File Nos. 333-90215
811-09685
As filed with the Securities and Exchange Commission on February 15, 2000
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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Pre-Effective Amendment No. 1 / X /
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Post-Effective Amendment No. __ /___/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 / X /
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Amendment No. 1 / X /
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(Check appropriate box or boxes)
PIONEER HIGH YIELD FUND
(Exact Name of Registrant as Specified in Charter)
60 State Street, Boston, Massachusetts 02109
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 742-7825
Joseph P. Barri, Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this registration statement under the Securities Act of 1933.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
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[Pioneer logo]
PIONEER
HIGH YIELD FUND
CLASS A, CLASS B AND CLASS C SHARES
Prospectus, February 25, 2000
CONTENTS
Basic information about the fund 1
Management 8
Buying, exchanging and selling shares 10
Dividends, capital gains and taxes 29
Financial highlights 30
Neither the Securities and Exchange Commission nor
any state securities agency has approved the
fund's shares or determined whether this
prospectus is accurate or complete. Any
representation to the contrary is a crime.
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AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
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CONTACT YOUR INVESTMENT PROFESSIONAL TO DISCUSS HOW THE FUND FITS INTO YOUR
PORTFOLIO.
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BASIC INFORMATION ABOUT THE FUND
INVESTMENT OBJECTIVE
Maximize total return through a combination of income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
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. 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.
The fund's investments may have fixed or variable principal payments and 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.
Pioneer Investment Management, Inc., 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, including the attractiveness of its market
valuation, 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. Pioneer adjusts sector weighting to reflect its outlook of the
market for high yield securities rather than using a fixed sector allocation.
In making these portfolio decisions, Pioneer relies on the knowledge, experience
and judgment of its staff who have access to a wide variety of research.
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BELOW INVESTMENT GRADE DEBT SECURITIES
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.
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BASIC INFORMATION ABOUT THE FUND
PRINCIPAL RISKS OF INVESTING IN THE FUND
Even though the fund seeks to maximize total return, you could lose money on
your investment or not make as much as if you invested elsewhere if:
|X| Interest rates go up, causing the value of debt securities in the fund's
portfolio to decline
|X| 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
|X| During periods of declining interest rates, the issuer of a security may
exercise 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
|X| During periods of rising interest rates, the average life of certain types
of securities may be 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
|X| Pioneer's judgment about the attractiveness, relative value or potential
appreciation of a particular sector, security or investment strategy proves
to be incorrect
|X| 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 the fund is subject to the following specific risks:
|X| Increased price sensitivity to changing interest rates and deteriorating
economic environment
|X| Greater risk of loss due to default or declining credit quality
|X| Adverse company specific events are more likely to render the issuer
unable to make interest and/or principal payments
|X| 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
The 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.
2
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THE FUND'S PAST PERFORMANCE
The bar chart and table indicate the risks of investing in the fund by showing
how the fund has performed in the past. The fund's performance will vary from
year to year.
The fund's past performance does not necessarily indicate how it will perform in
the future. As a shareowner, you may lose or make money on your investment. The
fund is newly organized and pursuant to an agreement and plan of reorganization
acquired all of the assets of Third Avenue High Yield Fund on February 25, 2000.
In the reorganization, Third Avenue High Yield Fund exchanged all of its assets
for Class A shares of the fund. The performance of each class of the fund from
February 12, 1998 to February 25, 2000 is the performance of Third Avenue High
Yield Fund's single class which has been restated to reflect any applicable
sales charges and Rule 12b-1 fees (but not other differences in expenses). This
adjustment has the effect of reducing the previously reported performance of
Third Avenue High Yield Fund.
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FUND PERFORMANCE
The chart shows the performance of the fund's Class A shares for each full
calendar year since the fund's inception on February 12, 1998. Class B and Class
C shares have different performance. The chart does not reflect any Class A
sales charge you may pay when you buy or sell fund shares. Any sales charge will
reduce your return.
THE FUND'S HIGHEST CALENDAR QUARTERLY RETURN WAS 11.09% (9/30/99 TO 12/31/99)
THE FUND'S LOWEST CALENDAR QUARTERLY RETURN WAS 3.57% (6/30/99 TO 9/30/99)
ANNUAL RETURN CLASS A SHARES
(Year ended December 31)
'99 27.09%
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COMPARISON WITH MERRILL LYNCH INDICES
The table shows the average annual total returns for each class of the fund over
time and compares these returns to the returns of the Merrill Lynch High Yield
Master II Index and the Merrill Lynch Index of Convertible Bonds (Speculative
Quality). These indices are recognized measures of the performance of high yield
securities. Unlike the fund, the indices are not managed and do not incur
expenses. The table:
|X| Reflects sales charges applicable to the class
|X| Assumes that you sell your shares at the end of the period
|X| Assumes that you reinvest all of your dividends and distributions
AVERAGE ANNUAL TOTAL RETURN (%)
(for periods ended December 31, 1999)
SINCE INCEPTION
1 YEAR INCEPTION DATE
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Class A 21.37 6.84 2/12/98
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Class B 22.13 6.74 2/12/98
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Class C 26.13 8.73 2/12/98
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High Yield
Master II Index 2.51 1.87 --
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Convertible Bonds
(Speculative
Quality) 38.91 23.70 --
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BASIC INFORMATION ABOUT THE FUND
FEES AND EXPENSES
These are the fees and expenses, based on estimated expenses for the current
fiscal year, you may pay if you invest in the fund.
SHAREOWNER FEES
PAID DIRECTLY FROM YOUR INVESTMENT CLASS A CLASS B CLASS C
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Maximum sales charge (load) when you buy shares
as a percentage of offering price 4.50% None 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(1) 4% 1%
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ANNUAL FUND OPERATING EXPENSES
PAID FROM THE ASSETS OF THE FUND
as a percentage of average daily net
assets(2) CLASS A CLASS B CLASS C
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Management Fee(3) 0.70% 0.70% 0.70%
.......................................................................
Distribution and Service (12b-1) Fee 0.25% 1.00% 1.00%
.......................................................................
Other Expenses(3) 0.55% 0.55% 0.55%
.......................................................................
Total Annual Fund Operating Expenses(3) 1.50% 2.25% 2.25%
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(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.
See "Buying, exchanging and selling shares."
(2) The expense table and example are based upon estimated expenses for the
current fiscal year. For the fiscal year ended October 31, 1999, actual
total operating expenses were 3.67% for Third Avenue High Yield Fund
shares (1.90% after expense reimbursements).
(3) 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; the portion of fund
expenses attributable to Class B and Class C shares will be reduced
only to the extent such expenses are reduced for Class A shares. This
agreement is voluntary and temporary and may be revised or terminated
at any time.
Class A Class B Class C
Management Fee 0.00% 0.00% 0.00%
Distribution and Service
(12b-1) Fee 0.25% 1.00% 1.00%
Other Expenses 0.50% 0.50% 0.50%
Total Annual Fund
Operating Expenses 0.75% 1.50% 1.50%
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.
<TABLE>
<CAPTION>
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
IF YOU SELL YOUR SHARES IF YOU DO NOT SELL YOUR SHARES
--------------------------------------------------------------------------------
NUMBER OF YEARS YOU OWN YOUR SHARES
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1 3 5 10 1 3 5 10
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $596 $903 $1,232 $2,160 $596 $903 $1,232 $2,160
..........................................................................................
Class B 628 1,003 1,405 2,396 228 703 1,205 2,396
..........................................................................................
Class C 328 703 1,205 2,585 228 703 1,205 2,585
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OTHER INVESTMENT STRATEGIES
As discussed, the fund invests primarily in below investment grade debt
securities and preferred stocks to maximize total return.
This section describes additional investments that the fund may make or
strategies that it may pursue to a lesser degree to achieve the fund's goal.
Some of the fund's 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).
ADDITIONAL INFORMATION ABOUT DEBT SECURITIES
The fund may invest in investment grade and below investment grade
convertible 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.
The 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.
To the extent the fund invests significantly in asset-backed and
mortgage-related securities, its exposure to prepayment and extension risks may
be greater than if it invested in other fixed income securities.
Certain debt instruments may only pay principal at maturity or may only
represent the right to receive payments of principal or payments of interest on
underlying pools of mortgage or government securities, but not both. The value
of these types of instruments may change more drastically than debt securities
that pay both principal and interest during periods of changing interest rates.
