File No. 333-20891
File No. 811-08039
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Third Avenue Trust
(Name of Registrant as Specified in Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
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THIRD AVENUE HIGH YIELD FUND
767 THIRD AVENUE
NEW YORK, NEW YORK 10017-2023
1-800-443-1021
NOTICE OF MEETING OF SHAREHOLDERS
SCHEDULED FOR FEBRUARY 23, 2000
THIS IS THE FORMAL AGENDA FOR YOUR FUND'S SHAREHOLDER MEETING. IT TELLS
YOU WHAT MATTERS WILL BE VOTED ON AND THE TIME AND PLACE OF THE MEETING, IN CASE
YOU WANT TO ATTEND IN PERSON.
To the shareholders of Third Avenue High Yield Fund:
A meeting of shareholders of your fund will be held at Four Times Square,
37th Floor, New York, New York 10036 on Wednesday, February 23, 2000, at 3:00
p.m., New York time, to consider the following:
1. A proposal to approve an Agreement and Plan of Reorganization between
your fund and Pioneer High Yield Fund. Under this Agreement, your fund
will transfer all of its assets to Pioneer High Yield Fund in exchange
for shares of Pioneer High Yield Fund. Class A shares of Pioneer High
Yield Fund having a value on the reorganization date equal to the
value of your shares of your fund will be distributed in exchange for
your shares of your fund. Pioneer High Yield Fund will also assume
your fund's liabilities that are included in the calculation of your
fund's net assets at the closing. Your board of trustees recommends
that you vote FOR this proposal.
2. Any other business that may properly come before the meeting.
Shareholders of record as of the close of business on December 3, 1999 are
entitled to vote at the meeting and any related follow-up meetings.
By order of the board of trustees,
Ian M. Kirschner, Secretary
New York, New York
December 28, 1999
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WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN
THE ENCLOSED PROXY CARD.
7089-00-1299
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PROXY STATEMENT OF
THIRD AVENUE HIGH YIELD FUND
PROSPECTUS FOR CLASS A SHARES OF
PIONEER HIGH YIELD FUND
This proxy statement and prospectus contains the information you should
know before voting on the proposed reorganization of your fund into Pioneer High
Yield Fund. Please read it carefully and retain it for future reference.
HOW THE REORGANIZATION WILL WORK:
o Your fund will transfer all of its assets to Pioneer High Yield Fund.
Pioneer High Yield Fund will assume your fund's liabilities that are
included in the calculation of your fund's net assets at the closing and
liabilities with respect to your fund's investment operations that are not
required by generally accepted accounting principles to be included in the
calculation of net asset value.
o Pioneer High Yield Fund will issue Class A shares to your fund in an amount
equal to the value of your fund's shares. Class A shares of Pioneer High
Yield Fund having a value on the reorganization date equal to the value of
your shares of your fund will be distributed in exchange for your shares of
your fund.
o The reorganization is intended to be tax free for federal income tax
purposes.
o Your fund will be liquidated and terminated, and you will become a
shareholder of Pioneer High Yield Fund.
WHY YOUR FUND'S TRUSTEES ARE RECOMMENDING THE REORGANIZATION:
The trustees of your fund believe that reorganizing your fund into Pioneer
High Yield Fund is in the best interest of your fund. In August 1999, the fund's
portfolio manager became a dual employee of Pioneer Investment Management, Inc.
(Pioneer) and your fund's adviser, EQSF Advisers, Inc. She also has informed
Pioneer that she will become an employee solely of Pioneer whether or not the
reorganization occurs. Among other things, the reorganization will provide the
shareholders of your fund with continuity of management, and it is also expected
to result in a lower overall expense ratio, after giving effect to voluntary
expense limitations. Therefore, the trustees recommend you vote FOR the
reorganization.
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INVESTMENT OBJECTIVES
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THIRD AVENUE HIGH YIELD FUND PIONEER HIGH YIELD FUND
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To maximize total return through a combination of income and Maximize total return through a combination of income and
capital appreciation. capital appreciation.
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MORE INFORMATION IS AVAILABLE
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WHAT WHERE
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o Your fund's annual and semi-annual reports to
shareholders.
Your fund makes this information available to you free of
o Most recent prospectus of your fund, dated February charge (please call 1-800-443-1021, or write to the fund at
28, 1999 (as supplemented August 13 and June 28, 1999). 767 Third Avenue, New York, New York 10017-2023). This
information is also on file with the Securities and Exchange
o Statement of additional information dated December 3, Commission (SEC) and available for a fee. See "Available
1999. It contains additional information about your fund Information."
and Pioneer High Yield Fund. The statement of additional
information is incorporated by reference into this proxy
statement and prospectus.
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To ask questions about this proxy statement and prospectus: Call your fund's toll-free telephone number: 1-800-443-1021
or write to your fund at 767 Third Avenue, New York, New York,
10017-2023.
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AN INVESTMENT IN PIONEER HIGH YIELD FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
AGENCY HAS APPROVED PIONEER HIGH YIELD FUND'S SHARES OR DETERMINED WHETHER THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIME.
THE DATE OF THIS PROXY STATEMENT AND PROSPECTUS IS DECEMBER 3, 1999.
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TABLE OF CONTENTS
PAGE
Introduction.................................................................2
Summary of Proxy Statement/Prospectus........................................3
Risk/Return Summary..........................................................5
Proposal to Approve Agreement and Plan of Reorganization....................10
Capitalization..............................................................12
Boards' Evaluation and Recommendation.......................................12
Voting Rights and Required Vote.............................................13
Additional Information about the Funds......................................13
Material Provisions of Management Agreements................................18
Pioneer High Yield Fund's Rule 12b-1 Distribution Plan......................19
Trustees and Executive Officers of Pioneer High Yield Fund..................20
Financial Highlights........................................................23
Information Concerning the Meeting..........................................24
Ownership of Shares of the Funds............................................25
Experts.....................................................................25
Available Information.......................................................25
Exhibit A: Agreement and Plan of Reorganization.............................26
Exhibit B: Excerpts from Third Avenue High Yield Fund's April 30, 1999
Semi-Annual Report and October 31, 1998 Annual Report.......................35
INTRODUCTION
This proxy statement and prospectus is being used by the board of trustees
of your fund to solicit proxies to be voted at a meeting of shareholders of your
fund. This meeting will be held at Four Times Square, 37th Floor, New York, New
York 10036 on Wednesday, February 23, 2000, at 3:00 p.m., New York time. The
purpose of the meeting is to consider a proposal to approve an Agreement and
Plan of Reorganization providing for the reorganization of your fund into
Pioneer High Yield Fund, a newly created mutual fund that is not yet
operational. YOU SHOULD UNDERSTAND THAT IF YOU VOTE IN FAVOR OF THE
REORGANIZATION, YOU ARE APPROVING A REORGANIZATION INTO A CLASS OF SHARES
SUBJECT TO RULE 12B-1 DISTRIBUTION FEES. This proxy statement and prospectus is
being mailed to your fund's shareholders on or about December 28, 1999.
WHO IS ELIGIBLE TO VOTE?
Shareholders of record on December 3, 1999 are entitled to attend and to
vote at the meeting or any adjourned meeting. Each share is entitled to one
vote. Shares represented by properly executed proxies, unless revoked before or
at the meeting, will be voted according to shareholders' instructions. If you
sign a proxy, but do not fill in a vote, your shares will be voted to approve
the Agreement and Plan of Reorganization. If any other business comes before the
meeting, your shares will be voted at the discretion of the persons named as
proxies.
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SUMMARY OF PROXY STATEMENT/PROSPECTUS
The following is a summary of more complete information appearing later in
this proxy statement. You should carefully read the entire proxy statement and
its exhibits because they contain details that are not in the summary.
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COMPARISON OF THIRD AVENUE HIGH YIELD FUND WITH PIONEER HIGH YIELD FUND
BUSINESS AND INVESTMENTS
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THIRD AVENUE HIGH YIELD FUND PIONEER HIGH YIELD FUND
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NET ASSETS AS OF $8,085,038 None. Pioneer High Yield Fund is newly
NOVEMBER 30, 1999: organized and does not currently expect to
commence investment operations before the
reorganization occurs.
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INVESTMENT OBJECTIVE: To maximize total return through a combination Maximize total return through a combination of
of income and capital appreciation. income and capital appreciation.
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PRIMARY INVESTMENTS: Your fund invests at least 65% of Pioneer High Yield Fund invests at least 65% of
its total assets in bonds and preferred stocks of its total assets (at the time of purchase)
of companies whose securities are rated below in below investment grade (high yield) debt
investment grade (and comparable unrated securities and preferred stocks.
securities) at the time of the fund's
investment. The fund also invests in bonds and
preferred stocks that are convertible into the
The fund also invests in bonds and preferred equity securities of the issuer.
stocks that are convertible into the equity
securities of the issuer. The fund's investments may have all types of
interest rate and dividend payment and reset
terms, including fixed rate, adjustable rate,
zero coupon, contingent, deferred, payment in
kind and auction rate features.
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QUALITY OF INVESTMENTS: Your fund primarily invests in securities The fund primarily invests in securities rated
rated below investment grade (and comparable BB or lower by Standard & Poor's Ratings Group
unrated securities) at the time of the fund's or the equivalent rating by a nationally
investment. Securities are rated below recognized securities rating organization or,
investment grade if they are rated below Baa3 if unrated, determined to be of equivalent
by Moody's Investors Service, Inc. and below credit quality by Pioneer. Such securities are
BBB- by Standard & Poor's Ratings Group. Such commonly referred to as "junk bonds."
securities are commonly referred to as "junk
bonds."
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MATURITY: Neither fund has a maturity policy.
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INVESTMENT CONCENTRATION: Neither fund concentrates its assets in any industry.
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OPTIONS AND FUTURES Your fund has expressed no policy on the use Pioneer High Yield Fund may use options and
CONTRACTS: of options and futures. futures.
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INVESTMENT ADVISERS AND Margaret D. Patel has served as the portfolio Day-to-day management of the fund's portfolio
PORTFOLIO MANAGERS: manager of your fund since its inception. From will be the responsibility of Margaret D.
1995 to 1996, Ms. Patel was a portfolio Patel. Ms. Patel is a vice president of
manager of several mutual funds at Northstar Pioneer. She joined Pioneer in August 1999 and
Investment Management Corp. Ms. Patel was a has been an investment professional since
portfolio manager of several mutual funds at 1972. Prior to joining Pioneer, she was a
Boston Security Counsellors, Inc. from 1988 to portfolio manager at EQSF Advisers, Inc. from
1995. 1998 and a portfolio manager of several mutual
funds at Northstar Investment Management Corp.
It is expected that Ms. Patel will remain an from 1995 to 1996. Ms. Patel was a portfolio
employee of EQSF Advisers, Inc. until the manager of several mutual funds at Boston
closing of the reorganization or, in the event Security Counsellors, Inc. from 1988 to 1995.
that the reorganization is not expected to
occur, such earlier date as determined by Ms. Ms. Patel is supported by a team of fixed
Patel or EQSF Advisers, Inc. income portfolio managers and analysts
supervised by Sherman B. Russ and Kenneth J.
Taubes. Mr. Russ and Mr. Taubes are jointly
responsible for overseeing Pioneer's U.S. and
global fixed income team. Ms. Patel, Mr. Russ,
Mr. Taubes and the fixed income team operate
under the supervision of Theresa A. Hamacher.
Ms. Hamacher joined Pioneer in 1997 and has
been an investment professional since 1984,
most recently as chief investment officer at
another investment adviser.
Ms. Patel has informed Pioneer that she will
become an employee solely of Pioneer whether
or not the reorganization occurs.
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BUSINESS: Your fund is a non-diversified series of an Pioneer High Yield Fund is a non- diversified
open-end investment company organized as a open-end investment company organized as a
Delaware business trust. Delaware business trust.
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SALES CHARGES
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THIRD AVENUE HIGH YIELD FUND PIONEER HIGH YIELD FUND
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SALES CHARGES: Your fund's shares are offered without Pioneer High Yield Fund offers four classes of
front-end or deferred sales charges. Your fund shares. You will receive Class A shares in the
does not have a Rule 12b-1 plan. reorganization but will not pay a sales charge
in connection with the transaction. Assets
attributable to Pioneer accounts (other than
omnibus accounts) established in connection with
the reorganization will not be considered in
determining the Rule 12b-1 fee on Class A
shares, but will be allocated their respective
portion of the overall Rule 12b-1 fees incurred
by the fund. Sales charges will not be imposed
on future purchases of Class A shares for
accounts opened in connection with the
reorganization.
Class A shares are subject to an initial sales
charge of up to 4.5% of the offering price and
an annual Rule 12b-1 fee of 0.25% of the
average daily net assets attributable to Class
A shares.
Class B shares are subject to a contingent
deferred sales charge of up to 4% and an annual
Rule 12b-1 fee of 1% of the average daily net
assets attributable to Class B shares. Class B
shares convert to Class A shares after eight
years.
Class C shares are subject to a contingent
deferred sales charge of 1% if redeemed within
a year and an annual Rule 12b-1 fee of 1% of
the average daily net assets attributable to
Class C shares.
Class Y shares are subject to a minimum purchase
of $5 million and are offered without front-end
or deferred sales charges and are not subject to
a Rule 12b-1 fee.
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REDEMPTION FEE: Your fund charges a redemption fee of 1% on Pioneer High Yield Fund does not impose a
redemptions of shares held less than one year. redemption fee.
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EXCHANGE FEE: Your fund charges an exchange fee of 1% on You may exchange shares of Pioneer High Yield
exchanges of shares held less than one year. Fund without charge. You may make up to four
exchanges of $25,000 or more per account per
calendar year out of the fund. For purposes of
this exchange limit, Pioneer may aggregate
transactions and/or accounts that appear to be
under common ownership or control.
The exchange limitation does not apply to
automatic exchange transactions or to exchanges
made by participants in employer-sponsored
retirement plans qualified under Section 401 of
the Internal Revenue Code. The exchange
limitation also may not apply to transactions made
through an omnibus account for fund shares.
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BUYING, SELLING AND For more information on buying, selling and For more information, see "Buying, exchanging
EXCHANGING SHARES: exchanging shares of your fund, see its and selling Pioneer High Yield Fund shares"
current prospectus. below.
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REORGANIZATION
o The reorganization is scheduled to occur after the close of business on
February 25, 2000, but may occur as of any later date on or before April
15, 2000 or otherwise agreed to by the funds. Upon consummation of the
reorganization, your fund will transfer all of its assets to Pioneer High
Yield Fund in exchange for shares of Pioneer High Yield Fund. Pioneer High
Yield Fund will also assume your fund's liabilities that are included in
the calculation of your fund's net assets at the closing and liabilities
with respect to your fund's investment operations that are not required by
generally accepted accounting principles to be included in the calculation
of net asset value. The net asset values of both funds will be computed as
of the close of the New York Stock Exchange (normally 4:00 p.m. Eastern
time) on the reorganization date.
o Pioneer High Yield Fund will issue to your fund Class A shares of Pioneer
High Yield Fund in an amount equal to the aggregate net asset value of your
fund's shares. Class A shares of Pioneer High Yield Fund having a value on
the reorganization date equal to the value of your shares of your fund will
be distributed to you in exchange for shares of your fund. As a result, all
shareholders of your fund will become Class A shareholders of Pioneer High
Yield Fund.
o After the reorganization is complete, your fund will be liquidated and
terminated.
o The reorganization is intended to be tax free for federal income tax
purposes.
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OTHER CONSEQUENCES OF THE REORGANIZATION. The funds pay monthly management
fees, and Pioneer High Yield Fund pays Rule 12b-1 distribution fees, equal to
the following annual percentages of average daily net assets:
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PIONEER HIGH YIELD FUND
MANAGEMENT FEE BREAKPOINTS THIRD AVENUE HIGH YIELD FUND PIONEER HIGH YIELD FUND COMBINED MANAGEMENT FEE
(FUND'S NET ASSETS) MANAGEMENT FEE MANAGEMENT FEE AND CLASS A RULE 12B-1 FEE
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First $500 million 0.70% 0.95%
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Over $500 million up to $1 0.90% 0.65% 0.90%
billion
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Over $1 billion 0.60% 0.85%
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At all asset levels, the annual management fee rate payable by Pioneer High
Yield Fund (without giving effect to expense limitations) is lower than the rate
paid by your fund. Pioneer High Yield Fund also has breakpoints in its
management fee which may reduce the effective management fee rate as Pioneer
High Yield Fund's assets grow. While you may benefit from Pioneer High Yield
Fund's reduced management fee, you will pay Rule 12b-1 fees as a shareholder of
Pioneer High Yield Fund. Depending upon the size of the fund, this fee may
offset some or all of the benefit of the lower management fee or result in
higher overall expenses.
The expenses of Class A shares of Pioneer High Yield Fund include an annual
Rule 12b-1 fee equal to 0.25% of average daily net assets attributable to Class
A shares. In calculating the Rule 12b-1 fee payable by Pioneer High Yield Fund,
Pioneer will not include the assets held in accounts established in the
reorganization (other than assets held in an omnibus account with a financial
intermediary). However, since Rule 12b-1 fees are not assessed at a shareholder
account level, the effect will be a reduction in the Rule 12b-1 fee paid by all
Class A shareholders and not a waiver of the Rule 12b-1 fee for shareholders
participating in the reorganization. Because approximately 51% (as of November
30, 1999) of your fund's assets are held in omnibus accounts with financial
intermediaries, this exclusion will not materially reduce the amount of 12b-1
fees incurred. YOU SHOULD UNDERSTAND THAT IF YOU VOTE IN FAVOR OF THE
REORGANIZATION, YOU ARE APPROVING A REORGANIZATION INTO A CLASS OF SHARES
SUBJECT TO RULE 12B-1 DISTRIBUTION FEES.
The advisers to both funds currently waive all or a portion of their
management fees or reimburse the respective funds to limit total annual
operating expenses. Your fund currently limits expenses to 1.90% of average
daily net assets on the first $100 million and 1.50% of average daily net assets
in excess of $100 million. Pioneer High Yield Fund currently limits expenses to
0.75% on Class A shares of the fund. Consequently, as long as Pioneer High Yield
Fund's expense limitation remains in effect, Pioneer High Yield Fund's expenses
will be substantially lower than the historic expenses of your fund. Pioneer's
fee waiver and expense reimbursement agreement is voluntarily and temporary and
may be revised or terminated at any time. SINCE PIONEER IS NOT OBLIGATED TO
MAINTAIN THE EXPENSE LIMITATION, YOU SHOULD CONSIDER THE POTENTIAL EFFECT THAT
THE REORGANIZATION WILL HAVE ON PER SHARE EXPENSES WITHOUT GIVING EFFECT TO THE
EXPENSE LIMITATION.
Pioneer High Yield Fund anticipates that its Class A share expense ratio
will be 1.50% for the fiscal year ending October 31, 2000 (0.75% after giving
effect to the expense limitation). This ratio is lower than your fund's gross
expense ratio of 3.99% (1.90% after giving effect to the expense limitation) for
the period ended October 31, 1998.
RISK/RETURN SUMMARY
INVESTMENT OBJECTIVES
THIRD AVENUE HIGH YIELD FUND. To maximize total return through a
combination of income and capital appreciation.
