made a
part of Post-Effective Amendment No. 2 and Amendment No. 3 to registration
statement File Nos. 333-18639 and 811-07985, respectively.
Arthur Andersen LLP
Boston, Massachusetts
March 26, 1998
PIONEER EMERGING MARKETS FUND
PIONEER EUROPE FUND
PIONEER GROWTH TRUST
PIONEER INDIA FUND
PIONEER INTERNATIONAL GROWTH FUND
PIONEER WORLD EQUITY FUND
PIONEER GROWTH SHARES
PIONEER MID-CAP FUND
PIONEER SMALL COMPANY FUND
PIONEER MICRO-CAP FUND
PIONEER BALANCED FUND
PIONEER FUND
PIONEER II
PIONEER REAL ESTATE SHARES
PIONEER AMERICA INCOME TRUST
PIONEER BOND FUND
PIONEER SHORT TERM INCOME TRUST
PIONEER INTERMEDIATE TAX-FREE FUND
PIONEER MONEY MARKET TRUST
POWER OF ATTORNEY
Dated October 7, 1997
I, the undersigned Trustee of each of the above-listed registered
investment companies (each a "Fund"), each a Delaware or a Massachusetts
business trust, do hereby constitute and appoint John F. Cogan, Jr., David D.
Tripple, and Joseph P. Barri, and each of them acting singly, to be my true,
sufficient and lawful attorneys, with full power to each of them, and each of
them acting singly, to sign for me, in my name and in my capacity as trustee,
any and all amendments to the Registration Statement on Form N-1A to be filed by
each 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 my
name and on my behalf in my capacity as trustee to enable each 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 my signature as
it may be signed by said attorneys or each of them to any and all amendments to
said Registration Statement.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument as
of the date first written above.
/s/ Mary K. Bush
Mary K. Bush, Trustee
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> PIONEER MICROCAP FUND CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 119886472
<INVESTMENTS-AT-VALUE> 123116569
<RECEIVABLES> 1455170
<ASSETS-OTHER> 4735
<OTHER-ITEMS-ASSETS> 33225
<TOTAL-ASSETS> 124609699
<PAYABLE-FOR-SECURITIES> 1035053
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 779137
<TOTAL-LIABILITIES> 1814190
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 112045930
<SHARES-COMMON-STOCK> 2904412
<SHARES-COMMON-PRIOR> 3333
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7519482
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3230097
<NET-ASSETS> 122795509
<DIVIDEND-INCOME> 212794
<INTEREST-INCOME> 414890
<OTHER-INCOME> 0
<EXPENSES-NET> 1142138
<NET-INVESTMENT-INCOME> (514454)
<REALIZED-GAINS-CURRENT> 7941761
<APPREC-INCREASE-CURRENT> 3230097
<NET-CHANGE-FROM-OPS> 10657404
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3093613
<NUMBER-OF-SHARES-REDEEMED> 192534
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 122695509
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 592206
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1358498
<AVERAGE-NET-ASSETS> 31503230
<PER-SHARE-NAV-BEGIN> 15.00
<PER-SHARE-NII> (.07)
<PER-SHARE-GAIN-APPREC> 2.91
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.84
<EXPENSE-RATIO> 1.76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 002
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