Principal only mortgage-backed securities generally increase in value if
interest rates decline, but are also subject to the risk of prepayment. Interest
only instruments generally increase in value in a rising interest rate
environment when fewer of the underlying mortgages are prepaid.
The fund may invest in mortgage derivatives and structured securities. Because
these securities have imbedded leverage features, small changes in interest or
prepayment rates may cause large and sudden price movements. Mortgage
derivatives can also become illiquid and hard to value in declining markets.
5
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BASIC INFORMATION ABOUT THE FUND
INVESTMENTS OTHER THAN HIGH YIELD OR DEBT SECURITIES
Consistent with its objective, the 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. Although equity
securities may not pay dividends, the fund invests in equity securities when
Pioneer believes they offer the potential for capital gains or to diversify the
fund's portfolio.
INVESTMENTS IN NON-U.S. SECURITIES
The 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 its non-U.S. investments in any one region.
These risks may include:
|X|Less information about non-U.S. issuers or markets may be available due to
less rigorous disclosure and accounting standards or regulatory practices
|X| Many non-U.S. markets are smaller, less liquid and more volatile. In a
changing market, Pioneer may not be able to sell the fund's portfolio
securities in amounts and at prices it considers reasonable
|X| Adverse effect of currency exchange rates or controls on the value of the
fund's investments
|X| Economic, political and social developments that adversely affect the
securities markets
|X| Withholding and other non-U.S. taxes may decrease the fund's return
TEMPORARY INVESTMENTS
Normally, the fund invests substantially all of its assets to meet its
investment objective. The fund may invest the remainder of its assets in
securities with remaining maturities of less than one year or may hold cash or
cash equivalents. For temporary defensive purposes, the fund may depart from its
principal investment strategies and invest part or all of its assets in these
securities or may hold cash. During such periods, the fund may not be able to
achieve its investment objective. The 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 fund usually does not trade for short-term profits. The 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 the fund does a lot of trading,
it may incur additional operating expenses, which would reduce performance, and
could cause shareowners to incur a higher level of taxable income or capital
gains.
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DERIVATIVES
The fund may use futures, options, forward foreign currency exchange contracts
and other derivatives. 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. The fund does
not use derivatives as a primary investment technique and generally limits their
use to hedging. However, the fund may use derivatives for a variety of purposes,
including:
|X| As a hedge against adverse changes in stock market prices, interest rates
or currency exchange rates
|X| As a substitute for purchasing or selling securities
|X| 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 the
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.
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MANAGEMENT
PIONEER, THE FUND'S INVESTMENT ADVISER,
selects the fund's investments and oversees the fund's operations.
PIONEER GROUP
The Pioneer Group, Inc. and its subsidiaries are engaged in financial
services businesses in the United States and many foreign countries. As of
December 31, 1999, the firm had more than $24 billion in assets under management
worldwide including more than $23 billion in U.S. mutual funds. The firm's U.S.
mutual fund investment history includes creating in 1928 one of the first mutual
funds. John F. Cogan, chairman of the board and president of The Pioneer Group,
Inc., owns approximately 14% of the firm. He is also an officer and director of
each of the Pioneer mutual funds.
INVESTMENT ADVISER
Pioneer manages a family of U.S. and international stock funds, bond funds
and money market funds. Pioneer is a subsidiary of The Pioneer Group, Inc. Its
main office is at 60 State Street, Boston, Massachusetts 02109.
PORTFOLIO MANAGER
Day-to-day management of the fund's portfolio has been the responsibility
of Margaret D. Patel since inception. Ms. Patel joined Pioneer as a vice
president in August 1999 and has been an investment professional since 1972.
Prior to joining Pioneer, she was a portfolio manager at EQSF Advisers, Inc.
from 1998 to 2000 and a portfolio manager of several mutual funds at Northstar
Investment Management Corp. from 1995 to 1996. Ms. Patel was a portfolio manager
of several mutual funds at Boston Security Counsellors, Inc. from 1988 to 1995.
Ms. Patel is supported by a team of fixed 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 is chief investment officer of
Pioneer. She joined Pioneer in 1997 and has been an investment professional
since 1984, most recently as chief investment officer at another investment
adviser.
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MANAGEMENT FEE
The fund pays Pioneer a fee for managing the fund and to cover the cost of
providing certain services to the fund. Pioneer's annual fee is 0.70% of the
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 daily
and paid monthly.
DISTRIBUTOR AND TRANSFER AGENT
Pioneer Funds Distributor, Inc. is the fund's distributor. Pioneering
Services Corporation is the fund's transfer agent. The fund compensates the
distributor and transfer agent for their services. The distributor and the
transfer agent are subsidiaries of The Pioneer Group, Inc.
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 fund and the provision of services to its shareowners.
Pioneer has addressed and continues to monitor the Year 2000 problem with
respect to its systems and those used by the distributor and transfer agent.
During 1999, Pioneer addressed all material Year 2000 issues and participated in
industry-wide testing. The fund has obtained assurances from its other service
providers that they have taken appropriate Year 2000 measures and Pioneer
continues to monitor their efforts. Although the fund does not expect the Year
2000 problem to adversely impact it, the fund cannot guarantee that its, or the
fund's service providers', efforts will be successful.
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BUYING, EXCHANGING AND SELLING SHARES
NET ASSET VALUE
The 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. The fund
calculates a net asset value for each class of shares every day the New York
Stock Exchange is open when regular trading closes (normally 4:00 p.m. Eastern
time).
The fund generally values its portfolio securities based on market prices or
quotations. When market prices are not available or are considered by Pioneer 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 share price. When you buy Class A shares, you pay
an initial sales charge. When you sell Class B or Class C shares, you may pay a
contingent deferred sales charge depending on how long you have owned your
shares.
CHOOSING A CLASS OF SHARES
The fund offers three classes of shares through this prospectus. Each class has
different sales charges and expenses, allowing you to choose the class that best
meets your needs.
Factors you should consider include:
|X| How long you expect to own the shares
|X| The expenses paid by each class
|X| Whether you qualify for any reduction or waiver of sales charges
Your investment professional can help you determine which class meets your
goals. Your investment firm may receive different compensation depending upon
which class you choose. If you are not a U.S. citizen and are purchasing shares
outside the U.S., you may pay different sales charges under local laws and
business practices.
DISTRIBUTION PLANS
The fund has adopted a distribution plan for each class of shares offered
through this prospectus in accordance with Rule 12b-1 under the Investment
Company Act of 1940. Under each plan the fund pays distribution and service fees
to the distributor. 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.
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SHARE PRICE
The net asset value per share calculated on the day of your transaction,
adjusted for any applicable sales charge, is often referred to as the share
price.
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COMPARING CLASSES OF SHARES
CLASS A
CLASS B
CLASS C
WHY YOU MIGHT PREFER EACH CLASS
Class A shares may be your best alternative if you prefer to pay an initial
sales charge and have lower annual expenses, or if you qualify for any reduction
or waiver of the initial sales charge.
You may prefer Class B shares if you do not want to pay an initial sales charge,
or if you plan to hold your investment for at least six years. Class B shares
are not recommended if you are investing $250,000 or more.
You may prefer Class C shares if you do not wish to pay an initial sales charge
and you would rather pay higher annual expenses over time.
INITIAL SALES CHARGE
Up to 4.5% of the offering price, which is reduced or waived for large purchases
and certain types of investors. At the time of your purchase, your investment
firm may receive a commission from the distributor of up to 4%, declining as the
size of your investment increases.
None
None
CONTINGENT DEFERRED SALES CHARGES
None, except in certain circumstances when the initial sales charge is waived.
Up to 4% is charged if you sell your shares. The charge is reduced over time and
not charged after six years. Your investment firm may receive a commission from
the distributor at the time of your purchase of up to 4%.
A 1% charge if you sell your shares within one year of purchase. Your investment
firm may receive a commission from the distributor at the time of your purchase
of up to 1%.
DISTRIBUTION AND SERVICE FEES Up to 0.25% of average daily net assets.
Up to 1% of average daily net assets.
Up to 1% of average daily net assets.
ANNUAL EXPENSES (INCLUDING DISTRIBUTION AND SERVICE FEES) Lower than Class B or
Class C.
Higher than Class A shares; Class B shares convert to Class A shares after eight
years.