PIONEER HIGH YIELD FUND. Maximize total return through a combination of
income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
THIRD AVENUE HIGH YIELD FUND. Third Avenue High Yield Fund invests at least
65% of its total assets in bonds and preferred stocks of companies whose
securities are rated below investment grade (and comparable unrated securities)
at the time of the fund's investment. Securities are rated below investment
grade if they are rated below Baa3 by Moody's Investors Service, Inc. and below
BBB- by Standard & Poor's Ratings Group. Such securities are commonly referred
to as "junk bonds." The fund will acquire securities of companies whose capital
structures, in the opinion of the adviser, have a market value priced below
their takeover values. The fund will also invest in bonds and preferred stocks
that are convertible into the equity of the issuer. Convertible securities have
general characteristics similar to both fixed income and equity securities and
provide the possibility of capital appreciation should the underlying common
stock increase in value. The fund can invest in securities with any maturity the
fund's adviser believes is appropriate.
PIONEER HIGH YIELD FUND. Normally, the fund invests at least 65% of its
total assets (at the time of purchase) in below investment grade (high yield)
debt securities and preferred stocks. A debt security is below investment grade
if it is rated BB or lower by Standard & Poor's Ratings Group or the equivalent
rating by a nationally recognized securities rating organization or, if unrated,
determined to be of equivalent credit quality by Pioneer. These high yield
securities may be convertible into the equity securities of the issuer. Debt
securities rated below investment grade are commonly referred to as "junk bonds"
and are considered speculative. Below investment grade debt securities involve
greater risk of loss, are subject to greater price volatility and are less
liquid, especially during periods of economic uncertainty or change, than higher
rated debt securities.
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The fund's investments may have all types of interest rate and dividend
payment and reset terms, including fixed rate, adjustable rate, zero coupon,
contingent, deferred, payment in kind and auction rate features. The fund
invests in securities with a broad range of maturities.
INVESTMENT PHILOSOPHY
The investment philosophy of both funds is substantially the same, with
both advisers applying a value approach to investing.
THIRD AVENUE HIGH YIELD FUND. EQSF Advisers, Inc. adheres to a strict value
discipline in selecting securities. This means seeking securities whose prices
are low in relation to what the adviser believes is the true value of the
securities. The adviser believes this both lowers risk and increases
appreciation potential. The fund intends its investments in debt securities to
be, for the most part, in securities which the adviser believes will provide
above-average current yields, yields to events, or yields to maturity. The fund
identifies investment opportunities through intensive research of individual
companies and ignores general stock market conditions and other macro factors.
For these reasons, the fund may seek investments in the securities of companies
or industries that are temporarily depressed. The fund follows a "buy and hold"
strategy. The fund will generally sell an investment only when there has been a
fundamental change in the business or capital structure of the company which
significantly affects the investment's inherent value.
PIONEER HIGH YIELD FUND. Pioneer, the fund's investment adviser, uses a
value approach to select the fund's investments. Using this investment style,
Pioneer seeks securities selling at reasonable prices or substantial discounts
to their underlying values and then holds these securities for their incremental
yields or until the market values reflect their intrinsic values. Pioneer
evaluates a security's potential value based on the company's assets and
prospects for earnings growth. In making that assessment, Pioneer employs due
diligence and fundamental research, an evaluation of the issuer based on its
financial statements and operations. Pioneer also considers a security's
potential to provide income. In assessing the appropriate maturity, rating and
sector weighting of the fund's portfolio, Pioneer considers a variety of factors
that are expected to influence economic activity and interest rates. These
factors include fundamental economic indicators, such as the rates of economic
growth and inflation, Federal Reserve monetary policy and the relative value of
the U.S. dollar compared to other currencies. In making these portfolio
decisions, Pioneer relies on the knowledge, experience and judgment of its own
staff who have access to a wide variety of research.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
Each fund is subject to similar risks. Even though each fund seeks to
maximize total return, you could lose money on your investment or not make as
much as if you invested elsewhere if:
o Interest rates go up, causing the value of debt securities in the fund's
portfolio to decline
o The issuer of a security owned by the fund defaults on its obligation to
pay principal and/or interest or has its credit rating downgraded
o During periods of declining interest rates, the issuer of a security
exercises its option to prepay principal earlier than scheduled, forcing
the fund to reinvest in lower yielding securities. This is known as call or
prepayment risk
o During periods of rising interest rates, the average life of certain types
of securities is extended because of slower than expected principal
payments. This may lock in a below market interest rate, increase the
security's duration and reduce the value of the security. This is known as
extension risk
o The adviser's judgment about the attractiveness, relative value or
potential appreciation of a particular sector, security or investment
strategy proves to be incorrect
o A downturn in equity markets causes the price of convertible securities to
drop even when the prices of below investment grade bonds otherwise would
not go down
INVESTMENT IN HIGH YIELD SECURITIES INVOLVES SUBSTANTIAL RISK OF LOSS.
These securities are considered speculative with respect to the issuer's ability
to pay interest and principal and are susceptible to default or decline in
market value due to adverse economic and business developments. The market
values for high yield securities tend to be very volatile, and these securities
are less liquid than investment grade debt securities. For these reasons, your
investment in either fund is subject to the following specific risks:
o Increased price sensitivity to changing interest rates and deteriorating
economic environment
o Greater risk of loss due to default or declining credit quality
o Adverse company specific events are more likely to render the issuer unable
to make interest and/or principal payments
o A negative perception of the high yield market develops, depressing the
price and liquidity of high yield securities. This negative perception
could last for a significant period of time
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Each fund is not diversified, which means that it can invest a higher
percentage of its assets in any one issuer than a diversified fund. Being
non-diversified may magnify the fund's losses from adverse events affecting a
particular issuer.
EACH FUND'S PAST PERFORMANCE
Performance information for Pioneer High Yield Fund is not presented
because the fund has not yet commenced operations. Annual performance
information for Third Avenue High Yield Fund is not presented because the fund
has not been in operation for a full calendar year. Fund performance varies from
year to year. A fund's past performance does not necessarily indicate how it
will perform in the future. As a shareholder, you may lose or make money on your
investment.
FEES AND EXPENSES
Shareholders of both funds pay various expenses, either directly or
indirectly. The following expense table for Third Avenue High Yield Fund shows
fund expenses for the year ended October 31, 1998. Future expenses may be
greater or less.
THIRD AVENUE HIGH YIELD FUND
SHAREHOLDER FEES PAID DIRECTLY
FROM YOUR INVESTMENT
Maximum sales charge (load) when you buy
shares as a percentage of offering price..................................None
Maximum deferred sales charge (load) as
a percentage of offering price or the
amount you receive when you sell
shares, whichever is less.................................................None
Redemption fee (as a percentage of amount
redeemed).................................................................1.00%1
Exchange fee (as a percentage of amount
exchanged)................................................................1.00%1
ANNUAL FUND OPERATING EXPENSES PAID
FROM THE ASSETS OF THE FUND AS A
PERCENTAGE OF AVERAGE DAILY NET ASSETS
Management Fee............................................................0.90%
Other Expenses............................................................3.09%2
Total Annual Fund Operating Expenses......................................3.99%2
- ------------------
1 Fee is charged only on redemptions or exchanges of shares held less than
one year.
2 These expenses do not reflect reimbursements by EQSF Advisers, Inc. for all
expenses incurred by the fund in excess of 1.9% of fund assets (this
expense reimbursement arrangement will terminate after the reorganization).
The fund will repay EQSF Advisers, Inc. the amount of its reimbursement for
up to three years following the reimbursement to the extent fund expenses
drop below 1.9%. EQSF Advisers, Inc. expects to continue to reimburse the
fund for these expenses for the foreseeable future. Either the fund or EQSF
Advisers, Inc. can terminate this arrangement at any time.
THIRD AVENUE HIGH YIELD FUND EXAMPLE
This example helps you compare the cost of investing in the fund with the
cost of investing in other mutual funds. It assumes that: a) you invest $10,000
in the fund for the time periods shown, b) you reinvest all dividends and
distributions, c) your investment has a 5% return each year and d) the fund's
operating expenses remain the same.
Although your actual costs may be higher or lower, under these
assumptions your costs would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES IF YOU DO NOT SELL YOUR SHARES
------------------------------------------- ------------------------------------------
NUMBER OF YEARS YOU OWN YOUR SHARES
--------------------------------------------------------------------------------------
1 3 5 10 1 3 5 10
- ------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Third Avenue
High Yield Fund $502 $1,215 $2,046 $4,197 $401 $1,215 $2,046 $4,197
- ------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
</TABLE>
PIONEER HIGH YIELD FUND
SHAREHOLDER FEES PAID DIRECTLY
FROM YOUR INVESTMENT
CLASS A
Maximum sales charge (load) when you buy
shares as a percentage of offering price..................................4.5%
Maximum deferred sales charge (load) as
a percentage of offering price or the
amount you receive when you sell
shares, whichever is less.................................................None1
ANNUAL FUND OPERATING EXPENSES PAID
FROM THE ASSETS OF THE FUND AS A
PERCENTAGE OF AVERAGE DAILY NET ASSETS
Management Fee............................................................0.70%2
Distribution and Service (Rule 12b-1) Fee.................................0.25%
Other Expenses............................................................0.55%2
Total Annual Fund Operating Expenses......................................1.50%2
7
<PAGE>
- ------------------
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.
2 Estimated based on anticipated expenses for the fund during its initial
fiscal year. Pioneer has agreed not to impose all or a portion of its
management fee and, if necessary, to limit other operating expenses of the
fund to the extent required to reduce Class A expenses to 0.75% of the
average daily net assets attributable to Class A shares. This agreement is
voluntary and temporary and may be revised or terminated at any time.
Reimbursed expenses may be subsequently recovered by Pioneer from the fund
if the fund's expense ratio is less than the expense limitation. Given the
expense limitation, actual fund expenses as a percentage of average daily
net assets are estimated as follows:
CLASS A
Management Fee 0.00%
Distribution and Service (12b-1) Fee 0.25%
Other Expenses 0.50%
Total Annual Fund Operating Expenses 0.75%
PIONEER HIGH YIELD FUND EXAMPLE
This example helps you compare the costs of investing in the fund with the
cost of investing in other mutual funds. It assumes that: a) you invest $10,000
in the fund for the time periods shown, b) you reinvest all dividends and
distributions, c) your investment has a 5% return each year and d) the fund's
operating expenses remain the same.
Although your actual costs may be higher or lower, under these assumptions
your costs would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES IF YOU DO NOT SELL YOUR SHARES
------------------------------------------- ------------------------------------------
NUMBER OF YEARS YOU OWN YOUR SHARES
--------------------------------------------------------------------------------------
1 3 5 10 1 3 5 10
- ------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pioneer High
Yield Fund $596 $903 $1,232 $2,160 $596 $903 $1,232 $2,160
- ------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
</TABLE>
OTHER INVESTMENT STRATEGIES
As discussed, each fund invests primarily in below investment grade debt
securities and preferred stocks to maximize total return.
This section describes additional investments that a fund may make or
strategies that it may pursue to a lesser degree to achieve the fund's goal.
Some of the funds' secondary investment policies also entail risks. To learn
more about these investments and risks, you should obtain and read the statement
of additional information (SAI).
CONVERTIBLE SECURITIES
Each fund may invest in bonds and preferred stocks that are convertible
into the equity securities of the issuer. Convertible securities generally offer
lower interest or dividend yields than non-convertible securities of similar
quality. As with all fixed income securities, the market values of convertible
securities tend to decline as interest rates increase and, conversely, to
increase as interest rates decline. However, when the market price of the common
stock underlying a convertible security exceeds the conversion price, the
convertible security tends to reflect the market price of the underlying common
stock. As the market price of the underlying common stock declines, the
convertible security tends to trade increasingly on a yield basis and thus may
not decline in price to the same extent as the underlying common stock.
Convertible securities rank senior to common stocks in an issuer's capital
structure and consequently entail less risk than the issuer's common stock.
EQUITY SECURITIES
Consistent with its objective each fund may invest in equity securities,
including common stocks, depositary receipts, warrants, rights and other equity
interests. Equity securities represent an ownership interest in an issuer, rank
junior in a company's capital structure to debt securities and consequently may
entail greater risk of loss than fixed income securities.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
Each fund may invest in mortgage-backed and asset-backed securities.
Mortgage-backed securities may be issued by private companies or by agencies of
the U.S. government and represent direct or indirect participation in, or are
collateralized by and payable from, mortgage loans secured by real property.
Asset-backed securities represent participations in, or are secured by and
payable from, assets such as installment sales or loan contracts, leases, credit
card receivables and other categories of receivables.
FOREIGN SECURITIES
Third Avenue High Yield Fund does not limit the percentage of its assets
that may be invested in non-U.S. issuers, but only invests in non-U.S. issuers
meeting certain disclosure standards.
8
<PAGE>
Pioneer High Yield Fund may invest in securities of Canadian issuers to the
same extent as securities of U.S. issuers. The fund may invest up to 15% of its
total assets (at the time of purchase) in securities of non-U.S. issuers,
including debt and equity securities of corporate issuers and debt securities of
government issuers in developed and emerging markets. Investing in Canadian and
non-U.S. issuers may involve unique risks compared to investing in securities of
U.S. issuers. These risks are more pronounced to the extent the fund invests in
issuers in emerging markets or concentrates such investments in any one region.
These risks may include:
o Less information about non-U.S. issuers or markets may be available due to
less rigorous disclosure and accounting standards or regulatory practices
o Many non-U.S. markets are smaller, less liquid and more volatile. In a
changing market, Pioneer might not be able to sell the fund's portfolio
securities in amounts and at prices it considers reasonable
o Adverse effect of currency exchange rates or controls on the value of the
fund's investments
o Political, economic and social developments that adversely affect the
securities markets
o Withholding and other non-U.S. taxes may decrease the fund's return
TEMPORARY INVESTMENTS
Normally, Pioneer High Yield Fund invests substantially all of its assets
to meet its investment objective. Pioneer High Yield Fund may invest the
remainder of its assets in securities with remaining maturities of less than one
year, cash equivalents or may hold cash. For temporary defensive purposes,
Pioneer High Yield Fund may depart from its principal investment strategies and
invest part or all of its assets in these securities. During such periods,
Pioneer High Yield Fund may not be able to achieve its investment objective.
Similarly, your fund may hold all or a portion of its assets in short-term U.S.
government obligations, cash or cash equivalents when the adviser deems a
short-term defensive posture appropriate. Pioneer High Yield Fund intends to
adopt a defensive strategy only when Pioneer believes high yield securities have
extraordinary risks due to political or economic factors.
SHORT-TERM TRADING
The funds usually do not trade for short-term profits. Each fund will sell
an investment, however, even if it has only been held for a short time, if it no
longer meets the fund's investment criteria. If a fund does a lot of trading, it
may incur additional operating expenses, which would reduce performance and
could cause shareholders to receive larger distributions of taxable income or
capital gains.
DERIVATIVES
Pioneer High Yield Fund may use futures, options, forward foreign currency
exchange contracts and other derivatives. Your fund has expressed no policy
regarding these instruments. A derivative is a security or instrument whose
value is determined by reference to the value or the change in value of one or
more securities, currencies, indices or other financial instruments. Pioneer
High Yield Fund does not use derivatives as a primary investment technique and
generally limits their use to hedging. However, Pioneer High Yield Fund may use
derivatives for a variety of purposes, including:
o As a hedge against adverse changes in stock market prices, interest rates
and currency exchange rates
o As a substitute for purchasing or selling securities
o To increase the fund's return as a non-hedging strategy that may be
considered speculative
Even a small investment in derivatives can have a significant impact on a
fund's exposure to stock market values, interest rates or currency exchange
rates. If changes in a derivative's value do not correspond to changes in the
value of the fund's other investments, the fund may not fully benefit from or
could lose money on the derivative position. In addition, some derivatives
involve risk of loss if the person who issued the derivative defaults on its
obligation. Certain derivatives may be less liquid and more difficult to
value.
YEAR 2000
Information technology experts are concerned about computer and other
electronic systems' ability to process date-related information on and after
January 1, 2000. This scenario, commonly referred to as the "Year 2000 problem,"
could have an adverse impact on the funds and the provision of services to their
shareholders. Each fund has addressed and continues to monitor the Year 2000
problem with respect to its systems and those used by its distributor and
transfer agent. Each fund has obtained assurances from its other service
providers that they are taking appropriate Year 2000 measures and each fund is
monitoring their efforts. Although neither fund expects the Year 2000 problem to
adversely impact it, neither fund can guarantee that its, or the fund's service
providers', efforts will be successful.
9
<PAGE>
PROPOSAL TO APPROVE AGREEMENT
AND PLAN OF REORGANIZATION
REORGANIZATION
o The reorganization is scheduled to occur after the close of business on
February 25, 2000 but may occur as of any later date on or before April 15,
2000 or otherwise agreed to by the funds. Upon consummation of the
reorganization, your fund will transfer all of its assets to Pioneer High
Yield Fund in exchange for shares of Pioneer High Yield Fund. Pioneer High
Yield Fund will also assume your fund's liabilities that are included in
the calculation of your fund's net assets at the closing and liabilities
with respect to your fund's investment operations that are not required by
generally accepted accounting principles to be included in the calculation
of net asset value. The net asset values of both funds will be computed as
of the close of the New York Stock Exchange (normally 4:00 p.m. Eastern
time) on the reorganization date.
o Pioneer High Yield Fund will issue to your fund Class A shares of Pioneer
High Yield Fund in an amount equal to the aggregate net asset value of your
fund's shares. Class A shares of Pioneer High Yield Fund having a value on
the reorganization date equal to the value of your shares of your fund will
be distributed to you in exchange for shares of your fund. As a result, all
shareholders of your fund will become Class A shareholders of Pioneer High
Yield Fund.
o After the reorganization is complete, your fund will be liquidated and
terminated.
o The reorganization is intended to be tax free for federal income tax
purposes.
DESCRIPTION OF REORGANIZATION
The shareholders of your fund are being asked to approve an Agreement and
Plan of Reorganization, a copy of which is attached as Exhibit A. The Agreement
provides for a reorganization on the terms described above.
REASONS FOR THE PROPOSED REORGANIZATION
The board of trustees of your fund believes that the proposed
reorganization will be advantageous to the shareholders of your fund for several
reasons. The board of trustees considered the following matters, among others,
in approving the proposal.
FIRST, shareholders of your fund would enjoy continuity of portfolio
management. Margaret D. Patel, the portfolio manager of your fund since
inception, will be the portfolio manager for Pioneer High Yield Fund. She has
informed your fund that she intends to manage Pioneer High Yield Fund in
substantially the same manner in which she manages your fund.
SECOND, it is expected that Pioneer High Yield Fund's actual expenses will
be lower than your fund's actual expenses. This is because Pioneer has
temporarily agreed to limit the expenses of Class A shares to 0.75% of average
daily net assets, while your fund currently has an expense limit of 1.90% of
average daily net assets on the first $100 million and 1.50% of average daily
net assets in excess of $100 million. Consequently, shareholders of your fund
are expected to pay significantly lower expenses each month as shareholders of
Pioneer High Yield Fund than they would if the reorganization did not occur, for
at least as long as the voluntary expense limitations on the funds' expenses are
continued. Since Pioneer is not obligated to maintain the expense limitation,
you should consider the potential effect that the reorganization will have on
per share expenses without giving effect to the expense limitation.
Furthermore, there is the potential that Pioneer High Yield Fund's total
annual operating expenses will continue to be lower than the total annual
operating expenses of your fund even after termination of the expense waiver.
Although the combined Rule 12b-1 and management fees for Pioneer High Yield Fund
are greater than the management fee for your fund so long as the net assets of
Pioneer High Yield Fund are $500 million or less, they are equal to or less than
your fund's management fee at net asset levels in excess of $500 million. There
can be no assurance if or when Pioneer High Yield Fund would have assets in
excess of $500 million. This difference could more than offset the higher
combined Rule 12b-1 and management fees of Pioneer High Yield Fund at net asset
levels below $500 million.
THIRD, Pioneer High Yield Fund shares received in the reorganization will
provide your fund's shareholders with substantially the same investment
advantages as they currently have.
FOURTH, Pioneer offers a diverse family of mutual funds, with over 20 funds
that will be available to your fund's shareholders through exchanges. Your fund
is exchangeable for shares of the other three Third Avenue funds and an
unaffiliated separately managed money market fund.
FIFTH, EQSF Advisers, Inc. does not expect to retain the services of Ms.
Patel after the reorganization (or, in the event that the reorganization is not
expected to occur, such earlier date as determined by Ms. Patel or EQSF
Advisers, Inc.) and does not have other portfolio managers with comparable
experience in managing high yield portfolios, nor does it expect to hire another
portfolio manager with such expertise. Consequently, EQSF Advisers, Inc. has
advised your fund that if the reorganization is not completed, EQSF Advises,
Inc. expects to recommend to your fund's trustees that your fund be liquidated.
Your fund's trustees could accept or reject such a recommendation.
10
<PAGE>
A liquidation would be taxable to your fund's shareholders and would not
offer the potential advantages of the reorganization. In recommending the
transaction, your fund's board considered the fact that the reorganization is
expected to be able to be completed on a tax-free basis.
The board of trustees of Pioneer High Yield Fund considered that the
reorganization presents an opportunity for Pioneer High Yield Fund to acquire
investment assets without the obligation to pay commissions or other transaction
costs that are normally associated with the purchase of securities. The trustees
also believe that your fund's shareholders and Pioneer High Yield Fund's
shareholders will benefit from the resulting continuity of management, including
the intended use of your fund's performance record as Pioneer High Yield Fund's
own. The ability of Pioneer High Yield Fund to utilize your fund's past
performance may be effective in drawing new shareholders to Pioneer High Yield
Fund. This could have the effect of increasing the fund's asset base and
lowering overall expenses for shareholders.
The board of trustees of Pioneer High Yield Fund also considered that the
advisers to both funds will benefit from the reorganization. Because Pioneer
High Yield Fund will have a performance record, Pioneer expects to be able to
increase the size of the fund at a faster rate than would otherwise be possible.
Such an increase in size benefits Pioneer by accelerating the period at which
management of the fund is profitable. EQSF Advisers, Inc. will benefit from the
reorganization because Pioneer has agreed to make certain payments to EQSF
Advisers, Inc. if the reorganization is completed. EQSF Advisers, Inc. will be
entitled to be paid by Pioneer $250,000 plus an annual fee equal to 0.549% of
the average daily net assets of Pioneer High Yield Fund during the first three
years after the reorganization.
COMPARATIVE FEES AND EXPENSE RATIOS. As discussed above, Pioneer High Yield
Fund pays a management fee rate lower than your fund's fee rate at all asset
levels. Pioneer High Yield Fund also has breakpoints in its management fee which
may reduce the effective management fee rate as Pioneer High Yield Fund's assets
grow. While you may benefit from Pioneer High Yield Fund's reduced management
fee, you will pay Rule 12b-1 fees as a shareholder of Pioneer High Yield Fund.
Depending upon the size of the fund, this fee may offset some or all of the
benefit of the lower management fee or result in higher overall expenses.
In addition to a lower management fee rate, Pioneer High Yield Fund's
estimated Class A expense ratio of 1.50% is lower than your fund's gross expense
ratio of 3.99% (0.75% vs. 1.90%, respectively, for net expenses with the expense
limitations).
The expenses of Class A shares of Pioneer High Yield Fund include an annual
Rule 12b-1 fee equal to 0.25% of average daily net assets attributable to Class
A shares. In calculating the Rule 12b-1 fee payable by Pioneer High Yield Fund,
Pioneer will not include the assets held in accounts established in the
reorganization, except for omnibus accounts maintained by a broker, financial
intermediary or recordkeeper. However, since Rule 12b-1 fees are not assessed at
a shareholder account level, the effect will be a reduction in the Rule 12b-1
fee paid by all Class A shareholders and not a waiver of the Rule 12b-1 fee for
shareholders participating in the reorganization.
Your trustees do not believe, given your fund's current size and growth
rate, that in the near future your fund will grow to an asset size which would
allow your fund to realize the benefits of economies of scale. Your trustees
also do not believe that in the near future your fund will reach an asset size
that will allow your fund to significantly increase the diversification of its
investment portfolio. In addition, the adviser to your fund may not continue to
subsidize a portion of your fund's expenses indefinitely. If the adviser were to
discontinue this voluntary expense limitation, your fund's expense ratio would
rise even higher above Pioneer High Yield Fund's Class A expense ratio after
giving effect to Pioneer's fee waiver.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The reorganization is intended to be tax free for United States federal
income tax purposes. The consummation of the reorganization is conditioned on
the receipt by both funds of an opinion as of the closing from Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to Third Avenue High Yield Fund,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in the opinion, the reorganization will be treated as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and Pioneer High Yield Fund and Third
Avenue High Yield Fund will each be a party to such reorganization within the
meaning of Section 368(b) of the Code. Accordingly, no gain or loss will be
recognized by Pioneer High Yield Fund or Third Avenue High Yield Fund as a
result of the reorganization, and no gain or loss will be recognized by a
shareholder of Third Avenue High Yield Fund who receives solely Pioneer High
Yield Fund shares in exchange for shares of Third Avenue High Yield Fund.
The aggregate tax basis of the Pioneer High Yield Fund shares to be
received by shareholders of Third Avenue High Yield Fund will be the same as the
aggregate tax basis in the shares of Third Avenue High Yield Fund surrendered in
exchange therefor, and the holding period of the Pioneer High Yield Fund shares
to be received by shareholders of Third Avenue High Yield Fund in connection
with the reorganization will include the holding period of the shares of Third
Avenue High Yield Fund surrendered in exchange therefor, provided that the
shares in Third Avenue High Yield Fund are held as a capital asset at the
closing of the reorganization.
No tax ruling has been or will be received from the Internal Revenue
Service ("IRS") in connection with the reorganization. An opinion of counsel is
not binding on the IRS or a court, and no assurance can be given that the IRS
would not assert, or a court would not sustain, a contrary position.
11
<PAGE>
THE ABOVE DISCUSSION MAY NOT APPLY TO PARTICULAR CATEGORIES OF HOLDERS OF
SHARES OF THIRD AVENUE HIGH YIELD FUND SUBJECT TO SPECIAL TREATMENT UNDER THE
CODE, SUCH AS FOREIGN HOLDERS OR HOLDERS WHOSE SHARES WERE ACQUIRED PURSUANT TO
THE EXERCISE OF AN EMPLOYEE STOCK OPTION OR OTHERWISE AS COMPENSATION.
SHAREHOLDERS OF THIRD AVENUE HIGH YIELD FUND ARE URGED TO CONSULT THEIR TAX
ADVISERS TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE REORGANIZATION TO
THEM, INCLUDING ANY STATE, LOCAL OR OTHER TAX CONSEQUENCES OF THE
REORGANIZATION.
ADDITIONAL TERMS OF AGREEMENT AND PLAN OF REORGANIZATION
SURRENDER OF SHARE CERTIFICATES. Shareholders of your fund whose shares are
represented by one or more share certificates need not surrender their
certificates. After the reorganization, certificates evidencing ownership of
your fund's shares will evidence ownership of Pioneer High Yield Fund shares
received in the reorganization. Shareholders must continue to follow procedures
for surrendering your fund's share certificates (or delivering the appropriate
affidavit) in order to redeem shares of Pioneer High Yield Fund after the
reorganization. Pioneer High Yield Fund will not issue share certificates in the
reorganization.
CONDITIONS TO CLOSING THE REORGANIZATION. The obligation of your fund to
consummate the reorganization is subject to the satisfaction of certain
conditions, including the performance by Pioneer High Yield Fund of all its
obligations under the Agreement and Plan of Reorganization and the receipt of
all consents, orders and permits necessary to consummate the reorganization (see
Sections 7 and 9 of Exhibit A).
The obligation of Pioneer High Yield Fund to consummate the reorganization
is subject to the satisfaction of certain conditions, including your fund's
performance of all of its obligations under the Agreement and Plan of
Reorganization, the receipt of certain documents and financial statements from
your fund and the receipt of all consents, orders and permits necessary to
consummate the reorganization (see Sections 8 and 9 of Exhibit A).
The obligations of both funds are subject to the approval of the Agreement
and Plan of Reorganization by the necessary vote of the outstanding shares of
your fund, in accordance with the provisions of your fund's trust instrument and
by-laws.
TERMINATION OF AGREEMENT AND PLAN OF REORGANIZATION. The boards of trustees
of your fund and Pioneer High Yield Fund may agree to terminate the Agreement
and Plan of Reorganization even if the shareholders of your fund have already
approved it, at any time before the reorganization date, if the boards believe
that proceeding with the reorganization would no longer be advisable.
EXPENSES OF THE REORGANIZATION. Pioneer will pay for all expenses incurred
in connection with the reorganization except that (i) your fund will pay for all
expenses incurred in connection with its liquidation and termination and (ii) if
the shareholders of your fund do not approve the reorganization, EQSF Advisers,
Inc. will pay 50% of expenses incurred in connection with the reorganization, up
to $20,000, and Pioneer will pay the remainder.
CAPITALIZATION
The following table sets forth the PRO FORMA combined capitalization of
both funds as if the reorganization had occurred on April 30, 1999. The table
reflects PRO FORMA exchange ratios of approximately one Class A Pioneer High
Yield Fund share being issued for each share of your fund. Because Pioneer High
Yield Fund will consist only of the Class A shares obtained through the
reorganization, the exchange ratio will most likely remain 1:1 on the closing
date.
<TABLE>
<CAPTION>
APRIL 30, 1999
- -------------------------------------------------------------------------------------------------------------------------------
PIONEER HIGH YIELD FUND
PIONEER HIGH YIELD FUND CLASS A SHARES
THIRD AVENUE HIGH YIELD FUND CLASS A SHARES PRO FORMA
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
<S> <C> <C> <C>
Net Assets $8,620,262 0 $8,620,262
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
Net Asset Value Per Share $9.41 N/A $9.41
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
Shares Outstanding 16,197 0 16,197
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
</TABLE>
It is impossible to predict how many Class A shares of Pioneer High Yield
Fund will actually be received and distributed by your fund on the
reorganization date. The table should not be relied upon to determine the number
or value of Pioneer High Yield Fund shares that will actually be received and
distributed.
BOARDS' EVALUATION AND RECOMMENDATION
For the reasons described above, the board of trustees of your fund,
including the trustees who are not "interested persons" of your fund or the
adviser (the independent trustees), approved the reorganization. In particular,
the trustees determined that the reorganization was in the best interest of your
fund. Similarly, the board of trustees of Pioneer High Yield Fund, including the
independent trustees, approved the reorganization. They also determined that the
reorganization was in the best interest of Pioneer High Yield Fund. If the
reorganization is not approved, your trustees will consider what other actions
may be appropriate, including the possible liquidation of your fund.
THE TRUSTEES OF YOUR FUND RECOMMEND THAT YOU VOTE FOR THE PROPOSAL TO
APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION.
12
<PAGE>
VOTING RIGHTS AND REQUIRED VOTE
Each share of your fund is entitled to one vote. Approval of the above
proposal requires the affirmative vote of a majority of the shares of your fund
outstanding and entitled to vote.
Shares of your fund represented in person or by proxy, including shares
which abstain or do not vote with respect to the proposal, will be counted for
purposes of determining whether there is a quorum at the meeting. Accordingly,
an abstention from voting has the same effect as a vote AGAINST the proposal.
If a broker or nominee holding shares in "street name" indicates on the
proxy card that it does not have discretionary authority to vote on the
proposal, those shares will NOT be considered present and entitled to vote on
the proposal. Thus, a "broker non-vote" has the same effect as a vote AGAINST
the proposal because shares represented by a "broker non-vote" are considered to
be outstanding shares.
If the required approval of shareholders is not obtained, your fund will
continue to engage in business as a separate mutual fund and the board of
trustees will consider what further action may be appropriate, including the
possible liquidation of your fund.
ADDITIONAL INFORMATION ABOUT THE FUNDS
NET ASSET VALUE
Each fund's net asset value is the value of its portfolio of securities
plus any other assets minus its operating expenses and any other liabilities.
Each fund calculates a net asset value every day the New York Stock Exchange is
open when regular trading closes (normally 4:00 p.m. Eastern time).
Each fund generally values its portfolio securities based on market prices
or quotations. When market prices are not available or are considered by the
adviser to be unreliable, the fund may use an asset's fair value. Fair value is
determined in accordance with procedures approved by the fund's trustees.
International securities markets may be open on days when the U.S. markets are
closed. For this reason, the values of any international securities owned by the
fund could change on a day when you cannot buy or sell shares of the fund.
You buy or sell shares at the net asset value per share calculated on the
day of your transaction.
THE FOLLOWING IS INFORMATION ABOUT BUYING, EXCHANGING AND SELLING SHARES OF
PIONEER HIGH YIELD FUND. FOR INFORMATION ABOUT BUYING, EXCHANGING AND SELLING
SHARES OF YOUR FUND, SEE YOUR FUND'S PROSPECTUS.
OPENING YOUR ACCOUNT
If your shares are held in your investment firm's name, the options and
services available to you may be different from those discussed in this
prospectus. Ask your investment professional for more information.
ACCOUNT OPTIONS
Use your account application to select options and privileges for your
account. You can change your selections at any time by sending a completed
account options form to the transfer agent. You may be required to obtain a
signature guarantee to make certain changes to an existing account.
Call or write to Pioneer High Yield Fund's transfer agent for account
applications, account options forms and other account information:
PIONEERING SERVICES CORPORATION
P.O. Box 9014
Boston, Massachusetts 02205-9014
Telephone 1-800-225-6292
TELEPHONE TRANSACTION PRIVILEGES
If your account is registered in your name, you can buy, exchange or sell
Pioneer High Yield Fund shares by telephone. If you do not want your account to
have telephone transaction privileges, you must indicate that choice on your
account application or by writing to the transfer agent.
When you request a telephone transaction the transfer agent will try to
confirm that the request is genuine. The transfer agent records the call,
requires the caller to provide the personal identification number for the
account and sends you a written confirmation. The fund may implement other
confirmation procedures from time to time. Different procedures may apply if you
have a non-U.S. account or if your account is registered in the name of an
institution, broker-dealer or other third party.
13
<PAGE>
GENERAL RULES ON BUYING, EXCHANGING AND SELLING YOUR PIONEER HIGH YIELD FUND
SHARES
SHARE PRICE
If you place an order with your investment firm before the New York Stock
Exchange closes and your investment firm submits the order to the distributor
prior to the distributor's close of business (usually 5:30 p.m. Eastern time),
your share price will be calculated that day. Otherwise, your price per share
will be calculated at the close of the New York Stock Exchange after the
distributor receives your order. Your investment firm is responsible for
submitting your order to the distributor.
BUYING
You may buy Pioneer High Yield Fund shares from any investment firm that
has a sales agreement with the distributor. If you do not have an investment
firm, please call 1-800-225-6292 for information on how to locate an investment
professional in your area.
You can buy Pioneer High Yield Fund shares at the offering price, the net
asset value per share plus the applicable sales charge. Shareholders whose
Pioneer High Yield Fund accounts were established as a result of the
reorganization may purchase additional shares at net asset value. The
distributor may reject any order until it has confirmed the order in writing and
received payment. The fund reserves the right to stop offering any class of
shares.
MINIMUM INVESTMENT AMOUNTS
Your initial investment in Class A shares must be at least $1,000.
Additional investments must be at least $100 for Class A shares. You may qualify
for lower initial or subsequent investment minimums if you are opening a
retirement plan account, establishing an automatic investment plan or placing
your trade through your investment firm. The minimum initial investment amount
does not apply for purposes of the reorganization.
EXCHANGING
You may exchange your shares only for Class A shares of another Pioneer
mutual fund.
Your exchange request must be for at least $1,000.
SELLING
Your shares will be sold at net asset value per share next calculated after
Pioneer High Yield Fund receives your request in good order.
The fund generally will send your sale proceeds by check, bank wire or
electronic funds transfer. Normally you will be paid within seven days.
If you are selling shares from a non-retirement account or certain IRAs,
you may use any of the methods described below. If you are selling shares from a
retirement account other than an IRA, you must make your request in writing.
You may have to pay federal income taxes on a sale or an exchange.
FINANCIAL INTERMEDIARIES
If you invest in the fund through investment professionals or other
financial intermediaries, including wrap programs and fund supermarkets,
additional conditions may apply to your investment in the fund, and the
investment professional or intermediary may charge you a transaction-based or
other fee for its services. These conditions and fees are in addition to those
imposed by the fund and its affiliates. You should ask your investment
professional or financial intermediary about its services and any applicable
fees.
GOOD ORDER MEANS THAT:
o You have provided adequate instructions
o There are no outstanding claims against your account
o There are no transaction limitations on your account
o If you have any fund share certificates, you submit them and they are
signed by each record owner exactly as the shares are registered
o Your request includes a signature guarantee if you:
-- Are selling over $100,000 or exchanging over $500,000 worth
of shares
-- Changed your account registration or address within the last 30 days
-- Instruct the transfer agent to mail the check to an address different
from the one on your account
-- Want the check paid to someone other than the account owner(s)
-- Are transferring the sale proceeds to a Pioneer mutual fund account with
a different registration
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BUYING, EXCHANGING AND SELLING PIONEER HIGH YIELD FUND SHARES
<TABLE>
<CAPTION>
BUYING SHARES EXCHANGING SHARES
- ----------------- ------------------------------------------------ ------------------------------------------------
<S> <C> <C>
THROUGH YOUR Normally, your investment firm will send your Normally, your investment firm will send your
INVESTMENT FIRM purchase request to the fund's transfer exchange request to the fund's transfer agent.
agent. CONSULT YOUR INVESTMENT PROFESSIONAL CONSULT YOUR INVESTMENT PROFESSIONAL FOR MORE
FOR MORE INFORMATION. Your investment firm INFORMATION ABOUT EXCHANGING YOUR SHARES.
may receive a commission from the distributor
for your purchase of fund shares. The
distributor or its affiliates may pay additional
compensation, out of their own assets, to
certain investment firms or their affiliates
based on objective criteria established by the
distributor.
- ----------------- ------------------------------------------------ ------------------------------------------------
BY PHONE YOU CAN USE THE TELEPHONE PURCHASE PRIVILEGE After you establish your fund account, YOU CAN
IF you have an existing non-retirement EXCHANGE FUND SHARES BY PHONE IF:
account or certain IRAs. You can purchase
additional fund shares by phone if: o You are using the exchange to establish
a new account, provided the new
o You established your bank account of account has a registration identical to the
record at least 30 days ago original account
o Your bank information has not o The fund into which you are exchanging
changed for at least 30 days offers the same class of shares
o You are not purchasing more than o You are not exchanging more than
$25,000 worth of shares per account per day $500,000 worth of shares per account per day
o You can provide the proper account o You can provide the proper account
identification identification information
When you request a telephone purchase, the
transfer agent will electronically debit the
amount of the purchase from your bank account
of record. The transfer agent will purchase
fund shares for the amount of the debit at the
offering price determined after the transfer
agent receives your telephone purchase
instruction and good funds. It usually takes
three business days for the transfer agent to
receive notification from your bank that good
funds are available in the amount of your
investment.