Higher than Class A shares; Class C shares do not convert to any other class of
shares. You continue to pay higher annual expenses.
EXCHANGE PRIVILEGE
Class A shares of other Pioneer mutual funds.
Class B shares of other Pioneer mutual funds.
Class C shares of other Pioneer mutual funds.
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BUYING, EXCHANGING AND SELLING SHARES
SALES CHARGES: CLASS A SHARES
You pay the offering price when you buy Class A shares unless you qualify to
purchase shares at net asset value. You pay a lower sales charge as the size of
your investment increases. You do not pay a sales charge when you reinvest
dividends or distributions paid by the fund.
INVESTMENTS OF $1 MILLION OR MORE
You do not pay a sales charge when you purchase Class A shares if you are
investing $1 million or more or you are a participant in certain group plans.
However, you pay a deferred sales charge if you sell your Class A shares within
one year of purchase. The sales charge is equal to 1% of your investment or your
sale proceeds, whichever is less.
REDUCED SALES CHARGES
You may qualify for a reduced Class A sales charge if you own or are purchasing
shares of Pioneer mutual funds. If you or your investment professional notifies
the distributor of your eligibility for a reduced sales charge at the time of
your purchase, the distributor will credit you with the combined value (at the
current offering price) of all your Pioneer mutual fund shares and the shares of
your spouse and the shares of any children under 21. Certain trustees and
fiduciaries may also qualify for a reduced sales charge. For this purpose,
Pioneer mutual funds include any fund for which the distributor is principal
underwriter and, at the distributor's discretion, may include funds organized
outside the U.S. managed by Pioneer.
See "Qualifying for a reduced sales charge" for more information.
SALES CHARGES FOR CLASS A SHARES
SALES CHARGE AS % OF
------------------------
OFFERING NET AMOUNT
AMOUNT OF PURCHASE PRICE INVESTED
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Less than $100,000 4.50 4.71
......................................................................
$100,000 but less than $250,000 3.50 3.63
......................................................................
$250,000 but less than $500,000 2.50 2.56
......................................................................
$500,000 but less than $1 million 2.00 2.04
......................................................................
$1 million or more -0- -0-
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OFFERING PRICE
The net asset value per share plus any initial sales charge.
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SALES CHARGES: CLASS B SHARES
You buy Class B shares at net asset value per share without paying an initial
sales charge. However, you will pay a contingent deferred sales charge to the
distributor if you sell your Class B shares within six years of purchase. The
contingent deferred sales charge decreases as the number of years since your
purchase increases.
CONTINGENT DEFERRED SALES CHARGE
- ---------------------------------------------
ON SHARES SOLD AS A % OF
BEFORE THE DOLLAR AMOUNT SUBJECT
END OF YEAR TO THE SALES CHARGE
- ---------------------------------------------
1 4
.............................................
2 4
.............................................
3 3
.............................................
4 3
.............................................
5 2
.............................................
6 1
.............................................
7+ -0-
- ---------------------------------------------
CONVERSION TO CLASS A SHARES
Class B shares automatically convert into Class A shares. This helps you because
Class A shares pay lower expenses.
Your Class B shares will convert to Class A shares at the beginning of the
calendar month (calendar quarter for shares purchased before October 1, 1998)
that is eight years after the date of purchase except that:
|X| Shares purchased by reinvesting dividends and capital gain distributions
will convert to Class A shares at the same time as shares on which the
dividend or distribution was paid
|X| Shares purchased by exchanging shares from another fund will convert on the
date that the shares originally acquired would have converted into Class A
shares
Currently, the Internal Revenue Service permits the conversion of shares to take
place without imposing a federal income tax. Conversion may not occur if the
Internal Revenue Service deems it a taxable event for federal tax purposes.
[text box]
PAYING THE CONTINGENT DEFERRED SALES CHARGE (CDSC)
Several rules apply for Class B shares so that you pay the lowest possible CDSC.
|X| The CDSC is calculated on the current market value or the original cost of
the shares you are selling, whichever is less
|X| You do not pay a CDSC on reinvested dividends or distributions
|X| In determining the number of years since your purchase, all purchases are
considered to have been made on the first day of that month (quarter for
shares purchased before October 1, 1998)
|X| If you sell only some of your shares, the transfer agent will first sell
your shares that are not subject to any CDSC and then the shares that you
have owned the longest
|X| You may qualify for a waiver of the CDSC normally charged. See "Qualifying
for a reduced sales charge"
[end text box]
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CONTINGENT DEFERRED SALES CHARGE
A sales charge that may be deducted from your sale proceeds.
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BUYING, EXCHANGING AND SELLING SHARES
SALES CHARGES: CLASS C SHARES
You buy Class C shares at net asset value per share without paying an initial
sales charge. However, if you sell your Class C shares within one year of
purchase, you will pay to the distributor a contingent deferred sales charge of
1% of the current market value or the original cost of the shares you are
selling, whichever is less.
[text box]
PAYING THE CONTINGENT DEFERRED SALES CHARGE (CDSC)
Several rules apply for Class C shares which result in your paying the lowest
CDSC.
|X| The CDSC is calculated on the current market value or the original cost of
the shares you are selling, whichever is less
|X| You do not pay a CDSC on reinvested dividends or distributions
|X| In determining the amount of time since your purchase, all purchases are
considered to have been made on the first day of that month (quarter for
shares purchased before October 1, 1998)
|X| If you sell only some of your shares, the transfer agent will first sell
your shares that are not subject to any CDSC and then the shares that you
purchased most recently
|X| You may qualify for a waiver of the CDSC normally charged. See "Qualifying
for a reduced sales charge"
[end text box]
[text box: magnifier icon]
CONTINGENT DEFERRED SALES CHARGE
A sales charge that may be deducted from your sale proceeds.
[end text box]
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QUALIFYING FOR A REDUCED SALES CHARGE
INITIAL CLASS A SALES CHARGE WAIVERS
You may purchase Class A shares at net asset value (without a sales charge) or
with a reduced initial sales charge as follows. If you believe you qualify for
any of the waivers discussed below, contact the distributor. You are required to
provide written confirmation of your eligibility. You may not resell these
shares except to or on behalf of the fund.
CLASS A PURCHASES AT NET ASSET VALUE ARE AVAILABLE TO:
|X| Current or former trustees and officers of the fund;
|X| Current or former partners and employees of legal counsel to the fund;
|X| Current or former directors, officers, employees or sales representatives
of The Pioneer Group, Inc. and its affiliates;
|X| Current or former directors, officers, employees or sales representatives
of any subadviser or a predecessor adviser (or their affiliates) to any
investment company for which Pioneer serves as investment adviser;
|X| Current or former officers, partners, employees or registered
representatives of broker-dealers which have entered into sales agreements
with the distributor;
|X| Members of the immediate families of any of the persons above;
|X| Any trust, custodian, pension, profit sharing or other benefit plan of the
foregoing persons;
|X| Insurance company separate accounts;
|X| Certain "wrap accounts" for the benefit of clients of financial planners
adhering to standards established by the distributor;
|X| Other funds and accounts for which Pioneer or any of its affiliates serve
as investment adviser or manager;
|X| In connection with certain reorganization, liquidation or acquisition
transactions involving other investment companies or personal holding
companies;
|X| Certain unit investment trusts;
|X| Employer-sponsored retirement plans with 100 or more eligible employees or
at least $500,000 in plan assets;
|X| Participants in Optional Retirement Programs if (i) your employer has
authorized a limited number of mutual funds to participate in the program,
(ii) all participating mutual funds sell shares to program participants at
net asset value, (iii) your employer has agreed in writing to actively
promote Pioneer mutual funds to program participants and (iv) the program
provides for a matching contribution for each participant contribution;
|X| Participants in an employer-sponsored 403(b) plan or employer-sponsored 457
plan if (i) the employer has made special arrangements for your plan to
operate as a group through a single broker, dealer or financial
intermediary and (ii) all participants in the plan purchase shares of a
Pioneer mutual fund or mutual funds through a single broker, dealer or
other financial intermediary designated by your employer.
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BUYING, EXCHANGING AND SELLING SHARES
CLASS A PURCHASES AT A REDUCED INITIAL SALES CHARGE OR NET ASSET VALUE ARE ALSO
AVAILABLE TO: Group Plans if the sponsoring organization
|X| recommends purchases of Pioneer mutual funds to,
|X| permits solicitation of, or
|X| facilitates purchases by
its employees, members or participants.
LETTER OF INTENT (CLASS A)
You can use a letter of intent to qualify for reduced sales charges in two
situations:
|X| If you plan to invest at least $100,000 (excluding any reinvestment of
dividends and capital gain distributions) in the fund's Class A shares
during the next 13 months
|X| If you include in your letter of intent the value - at the current offering
price - of all of your Class A shares of the fund and all other Pioneer
mutual fund shares held of record in the amount used to determine the
applicable sales charge for the fund shares you plan to buy
Completing a letter of intent does not obligate you to purchase additional
shares, but if you do not buy enough shares to qualify for the projected level
of sales charges by the end of the 13-month period (or when you sell your
shares, if earlier), the distributor will recalculate your sales charge. You
must pay the additional sales charge within 20 days after you are notified of
the recalculation or it will be deducted from your account (or your sale
proceeds). For more information regarding letters of intent, please contact your
investment professional or obtain and read the statement of additional
information.
REINVESTMENT (CLASS A)
If you sold shares of another mutual fund within the past 60 days, you may be
able to reinvest the sale proceeds from that fund in Class A shares of the fund
at net asset value without a sales charge.
To qualify:
|X| Your investment firm must have a sales agreement with the distributor;
|X| You must demonstrate that the amount invested is from the proceeds of the
sale of shares from another mutual fund that occurred within 60 days
immediately preceding your purchase;
|X| You paid a sales charge on the original purchase of the shares sold; and
|X| The mutual fund whose shares were sold also offers net asset value
purchases to shareowners that sell shares of a Pioneer mutual fund.
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<PAGE>
WAIVER OR REDUCTION OF CONTINGENT DEFERRED SALES CHARGES (CDSC)
CLASS A SHARES THAT ARE SUBJECT TO A CDSC
Purchases of Class A shares of $1 million or more, or by participants in a Group
Plan which were not subject to an initial sales charge, may be subject to a CDSC
upon redemption. A CDSC is payable to the distributor in the event of a share
redemption within 12 months following the share purchase at the rate of 1% of
the lesser of the value of the shares redeemed (exclusive of reinvested dividend
and capital gain distributions) or the total cost of such shares. However, the
CDSC is waived for redemptions of Class A shares purchased by an
employer-sponsored retirement plan under Section 401, 403 or 457 of the
Internal Revenue Code that has 1,000 or more eligible employees or at least
$10 million in plan assets.
CLASS A, CLASS B AND CLASS C SHARES
The distributor may waive or reduce the CDSC for Class A shares that are subject
to a CDSC or for Class B or Class C shares if:
|X| The distribution results from the death of all registered account owners or
a participant in an employer-sponsored plan. For UGMAs, UTMAs and trust
accounts, the waiver applies only upon the death of all beneficial owners;
|X| The distribution results from a total and permanent disability (as defined
by Section 72 of the Internal Revenue Code) occurring after the purchase of
the shares being sold. For UGMAs, UTMAs and trust accounts, the waiver only
applies upon the disability of all beneficial owners;
|X| The distribution is made in connection with limited automatic redemptions
as described in "Systematic withdrawal plans" (limited in any year to 10%
of the value of the account in the fund at the time the withdrawal plan is
established);
|X| The distribution is from any type of IRA, 403(b) or employer-sponsored plan
and one of the following applies:
- It is part of a series of substantially equal periodic payments made
over the life expectancy of the participant or the joint life
expectancy of the participant and his or her beneficiary (limited in
any year to 10% of the value of the participant's account at the time
the distribution amount is established);
- It is a required minimum distribution due to the attainment of age
70-1/2, in which case the distribution amount may exceed 10% (based
solely on plan assets held in Pioneer mutual funds);
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<PAGE>
BUYING, EXCHANGING AND SELLING SHARES
- It is rolled over to or reinvested in another Pioneer mutual fund in
the same class of shares, which will be subject to the CDSC of the
shares originally held;
- It is in the form of a loan to a participant in a plan that permits
loans (each repayment will be subject to a CDSC as though a new
purchase);
|X| The distribution is to a participant in an employer-sponsored retirement
plan qualified under Section 401 of the Internal Revenue Code or to a
participant in an employer-sponsored 403(b) plan or employer-sponsored
457 plan if (i) the employer has made special arrangements for your plan to
operate as a group through a single broker, dealer or financial
intermediary and (ii) all participants in the plan purchase shares of a
Pioneer mutual fund or mutual funds through a single broker, dealer or
other financial intermediary designated by your employer and is:
- A return of excess employee deferrals or contributions;
- A qualifying hardship distribution as defined by the Internal Revenue
Code. For Class B shares, waiver is granted only on payments of up to
10% of total plan assets held by Pioneer for all participants,
reduced by the total of any prior distributions made in that calendar
year;
- Due to retirement or termination of employment. For Class B shares,
waiver is granted only on payments of up to 10% of total plan assets
held in a Pioneer mutual fund for all participants, reduced by the
total of any prior distributions made in the same calendar year;
- From a qualified defined contribution plan and represents a
participant's directed transfer, provided that this privilege has been
preauthorized through a prior agreement with the distributor regarding
participant directed transfers (not available to Class B shares);
|X| The distribution is made pursuant to the fund's right to liquidate or
involuntarily redeem shares in a shareholder's account;
|X| The selling broker elects, with the distributor's approval, to waive
receipt of the commission normally paid at the time of the sale.
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<PAGE>
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.
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.
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 the 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 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.
[text box: telephone icon]
BY PHONE
If you want to place your telephone transaction by speaking to a shareowner
services representative, call 1-800-225-6292 between 8:00 a.m. and 9:00 p.m.
Eastern time on any weekday that the New York Stock Exchange is open. You may
use FactFoneSM at any time.
[end text box]
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BUYING, EXCHANGING AND SELLING SHARES
GENERAL RULES ON BUYING, EXCHANGING AND SELLING YOUR 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 share price 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 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 fund shares at the offering price. 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 must be at least $1,000. Additional investments must be
at least $100 for Class A shares and $500 for Class B or Class C 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.
[text box]
RETIREMENT PLAN ACCOUNTS
You can purchase fund shares through tax-deferred retirement plans for
individuals, businesses and tax-exempt organizations.
Your initial investment for most types of retirement plan accounts must be at
least $250. Additional investments for most types of retirement plans must be at
least $100.
You may not use the account application accompanying this prospectus to
establish a Pioneer retirement plan. You can obtain retirement plan applications
from your investment firm or by calling the Retirement Plans Department at
1-800-622-0176.
[end text box]
[text box: questionmark icon]
Consult your investment professional to learn more about buying, exchanging or
selling fund shares.
[end text box]
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EXCHANGING
You may exchange your shares for shares of the same class of another Pioneer
mutual fund.
Your exchange request must be for at least $1,000 unless the fund you are
exchanging into has a different minimum. The fund allows you to exchange your
shares at net asset value without charging you either an initial or contingent
deferred sales charge at the time of the exchange. Shares you acquire as part of
an exchange will continue to be subject to any contingent deferred sales charge
that applies to the shares you originally purchased. When you ultimately sell
your shares, the date of your original purchase will determine your contingent
deferred sales charge.
Before you request an exchange, consider each fund's investment objective and
policies as described in the fund's prospectus.
SELLING
Your shares will be sold at net asset value per share next calculated after the
fund receives your request in good order.
If the shares you are selling are subject to a deferred sales charge, it will be
deducted from the sale proceeds. 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 recently sent a check to purchase the shares being
sold, the fund may delay payment of the sale proceeds until your check has
cleared. This may take up to 15 calendar days from the purchase date.
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.
[text box]
GOOD ORDER MEANS THAT:
|X| You have provided adequate instructions
|X| There are no outstanding claims against your account
|X| There are no transaction limitations on your account
|X| If you have any fund share certificates, you submit them and they are
signed by each record owner exactly as the shares are registered
|X| 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
[end text box]
[text box: capital icon]
You may have to pay income taxes on a sale or an exchange.
[end text box]
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BUYING, EXCHANGING AND SELLING SHARES
BUYING SHARES
EXCHANGING SHARES
THROUGH YOUR INVESTMENT FIRM
Normally, your investment firm will send your purchase request to the fund's
transfer agent. CONSULT YOUR INVESTMENT PROFESSIONAL FOR MORE INFORMATION. Your
investment firm 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.