- ----------------- ------------------------------------------------ ------------------------------------------------
IN WRITING, You can purchase fund shares for an existing You can exchange fund shares by MAILING OR
BY MAIL fund account by MAILING A CHECK TO THE FAXING A LETTER OF INSTRUCTION TO THE TRANSFER
OR BY FAX TRANSFER AGENT. Make your check payable to AGENT. You can exchange fund shares directly
the fund. Neither initial nor subsequent through the fund only if your account is
investments should be made by third party registered in your name. However, you may not
check. Your check must be in U.S. dollars fax an exchange request for more than
and drawn on a U.S. bank. Include in your $500,000. Include in your letter:
purchase request the fund's name, the account o The name, social security number and
number and the name or names in the account signature of all registered owners
registration. o A signature guarantee for each registered
owner if the amount of the exchange is
more than $500,000
o The name of the fund out of which you
are exchanging and the name of the fund
into which you are exchanging
o The class of shares you are exchanging
o The dollar amount or number of shares you
are exchanging
- ----------------- ------------------------------------------------ ------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
SELLING SHARES HOW TO CONTACT PIONEER
- ------------------------------------------------ ------------------------------------------------
<S> <C>
Normally, your investment firm will send your BY PHONE
request to sell shares to the fund's transfer For information or to request a telephone
agent. CONSULT YOUR INVESTMENT PROFESSIONAL transaction between 8:00 a.m. and 9:00 p.m.
FOR MORE INFORMATION. The fund has authorized (Eastern time) by speaking with a shareholder
the distributor to act as its agent in the services representative call 1-800-225-6292
repurchase of fund shares from qualified
investment firms. The fund reserves the right To request a transaction using FactFone(SM) call
to terminate this procedure at any time. 1-800-225-4321
- ------------------------------------------------
YOU MAY SELL UP TO $100,000 PER ACCOUNT PER DAY. Telecommunications Device for the Deaf (TDD)
You may sell fund shares held in a retirement 1-800-225-1997
plan account by phone only if your account is
an IRA. You may not sell your shares by phone BY MAIL
if you have changed your address (for checks) Send your written instructions to:
or your bank information (for wires and PIONEERING SERVICES CORPORATION
transfers) in the last 30 days. P.O. Box 9014
Boston, Massachusetts 02205-9014
You may receive your sale proceeds:
o By check, provided the check is made pay- BY FAX
able exactly as your account is registered Fax your exchange and sale requests to:
o By bank wire or by electronic funds 1-800-225-4240
transfer, provided the sale proceeds are
being sent to your bank address of record
- ------------------------------------------------ ------------------------------------------------
You can sell some or all of your fund shares by EXCHANGE PRIVILEGE
WRITING DIRECTLY TO THE FUND only if your You may exchange shares of this fund into
account is registered in your name. Include another Pioneer mutual fund, provided that
in your request your name, your social security you may not make more than four exchanges of
number, the fund's name, your fund account $25,000 or more per account per calendar year
number, the class of shares to be sold, the out of the fund.
dollar amount or number of shares to be sold
and any other applicable requirements as The fund and the distributor reserve the right
described below. The transfer agent will send to refuse any exchange request or restrict, at
the sale proceeds to your address of record any time without notice, the number and/or
unless you provide other instructions. Your frequency of exchanges to prevent abuses of the
request must be signed by all registered owners exchange privilege. Abuses include frequent trading
and be in good order. The transfer agent will in response to short-term market fluctuations
not process your request until it is received and a pattern of trading that appears to be an
in good order. You may not sell more than attempt to "time the market." In addition, the
$100,000 per account per day by fax. fund and the distributor reserve the right to
charge a fee for exchanges or to modify, limit or
suspend the exchange privilege. The fund will
provide 60 days' notice of material amendments to
or termination of the privilege.
- ------------------------------------------------ ------------------------------------------------
</TABLE>
16
<PAGE>
PIONEER HIGH YIELD FUND SHAREHOLDER ACCOUNT POLICIES
SIGNATURE GUARANTEES AND OTHER REQUIREMENTS
You are required to obtain a signature guarantee when you are:
o Requesting certain types of exchanges or sales of fund shares
o Redeeming shares for which you hold a share certificate
o Requesting certain types of changes for your existing account
You can obtain a signature guarantee from most broker-dealers, banks,
credit unions (if authorized under state law) and federal savings and loan
associations. You cannot obtain a signature guarantee from a notary public.
Fiduciaries and corporations are required to submit additional documents to
sell fund shares.
EXCHANGE LIMITATION
You may make up to four exchanges of $25,000 or more per account per
calendar year out of the fund. Except as noted, you may make any number of
exchanges of less than $25,000. The fund's exchange limitation is intended to
discourage short-term trading in fund shares. Short-term trading can increase
the expenses incurred by the fund and make portfolio management less efficient.
In determining whether the exchange redemption limit has been reached, Pioneer
may aggregate a series of exchanges (each valued at less than $25,000) and/or
fund accounts that appear to be under common ownership or control. Pioneer may
view accounts for which one person gives instructions or accounts that act on
advice provided by a single source to be under common control.
The exchange limitation does not apply to automatic exchange transactions
or to exchanges made by participants in employer-sponsored retirement plans
qualified under Section 401 of the Code. The exchange limitation also may not
apply to transactions made through an omnibus account for fund shares.
MINIMUM ACCOUNT SIZE
The fund requires that you maintain a minimum account value of $500. If you
hold less than the minimum in your account because you have sold or exchanged
some of your shares, the fund will notify you of its intent to sell your shares
and close your account. You may avoid this by increasing the value of your
account to at least the minimum within six months of the notice from the fund.
TELEPHONE ACCESS
You may have difficulty contacting the fund by telephone during times of
market volatility or disruption in telephone service. If you are unable to reach
the fund by telephone, you should communicate with the fund in writing.
SHARE CERTIFICATES
Normally, your shares will remain on deposit with the transfer agent and
certificates will not be issued. If you are legally required to obtain a
certificate, you may request one for your Class A shares only. A fee may be
charged for this service.
FORMER THIRD AVENUE HIGH YIELD FUND SHAREHOLDERS
You may purchase shares in any Pioneer mutual fund, either directly or by
exchange, for any account established as a result of the reorganization without
a sales charge. These shares will not be subject to the Class A distribution
fee, except that Class A shares held in an omnibus account are subject to the
Class A distribution fee whether those shares were issued in connection with the
reorganization or were later purchased by direct investment or by exchange.
OTHER POLICIES
The fund may suspend transactions in shares when trading on the New York
Stock Exchange is closed or restricted, when an emergency exists that makes it
impracticable for the fund to sell or value its portfolio securities or with the
permission of the Securities and Exchange Commission.
The fund or the distributor may revise, suspend or terminate the account
options and services available to shareholders at any time.
The fund reserves the right to redeem in kind by delivering portfolio
securities to a redeeming shareholder, provided that the fund must pay
redemptions in cash if a shareholder's aggregate redemptions in a 90-day period
are less than $250,000 or 1% of the fund's net assets.
17
<PAGE>
DIVIDENDS AND CAPITAL GAINS
Pioneer High Yield Fund declares a dividend from any net investment income
and any short-term capital gains each business day. You begin earning dividends
on the first business day following receipt of payment for shares; your shares
continue to earn dividends up to and including the date you redeem them.
Dividends are normally paid on the last business day of the month or shortly
thereafter. Pioneer High Yield Fund distributes net long-term capital gains, if
any, in November. Pioneer High Yield Fund may also pay dividends and
distributions at other times if necessary for the fund to avoid federal income
or excise tax. If you invest in the fund close to the time that the fund makes a
capital gain distribution, generally you will pay a higher price per share and
you will pay taxes on the amount of the capital gain distribution whether you
reinvest the distribution or receive it as cash.
Sales and exchanges may be taxable transactions to shareholders.
TAXES
For federal income tax purposes, distributions from Pioneer High Yield
Fund's net long-term capital gains are considered long-term capital gains and
may be taxable to you at different maximum rates depending upon their source and
other factors. Dividends and short-term capital gain distributions are taxable
as ordinary income. Dividends and distributions are taxable, whether you take
payment in cash or reinvest them to buy additional fund shares. You may also
have tax consequences (generally, a capital gain or loss) when you sell or
exchange fund shares. Each year the fund will mail to you information about your
dividends and distributions for, and the shares you sold in, the previous
calendar year.
You must provide your social security number or other taxpayer
identification number to the fund along with the certifications required by the
IRS when you open an account. If you do not or if it is otherwise legally
required to do so, the fund will withhold 31% "backup withholding" tax from your
dividends and distributions, sale proceeds and any other payments to you.
You should ask your own tax adviser about any federal or state tax
considerations, including possible additional withholding taxes for non-U.S.
shareholders. You may also consult the fund's statement of additional
information for a more detailed discussion of federal income tax considerations
that may affect the fund and its shareholders.
MATERIAL PROVISIONS OF MANAGEMENT AGREEMENTS
THIRD AVENUE HIGH YIELD FUND
Your fund entered into a management agreement with EQSF Advisers, Inc. on
February 9, 1998 (the "existing agreement"). After its initial two-year term,
the existing agreement would continue from year to year if approved annually by
the fund's board of trustees. The existing agreement may be terminated at any
time without penalty upon 60 days' written notice by either party and will
automatically terminate upon assignment thereof.
Pursuant to the existing agreement, your fund pays the adviser a monthly
fee equal to 0.90% annually of your fund's average daily net assets, based on
the prior month's net assets. During the fiscal year ended October 31, 1998,
your fund paid management fees to EQSF Advisers, Inc. equal to $50,472.
Under current arrangements, whenever in any fiscal year your fund's normal
operating expenses, including the investment advisory fee, but excluding
brokerage commissions and interest and taxes, exceed 1.9% of the first $100
million of average daily net assets of the fund, and 1.5% of assets in excess of
$100 million, EQSF Advisers, Inc. is obligated to reimburse the fund in an
amount equal to that excess. If operating expenses fall below that expense
limitation, the fund will begin repaying EQSF Advisers, Inc. for the amount
contributed on behalf of the fund. This repayment will continue for up to three
years after the end of the fiscal year in which an expense is reimbursed by the
adviser, subject to the expense limitation, until the adviser has been paid for
the entire amount contributed or such three-year period expires (this expense
reimbursement arrangement will terminate after the reorganization).
Under the existing agreement, EQSF Advisers, Inc. supervises and assists in
the management of your fund, provides investment research and research
evaluation and makes and executes recommendations for the purchase and sale of
securities. EQSF Advisers, Inc. furnishes at its expense all necessary office
equipment and personnel necessary for performance of its obligations and pays
the compensation for executive duties of officers of the fund.
All other expenses incurred in the operation of your fund and the
continuous offering of its shares, including taxes, fees and commissions,
bookkeeping expenses, fund employees, expenses of redemption of shares, charges
of administrators, custodians and transfer agents, auditing and legal expenses
and fees of outside trustees are borne by the fund.
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<PAGE>
PIONEER HIGH YIELD FUND
Pioneer High Yield Fund has contracted with Pioneer to act as its
investment adviser. Pioneer is a wholly owned subsidiary of The Pioneer Group,
Inc. (PGI). PGI is engaged in the financial services business in the U.S. and
other countries. Certain trustees or officers of Pioneer High Yield Fund are
also directors and/or officers of PGI and its subsidiaries (see management
biographies below).
As Pioneer High Yield Fund's investment adviser, Pioneer provides the fund
with investment research, advice and supervision and furnishes an investment
program for the fund consistent with the fund's investment objective and
policies, subject to the supervision of the fund's trustees. Pioneer determines
what portfolio securities will be purchased or sold, arranges for the placing of
orders for the purchase or sale of portfolio securities, selects brokers or
dealers to place those orders, maintains books and records with respect to the
fund's securities transactions, and reports to the trustees on the fund's
investments and performance.
Under the terms of its contract with Pioneer High Yield Fund, Pioneer pays
all the operating expenses, including executive salaries and the rental of
office space, relating to its services for the fund, with the exception of the
following, which are 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 Pioneer, 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
Securities and Exchange Commission, state or blue sky securities agencies and
foreign jurisdictions, including the preparation of prospectuses and statements
of additional information for filing with such regulatory agencies; (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 Securities and Exchange Commission
pursuant to the Investment Company Act of 1940 (1940 Act); (j) compensation of
those trustees of the fund who are not affiliated with or interested persons of
Pioneer, the fund (other than as trustees), PGI or Pioneer Funds Distributor,
Inc. (PFD); (k) the cost of preparing and printing share certificates; and (l)
interest on borrowed money, if any. In addition, the fund shall pay all brokers'
and underwriting commissions chargeable to the fund in connection with
securities transactions to which the fund is a party. The trustees' approval of
and the terms, continuance and termination of the management contract are
governed by the 1940 Act and the Investment Advisers Act of 1940, as applicable.
Pursuant to the management contract, Pioneer 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 Pioneer. Pioneer, 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 management contract.
As compensation for its management services, Pioneer High Yield Fund will
pay Pioneer a fee equal to 0.70% of Pioneer High Yield Fund's average daily net
assets up to $500 million; 0.65% of the next $500 million; and 0.60% on assets
over $1 billion. The fee is normally computed and accrued daily and paid
monthly.
Pioneer High Yield Fund has entered into an administration agreement with
Pioneer pursuant to which certain accounting and legal services which are
expenses payable by the fund under the management contract are performed by
Pioneer and pursuant to which Pioneer is reimbursed for its costs of providing
such services.
Pioneer has agreed to waive all or part of its management fee or to
reimburse Pioneer High Yield Fund for other expenses (other than extraordinary
expenses) to the extent the fund's Class A share expenses exceed 0.75% of
average daily net assets attributable to Class A shares. This agreement may be
revised or terminated at any time by Pioneer. If Pioneer waives any fee or
reimburses any expenses, and the expenses of the fund are subsequently less than
0.75% of the average daily net assets, the fund will reimburse Pioneer for such
waived fees or reimbursed expenses provided that such reimbursement does not
cause the fund's expenses to exceed 0.75% of the average daily net assets.
PIONEER HIGH YIELD FUND'S RULE 12b-1 DISTRIBUTION PLAN
As described above, Pioneer High Yield Fund has adopted a Rule 12b-1 plan
for Class A shares. Because these fees are an ongoing expense, over time they
increase the cost of your investment and your shares may cost more than shares
that are not subject to a distribution fee or a sales charge.
Pursuant to the Rule 12b-1 plan the fund will reimburse its principal
underwriter, 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. The fund's
board of trustees has approved the following categories of expenses that may be
reimbursed under the Class A plan: (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
19
<PAGE>
its expenditures for broker - dealer commissions and employee compensation on
certain sales of the fund's Class A shares with no initial sales charge; 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. The
expenses of the fund pursuant to the plan are accrued daily at a rate which may
not exceed the annual rate of 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
fund will not, however, pay such Rule 12b-1 fees on assets attributable to Class
A shares issued in the reorganization, other than those issued to omnibus
accounts.
The Rule 12b-1 plan does not provide for the carryover of reimbursable
expenses beyond 12 months from the time the fund is first invoiced for an
expense. The limited carryover provision in the Rule 12b-1 plan may result in an
expense invoiced to the fund in one fiscal year being paid in the subsequent
fiscal year and thus being treated for purposes of calculating the maximum
expenditures of the fund as having been incurred in the subsequent fiscal year.
In the event of termination or non-continuance of the plan, the fund has 12
months to reimburse any expense which it incurs prior to such termination or
non-continuance, provided that payments by the fund during such 12-month period
shall not exceed 0.25% of the fund's average daily net assets attributable to
Class A shares during such period.
TRUSTEES AND EXECUTIVE OFFICERS OF PIONEER HIGH YIELD FUND
When the reorganization occurs, you will become a shareholder of Pioneer
High Yield Fund, which is under different management from Third Avenue High
Yield Fund. Information regarding the trustees and executive officers of Pioneer
High Yield Fund is set forth below.
The following table sets forth each trustee's position(s) with the fund,
and age, address, principal occupation and employment during the past five years
and any other directorships held. Each trustee first became a trustee of the
fund on August 3, 1999. Because the fund is newly organized and not operational,
no trustee owns shares of the fund, beneficially or otherwise.
<TABLE>
<CAPTION>
NAME, AGE, POSITION(S) WITH
THE FUND AND ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT AND DIRECTORSHIPS1
<S> <C>
JOHN F. COGAN, JR.* President, Chief Executive Officer and a Director of
(72) PGI; Chairman and a Director of Pioneer, PFD, Pioneer
CHAIRMAN OF THE BOARD, Goldfields Limited, Teberebie Goldfields Limited, Closed
PRESIDENT AND TRUSTEE Joint-Stock Company "Amgun-Forest," Closed Joint-Stock
60 State Street Company "Udinskoye" and Closed Joint-Stock Company "Tas-Yurjah" Mining
Boston, MA 02109 Company; Director of Pioneer Real Estate Advisors, Inc. (PREA), Pioneer
Forest, Inc., Pioneer Management (Ireland) Ltd. (PMIL),
Pioneer First Investment Fund 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. and Pioneer Omega, Inc. (Pioneer Omega); Chairman of the Supervisory
Board of Pioneer Fonds Marketing, GmbH, Pioneer First Polish Investment
Fund Joint Stock Company, S.A. (Pioneer First Polish) and Pioneer Czech
Investment Company, A.S. (Pioneer Czech); Member of the Supervisory Board
of Pioneer Universal Pension Fund Company; Chairman, President and Trustee
of all of the Pioneer mutual funds; Director of Pioneer Global Equity
Fund Plc, Pioneer Global Bond Fund Plc, Pioneer Euro Reserve Fund Plc,
Pioneer European Equity Fund Plc, Pioneer Emerging Europe Fund Plc,
Pioneer US Real Estate Fund Plc, Pioneer U.S. Growth Fund Plc, Pioneer
Diversified Income Fund Plc and Pioneer America Fund Plc (collectively,
the Irish Funds); and Partner, Hale and Dorr LLP (counsel to PGI and the fund).
MARY K. BUSH President, Bush & Co. (international financial advisory firm); Director
(51) and/or Trustee of Mortgage Guaranty Insurance Corporation, Novecon Management
TRUSTEE Company, Hoover Institution, Folger Shakespeare Library, March of Dimes,
4201 Cathedral Ave., NW Project 2000, Inc. (not-for-profit educational organization), Wilberforce
Washington, DC 20016 University and Texaco, Inc.; Advisory Board Member, Washington Mutual
Investors Fund (registered investment company); and Trustee of all of the
Pioneer mutual funds, except Pioneer Variable Contracts Trust.
RICHARD H. EGDAHL, M.D. Alexander Graham Bell Professor of Health Care Entrepreneurship, Boston
(72) University; Professor of Management, Boston University School of Management;
TRUSTEE Professor of Public Health, Boston University School of Public Health;
Boston University Health Professor of Surgery, Boston University School of Medicine; University Professor,
Policy Institute Boston University; Director, Boston University Health Policy Institute, Boston
53 Bay State Road University Program for Health Care Entrepreneurship, CORE (management of workers'
Boston, MA 02215 compensation and disability costs - Nasdaq National Market) and WellSpace
(provider of complementary health care); Trustee, Boston Medical Center;
Honorary Trustee, Franciscan Children's Hospital; and Trustee of all of the
Pioneer mutual funds.