Normally, your investment firm will send your exchange request to the fund's
transfer agent. CONSULT YOUR INVESTMENT PROFESSIONAL FOR MORE INFORMATION ABOUT
EXCHANGING YOUR SHARES.
BY PHONE
YOU CAN USE THE TELEPHONE PURCHASE PRIVILEGE IF you have an existing
non-retirement account or certain IRAs. You can purchase additional fund shares
by phone if:
|X| You established your bank account of record at least 30 days ago
|X| Your bank information has not changed for at least 30 days
|X| You are not purchasing more than $25,000 worth of shares per account per
day
|X| You can provide the proper account 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.
After you establish your fund account, YOU CAN EXCHANGE FUND SHARES BY PHONE IF:
|X| You are using the exchange to establish a new account, provided the new
account has a registration identical to the original account
|X| The fund into which you are exchanging offers the same class of shares
|X| You are not exchanging more than $500,000 worth of shares per account per
day
|X| You can provide the proper account identification information
IN WRITING, BY MAIL OR BY FAX
You can purchase fund shares for an existing fund account by MAILING A CHECK TO
THE TRANSFER AGENT. Make your check payable to the fund. Neither initial nor
subsequent investments should be made by third party check. Your check must be
in U.S. dollars and drawn on a U.S. bank. Include in your purchase request the
fund's name, the account number and the name or names in the account
registration.
You can exchange fund shares by MAILING OR FAXING A LETTER OF INSTRUCTION TO THE
TRANSFER AGENT. You can exchange fund shares directly through the fund only if
your account is registered in your name. However, you may not fax an exchange
request for more than $500,000. Include in your letter:
|X| The name, social security number and signature of all registered owners
|X| A signature guarantee for each registered owner if the amount of the
exchange is more than $500,000
|X| The name of the fund out of which you are exchanging and the name of the
fund into which you are exchanging
|X| The class of shares you are exchanging
|X| The dollar amount or number of shares you are exchanging
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SELLING SHARES
Normally, your investment firm will send your request to sell shares to the
fund's transfer agent. CONSULT YOUR INVESTMENT PROFESSIONAL FOR MORE
INFORMATION. The fund has authorized the distributor to act as its agent in the
repurchase of fund shares from qualified investment firms. The fund reserves the
right to terminate this procedure at any time.
YOU MAY SELL UP TO $100,000 PER ACCOUNT PER DAY. You may sell fund shares held
in a retirement plan account by phone only if your account is an IRA. You may
not sell your shares by phone if you have changed your address (for checks) or
your bank information (for wires and transfers) in the last 30 days.
You may receive your sale proceeds:
|X| By check, provided the check is made payable exactly as your account is
registered
|X| By bank wire or by electronic funds 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 writing DIRECTLY TO THE FUND
only if your account is registered in your name. Include in your request your
name, your social security number, the fund's name, your fund account number,
the class of shares to be sold, the dollar amount or number of shares to be sold
and any other applicable requirements as described below. The transfer agent
will send the sale proceeds to your address of record unless you provide other
instructions. Your request must be signed by all registered owners and be in
good order. The transfer agent will not process your request until it is
received in good order. You may sell up to $100,000 per account per day by fax.
[text box]
HOW TO CONTACT US
BY PHONE [telephone icon]
For information or to request a telephone transaction between 8:00 a.m. and 9:00
p.m. (Eastern time) by speaking with a shareholder services representative call
1-800-225-6292 To request a transaction using FactFoneSM call 1-800-225-4321
Telecommunications Device for the Deaf (TDD) 1-800-225-1997
BY MAIL [envelope icon]
Send your written instructions to:
PIONEERING SERVICES CORPORATION
P.O. Box 9014
Boston, Massachusetts 02205-9014
BY FAX [fax icon]
Fax your exchange and sale requests to:
1-800-225-4240
[end text box]
[text box]
EXCHANGE PRIVILEGE
You may make up to four exchange redemptions of $25,000 or more per account per
calendar year.
The fund and the distributor reserve the right to refuse any exchange request or
restrict, at any time without notice, the number and/or frequency of exchanges
to prevent abuses of the exchange privilege. Abuses include frequent trading in
response to short-term market fluctuations and a pattern of trading that appears
to be an attempt to "time the market." In addition, the fund and the distributor
reserve the right, at any time without notice, 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.
[end text box]
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BUYING, EXCHANGING AND SELLING SHARES
ACCOUNT OPTIONS
See the account application form for more details on each of the following
options.
AUTOMATIC INVESTMENT PLANS
You can make regular periodic investments in the fund by setting up monthly bank
drafts, government allotments, payroll deductions, a Pioneer Investomatic Plan
and other similar automatic investment plans. You may use an automatic
investment plan to establish a Class A share account with a small initial
investment. If you have a Class B or Class C share account and your balance is
at least $1,000, you may establish an automatic investment plan.
PIONEER INVESTOMATIC PLAN
If you establish a Pioneer Investomatic Plan, the transfer agent will make a
periodic investment in fund shares by means of a preauthorized electronic funds
transfer from your bank account. Your plan investments are voluntary. You may
discontinue your plan at any time or change the plan's dollar amount, frequency
or investment date by calling or writing to the transfer agent. You should allow
up to 30 days for the transfer agent to establish your plan.
AUTOMATIC EXCHANGES
You can automatically exchange your fund shares for shares of the same class of
another Pioneer mutual fund. The automatic exchange will begin on the day you
select when you complete the appropriate section of your account application or
an account options form. In order to establish automatic exchange:
|X| You must select exchanges on a monthly or quarterly basis
|X| Both the originating and receiving accounts must have identical
registrations
|X| The originating account must have a minimum balance of $5,000
DISTRIBUTION OPTIONS
The fund offers three distribution options. Any fund shares you buy by
reinvesting distributions will be priced at the applicable net asset value per
share.
(1) Unless you indicate another option on your account application, any
dividends and capital gain distributions paid to you by the fund will
automatically be invested in additional fund shares.
(2) You may elect to have the amount of any dividends paid to you in cash
and any capital gain distributions reinvested in additional shares.
(3) You may elect to have the full amount of any dividends and/or capital
gain distributions paid to you in cash.
Options (2) or (3) are not available to retirement plan accounts or accounts
with a current value of less than $500.
If your distribution check is returned to the transfer agent or you do not cash
the check for six months or more, the transfer agent may reinvest the amount of
the check in your account and automatically change the distribution option on
your account to option (1) until you request a different option in writing.
These additional shares will be purchased at the then current net asset value.
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<PAGE>
DIRECTED DIVIDENDS
You can invest the dividends paid by one of your Pioneer mutual fund accounts in
a second Pioneer mutual fund account. The value of your second account must be
at least $1,000 ($500 for Pioneer Fund or Pioneer II). You may direct the
investment of any amount of dividends. There are no fees or charges for directed
dividends. If you have a retirement plan account, you may only direct dividends
to accounts with identical registrations.
SYSTEMATIC WITHDRAWAL PLANS
When you establish a systematic withdrawal plan for your account, the transfer
agent will sell the number of fund shares you specify on a periodic basis and
the proceeds will be paid to you or to any person you select. You must obtain a
signature guarantee to direct payments to another person after you have
established your systematic withdrawal plan. Payments can be made either by
check or by electronic transfer to a bank account you designate.
To establish a systematic withdrawal plan:
|X| Your account must have a total value of at least $10,000 when you establish
your plan
|X| You must request a periodic withdrawal of at least $50
|X| You may not request a periodic withdrawal of more than 10% of the value of
any Class B or Class C share account (valued at the time the plan is
implemented)
Systematic sales of fund shares may be taxable transactions for you. If you
purchase Class A shares while you are making systematic withdrawals from your
account, you may pay unnecessary sales charges.
DIRECT DEPOSIT
If you elect to take dividends or dividends and capital gain distributions in
cash, or if you establish a systematic withdrawal plan, you may choose to have
those cash payments deposited directly into your savings, checking or NOW bank
account.
VOLUNTARY TAX WITHHOLDING
You may have the transfer agent withhold 28% of the dividends and capital gain
distributions paid from your fund account (before any reinvestment) and forward
the amount withheld to the Internal Revenue Service as a credit against your
federal income taxes. Voluntary tax withholding is not available for retirement
plan accounts or for accounts subject to backup withholding.