MARGARET B.W. GRAHAM Founding Director, The Winthrop Group, Inc. (consulting firm); Manager of
(51) Research Operations, Xerox Palo Alto Research Center, from 1991 to 1994;
TRUSTEE formerly Professor of Operations Management and Management of Technology and
The Keep Associate Dean, Boston University School of Management; and Trustee of all of
P.O. Box 110 the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
Little Deer Isle, ME
04650
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NAME, AGE, POSITION(S) WITH
THE FUND AND ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT AND DIRECTORSHIPS1
JOHN W. KENDRICK Professor Emeritus, George Washington University; Director, American
(82) Productivity and Quality Center; Adjunct Scholar, American Enterprise
TRUSTEE Institute; Economic Consultant; and Trustee of all of the Pioneer mutual
6363 Waterway Drive funds, except Pioneer Variable Contracts Trust.
Falls Church, VA 22044
MARGUERITE A. PIRET President, Newbury, Piret & Company, Inc. (merchant banking firm); Trustee of
(50) Boston Medical Center; Member of the Board of Governors of the Investment
TRUSTEE Company Institute; Director, Organogenesis Inc. (tissue engineering company);
One Boston Place and Trustee of all of the Pioneer mutual funds.
26th Floor
Boston, MA 02108
DAVID D. TRIPPLE* Executive Vice President and a Director of PGI; President and a Director of
(55) Pioneer and PFD; Director of Pioneering Services Corporation (PSC), PIntl,
EXECUTIVE VICE PRESIDENT AND PREA, Pioneer Omega, PMIL, Pioneer First Investment Fund and the Irish Funds;
TRUSTEE Member of the Supervisory Board of Pioneer First Polish and Pioneer Czech;
60 State Street and Executive Vice President and Trustee of all of the Pioneer mutual funds.
Boston, MA 02109
STEPHEN K. WEST Of Counsel, Sullivan & Cromwell (law firm); Director, Kleinwort Benson
(71) Australian Income Fund, Inc. since May 1997, The Swiss Helvetia Fund, Inc. since 1995
TRUSTEE (investment companies), AMVESCAP PLC (investment managers) since 1997 and ING American
125 Broad Street Insurance Holdings, Inc.; Trustee, The Winthrop Focus Funds (mutual funds); and Trustee
New York, NY 10004 of all of the Pioneer mutual funds.
JOHN WINTHROP President, John Winthrop & Co., Inc. (private investment firm); Director, of
(63) NUI Corp. (energy sales, services and distribution); and Trustee of all of
TRUSTEE the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
One North Adgers Wharf
Charleston, SC 29401
- ------------------
* Messrs. Cogan and Tripple are "interested persons" of the fund and Pioneer
within the meaning of Section 2(a)(19) of the 1940 Act.
1 Each trustee also serves as a trustee for each of the open-end investment
companies (mutual funds) in the Pioneer family of mutual funds, for Pioneer
Interest Shares, a closed-end investment company, and for each of the 13
portfolios of the Pioneer Variable Contracts Trust (except as noted).
</TABLE>
Ms. Piret, Mr. West and Mr. Winthrop serve on the audit committee of the
board of trustees. The functions of the audit committee include recommending
independent auditors to the trustees, monitoring the independent auditors'
performance, reviewing the results of audits and responding to certain other
matters deemed appropriate by the trustees. Ms. Graham, Ms. Piret and Mr.
Winthrop also serve on the nominating committee of the board of trustees. The
primary responsibility of the nominating committee is the selection and
nomination of candidates to serve as independent trustees. The nominating
committee will also consider nominees recommended by shareholders to serve as
trustees provided that shareholders submitting such recommendations comply with
all relevant provisions of Rule 14a-8 under the Securities Exchange Act of 1934.
Ms. Bush, Dr. Egdahl, Ms. Graham, Mr. Kendrick, Ms. Piret, Mr. West and Mr.
Winthrop (the non-interested trustees) also serve on the non-interested trustees
committee of the board of trustees. The non-interested trustees committee meets
at least quarterly to discuss matters of particular interest to the
non-interested trustees.
As of September 30, 1999, Mr. Cogan owned approximately 13.2% and Mr.
Tripple owned approximately 1.2% of the outstanding common stock of PGI, and
none of the other trustees owned PGI common stock.
21
<PAGE>
The following table sets forth certain information with respect to the
compensation of each trustee of the fund.
<TABLE>
<CAPTION>
PENSION OR RETIREMENT TOTAL COMPENSATION FROM
AGGREGATE BENEFITS ACCRUED AS OTHER PIONEER MUTUAL
COMPENSATION FROM PART OF FUND EXPENSES FUNDS**
TRUSTEE FUND*
<S> <C> <C> <C>
John F. Cogan, Jr.*** $ 750.00 $0 $ 18,750.00
Mary K. Bush 1,806.00 0 77,125.00
Richard H. Egdahl, M.D. 1,806.00 0 79,125.00
Margaret B.W. Graham 1,812.00 0 81,750.00
John W. Kendrick 1,456.00 0 65,900.00
Marguerite A. Piret 1,906.00 0 98,750.00
David D. Tripple*** 750.00 0 18,750.00
Stephen K. West 1,731.00 0 85,050.00
John Winthrop 1,906.00 0 85,875.00
---------- -- -----------
$13,923.00 $0 $611,075.00
- ------------------
* Estimated for the fiscal year ending October 31, 2000.
** For the calendar year ended December 31, 1998.
*** Under the management agreement, Pioneer will reimburse the fund for any
trustees fees paid by the fund.
</TABLE>
OTHER EXECUTIVE OFFICERS
In addition to Messrs. Cogan and Tripple, who serve as executive officers
of the fund, the following table provides information with respect to the other
executive officers of the fund. Each executive officer is elected by the board
of trustees and serves until his successor is chosen and qualified or until his
resignation or removal by the board. The business address of all officers of the
fund is 60 State Street, Boston, Massachusetts 02109.
<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH THE FUND PRINCIPAL OCCUPATION(S)
<S> <C>
ERIC W. RECKARD (43), Treasurer Executive Vice President, Chief Financial Officer and
Treasurer of PGI since June 1999; Treasurer of
Pioneer, PFD, PSC, PIntl, PREA, PMT and Pioneer Omega
since June 1999; Vice President-Corporate Finance of
PGI from February 1999 to June 1999; Manager of
Business Planning and Internal Audit of PGI since
September 1996; Manager of Fund Accounting of Pioneer
since May 1994; Manager of Auditing, Compliance and
Business Analysis for PGI prior to May 1994; and
Treasurer of all of the Pioneer mutual funds
(Assistant Treasurer prior to June 1999).
VINCENT NAVE (54), Assistant Treasurer Vice President-Fund Accounting, Administration and
Custody Services of Pioneer (Manager from September
1996 to February 1999); Senior Vice President of The
Boston Company's Investor Services Group prior to July
1994; and Assistant Treasurer of all of the Pioneer
mutual funds since June 1999.
JOSEPH P. BARRI (53), Secretary Corporate Secretary of PGI and most of its
subsidiaries; Secretary of all of the Pioneer mutual
funds; and Partner, Hale and Dorr LLP.
ROBERT P. NAULT (35), Assistant Secretary Senior Vice President, General Counsel and Assistant
Secretary of PGI since 1995; Assistant Secretary of
Pioneer, certain other PGI subsidiaries and all of the
Pioneer mutual funds; Assistant Clerk of PFD and PSC;
and junior partner of Hale and Dorr LLP prior to 1995.
</TABLE>
22
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table helps you understand your fund's financial
performance.
Certain information reflects financial results for a single share of Third
Avenue High Yield Fund. The total returns in the table represent the rate that
you would have earned on an investment in Third Avenue High Yield Fund (assuming
reinvestment of all dividends and distributions).
The information for the period from February 12, 1998 through October 31,
1998 has been audited by PricewaterhouseCoopers LLP, whose report is included in
the 1998 annual report of Third Avenue Trust along with the financial statements
of Third Avenue High Yield Fund. The annual and semi-annual reports are
available upon request.
THIRD AVENUE HIGH YIELD FUND
Selected data (for a share outstanding throughout each period) and ratios are as
follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MONTHS ENDED
ENDED APRIL 30, OCTOBER 31,
1999 (UNAUDITED) 19981
<S> <C> <C>
Net asset value, beginning of period $8.50 $10.00
----- ------
Income (loss) from investment operations:
Net investment income 0.34 0.34
Net gain (loss) on securities (both
realized and unrealized) 0.92 (1.56)
-----
Total from investment operations 1.26 (1.22)
----- -----
Less distributions:
Dividends from net investment income (0.35) (0.28)
----- -----
Net asset value, end of period $9.41 $ 8.50
===== ======
Total return 15.02%2 (12.39)%2
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $8,620 $7,691
Ratio of expenses to average net assets
Before expense reimbursement 4.12%3 3.99%3
After expense reimbursement 1.90%3 1.90%3
Ratio of net income to average net assets
Before expense reimbursement 4.96%3 4.13%3
After expense reimbursement 7.18%3 6.22%3
Portfolio turnover rate 5%2 38%2
- ------------------
1 The fund commenced investment operations February 12, 1998.
2 Not annualized.
3 Annualized.
</TABLE>
23
<PAGE>
INFORMATION CONCERNING THE MEETING
SOLICITATION OF PROXIES
In addition to the mailing of these proxy materials, proxies may be
solicited by telephone, by fax or in person by the trustees, officers and
employees of your fund; by personnel of Pioneer, EQSF Advisers, Inc. or the
fund's transfer agent, PNC Financial Processing Corporation, Inc. (PFPC); or by
any of their representatives or compensated agents, including broker-dealer
firms. Shareholder Communications Corporation, a third-party solicitation firm,
has agreed to provide proxy solicitation services for your fund at a cost to
Pioneer of approximately $6,000.
REVOKING PROXIES
A Third Avenue High Yield Fund shareholder signing and returning a proxy
has the power to revoke it at any time before it is exercised:
o By filing a written notice of revocation with the fund's Secretary, or
o By returning a duly executed proxy with a later date before the time of the
meeting, or
o If a shareholder has executed a proxy but is present at the meeting and
wishes to vote in person, by notifying the fund's secretary (without
complying with any formalities) at any time before it is voted
Being present at the meeting alone does NOT revoke a previously executed
and returned proxy.
OUTSTANDING SHARES AND QUORUM
As of November 30, 1999, 800,597.863 shares of beneficial interest of your
fund were outstanding. Only shareholders of record on December 3, 1999 (the
record date) are entitled to notice of and to vote at the meeting. A majority of
the outstanding shares of your fund that are entitled to vote will be considered
a quorum for the transaction of business.
OTHER BUSINESS
Your fund's board of trustees knows of no business to be presented for
consideration at the meeting other than the proposal. If other business is
properly brought before the meeting, proxies will be voted according to the best
judgment of the persons named as proxies.
ADJOURNMENTS
If a quorum is not present in person or by proxy at the time any session of
the meeting is called to order, the persons named as proxies may vote those
proxies that have been received to adjourn the meeting to a later date. If a
quorum is present but there are not sufficient votes in favor of the proposal,
the persons named as proxies may propose one or more adjournments of the meeting
to permit further solicitation of proxies concerning the proposal. Any
adjournment will require the affirmative vote of a majority of your fund's
shares at the session of the meeting to be adjourned. If an adjournment of the
meeting is proposed because there are not sufficient votes in favor of the
proposal, the persons named as proxies will vote those proxies favoring the
proposal in favor of adjournment, and will vote those proxies against the
reorganization against adjournment.
TELEPHONE VOTING
In addition to soliciting proxies by mail, by fax or in person, your fund
may also arrange to have votes recorded by telephone by officers and employees
of your fund or by personnel of Pioneer, EQSF Advisers, Inc. or your fund's
transfer agent, or by representatives of compensated agents of any of these
parties. The telephone voting procedure is designed to verify a shareholder's
identity, to allow a shareholder to authorize the voting of shares in accordance
with the shareholder's instructions and to confirm that the voting instructions
have been properly recorded. If these procedures were subject to a successful
legal challenge, these telephone votes would not be counted at the meeting. Your
fund has not obtained an opinion of counsel about telephone voting, but is
currently not aware of any challenge.
o A shareholder will be called on a recorded line and will be asked to
provide the shareholder's social security number or other identifying
information
o The shareholder will then be given an opportunity to authorize proxies to
vote his or her shares at the meeting in accordance with the shareholder's
instructions
o To ensure that the shareholder's instructions have been recorded correctly,
the shareholder will also receive a confirmation of the voting instructions
by mail
o A toll-free number will be available in case the voting information
contained in the confirmation is incorrect
24
<PAGE>
o If the shareholder decides after voting by telephone to attend the meeting,
the shareholder can revoke the proxy at that time and vote the shares at
the meeting
OWNERSHIP OF SHARES OF THE FUNDS
To the knowledge of your fund, as of November 30, 1999, the following
persons owned of record or beneficially 5% or more of the outstanding shares of
the fund. No shares of Pioneer High Yield Fund were outstanding on November 30,
1999.
<TABLE>
<CAPTION>
NAMES AND ADDRESSES OF OWNERS OF MORE THAN 5% OF SHARES OF THIRD AVENUE PRO FORMA OWNERSHIP OF PIONEER
SHARES HIGH YIELD FUND HIGH YIELD FUND
<S> <C> <C>
Charles Schwab & Co. Inc.101 Montgomery
StreetSan Francisco, CA 94104-4122 301,144.77 Shares (37.61%) 301,144.77 Shares (37.61%)
National Investor Services Corporation
55 Water Street, 32nd Floor
New York, NY 10041-3299 55,064.56 (6.88%) 55,064.56 (6.88%)
National Financial Services Corporation
Church Street Station
P.O. Box 3908
New York, NY 10008-3908 48,383.50 (6.10%) 48,383.50 (6.10%)
</TABLE>
As of November 30, 1999, the trustees and officers of your fund, as a
group, owned in the aggregate less than 1% of the outstanding shares of your
fund. As of November 30, 1999, the trustees and officers of Pioneer High Yield
Fund, as a group, owned in the aggregate less than 1% of the outstanding shares
of Pioneer High Yield Fund.
EXPERTS
The financial statements of Third Avenue High Yield Fund as of October 31,
1998 are incorporated by reference into this proxy statement and prospectus. The
financial statements and highlights have been independently audited by
PricewaterhouseCoopers LLP, as stated in their report appearing in the statement
of additional information. These financial statements and highlights are
included in reliance upon the reports given upon the authority of such firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
Each fund is subject to the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act and files reports, proxy statements and
other information with the SEC. You can also review these documents at the SEC's
Public Reference Room in Washington, D.C. Call 1-202-942-8090 for information.
The SEC charges a fee for copies. You can get the same information free from the
SEC's EDGAR database on the Internet (http://www.sec.gov). You may also e-mail
requests for these documents to [email protected] or make a request in writing
to the SEC's Public Reference Section, Washington, D.C. 20549-0102.
25
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made as of
this 10th day of December, 1999, between Pioneer High Yield Fund (the "ACQUIRING
FUND"), a business trust organized under the laws of the State of Delaware with
its principal place of business at 60 State Street, Boston, Massachusetts 02109,
and Third Avenue Trust, a business trust organized under the laws of the State
of Delaware with its principal place of business at 767 Third Avenue, New York,
New York 10017-2023 (the "TRUST"), on behalf of Third Avenue High Yield Fund
(the "ACQUIRED FUND"), a series of the Trust.
This Agreement is intended to be and is adopted as a plan of reorganization
within the meaning of Section 368(a) of the United States Internal Revenue Code
of 1986, as amended (the "CODE"). The reorganization (the "REORGANIZATION") will
consist of (a) the transfer of all of the assets of the Acquired Fund to the
Acquiring Fund in exchange for (i) the issuance of Class A shares of beneficial
interest of the Acquiring Fund (collectively, the "ACQUIRING FUND SHARES" and
each, an "ACQUIRING FUND SHARE") to the Acquired Fund, and (ii) the assumption
by the Acquiring Fund of (I) the liabilities of the Acquired Fund that are
included in the calculation of net asset value ("NAV") on the closing date set
forth below (the "CLOSING DATE") and (II) the liabilities of the Acquired Fund
with respect to its investment operations that are not required by generally
accepted accounting principles ("GAAP") to be included in the calculation of NAV
consistent with liabilities incurred by registered management investment
companies in the ordinary course of their businesses (i.e., not including any
extraordinary obligations, including, but not limited to legal proceedings,
shareholder claims and distribution payments) (the "ASSUMED LIABILITIES"), and
(b) the distribution by the Acquired Fund, on the Closing Date, or as soon
thereafter as practicable, of the Acquiring Fund Shares to the shareholders of
the Acquired Fund in liquidation of the Acquired Fund and the termination of the
Acquired Fund, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, Acquiring Fund and the Trust are each registered investment
companies classified as management companies of the open-end type, and the
Acquired Fund owns securities that generally are assets of the character in
which the Acquiring Fund is permitted to invest;
WHEREAS, the Acquiring Fund is authorized to issue shares of beneficial
interest;
WHEREAS, the Board of Trustees of the Acquiring Fund has determined that
the exchange of all of the assets of the Acquired Fund for Acquiring Fund Shares
and the assumption of the Assumed Liabilities of the Acquired Fund by the
Acquiring Fund are in the best interests of the Acquiring Fund shareholders;
WHEREAS, the Board of Trustees of the Trust has determined that the
exchange of all of the assets of the Acquired Fund for Acquiring Fund Shares and
the assumption of the Assumed Liabilities of the Acquired Fund by the Acquiring
Fund are in the best interests of the Acquired Fund shareholders.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING FUND
SHARES AND ASSUMPTION OF THE ASSUMED LIABILITIES AND LIQUIDATION AND
TERMINATION OF THE ACQUIRED FUND.
1.1. Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Fund agrees
to transfer its assets as set forth in paragraph 1.2 to the Acquiring Fund free
and clear of all liens and encumbrances (other than those arising under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), liens for taxes not
yet due and contractual restrictions on the transfer of the acquired assets),
and the Acquiring Fund agrees in exchange therefor: (a) to issue to the Acquired
Fund the number of Acquiring Fund Shares, including fractional Acquiring Fund
Shares, determined (to at least two decimal places) by dividing the value of the
Acquired Fund's net assets transferred to the Acquiring Fund, computed in the
manner and as of the time and date set forth in paragraph 2.1, by the NAV of one
Acquiring Fund Share, computed in the manner and as of the time and date set
forth in paragraph 2.2; and (b) to assume the Assumed Liabilities, as set forth
in paragraph 1.3. Such transactions shall take place at the closing provided for
in paragraph 3.1 (the "CLOSING").
1.2. (a) The assets of the Acquired Fund to be acquired by the Acquiring
Fund shall consist of all of its property, including, without limitation, all
goodwill, all contractual rights of the Acquired Fund or the Trust in respect of
the Acquired Fund, all other intangible property owned by the Acquired Fund and
originals or copies of all books and records of the Acquired Fund but shall not
include any interest in the name "Third Avenue."
(b) The Acquired Fund has provided the Acquiring Fund with a list of
all of the Acquired Fund's securities and other assets as of the date of
this Agreement. The Acquired Fund reserves the right to sell any of these
securities but will not, without the prior approval of the Acquiring Fund,
acquire any additional securities other than securities of the type in which the
Acquiring Fund is permitted to invest
26
<PAGE>
and shall not acquire, without the consent of the Acquiring Fund, any
securities that are valued at "fair value" under the valuation procedures of
either the Acquired Fund or the Acquiring Fund.