REINSTATEMENT PRIVILEGE FOR CLASS A SHARES
You may qualify for the reinstatement privilege if you recently sold all or part
of your Class A shares.
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BUYING, EXCHANGING AND SELLING SHARES
SHAREOWNER SERVICES
PIONEER WEBSITE
WWW.PIONEERFUNDS.COM
The website includes a full selection of information on mutual fund investing.
You can also use the website to get:
|X| Your current account information
|X| Prices, returns and yields of all publicly available Pioneer mutual funds
|X| Prospectuses for all the Pioneer mutual funds
FACTFONESM 1-800-225-4321 You can use FactFoneSM to:
|X| Obtain current information on your Pioneer mutual fund accounts
|X| Inquire about the prices and yields of all publicly available Pioneer
mutual funds
|X| Make computer-assisted telephone purchases, exchanges and redemptions
for your fund accounts
|X| Request account statements
If you plan to use FactFoneSM to make telephone purchases and redemptions, first
you must activate your personal identification number and establish your bank
account of record. If your account is registered in the name of a broker-dealer
or other third party, you may not be able to use FactFoneSM.
HOUSEHOLD DELIVERY OF FUND DOCUMENTS
With your consent, Pioneer may send a single prospectus and shareholder report
to your residence for you and any other member of your household who has an
account with the fund. If you wish to revoke your consent to this practice, you
may do so by notifying Pioneer, by phone or in writing (see "How to contact
us"). Pioneer will begin mailing separate prospectuses and shareholder reports
to you within 30 days after receiving your notice.
CONFIRMATION STATEMENTS
The transfer agent maintains an account for each investment firm or individual
shareowner and records all account transactions. You will be sent confirmation
statements showing the details of your transactions as they occur, except
automatic investment plan transactions, which are confirmed quarterly. If you
have more than one Pioneer mutual fund account registered in your name, the
Pioneer combined account statement will be mailed to you each quarter.
TAX INFORMATION
In January of each year, the fund will mail you information about the tax status
of the dividends and distributions paid to you by the fund.
TDD 1-800-225-1997
If you have a hearing disability and access to TDD keyboard equipment, you can
contact our telephone representatives with questions about your account by
calling our TDD number between 8:30 a.m. and 5:30 p.m. Eastern time any weekday
that the New York Stock Exchange is open.
26
<PAGE>
SHAREOWNER ACCOUNT POLICIES
SIGNATURE GUARANTEES AND OTHER REQUIREMENTS You are required to obtain a
signature guarantee when you are:
|X| Requesting certain types of exchanges or sales of fund shares
|X| Redeeming shares for which you hold a share certificate
|X| 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
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 Internal Revenue Code. The exchange limitation 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. On New York Stock Exchange
holidays or on days when the exchange closes early, the telephone center will
adjust its hours accordingly. 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 SHAREOWNERS
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 issued were in connection with the
reorganization or were later purchased by direct investment or by exchange.
[text box]
You may make up to four exchange redemptions 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.
[end text box]
[text box repositioned unchanged]
27
<PAGE>
BUYING, EXCHANGING AND SELLING SHARES
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 shareowners at any time.
The fund reserves the right to redeem in kind by delivering portfolio securities
to a redeeming shareowner, provided that the fund must pay redemptions in cash
if a shareowner's aggregate redemptions in a 90-day period are less than
$250,000 or 1% of the fund's net assets.
[text box repositioned unchanged]
28
<PAGE>
DIVIDENDS, CAPITAL GAINS AND TAXES
DIVIDENDS AND CAPITAL GAINS
The fund declares a dividend daily. The dividend consists of substantially
all of the fund's net income. You begin to earn dividends on the first business
day following receipt of payment for shares. You continue to earn dividends up
to and including the date of sale. Dividends are normally paid on the last
business day of each month. The fund generally pays any distributions of net
short- and long-term capital gains in November. The fund may also pay dividends
and capital gain 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 distribution, generally you will pay a higher price per share
and you will pay taxes on the amount of the distribution whether you reinvest
the distribution or receive it as cash.
TAXES
For federal income tax purposes, your distributions from the 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. When you sell or
exchange fund shares you will generally recognize a capital gain or capital loss
in an amount equal to the difference between the net amount of sale proceeds
(or, in the case of an exchange, the fair market value of the shares) that you
receive and your tax basis for the shares that you sell or exchange. In January
of each year the fund will mail to you information about your dividends,
distributions, and any 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 Internal
Revenue Service 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 shareowners.
[text box: capital icon]
Sales and exchanges may be taxable transactions to shareowners.
[end text box]
29
<PAGE>
FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLE HELPS YOU UNDERSTAND the fund's financial
performance since inception.
Certain information reflects financial results for a single fund share. The
total returns in the table represent the rate that you would have earned on an
investment in Third Avenue High Yield Fund, the predecessor to Pioneer High
Yield Fund, assuming reinvestment of all dividends and distributions.(1)
This information has been audited by PricewaterhouseCoopers LLP, whose report is
included in the annual report of Third Avenue High Yield Fund along with the
fund's financial statements. The annual report is available upon request.
<TABLE>
<CAPTION>
PIONEER HIGH YIELD FUND(1)
SELECTED DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD) AND RATIOS
ARE AS FOLLOWS:
FOR THE FOR THE PERIOD
YEAR ENDED ENDED
OCTOBER 31, 1999 OCTOBER 31,
19981
<S> <C> <C>
Net asset value, beginning of period $ 8.50 $10.00
------ ------
Income (loss) from investment operations:
Net investment income 0.70 0.34
Net gain (loss) on securities (both
realized and unrealized) 1.14 (1.56)
------ ------
Total from investment operations 1.84 (1.22)
------ ------
Less distributions:
Dividends from net investment income (0.69) (0.28)
------ ------
Net asset value, end of period $ 9.65 $ 8.50
====== ======
Total return 22.20% (12.39)%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $7,591 $7,691
Ratio of expenses to average net assets
Before expense reimbursement 3.67% 3.99%(3)
After expense reimbursement 1.90% 1.90%(3)
Ratio of net income to average net assets
Before expense reimbursement 5.36% 4.13%(3)
After expense reimbursement 7.13% 6.22%(3)
Portfolio turnover rate 64% 38%(2)
(1) The fund is the successor to Third Avenue High Yield Fund, a series of
Third Avenue Trust. Third Avenue High Yield Fund transferred all of its
assets to the fund on February 25, 2000 pursuant to an agreement and
plan of reorganization. Third Avenue High Yield Fund commenced
investment operations on February 12, 1998.
(2) Not annualized.
(3) Annualized.
</TABLE>
30
<PAGE>
NOTES
31
<PAGE>
NOTES
32
<PAGE>
NOTES
33
<PAGE>
PIONEER
HIGH YIELD FUND
YOU CAN OBTAIN MORE FREE INFORMATION about the fund from your investment firm or
by writing to Pioneering Services Corporation, 60 State Street, Boston,
Massachusetts 02109. You may also call 1-800-225-6292.
SHAREOWNER REPORTS
Annual and semiannual reports to shareowners provide information about the
fund's investments. The annual report discusses market conditions and investment
strategies that significantly affected the fund's performance during its last
fiscal year.
STATEMENT OF ADDITIONAL INFORMATION
The statement of additional information provides more detailed information about
the fund. It is incorporated by reference into this prospectus.
VISIT OUR WEBSITE
www.pioneerfunds.com
You can also review the fund's shareowner reports, prospectus and statement of
additional information at the Securities and Exchange Commission's Public
Reference Room in Washington, D.C. Call 1-202-942-8090 for information. The
Commission charges a fee for copies. You can get the same information free from
the Commission'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 Commission's Public Reference Section, Washington, D.C.
20549-0102.
(Investment Company Act file no. 811-09685)
[Pioneer
logo] Pioneer Funds Distributor, Inc.
60 State Street
Boston, MA 02109 7491-00-0200
www.pioneerfunds.com (C) Pioneer Funds Distributor, Inc.
<PAGE>
[Pioneer logo]
PIONEER
HIGH YIELD FUND
CLASS Y SHARES
Prospectus, February 25, 2000
CONTENTS
Basic information about the fund 1
Management 8
Buying, exchanging and selling shares 10
Dividends, capital gains and taxes 18
Financial highlights 19
Neither the Securities and Exchange Commission nor
any state securities agency has approved the
fund's shares or determined whether this
prospectus is accurate or complete. Any
representation to the contrary is a crime.