1.3. The Acquired Fund will endeavor to discharge all the Acquired Fund's
known liabilities and obligations that are or will become due prior to the
Closing Date. The Acquired Fund shall prepare an unaudited statement of assets
and liabilities (the "CLOSING STATEMENT"), as of the Valuation Date (as defined
in paragraph 2.1), in accordance with GAAP consistently applied from the prior
audited period, including a calculation of the net assets of the Acquired Fund
as of the close of business on the Closing Date. The Acquiring Fund shall assume
the Assumed Liabilities.
1.4. On the Closing Date or as soon thereafter as is conveniently
practicable, the Trust shall liquidate the Acquired Fund and distribute pro rata
to the Acquired Fund's shareholders of record determined as of the close of
business on the Closing Date (the "ACQUIRED FUND SHAREHOLDERS") the Acquiring
Fund Shares it receives pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the Trust instructing the Acquiring Fund to
transfer the Acquiring Fund Shares then credited to the account of the Acquired
Fund on the books of the Acquiring Fund to open accounts on the share records of
the Acquiring Fund in the names of the Acquired Fund Shareholders (as provided
to the Acquiring Fund by the Trust) and representing the respective pro rata
number of the Acquiring Fund Shares due such shareholders. The Trust shall
promptly provide the Acquiring Fund with evidence of such liquidation and
distribution. All issued and outstanding shares of the Acquired Fund will
simultaneously be cancelled on the books of the Acquired Fund, although share
certificates representing interests in the Acquired Fund will represent a number
of Acquiring Fund Shares after the Closing Date as determined in accordance with
paragraph 1.1. The Acquiring Fund shall not issue certificates representing the
Acquiring Fund Shares in connection with such exchange.
1.5. Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent for its Class A shares. Acquiring Fund Shares
will be issued in the manner described in the Acquiring Fund's Registration
Statement on Form N-14 in the form attached to this Agreement as Annex A.
1.6. Any transfer taxes payable upon issuance of the Acquiring Fund Shares
in a name other than the registered holder of the Acquired Fund shares on the
books of the Acquired Fund as of the time of issuance shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.7. Any reporting responsibility of the Trust with respect to the Acquired
Fund is and shall remain the responsibility of the Trust up to and including the
Closing Date and such later date on which the Acquired Fund is terminated.
1.8. The Acquired Fund shall, following the Closing Date and the making of
all distributions pursuant to paragraph 1.4, be terminated as a series of the
Trust under the laws of the State of Delaware and in accordance with the Trust
Instrument and By-Laws of the Trust.
2. VALUATION
2.1. The value of the assets of the Acquired Fund to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of the
close of regular trading on the New York Stock Exchange, Inc. on the Closing
Date (such time and date being hereinafter called the "VALUATION DATE"), using
the valuation procedures set forth in the prospectus or statement of additional
information of the Acquired Fund as in effect on the date hereof.
2.2. The NAV of the Acquiring Fund Class A shares shall be calculated in
accordance with the valuation procedures described in paragraph 2.1.
2.3. All computations of value shall be made by PNC Financial Processing
Corporation, Inc. in accordance with its regular practice as pricing agent for
the Acquired Fund.
3. CLOSING AND CLOSING DATE
3.1. The Closing Date shall be February 25, 2000, or such later date as the
parties may agree to in writing. All acts taking place at the Closing shall be
deemed to take place simultaneously as of the close of business on the Closing
Date unless otherwise provided. The Closing shall be held as of 5:00 p.m.
(Eastern time) at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts, or at such other time and/or place as the parties may agree.
3.2. Portfolio securities shall be presented by the Acquired Fund to Brown
Brothers Harriman & Co. ("BBH") as custodian for the Acquiring Fund for
examination no later than three business days preceding the Valuation Date. The
Acquiring Fund may, in its sole discretion, reject any securities if it
reasonably believes that the ownership of such securities by the Acquired Fund
or the acquisition of such securities by the Acquiring Fund would violate the
investment policies and restrictions of the Acquired Fund and the Acquiring
Fund. The portfolio securities, cash and due bills shall be delivered by the
Acquired Fund to BBH as custodian for the Acquiring Fund for the account of the
Acquiring Fund at the Closing duly endorsed in proper form for transfer in such
condition as to constitute good delivery thereof in accordance with the custom
of brokers. The cash shall be delivered by wire in federal funds to an account
of the Acquiring Fund specified by the Acquiring Fund.
27
<PAGE>
3.3. Custodial Trust Company, custodian for the Acquired Fund, shall
deliver at the Closing a certificate of an authorized officer stating that: (a)
the Acquired Fund's assets have been delivered in proper form to the Acquiring
Fund on the Closing Date and (b) all necessary transfer taxes including all
applicable federal and state stock transfer stamps, if any, have been paid, or
provision for payment shall have been made, in conjunction with the delivery of
portfolio securities.
3.4. In the event that on the Valuation Date (a) the primary trading market
for portfolio securities of the Acquired Fund shall be closed to trading or
trading thereon shall be restricted or (b) trading or the reporting of trading
on such market shall be disrupted so that accurate calculation based upon
available market prices of the value of the net assets of the parties hereto is
impracticable, the Closing Date shall be postponed until the first business day
after the day when trading shall have been fully resumed and reporting shall
have been restored, provided that unless the parties otherwise agree, if the
transactions contemplated by this Agreement shall not have occurred on or prior
to April 15, 2000, each party's obligations under this Agreement shall terminate
without liability to the other party, except for any liability that may arise
out of a party's breach of its obligations under this Agreement prior to such
termination.
3.5. The Acquired Fund shall deliver to the Acquiring Fund at the Closing
(or, if not reasonably available at the Closing, as soon as practicable
thereafter) a list of the names, addresses, taxpayer identification numbers and
backup withholding and nonresident alien withholding status of the Acquired Fund
Shareholders and the number and percentage ownership of outstanding shares owned
by each such shareholder immediately prior to the Closing, certified by the
President or a Vice President of the Trust on behalf of the Acquired Fund as
being an accurate record of the information (i) provided by Acquired Fund
Shareholders or (ii) derived from the Trust's records by such officers or one of
the Trust's service providers.
3.6. The Acquiring Fund shall issue and deliver a confirmation evidencing
the Acquiring Fund Shares to be credited to the Acquired Fund's account on the
Closing Date to the Secretary of the Trust on behalf of the Acquired Fund, or
provide evidence satisfactory to the Acquired Fund that such Acquiring Fund
Shares have been credited to the Acquired Fund's account on the books of the
Acquiring Fund. At the Closing, each party shall deliver to the other such bills
of sale, checks, assignments, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request.
4. LIQUIDATION AND DISSOLUTION OF ACQUIRED FUND
4.1. As soon as practicable after the Closing, the Trust shall liquidate
the Acquired Fund and distribute pro rata to the Acquired Fund Shareholders the
Acquiring Fund Shares received pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
credited to the account of the Acquired Fund to open accounts on the share
records in the names of Acquired Fund Shareholders as delivered to the Acquiring
Fund prior to the Closing Date in accordance with paragraph 3.5 and representing
the respective pro rata entitlement of each Acquired Fund Shareholder in the
Acquiring Fund Shares.
4.2. In connection with such liquidating distributions, (a) the Acquiring
Fund shall not deliver certificates representing its shares and (b) the share
transfer books of the Acquired Fund shall be permanently closed as of the
Closing Date and arrangements satisfactory to the Acquiring Fund, acting
reasonably, shall be made to restrict the further transfer of the Acquired
Fund's shares.
4.3. As soon as practicable after the liquidation of the Acquired Fund, the
Trust shall terminate the Acquired Fund as a series of the Trust under the laws
of the State of Delaware and in accordance with the Trust Instrument and By-Laws
of the Trust.
5. REPRESENTATIONS AND WARRANTIES
5.1. The Trust, on behalf of the Acquired Fund, represents and warrants to
the Acquiring Fund, which representations and warranties will be true and
correct on the date hereof and on the Closing Date as though made on and as of
the Closing Date, as follows:
(a) The Acquired Fund is a series of the Trust. The Trust is a business
trust validly existing and in good standing under the laws of the State of
Delaware and has the power to own all of its properties and assets and, subject
to approval by the Acquired Fund Shareholders, to perform its obligations under
this Agreement. The Acquired Fund is not required to qualify to do business in
any jurisdiction in which it is not so qualified or where failure to qualify
would not subject it to any material liability or disability. Each of the
Acquired Fund and the Trust has all necessary federal, state and local
authorizations to own all of the properties and assets attributable to the
Acquired Fund and to carry on the business of the Acquired Fund as now being
conducted;
(b) The Trust is a registered investment company classified as a management
company of the open-end type, and its registration with the Securities and
Exchange Commission (the "COMMISSION") under the Investment Company Act of 1940
(the "INVESTMENT COMPANY ACT") is in full force and effect;
(c) The Trust is not, and the execution, delivery and performance of this
Agreement in respect of the Acquired Fund will not result, in a material
violation of its Trust Instrument or By-Laws or of any material agreement,
indenture, instrument, contract, lease or other undertaking with respect to the
Acquired Fund to which the Trust is a party or by which the Acquired Fund or its
assets are bound;
(d) Except as specifically disclosed on Schedule 5.1(d) or included in the
calculation of NAV on the Valuation Date, the Trust has no material contracts or
other commitments (other than this Agreement) with respect to the Acquired Fund
which will be terminated with liability to either the Trust or to the Acquired
Fund on or prior to the Closing Date;
28
<PAGE>
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or to its knowledge
threatened against the Trust with respect to the Acquired Fund or any of the
Acquired Fund's properties or assets, except as previously disclosed in writing
to, and acknowledged in writing by, the Acquiring Fund. Neither the Trust nor
the Acquired Fund is a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which materially and
adversely affects the Acquired Fund's business or the Trust's ability to
consummate the transactions herein contemplated;
(f) The statement of assets and liabilities of the Acquired Fund as of
October 31, 1998 has been, and the statement of assets and liabilities of the
Acquired Fund as of October 31, 1999 to be delivered to the Acquiring Fund
pursuant to paragraph 8.4 will be, audited by PricewaterhouseCoopers LLP,
independent certified public accountants, and is or will be in accordance with
GAAP consistently applied and fairly reflects, or will fairly reflect, the
financial condition of the Acquired Fund as of such dates; except for the
Assumed Liabilities, the Acquired Fund will not have any known or contingent
liabilities on the Closing Date;
(g) Since October 31, 1998, except as disclosed on a schedule to this
Agreement or specifically disclosed in the Acquired Fund's prospectus or
statement of additional information as in effect on the date of this Agreement,
there has not been any material adverse change in the Acquired Fund's financial
condition, assets, liabilities, business or prospects, or any incurrence by the
Acquired Fund of indebtedness, except for normal contractual obligations
incurred in the ordinary course of business or in connection with the settlement
of purchases and sales of portfolio securities. For the purposes of this
subparagraph (g), a decline in NAV per share of the Acquired Fund arising out of
its normal investment operations or a decline in net assets of the Acquired Fund
as a result of redemptions shall not constitute a material adverse change;
(h) For each taxable year of its operation, the Acquired Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company and has elected to be treated as such and will
qualify as such as of the Closing Date. The Acquired Fund has not taken any
action which has caused or will cause the Acquired Fund to fail to qualify as a
regulated investment company under the Code. The Acquired Fund has not been
notified that any tax return or other filing of the Acquired Fund has been
reviewed or audited by any federal, state, local or foreign taxing authority.
Except as set forth on Schedule 5.1:
(A) Within the times and in the manner prescribed by
law, the Acquired Fund has filed all federal, state
and local tax returns, including all information
returns and payee statements, and all tax returns for
foreign countries, provinces and other governing
bodies that have jurisdiction to levy taxes upon it
and which are required to be filed;
(B) The Acquired Fund has paid all taxes, interest,
penalties, assessments and deficiencies which have
become due or which have been claimed to be due;
(C) All tax returns filed by the Acquired Fund
constitute complete and accurate reports of the
respective tax liabilities of the Acquired Fund or,
in the case of information returns and payee
statements, the amounts required to be reported
accurately set forth all items required to be
included or reflected in such returns except for such
instances of misreporting with respect to which,
individually or in the aggregate, the Acquired Fund
is not required to notify any shareholder;
(D) The Acquired Fund has not waived or extended any
applicable statute of limitations relating to the
assessment of federal, state, local or foreign taxes;
and
(E) The Acquired Fund has not been notified that any
examinations of the federal, state, local or foreign
tax returns of the Acquired Fund are currently in
progress or threatened and no deficiencies have been
asserted or assessed against the Acquired Fund as a
result of any audit by the Internal Revenue Service
or any state, local or foreign taxing authority, and
no such deficiency has been proposed or threatened;
(i) All issued and outstanding shares of the Acquired Fund are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable. To the Trust's knowledge, all of the issued and outstanding
shares of the Acquired Fund will, at the time of Closing, be held of record by
the persons and in the amounts set forth in the records of the transfer agent as
provided in paragraph 3.5. The Acquired Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any shares of the
Acquired Fund, nor is there outstanding any security convertible into any shares
of the Acquired Fund;
(j) At the Closing Date, the Trust in respect of the Acquired Fund will
have good and marketable title to the assets to be transferred to the Acquiring
Fund pursuant to paragraph 1.1 and full right, power and authority to sell,
assign, transfer and deliver such assets hereunder, and, upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof, except
such restrictions as might arise under the Securities Act, other than as
disclosed in writing to, and acknowledged in writing by, the Acquiring Fund;
(k) The Trust on behalf of the Acquired Fund has the trust power and
authority to enter into and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement has been duly authorized
by all necessary action on the part of the Trust's Board of Trustees on behalf
of the Acquired Fund, and, subject to the approval of the Acquired Fund
Shareholders, assuming due authorization, execution and delivery by the
Acquiring Fund, this Agreement will constitute a valid and binding obligation
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<PAGE>
of the Trust in respect of the Acquired Fund, enforceable in accordance
with its terms, subject as to enforcement, bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity principles;
(l) Any information furnished by EQSF Advisers, Inc. or the Trust on behalf
of the Acquired Fund for use in registration statements, proxy materials and any
information necessary to compute the yield and total return of the Acquired Fund
shall be accurate and complete in all material respects and shall comply in all
material respects with federal securities and other laws and regulations
applicable thereto or the requirements of any form for which its use is
intended;
(m) The proxy statement to be included in the Acquiring Fund's Registration
Statement on Form N-14 attached hereto as Annex A (other than information
therein that relates to Pioneer Investment Management, Inc., the Acquiring Fund
or their affiliates) will, on the effective date of that Registration Statement
and on the Closing Date, not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading;
(n) Except as set forth on Schedule 5.1 and as will be obtained on or prior
to the Closing Date, no consent, approval, authorization or order of any court
or governmental authority is required for the consummation by the Trust or the
Acquired Fund of the transactions contemplated by this Agreement;
(o) To the Trust's knowledge, all of the issued and outstanding shares of
beneficial interest of the Acquired Fund have been offered for sale and sold in
conformity with all applicable federal and state securities laws, except as may
have been previously disclosed in writing to the Acquiring Fund;
(p) The Acquired Fund currently complies in all material respects with and
since its organization has complied in all material respects with the
requirements of, and the rules and regulations under, the Investment Company
Act, the Securities Act, the Securities Exchange Act of 1934 (the "EXCHANGE
ACT"), state "Blue Sky" laws and all other applicable federal and state laws or
regulations. The Acquired Fund currently complies in all material respects with,
and since its organization has complied in all material respects with, all
investment objectives, policies, guidelines and restrictions and any compliance
procedures established by the Trust with respect to the Acquired Fund. All
advertising and sales material used by the Acquired Fund complies in all
material respects with and has complied in all material respects with the
applicable requirements of the Securities Act, the rules and regulations of the
Commission, and, to the extent applicable, the Conduct Rules of the National
Association of Securities Dealers, Inc. (the "NASD") and any applicable state
regulatory authority. All registration statements, prospectuses, reports, proxy
materials or other filings required to be made or filed with the Commission, the
NASD or any state securities authorities by the Acquired Fund have been duly
filed and have been approved or declared effective, if such approval or
declaration of effectiveness is required by law. Such registration statements,
prospectuses, reports, proxy materials and other filings under the Securities
Act, the Exchange Act and the Investment Company Act (i) are or were in
compliance in all material respects with the requirements of all applicable
statutes and the rules and regulations thereunder and (ii) do not or did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not false or misleading;
(q) The Acquired Fund has previously provided to the Acquiring Fund (and
will at the Closing provide an update through the Closing Date of such
information) with data which supports a calculation of the Acquired Fund's total
return and yield for all periods since the organization of the Acquired Fund.
Such data has been prepared in accordance in all material respects with the
requirements of the Investment Company Act and the regulations thereunder and
the rules of the NASD; and
(r) The prospectus of the Acquired Fund dated February 28, 1999, and any
amendments or supplements thereto, previously furnished to the Acquiring Fund,
did not as of their dates or the dates of their distribution to the public
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading.
5.2. The Acquiring Fund represents and warrants to the Trust, which
representations and warranties will be true and correct on the date hereof and
on the Closing Date as though made on and as of the Closing Date, as follows:
(a) The Acquiring Fund is a business trust, validly existing and in good
standing under the laws of the State of Delaware and has the power to own all of
its properties and assets and to perform its obligations under this Agreement.
The Acquiring Fund is not required to qualify to do business in any jurisdiction
in which it is not so qualified or where failure to qualify would not subject it
to any material liability or disability. The Acquiring Fund has all necessary
federal, state and local authorizations to own all of its properties and assets
and to carry on its business as now being conducted;
(b) The Acquiring Fund is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the Investment Company Act is in full
force and effect;
(c) The prospectus and statement of additional information of the Acquiring
Fund included in the Acquiring Fund's registration statement that will be in
effect on the Closing Date will conform in all material respects with the
applicable requirements of the Securities
30
<PAGE>
Act and the Investment Company Act and the rules and regulations of the
Commission thereunder and did not as of its date and will not as of the Closing
Date contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading;
(d) The Acquiring Fund is not, and its execution, delivery and performance
of this Agreement will not result, in a violation of its Agreement and
Declaration of Trust or By-Laws or a material violation of any agreement,
indenture, instrument, contract, lease or other undertaking with respect to the
Acquiring Fund to which it is a party or by which it is bound;
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or threatened against
the Acquiring Fund or any of the Acquiring Fund's properties or assets, except
as previously disclosed in writing to, and acknowledged in writing by, the
Acquired Fund. The Acquiring Fund knows of no facts which might form the basis
for the institution of such proceedings, and the Acquiring Fund is not a party
to or subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects the Acquiring Fund's
business or its ability to consummate the transactions contemplated herein;
(f) The Acquiring Fund has the trust power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary action,
if any, on the part of the Acquiring Fund's Board of Trustees, and, assuming due
authorization, execution and delivery by the Acquired Fund, this Agreement will
constitute a valid and binding obligation of the Acquiring Fund, enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity principles;
(g) The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund, for the account of the Acquired Fund Shareholders, pursuant to the terms
of this Agreement, will at the Closing Date have been duly authorized and, when
so issued and delivered, will be duly and validly issued Acquiring Fund Shares
and will be fully paid and non-assessable; the Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any Acquiring Fund Shares, nor is there outstanding any security convertible
into any of the Acquiring Fund Shares;
(h) The information to be furnished by the Acquiring Fund or Pioneer
Investment Management, Inc. for use in proxy materials and other documents which
may be necessary in connection with the transactions contemplated hereby shall
be accurate and complete in all material respects and shall comply in all
material respects with federal securities and other laws and regulations
applicable thereto or the requirements of any form for which its use is
intended;
(i) The Acquiring Fund is a qualified institutional buyer as defined in
Rule 144A under the Securities Act;
(j) Neither the Acquiring Fund nor, to the knowledge of the Acquiring Fund,
any "affiliated person" of the Acquiring Fund has been convicted of any felony
or misdemeanor, described in Section 9(a)(1) of the Investment Company Act, nor,
to the knowledge of the Acquiring Fund, has any affiliated person of the
Acquiring Fund been the subject, or presently is the subject, of any proceeding
or investigation with respect to any disqualification that would be a basis for
denial, suspension or revocation of registration as an investment adviser under
Section 203(e) of the Investment Advisers Act of 1940 or Rule 206(4)-4(b)
thereunder or of a broker-dealer under Section 15 of the Exchange Act, or for
disqualification as an investment adviser, employee, officer or director of an
investment company under Section 9 of the Investment Company Act;
(k) The Acquiring Fund intends to elect to qualify as a regulated
investment company under Section 851 of the Code. Immediately prior to the
Closing, the Acquiring Fund will be in compliance in all material respects with
all applicable laws, rules and regulations, including, without limitation, the
Investment Company Act, the Securities Act, the Exchange Act and all applicable
state securities laws. Immediately prior to the Closing, the Acquiring Fund will
be in compliance in all material respects with the applicable investment
policies and restrictions set forth in its registration statement currently in
effect and will have calculated its NAV in accordance with the Acquiring Fund's
registration statement;
(l) The Acquiring Fund Shares to be issued pursuant to this Agreement shall
on the Closing Date be duly registered under the Securities Act by a
Registration Statement on Form N-14 of the Acquiring Fund then in effect and
qualified for sale under the applicable state securities laws; and
(m) The Acquiring Fund Shares to be issued pursuant to this Agreement are
duly authorized and on the Closing Date will be validly issued and fully paid
and non-assessable and will conform in all material respects to the description
thereof contained in the Acquiring Fund's Registration Statement on Form N-14.