<PAGE>
[text box]
AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
[end text box]
[text box]
CONTACT YOUR INVESTMENT PROFESSIONAL TO DISCUSS HOW THE FUND FITS INTO YOUR
PORTFOLIO.
[end text box]
[both paragraphs repositioned unchanged]
<PAGE>
BASIC INFORMATION ABOUT THE FUND
INVESTMENT OBJECTIVE
Maximize total return through a combination of income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
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. 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.
The fund's investments may have fixed or variable principal payments and 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.
Pioneer Investment Management, Inc., 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, including the attractiveness of its market
valuation, 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. Pioneer adjusts sector weighting to reflect its outlook of the
market for high yield securities rather than using a fixed sector allocation.
In making these portfolio decisions, Pioneer relies on the knowledge, experience
and judgment of its staff who have access to a wide variety of research.
[text box: magnifier icon]
BELOW INVESTMENT GRADE DEBT SECURITIES
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.
[end text box]
[text box repositioned unchanged]
[two paragraphs repositioned unchanged]
1
<PAGE>
BASIC INFORMATION ABOUT THE FUND
PRINCIPAL RISKS OF INVESTING IN THE FUND
Even though the fund seeks to maximize total return, you could lose money on
your investment or not make as much as if you invested elsewhere if:
|X| Interest rates go up, causing the value of debt securities in the fund's
portfolio to decline
|X| 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
|X| During periods of declining interest rates, the issuer of a security may
exercise 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
|X| During periods of rising interest rates, the average life of certain types
of securities may be 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
|X| Pioneer's judgment about the attractiveness, relative value or potential
appreciation of a particular sector, security or investment strategy proves
to be incorrect
|X| 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 the fund is subject to the following specific risks:
|X| Increased price sensitivity to changing interest rates and deteriorating
economic environment
|X| Greater risk of loss due to default or declining credit quality
|X| Adverse company specific events are more likely to render the issuer
unable to make interest and/or principal payments
|X| 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
The 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.
2
<PAGE>
THE FUND'S PAST PERFORMANCE
The bar chart and table indicate the risks of investing in the fund by showing
how the fund has performed in the past. The fund's performance will vary from
year to year.
The fund's past performance does not necessarily indicate how it will perform in
the future. As a shareowner, you may lose or make money on your investment. The
fund is newly organized and pursuant to an agreement and plan of reorganization
acquired all of the assets of Third Avenue High Yield Fund on February 25, 2000.
In the reorganization, Third Avenue High Yield Fund exchanged all of its assets
for Class A shares of the fund. The performance of the fund's Class Y shares
from February 12, 1998 to February 25, 2000 includes the performance of Third
Avenue High Yield Fund's single class of shares.
- -----------------------------------------------------------------------
FUND PERFORMANCE
The chart shows the performance of the fund's Class Y shares for each full
calendar year since the fund's inception on February 12, 1998.
THE FUND'S HIGHEST CALENDAR QUARTERLY RETURN WAS 11.15% (9/30/99 TO 12/31/99)
THE FUND'S LOWEST CALENDAR QUARTERLY RETURN WAS 3.63% (6/30/99 TO 9/30/99)
ANNUAL RETURN CLASS Y SHARES
(Year ended December 31)
'99 27.37%
_______________________________________________________________________
COMPARISON WITH MERRILL LYNCH INDICES
The table shows the average annual total returns for the Class Y shares of the
fund over time and compares these returns to the returns of the Merrill Lynch
High Yield Master II Index and the Merrill Lynch Index of Convertible Bonds
(Speculative Quality). These indices are recognized measures of the performance
of high yield securities. Unlike the fund, the indices are not managed and do
not incur expenses. The table:
|X| Assumes that you sell your shares at the end of the period
|X| Assumes that you reinvest all of your dividends and distributions
AVERAGE ANNUAL TOTAL RETURN (%)
(for periods ended December 31, 1999)
SINCE INCEPTION
1 YEAR INCEPTION DATE
- ---------------------------------------------
Class Y 27.37 9.80 2/12/98
- ---------------------------------------------
High Yield
Master II Index 2.51 1.87 --
- ---------------------------------------------
Convertible Bonds
(Speculative
Quality) 38.91 23.70 --
- ---------------------------------------------
3
<PAGE>
BASIC INFORMATION ABOUT THE FUND
FEES AND EXPENSES
These are the fees and expenses, based on estimated expenses for the current
fiscal year, you may pay if you invest in the fund.
SHAREOWNER FEES
PAID DIRECTLY FROM YOUR INVESTMENT CLASS Y
- -------------------------------------------------------------
Maximum sales charge (load) when you buy shares None
.............................................................
Maximum deferred sales charge (load) None
- -------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
PAID FROM THE ASSETS OF THE FUND
as a percentage of average daily net assets CLASS Y
- -------------------------------------------------------------
Management Fee(1) 0.70%
.............................................................
Distribution and Service (12b-1) Fee 0.00%
.............................................................
Other Expenses(1) 0.55%
.............................................................
Total Annual Fund Operating Expenses(1) 1.25%
- -------------------------------------------------------------
(1) 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; the portion of fund
expenses attributable to Class Y shares will be reduced only to the
extent such expenses are reduced for Class A shares. This agreement is
voluntary and temporary and may be revised or terminated at any time.
Class Y
Management Fee 0.00%
Distribution and Service (12b-1) Fee 0.00%
Other Expenses 0.50%
Total Annual Fund Operating Expenses 0.50%
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:
NUMBER OF YEARS YOU OWN YOUR SHARES
-----------------------------------
1 3 5 10
- ------------------------------------------------------------------
Class Y $127 $397 $686 $1,511
- ------------------------------------------------------------------
4
<PAGE>
OTHER INVESTMENT STRATEGIES
As discussed, the fund invests primarily in below investment grade debt
securities and preferred stocks to maximize total return.
This section describes additional investments that the fund may make or
strategies that it may pursue to a lesser degree to achieve the fund's goal.
Some of the fund's 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).
ADDITIONAL INFORMATION ABOUT DEBT SECURITIES
The fund may invest in investment grade and below investment grade
convertible 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.
The 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.
To the extent the fund invests significantly in asset-backed and
mortgage-related securities, its exposure to prepayment and extension risks may
be greater than if it invested in other fixed income securities.
Certain debt instruments may only pay principal at maturity or may only
represent the right to receive payments of principal or payments of interest on
underlying pools of mortgage or government securities, but not both. The value
of these types of instruments may change more drastically than debt securities
that pay both principal and interest during periods of changing interest rates.
Principal only mortgage-backed securities generally increase in value if
interest rates decline, but are also subject to the risk of prepayment. Interest
only instruments generally increase in value in a rising interest rate
environment when fewer of the underlying mortgages are prepaid.
The fund may invest in mortgage derivatives and structured securities. Because
these securities have imbedded leverage features, small changes in interest or
prepayment rates may cause large and sudden price movements. Mortgage
derivatives can also become illiquid and hard to value in declining markets.
5
<PAGE>
BASIC INFORMATION ABOUT THE FUND
INVESTMENTS OTHER THAN HIGH YIELD OR DEBT SECURITIES
Consistent with its objective, the 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. Although equity
securities may not pay dividends, the fund invests in equity securities when
Pioneer believes they offer the potential for capital gains or to diversify the
fund's portfolio.
INVESTMENTS IN NON-U.S. SECURITIES
The 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 its non-U.S. investments in any one region.
These risks may include:
|X| Less information about non-U.S. issuers or markets may be available due to
less rigorous disclosure and accounting standards or regulatory practices
|X| Many non-U.S. markets are smaller, less liquid and more volatile. In a
changing market, Pioneer may not be able to sell the fund's portfolio
securities in amounts and at prices it considers reasonable
|X| Adverse effect of currency exchange rates or controls on the value of the
fund's investments
|X| Economic, political and social developments that adversely affect the
securities markets
|X| Withholding and other non-U.S. taxes may decrease the fund's return
TEMPORARY INVESTMENTS
Normally, the fund invests substantially all of its assets to meet its
investment objective. The fund may invest the remainder of its assets in
securities with remaining maturities of less than one year or may hold cash or
cash equivalents. For temporary defensive purposes, the fund may depart from its
principal investment strategies and invest part or all of its assets in these
securities or may hold cash. During such periods, the fund may not be able to
achieve its investment objective. The 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 fund usually does not trade for short-term profits. The 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 the fund does a lot of trading,
it may incur additional operating expenses, which would reduce performance, and
could cause shareowners to incur a higher level of taxable income or capital
gains.