On the Closing Date, the Acquiring Fund shall not, except as provided herein,
have outstanding any warrants, options, convertible securities or any other type
of right pursuant to which any person could acquire Acquiring Fund Shares.
6. COVENANTS OF EACH OF THE PARTIES
6.1. The Trust, on behalf of the Acquired Fund, will operate the Acquired
Fund's business in the ordinary course between the date hereof and the Closing
Date. It is understood that such ordinary course of business will include the
declaration and payment of customary
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<PAGE>
dividends and distributions and any other dividends and distributions
necessary or advisable (except to the extent distributions that are not
customary may be limited by representations made in connection with the issuance
of the tax opinion described in paragraph 9.5 hereof), in each case payable
either in cash or in additional shares.
6.2. The Trust will call a meeting of the Acquired Fund Shareholders to
consider and act upon the matters set forth in the proxy statement. Each of the
Trust, on behalf of the Acquired Fund, and the Acquiring Fund will use
reasonable efforts to promptly prepare and file with the Commission a
Registration Statement on Form N-14 relating to the transactions contemplated by
this Agreement.
6.3. The Trust, on behalf of the Acquired Fund, covenants that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof other than in accordance with the
terms of this Agreement.
6.4. The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund's shares.
6.5. Subject to the provisions of this Agreement each of the Trust, on
behalf of the Acquired Fund, and the Acquiring Fund will take, or cause to be
taken, all actions, and do or cause to be done, all things reasonably necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
6.6. The Acquired Fund shall furnish to the Acquiring Fund on the Closing
Date the Closing Statement, which statement shall be prepared in accordance with
GAAP consistently applied and shall be certified by the Trust's Treasurer or
Assistant Treasurer. As promptly as practicable, but in any case within 90 days
after the Closing Date, the Trust shall furnish to the Acquiring Fund, in such
form as is reasonably satisfactory to the Acquiring Fund, a statement of the
earnings and profits of the Acquired Fund for federal income tax purposes, and
of any capital loss carryovers and other items that will be carried over to the
Acquiring Fund as a result of Section 381 of the Code, and which statement will
be certified by the Treasurer of the Trust.
6.7. The Trust will provide the Acquiring Fund with information reasonably
necessary for the preparation of a prospectus, which will include the proxy
statement, referred to in paragraph 5.1(m), all to be included in the Acquiring
Fund's Registration Statement on Form N-14, in compliance with the Securities
Act, the Exchange Act and the Investment Company Act in connection with the
meeting of the Acquired Fund Shareholders to consider approval of this Agreement
and the transactions contemplated herein.
6.8. The Trust shall maintain errors and omissions insurance covering
management of the Acquired Fund prior to and including the Closing Date.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all of the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following further
conditions, unless waived by the Acquired Fund in writing:
7.1. All representations and warranties made in this Agreement by the
Acquiring Fund shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date; and
7.2. The Acquiring Fund shall have delivered to the Acquired Fund a
certificate executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in form and substance reasonably satisfactory
to the Acquired Fund and dated as of the Closing Date, to the effect that the
representations and warranties made in this Agreement by or on behalf of the
Acquiring Fund are true and correct in all material respects at and as of the
Closing Date, except as they may be affected by the transactions contemplated by
this Agreement.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Trust and Acquired Fund of all of the obligations to be performed by them
hereunder on or before the Closing Date and, in addition thereto, the following
further conditions:
8.1. All representations and warranties made in this Agreement by or on
behalf of the Trust and the Acquired Fund shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date;
8.2. The Trust shall have delivered to the Acquiring Fund a statement of
the Acquired Fund's assets and liabilities showing the federal tax bases and
holding periods as of the Closing Date, certified by the Trust's Treasurer or
Assistant Treasurer on behalf of the Trust;
8.3. The Trust, on behalf of the Acquired Fund, shall have delivered to the
Acquiring Fund on the Closing Date a certificate executed in its name by its
President or Vice President and Treasurer or Assistant Treasurer, in form and
substance reasonably satisfactory to the Acquiring Fund and dated as of the
Closing Date, to the effect that the representations and warranties made in this
Agreement are true and correct in all material respects at and as of the Closing
Date, except as they may be affected by the transactions contemplated by this
Agreement; and
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<PAGE>
8.4. The Trust shall have delivered to the Acquiring Fund at least 30 days
prior to the Closing Date financial statements of the Acquired Fund as of
October 31, 1999 audited by PricewaterhouseCoopers LLP. With the consent of
PricewaterhouseCoopers LLP (which the Trust agrees to use its reasonable efforts
to obtain), the Trust consents to the inclusion of such financial statements,
and any financial statement of the Acquired Fund for a prior period, in the
Acquiring Fund's registration statements under the Securities Act and the
Investment Company Act.
9. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH OF THE PARTIES
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to either party hereto, the other party to this
Agreement shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
9.1. This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of each of the Trust's Trust
Instrument and By-Laws, and certified copies of the votes evidencing such
approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, neither party hereto may waive the conditions
set forth in this paragraph 9.1;
9.2. On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein;
9.3. All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by either party hereto to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of
either party hereto, provided that either party may for itself waive any of such
conditions;
9.4. The Acquiring Fund's Registration Statement on Form N-14 shall have
become effective under the Securities Act and no stop orders suspending the
effectiveness thereof shall have been issued and, to the best knowledge of the
parties hereto, no investigation or proceeding for that purpose shall have been
instituted or be pending, threatened or contemplated under the Securities Act;
9.5. The parties shall have received a favorable opinion of Skadden, Arps,
Slate, Meagher & Flom (Illinois), addressed to the Acquiring Fund and the Trust
in respect of the Acquired Fund and satisfactory to the Acquiring Fund and the
Trust, substantially to the effect that for federal income tax purposes, on the
basis of the facts, representations and assumptions set forth in such opinion,
the acquisition by the Acquiring Fund of all of the assets of the Acquired Fund
solely in exchange for the issuance of Acquiring Fund Shares to the Acquired
Fund and the assumption of all of the Assumed Liabilities by the Acquiring Fund,
followed by the distribution by the Acquired Fund, in liquidation of the
Acquired Fund, of Acquiring Fund Shares to the Acquired Fund Shareholders in
exchange for their Acquired Fund shares of beneficial interest and the
termination of the Acquired Fund, will constitute a reorganization within the
meaning of Section 368(a) of the Code, and the Acquired Fund and the Acquiring
Fund will each be "a party to a reorganization" within the meaning of Section
368(b) of the Code.
9.6. Each of the Acquiring Fund and the Acquired Fund agrees to make, to
the extent that it is able to accurately do so, and provide representations with
respect to itself that are reasonably necessary to enable Skadden, Arps, Slate,
Meagher & Flom (Illinois) to deliver an opinion substantially as set forth in
paragraph 9.5.
10. BROKERAGE FEES AND EXPENSES
10.1. Each party hereto represents and warrants to the other party hereto
that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
10.2. The parties have been informed by Pioneer Investment Management, Inc.
that it will pay all expenses incurred in connection with the Reorganization
(including, but not limited to, the preparation of the proxy statement and
solicitation expenses), except that the Acquired Fund shall be liable for its
fees and expenses incurred in connection with its liquidation and termination;
provided, however, that any fees and expenses of counsel to the Trust in excess
of $15,000 shall be paid by EQSF Advisers, Inc.; and provided further that in
the event that the transactions contemplated by this Agreement are not approved
by the shareholders of the Acquired Fund or the transactions contemplated hereby
are not otherwise completed otherwise than as a result of a breach of this
Agreement, each of Pioneer Investment Management, Inc. and EQSF Advisers, Inc.
shall pay 50% of the costs incurred by each of the Acquiring Fund and the
Acquired Fund in connection with the transactions contemplated by this
Agreement; provided finally EQSF Advisers, Inc. shall not be liable for more
than $20,000 pursuant to the preceding clause. EQSF Advisers, Inc. shall also be
solely liable for any expenses incurred in connection with obtaining the
approval of the Trustees of the Trust of the transactions contemplated by this
Agreement.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1. The parties hereto agree that no party has made any representation,
warranty or covenant not set forth herein or referred to in paragraph 9.6 hereof
and that this Agreement constitutes the entire agreement between the parties.
11.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
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12. TERMINATION
12.1. This Agreement may be terminated at any time prior to the Closing
Date by: (a) the mutual agreement of the Trust, on behalf of the Acquired Fund,
and the Acquiring Fund; (b) any party in the event that the other party hereto
shall breach any material representation, warranty or agreement contained herein
to be performed at or prior to the Closing Date and has not cured such breach
within 10 days of notice thereof; or (c) a condition herein expressed to be
precedent to the obligations of the terminating party has not been met and it
reasonably appears that it will not or cannot be met.
12.2. In the event of any such termination, there shall be no liability for
damages on the part of any party hereto or their respective Trustees or officers
to the other party, but, except as provided in Section 10, each shall bear the
expenses incurred by it incidental to the preparation and carrying out of this
Agreement.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the Trust
on behalf of the Acquired Fund and the Acquiring Fund; provided, however, that
following the meeting of the Acquired Fund Shareholders called by the Trust
pursuant to paragraph 6.2 of this Agreement, no such amendment may have the
effect of changing the provisions for determining the number of the Acquiring
Fund Shares to be issued to the Acquired Fund Shareholders under this Agreement
to the detriment of the Acquired Fund Shareholders without their further
approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provision of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Trust on behalf of the
Acquired Fund at 767 Third Avenue, New York, New York 10017-2023, and the
Acquiring Fund at 60 State Street, Boston, Massachusetts 02109.
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
15.1. The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
15.3. This Agreement shall be governed by and construed in accordance with
the laws of The Commonwealth of Massachusetts.
15.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by
either party without the written consent of the other party hereto. Nothing
herein expressed or implied is intended or shall be construed to confer upon or
give any person, firm, corporation or other entity, other than the parties
hereto and their respective successors and assigns, any rights or remedies under
or by reason of this Agreement.
15.5 It is expressly agreed that the obligations of the Acquiring Fund and
the Trust, on behalf of the Acquired Fund, shall not be binding upon any of
their respective Trustees, shareholders, nominees, officers, agents or employees
personally, but bind only the trust property of the Acquiring Fund or the
Acquired Fund, as the case may be, as provided in the trust instruments of the
Acquiring Fund and the Trust, respectively. The execution and delivery of this
Agreement have been authorized by the Trustees of each of the Acquiring Fund and
the Trust, on behalf of the Acquired Fund, and this Agreement has been executed
by authorized officers of the Acquiring Fund and the Trust, on behalf of the
Acquired Fund, acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officers shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Acquiring Fund and the
Acquired Fund, as the case may be, as provided in the trust instruments of the
Acquiring Fund and the Trust, respectively.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President or Vice President and attested by its Secretary or
Assistant Secretary.
Attest: THIRD AVENUE TRUST ON BEHALF OF
THIRD AVENUE HIGH YIELD FUND
By: __________________________ By: ____________________________
Name: Ian M. Kirschner Name: __________________________
Title: Secretary Title: _________________________
Attest: PIONEER HIGH YIELD FUND
By: __________________________ By: ____________________________
Name: Joseph P. Barri Name: __________________________
Title: Secretary Title: _________________________
34
<PAGE>
EXHIBIT B
EXCERPTS FROM THIRD AVENUE HIGH YIELD FUND'S
APRIL 30, 1999 SEMI-ANNUAL REPORT AND OCTOBER 31, 1998 ANNUAL REPORT
The following information is provided for your convenience. It has been
excerpted in its entirety from Third Avenue High Yield Fund's most recent
semi-annual and annual reports, both of which were mailed to shareholders of
Third Avenue High Yield Fund. Specifically, these excerpts contain your fund's
portfolio manager's discussion of portfolio holdings and factors affecting fund
performance.
EXCERPT FROM THIRD AVENUE HIGH YIELD FUND'S
APRIL 30, 1999 SEMI-ANNUAL REPORT
Dear Fellow Shareholders:
At April 30, 1999, the unaudited net asset value attributable to the
916,197 common shares outstanding of the Third Avenue High Yield Fund (the
"Fund") was $9.41 per share. On March 31, 1999, the most recent dividend date,
the Fund paid $0.167 per share in dividends, representing income received from
the Fund's holdings of fixed income securities. Since the end of the Fund's last
fiscal year, ending on October 31, 1998, when the Fund's net asset value was
$8.50, a total of $0.35 per share has been paid in dividends. On January 31,
1999, the last day of the Fund's first fiscal quarter, the net asset value per
share was $9.58. At May 20, 1999, the net asset value per share was $9.64.
QUARTERLY ACTIVITY
During the second quarter of fiscal 1999, the Fund made small reductions in
three holdings, and established three new positions, as shown below.
PAR VALUE
OR NUMBER OF SHARES REDUCTIONS IN EXISTING POSITIONS
$100,000 Alpharma, Inc. 144A 5.75% due 4/01/05
$100,00 Credence Systems Corp. 5.25% due 9/15/02
1,000 shares Nextlink Communications, Inc. 144A 6.50%
due 3/31/10
These reductions were made in order to better reflect what we thought were
appropriate weightings for these holdings, given their substantial appreciation
at the time of their sales in the fiscal year. We continue to regard the
business prospects of these companies favorably, and expect to retain our still
significant positions.
Alpharma is a generic pharmaceutical company which develops and sells a
wide range of human and animal health products worldwide, and has grown steadily
through development of new products and selected acquisitions.
Credence Systems makes automatic test equipment and software used in the
production of semiconductors. It sells its products worldwide to semiconductor
makers, and after some delays in the introduction of new products, should have a
good increase in sales as these products have been received quite favorably by
its customers. Its equipment is increasingly focused on the most rapidly growing
segments of the semiconductor market: those used in telecommunications, internet
applications, media and consumer devices.
Nextlink is a new telecommunications company established in 1996 to provide
local, long distance and data communication services. The company was formed to
take advantage of the many growth opportunities in the industry following the
federal telecommunication act of 1996 which opened competition in
telecommunication services to new entrants.
PAR VALUE
OR NUMBER OF SHARES NEW POSITIONS ACQUIRED
$500,000 Webb (Del E.) Corp. 10.25% due 2/15/10
4,000 shares KN Energy, Inc. 8.25% due 11/30/01
$250,000 NCI Building Systems, Inc. 144A 9.25%
due 5/01/09
Del Webb is one of the US's biggest residential real estate developers, and
the nation's largest developer of planned age-restricted retirement communities,
with operations primarily in the sunbelt states of Nevada, Arizona, California,
Florida, and South Carolina, as well as in Illinois. Recently, the company has
expanded its development activities to include communities without the age
restrictions. It has an excellent track record, diversified locations, and is
well positioned for the move-up buyer, as well as the active adult market
segment.
KN Energy gathers, processes, stores and transports natural gas, and
operates pipelines in the central and western US. It is the nation's sixth
largest integrated natural gas company. Above-normal winter temperatures have
reduced demand for natural gas, and the resulting depressed prices for gas,
along with low oil prices, have recently caused financial results to decline.
However, the company is well run, has diversified operations, and earnings are
expected to recover with more normal seasonal temperatures and higher energy
prices in general. Recently, Sempra Energy offered to acquire KN Energy. San
Diego-based Sempra has started the process of restructuring, as California
35
<PAGE>
begins to deregulate the retail power market, and has sold some assets, while
expanding further into the gas industry, through its offer to purchase KN
Energy. The credit quality of KN Energy would be improved if the acquisition
were made, since Sempra's corporate debt is A-rated, or one level above that of
KN Energy.
NCI Building Systems was substantially expanded a year ago with the
acquisition of a major competitor. The company is one of the largest integrated
manufacturers of metal products for the nonresidential building industry. It
operates in 17 states and Mexico. NCI makes and sells metal components and
engineered building systems such as metal roof and wall systems; overhead,
interior and exterior doors; and related accessories, both to the new
construction and renovation markets. With its recent acquisition, it is now
twice as large as its next competitor, has substantial purchasing power because
of its size in a fragmented market, and has proprietary techniques for producing
higher margin coated metal products. Metal roofing products comprise only 6% of
the $21 billion roofing market, but this segment is growing faster than the
industry as a whole due to low cost, flexibility of use, and improvements in
function and appearance.
PORTFOLIO STRUCTURE
The table below lists our largest sector concentrations for the portfolio as of
April 30, 1999, reflecting our emphasis on industries which we feel represent
attractive value.
INDUSTRY PERCENTAGE OF TOTAL ASSETS
Telecommunications 14.54%
Semiconductor capital equipment 13.66%
Diversified technology 12.33%
Real estate 11.56%
Electric and gas utilities 10.58%
We think the telecommunications industry remains an excellent investment,
and have made a substantial commitment. Lower prices, faster transmission speed,
and greater functionality have dramatically changed the nature of
telecommunications in the last few years, and these trends should continue into
the future. Usage of traditional voice services has expanded much faster than
growth of the general economy, as falling prices have stimulated demand. In
addition, increasing amounts of data are being transported as information needs
grow. New demand for an enlarged range of data, video and voice services,
spawned by ever growing internet usage, has also dramatically multiplied.
Increased uses of semiconductors in a widening array of products continue
to drive the revenues of technology companies, for both SEMICONDUCTOR CAPITAL
EQUIPMENT issuers, and in other TECHNOLOGY based companies. The capital
equipment sector has bottomed out from a two year cyclical decline in new
capacity, but early indications are that an upswing in new investment is
underway. Technology demand is growing not only from augmenting computer sales,
but also from telecommunications' increased utilization of complex chips, as
discussed above. In addition, industrial processes and consumer products
continue to incorporate more intelligence on chips to increase efficiency and
performance characteristics, and always at continuously declining prices.
We believe increasing use of intelligent silicon has been a big contributor
to the higher productivity of the American worker over the past few years.
Technology comprises an ever larger share of our economic activity, with
constantly falling prices, yet offering much higher functionality. So we think
the Fund should reflect these positive trends through the industries in which we
invest.
We regard the REAL ESTATE sector as undervalued, and therefore we have
moderately increased our exposure to this area, as discussed in the new
purchases section above. Our positive view of real estate is shared by our other
Third Avenue funds, which have also increased their commitments.
Our investment in the ELECTRIC AND GAS UTILITY industry has grown in the
quarter. We consider this sector to be under-appreciated by many investors. We
think that deregulation of the retail market, now proceeding on a state by state
basis, will create opportunities for well-run companies to restructure by
selling under-performing assets, and to increase their investment in activities
which will expand their operations and improve their efficiency.
We want to keep the portfolio positioned in front of these high growth
trends, as well as to emphasize those areas that are undervalued in today's
often fickle and short-term oriented marketplace.
Sincerely,
/s/ Margaret D. Patel
Margaret D. Patel
Portfolio Manager, Third Avenue High Yield Fund
36
<PAGE>
EXCERPT FROM THIRD AVENUE HIGH YIELD FUND'S
OCTOBER 31, 1998 ANNUAL REPORT
Dear Fellow Shareholders:
At October 31, 1998, the audited net asset value attributable to the
904,440 common shares outstanding of the Third Avenue High Yield Fund (the
"Fund") was $8.50 per share. This compares with an unaudited net asset value of
$9.82 at July 31, 1998, and a net asset value of $10.00 per share at February
12, 1998, the date of the Fund's inception. At December 11, 1998, the unaudited
net asset value was $9.00 per share.
QUARTERLY ACTIVITY
During the fourth quarter of fiscal 1998, the Fund established one new
position, as new monies flowed into the Fund, and eliminated three positions in
order to raise cash to accommodate redemptions of shares by short-term investors
on several occasions.
Transactions made during the quarter are summarized below.
PAR VALUE NEW POSITION ACQUIRED
$500,000 CalEnergy Co., Inc 8.48%, due 9/15/28
POSITIONS ELIMINATED
$300,000 Alcatel SA 7.00%, due 8/01/04
$300,000 MascoTech 4.50%, due 12/15/03
$500,000 PSINet, Inc. 10.00%, due 2/15/05
PORTFOLIO ACTIVITY
The three months ending October 31 marked a once-in-a-decade chance for
investors in the high yield bond market, where the Fund has substantial
investments, to profit from disorderly market conditions. Because of lack of
liquidity and forced sales from leveraged investors, yields rose to levels which
on a relative basis were at least as attractive as in the 1990-1991 period, the
last such great unsettled period. Similarly, convertible bonds, where the bulk
of the Fund's assets is currently concentrated, dropped to levels seen only
fleetingly in 1990. Convertible bonds suffered from the combined effects of
lower stock prices and higher interest rates on below investment grade bonds in
general.
We believe the Fund's portfolio of securities offers both high current
income and the possibility of future capital appreciation. Further, our holdings
are concentrated in companies and industries whose profits, we think, will
expand faster than the economy as a whole, either through internal growth or in
combination with restructuring and consolidating among companies. Such asset
transfer activity can improve profits and return on investment even in
businesses with slow underlying growth rates.
Our largest concentration of holdings, comprising just over 14% of total
assets, is in the semiconductor capital equipment industry. Our companies hold
leading technological positions in this multifaceted area, and have the
financial flexibility to ride out the rest of the current industry
consolidation. We believe they are well positioned for the next industry
upswing, which some industry analysts think is already underway.
Our second largest industry representation, about 13.5% of total assets,
consists of issues of corporations manufacturing a wide range of technology
products such as semiconductors, networking products and disks for computers.
Companies in these industries have just completed a period of relatively flat
demand, coupled with the worst excess inventory supply cycle seen in the
post-World War II period, causing sharp price erosion as inventories were worked
off. This process is nearly completed, and demand, especially for computer-based
products, seems to be moving up again at very healthy rates.
The third largest sector in the Fund, amounting to 11% of assets, is
telecommunications. This industry is undergoing dynamic change as a result of
the Telecommunications Act of 1996. This legislation provided for the
deregulation of the industry and has spawned a number of aggressive competitors
offering voice, data, and internet services using new technology to share in the
explosive growth in demand. We hold issues of several of these new entrants, and
think they will profit not only from new markets but also by taking market share
from existing incumbent service providers.
Healthcare makes up close to 11% of the Fund's total assets. Current
industry conditions are unsettled, as long-term care providers adjust their
business plans to new federal government regulations on reimbursement for care.
The number of people needing long-term care along with ancillary services is
growing much faster than the population as a whole. Once companies adapt to the
new reimbursement rules being phased into the system, we expect other investors
will recognize their bright future, as demand for both the quantity and quality
of healthcare expands faster than growth of the domestic economy.
The electric and gas utility industry is our fifth largest sector,
amounting to close to 10% of the Fund's total assets. While this industry should
grow at levels in line with overall economic growth in the U.S., massive changes
are just starting to be felt as states begin to deregulate the power industry.
Similar deregulation moves are also going on in industrialized countries
overseas, which in some cases, notably the United Kingdom (U.K.), are actually
ahead of the U.S. in opening their power markets to free competition. We think
smart managements will be able to take advantage of these changes to grow their
revenues and profits far above the growth of the power market as a whole.
37
<PAGE>
Further, the electric utility industry in the U.S. and other industrialized
countries is relatively insensitive to the recent economic declines in less
industrialized, so-called emerging market countries, primarily in Asia and Latin
America. These countries have begun to reduce their demand for many products
manufactured in the U.S., and are attempting to increase their exports to
industrialized countries, in an effort to solve their economic troubles. As a
result of this lowered export demand and increased import supply, many domestic
companies, especially those in commodity-based industries like metals, energy,
chemicals, paper and forest products, and textiles, will experience revenue and
profit pressure next year.
NEW PURCHASE
CalEnergy is a diversified global energy company which has grown by
acquisition of electric and gas companies in the U.S., U.K., Australia, Canada,
and New Zealand. Its recent purchase of Iowa-based MidAmerican Energy will
provide access to an attractive and growing market for its low cost power. As
the electric utility industry begins to deregulate, both in the U.S. and abroad,
CalEnergy should benefit from the knowledge it has gained since its 1997
acquisition of Northern Electric in the U.K.
POSITIONS ELIMINATED
Among the three positions which were eliminated in the quarter were bonds
of Alcatel, the large French telecommunications equipment company. Alcatel had
agreed in June, 1998, to take over DSC Communications, a Texas-based
telecommunications equipment company. The DSC bonds had a speculative grade
rating of "B" by the major rating services, and experienced substantial
appreciation in price due to Alcatel's higher investment grade credit rating of
"A" by the major rating agencies.
MascoTech convertible bonds were sold, although our fundamentally favorable
opinion of the company has not changed, because we felt other holdings in the
portfolio had a likelihood of greater capital appreciation. Similarly, we also
sold our holding of PSINet, an Internet access and Web hosting provider to
corporations and other Internet service providers, because we felt its
continuing need to tap the high yield bond market at future dates would provide
other opportunities to reestablish a position in this credit in the future.
THE MISFORTUNE OF MARKET TIMING
Notably, redemptions of the Fund in the quarter were concentrated during
the first half of October, the very period when financial markets were at their
most stressed condition in many years, and short-term downward pressure was most
intense on all securities prices. You may recall that at this time, prices of
virtually all securities, except for U.S. Treasury issues, declined sharply, due
to liquidity pressures arising from forced sales of securities by numerous
leveraged investment funds. In addition, credit concerns about so-called
emerging market bonds, such as those from Russia which defaulted in the quarter,
caused prices of all emerging market debt, as well as prices of domestic high
yield bonds, to drop significantly. The combination of all these events led to
extremely illiquid market conditions not seen in many years.
Of course, we recognize that in future periods of market turmoil, the net
asset value per share of the Fund may well drop again, reflecting short-term
changes in the prices of securities held in the Fund. We regard such times as
great opportunities to purchase, but certainly not to sell. Lower prices allow
us to buy more bonds or shares for the same amount of money. If our intensive
research evaluations are accurate, we can take advantage of short-term price
declines to create even greater opportunity to increase our shareholders'
investment over the long term.
38
<PAGE>
1998 DISTRIBUTIONS
On November 18, 1998, the Fund declared a dividend from the Fund's
estimated net investment income through the period ending December 31, 1998. The
amount is estimated to be approximately $0.16 per Fund share. This distribution
is payable January 6, 1999 to Fund shareholders of record on December 30, 1998.
The precise amount of the distribution will be determined based on the total
number of Fund shares outstanding on the close of business on the record date,
December 30, 1998. The distribution is payable in cash or, for those
shareholders who have elected the reinvestment option, in additional Fund shares
at the Fund's net asset value on December 31, 1998, the "ex" date, or valuation
date, for reinvestment.
I look forward to writing to you again when the first quarter report for
the period ending January 31, 1999 is published.
Sincerely,
/s/ Margaret D. Patel
Margaret D. Patel
Portfolio Manager, Third Avenue High Yield Fund
PERFORMANCE INFORMATION
PERFORMANCE ILLUSTRATIONS
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THIRD AVENUE HIGH YIELD FUND AND THE MERRILL LYNCH HIGH YIELD
MASTER II INDEX AND THE MERRILL LYNCH INDEX OF
ALL CONVERTIBLES, SPECULATIVE QUALITY
Total Return Since Inception
-12.39%
[The following table represents a chart in the printed piece.]
<TABLE>
<CAPTION>
TAHYF Merrill Lynch Merrill Lynch
High Yield Index of all Convertibles,
Master II Index Speculative Quality
<S> <C> <C> <C>
2/12/98* $10,000.00 $10,000.00 $10,000.00
10/31/98 8,761.00 9,621.00 9,293.00
- --------------------------------------------------------------------------------
* Period beginning February 12, 1998 (THIRD AVENUE HIGH YIELD FUND'S
commencement of operations)
</TABLE>
As with all mutual funds, past performance does not indicate future results.
39
<PAGE>
[landscape oriented on perforated top of proxy card]
[triangle] Please fold and detach card at perforation before mailing [triangle]
- --------------------------------[perforation]-----------------------------------
PROXY PROXY
THIRD AVENUE HIGH YIELD FUND
PROXY FOR THE MEETING OF SHAREHOLDERS
To be held February 23, 2000
I (we), having received notice of the meeting and management's proxy
statement therefor, and revoking all prior proxies, hereby appoint David M.
Barse, Michael T. Carney and Ian M. Kirschner, and each of them, my (our)
attorneys (with full power of substitution in them and each of them) for and in
my (our) name(s) to attend the Meeting of Shareholders of my (our) fund to be
held on Wednesday, February 23, 2000, at 2:00 p.m. (New York time) at Four Times
Square, 37th Floor, New York, New York 10036, and any adjourned session or
sessions thereof, and there to vote and act upon the following matter (as more
fully described in the accompanying proxy statement) in respect of all shares of
the fund which I (we) will be entitled to vote or act upon, with all the powers
I (we) would possess if personally present.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING. THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED FOR THE PROPOSAL.
Note: In signing, please write
name(s) exactly as appearing
hereon. When signing as attorney,
executor, administrator or other
fiduciary, please give your full
title as such. Joint owners
should each sign personally.
________________________________
Signature(s)
Date ___________________________
TAHYF
<PAGE>
[triangle] Please fold and detach card at perforation before mailing [triangle]
- --------------------------------[perforation]-----------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF YOUR FUND AND
SHOULD BE RETURNED AS SOON AS POSSIBLE IN THE ENVELOPE PROVIDED. IF YOU VOTE IN
FAVOR OF THE REORGANIZATION, YOU ARE APPROVING A REORGANIZATION INTO A CLASS OF
SHARES SUBJECT TO RULE 12B-1 DISTRIBUTION FEES. THE BOARD RECOMMENDS THAT YOU
VOTE IN FAVOR OF THE FOLLOWING:
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW.
1. To approve an Agreement and Plan of FOR AGAINST ABSTAIN
Reorganization between your fund and
Pioneer High Yield Fund as more fully [ ] [ ] [ ]
described in the proxy statement.
<PAGE>
[logo
Third Avenue Funds]
December 1999
Dear Shareholder,
VOTING YOUR SHARES I am writing to let you know that a meeting will be held
BY MAIL IS QUICK February 23, 2000 for shareholders of Third Avenue High
AND EASY. EVERY- Yield Fund. As a shareholder of the Fund, you have the
THING YOU NEED IS opportunity to voice your opinion on an important proposal,
ENCLOSED. which is described below.
This package contains information about the proposal, along
with the proxy card for you to use when voting by mail.
Please take a moment to read the enclosed materials and cast
your vote on the proxy card.
The proposal has been reviewed and unanimously approved by
your Fund's Board of Trustees, which recommends that you
vote FOR the proposal.
THE PROPOSAL TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
YOUR FUND AND PIONEER HIGH YIELD FUND. Under this Agreement,
your Fund will transfer all of its assets to Pioneer High
Yield Fund in exchange for Class A shares of Pioneer High
Yield Fund. The reorganization is intended to be tax free
for U.S. federal income tax purposes.
Your Fund and Pioneer High Yield Fund have similar
investment objectives; both seek to maximize total return
through a combination of income and capital appreciation.
THE BOARD OF The Funds also have similar investment styles, policies and
TRUSTEES restrictions.
RECOMMENDS THAT
YOU VOTE FOR THE If the Proposal is approved, you will receive Class A shares
PROPOSAL.--- of Pioneer High Yield Fund and your Fund will be liquidated.
Your Fund's Trustees believe the proposed reorganization is
advantageous because it offers:
o Continuity of investment management through Margaret
Patel, your Fund's portfolio manager, who will be
Pioneer High Yield Fund's portfolio manager. Ms. Patel
is not expected to continue as your Fund's portfolio
manager if the proposal is not approved.
o Lower initial actual expenses than your Fund's current
actual expenses and the potential for lower future
expenses than your Fund's expenses.
o Access through exchanges to Pioneer's family of over 20
mutual funds, which will provide you with additional
investment options.
PLEASE VOTE! YOUR You should understand that if you vote in favor of the
VOTE IS EXTREMELY reorganization, you are approving a reorganization into a
IMPORTANT, NO class of shares subject to Rule 12b-1 distribution fees.
MATTER HOW MANY
SHARES YOU OWN. Cast your vote by completing and signing the proxy card
enclosed in this package. Please mail your completed and
signed proxy as quickly as possible, using the postage-paid
envelope provided.
Please feel free to call 1-800-443-1021 if you have any
questions about the proposal or the process for voting your
shares. Thank you for your prompt response.
Sincerely,
/s/ Martin J. Whitman
Martin J. Whitman
Chairman of the Board
Third Avenue Trust
767 Third Avenue New York, NY 10017 Phone (212) 888-6685
Toll Free (800) 443-1021 Fax (212) 888-6757
7290-00-1299
<PAGE>
[logo
Third Avenue Funds]
December 1999
Dear Shareholder,
VOTING YOUR SHARES I am writing to let you know that a meeting will be held
BY MAIL IS QUICK February 23, 2000 for shareholders of Third Avenue High
AND EASY. EVERY- Yield Fund. As a shareholder of the Fund, you have the
THING YOU NEED IS opportunity to voice your opinion on an important proposal,
ENCLOSED. which is described below.
This package contains information about the proposal, along
with the proxy card for you to use when voting by mail.
Please take a moment to read the enclosed materials and cast
your vote on the proxy card.
The proposal has been reviewed and unanimously approved by
your Fund's Board of Trustees, which recommends that you
vote FOR the proposal.
THE PROPOSAL TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
YOUR FUND AND PIONEER HIGH YIELD FUND. Under this Agreement,
your Fund will transfer all of its assets to Pioneer High
Yield Fund in exchange for Class A shares of Pioneer High
Yield Fund. The reorganization is intended to be tax free
for U.S. federal income tax purposes.
Your Fund and Pioneer High Yield Fund have similar
investment objectives; both seek to maximize total return
through a combination of income and capital appreciation.
THE BOARD OF The Funds also have similar investment styles, policies and
TRUSTEES restrictions.
RECOMMENDS THAT
YOU VOTE FOR THE If the Proposal is approved, you will receive Class A shares
PROPOSAL.--- of Pioneer High Yield Fund and your Fund will be liquidated.
Your Fund's Trustees believe the proposed reorganization is
advantageous because it offers:
o Continuity of investment management through Margaret
Patel, your Fund's portfolio manager, who will be
Pioneer High Yield Fund's portfolio manager. Ms. Patel
is not expected to continue as your Fund's portfolio
manager if the proposal is not approved.
o Lower initial actual expenses than your Fund's current
actual expenses and the potential for lower future
expenses than your Fund's expenses.
o Access through exchanges to Pioneer's family of over 20
mutual funds, which will provide you with additional
investment options.
PLEASE VOTE! YOUR You should understand that if you vote in favor of the
VOTE IS EXTREMELY reorganization, you are approving a reorganization into a
IMPORTANT, NO class of shares subject to Rule 12b-1 distribution fees.
MATTER HOW MANY
SHARES YOU OWN. Cast your vote by completing and signing the proxy card
enclosed in this package. Please mail your completed and
signed proxy as quickly as possible, using the postage-paid
envelope provided. Thank you for your prompt response.
Sincerely,
/s/ Martin J. Whitman
Martin J. Whitman
Chairman of the Board
Third Avenue Trust
767 Third Avenue New York, NY 10017 Phone (212) 888-6685
Toll Free (800) 443-1021 Fax (212) 888-6757
7684-00-1299
<PAGE>
Third Avenue High Yield Fund
----------------------------
Hello. My name is ___. May I please speak with ____? I'm calling on behalf of
your current investment in Third Avenue High Yield Fund. Briefly, I wanted to be
sure you received a proxy card for the Special Meeting of Shareholders to
be held on February 23, 2000. Has that arrived? |
| |
Yes No
| |
Have you had a chance to I'd like to mail
return your proxy yet? you another proxy card.
| |______________________________ Do you still reside at
Yes No | check address)? I'll
| | mail that today. |
For whatever reason, that | |
vote is not yet registered. | |
Would you like to place a vote Did you know that you |
right now over the telephone? can vote your shares |
| |___________________ over the telephone |
Yes No | instead of returning the |
| | card? | | |
Would you like to register a | | | |
vote along with the recommenda- | Yes No |
tions of the Board of Trustees? | | | |
| |________________ | Would you be interested in |
Yes No | | casting a vote now? |
| | | | |_________________ |
I am recording your ___ vote | | Yes No | |
and will send you a printed | | | | |
confirmation to (address). | | Would you like to register a | |
For confirmation purposes, | | vote along with the recommendations | |
may I have the city, | | of the Board? | | |
state and zip that we'll | | | | | |
be mailing your confirm___________________Yes No | |
to? | | | | | |
| | | | | | | |
| | | |_____Would you like to review the | |
Yes No | | proposal? | | |
| | | | | | | |
| | | | Yes No | |
| | |_________________(Briefly) | | |
| | | | | |
| | |__If you could return your vote_______| |
| | in the mail, it would |
| | be appreciated. |
| | |
|__________Thank you for you time and have a good ____.______________|
MACHINE MESSAGE: This message is to remind you that a Special Meeting of the
Shareholders of Third Avenue High Yield Fund is scheduled for February 23, 2000.
We haven't received your ballot by mail. You may fax your ballot to us toll free
at 1-800-733-1885. Your vote is important! Thank you.