6
<PAGE>
DERIVATIVES
The fund may use futures, options, forward foreign currency exchange contracts
and other derivatives. 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. The fund does
not use derivatives as a primary investment technique and generally limits their
use to hedging. However, the fund may use derivatives for a variety of purposes,
including:
|X| As a hedge against adverse changes in stock market prices, interest rates
or currency exchange rates
|X| As a substitute for purchasing or selling securities
|X| 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 the
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.
7
<PAGE>
MANAGEMENT
PIONEER, THE FUND'S INVESTMENT ADVISER,
selects the fund's investments and oversees the fund's operations.
PIONEER GROUP
The Pioneer Group, Inc. and its subsidiaries are engaged in financial
services businesses in the United States and many foreign countries. As of
December 31, 1999, the firm had more than $24 billion in assets under management
worldwide including more than $23 billion in U.S. mutual funds. The firm's U.S.
mutual fund investment history includes creating in 1928 one of the first mutual
funds. John F. Cogan, chairman of the board and president of The Pioneer Group,
Inc., owns approximately 14% of the firm. He is also an officer and director of
each of the Pioneer mutual funds.
INVESTMENT ADVISER
Pioneer manages a family of U.S. and international stock funds, bond funds
and money market funds. Pioneer is a subsidiary of The Pioneer Group, Inc. Its
main office is at 60 State Street, Boston, Massachusetts 02109.
PORTFOLIO MANAGER
Day-to-day management of the fund's portfolio has been the responsibility
of Margaret D. Patel since inception. Ms. Patel joined Pioneer as a vice
president in August 1999 and has been an investment professional since 1972.
Prior to joining Pioneer, she was a portfolio manager at EQSF Advisers, Inc.
from 1998 to 2000 and a portfolio manager of several mutual funds at Northstar
Investment Management Corp. from 1995 to 1996. Ms. Patel was a portfolio manager
of several mutual funds at Boston Security Counsellors, Inc. from 1988 to 1995.
Ms. Patel is supported by a team of fixed 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 is chief investment officer of
Pioneer. She joined Pioneer in 1997 and has been an investment professional
since 1984, most recently as chief investment officer at another investment
adviser.
8
<PAGE>
MANAGEMENT FEE
The fund pays Pioneer a fee for managing the fund and to cover the cost of
providing certain services to the fund. Pioneer's annual fee is 0.70% of the
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 daily
and paid monthly.
DISTRIBUTOR AND TRANSFER AGENT
Pioneer Funds Distributor, Inc. is the fund's distributor. Pioneering
Services Corporation is the fund's transfer agent. The fund compensates the
distributor and transfer agent for their services. The distributor and the
transfer agent are subsidiaries of The Pioneer Group, Inc.
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 fund and the provision of services to its shareowners.
Pioneer has addressed and continues to monitor the Year 2000 problem with
respect to its systems and those used by the distributor and transfer agent.
During 1999, Pioneer addressed all material Year 2000 issues and participated in
industry-wide testing. The fund has obtained assurances from its other service
providers that they have taken appropriate Year 2000 measures and Pioneer
continues to monitor their efforts. Although the fund does not expect the Year
2000 problem to adversely impact it, the fund cannot guarantee that its, or the
fund's service providers', efforts will be successful.
9
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BUYING, EXCHANGING AND SELLING SHARES
NET ASSET VALUE
The 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. The fund
calculates a net asset value for each class of shares every day the New York
Stock Exchange is open when regular trading closes (normally 4:00 p.m. Eastern
time).
The fund generally values its portfolio securities based on market prices or
quotations. When market prices are not available or are considered by Pioneer 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 Class Y shares at the net asset value per share calculated on
the day of your transaction.
DISTRIBUTION OF CLASS Y SHARES
The distributor incurs the expenses of distributing the fund's Class Y shares,
none of which are reimbursed or paid for by the fund or the Class Y shareowners.
Distribution expenses include fees paid to broker-dealers which have sales
agreements with the distributor and other parties, advertising expenses and the
cost of printing and mailing prospectuses to potential investors.
The distributor or its affiliates may make payments out of their own resources
to dealers and other persons who distribute Class Y shares. Such payments may be
based upon the value of Class Y shares sold. The distributor may impose
conditions on the payment of such fees.
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OPENING YOUR ACCOUNT
If you are an individual or other non-institutional investor, open your Class Y
share account by completing an account application and sending it to the
transfer agent by mail or by fax. If you are any other type of investor, please
call the transfer agent to obtain a Class Y share account set-up kit and an
account number.
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.
The transfer agent must receive your account application before you send your
initial check or federal funds wire. In addition, you must provide a bank wire
address of record when you establish 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 the transfer agent for account applications, account options
forms and other account information:
PIONEERING SERVICES CORPORATION
P.O. Box 9014
Boston, Massachusetts 02205-9014
Telephone 1-888-294-4480
TELEPHONE TRANSACTION PRIVILEGES
If your account is registered in your name, you can exchange or sell Class Y
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.
[text box: telephone icon]
BY PHONE
If you want to place your telephone transaction by speaking to a shareowner
services representative, call 1-888-294-4480 between 9:00 a.m. and 6:00 p.m.
Eastern time on any weekday that the New York Stock Exchange is open.
[end text box]
11
<PAGE>
BUYING, EXCHANGING AND SELLING SHARES
GENERAL RULES ON BUYING, EXCHANGING AND SELLING YOUR FUND SHARES
SHARE PRICE
When you place an order to purchase, exchange or sell Class Y shares it must be
received in good order by the transfer agent or by your broker-dealer by the
close of regular trading on the New York Stock Exchange (currently 4:00 p.m.
Eastern time) in order to purchase shares at the price determined on that day.
If you place your order through a broker-dealer, you must place the order before
the close of regular trading on the New York Stock Exchange and your
broker-dealer must submit the order to the distributor prior to the
distributor's close of business (usually 5:30 p.m. Eastern time) for your share
price to be determined at the close of regular trading on the date your order is
received. Your broker-dealer is responsible for transmitting your order to the
distributor. In all other cases except as described below for wire transfers,
your share price will be calculated at the close of the New York Stock Exchange
after the distributor receives your order.
BUYING
You can buy Class Y shares at net asset value per share. The fund does not
impose any initial, contingent deferred or asset based sales charge on Class Y
shares. The distributor may reject any order until it has confirmed it in
writing and received payment.
MINIMUM INVESTMENT AMOUNT
Your initial Class Y share investment must be at least $5 million. This amount
may be invested in one or more of the Pioneer mutual funds that currently offer
Class Y shares. There is no minimum additional investment amount.
WAIVERS OF THE MINIMUM INVESTMENT AMOUNT
The fund will accept an initial investment of less than $5 million if:
(a) The investment is made by a trust company or bank trust department
which is initially investing at least $1 million in any of the Pioneer
mutual funds and, at the time of the purchase, such assets are held in
a fiduciary, advisory, custodial or similar capacity over which the
trust company or bank trust department has full or shared investment
discretion; or
(b) The investment is made by an employer-sponsored retirement plan that
meets the requirements of Sections 401, 403 or 457 of the Internal
Revenue Code, provided that the number of employees covered by the plan
is 5,000 or more, or the plan has assets of $25 million or more; or
(c) The investment is at least $1 million in any of the Pioneer mutual funds
and the purchaser is an insurance company separate account; or
(d) The investment is made by an employer-sponsored retirement plan
established for the benefit of (1) employees of The Pioneer Group, Inc.
or employees of its affiliates, or (2) employees or the affiliates of
broker-dealers who have a Class Y shares sales agreement with the
distributor; or
(e) The investment is at least $1 million and is made by an ERISA-qualified
account, an endowment or a foundation.
12
<PAGE>
EXCHANGING
You may exchange your Class Y shares for the Class Y shares of another Pioneer
mutual fund.
Your exchange request must be for at least $1,000 unless the fund you are
exchanging into has a different minimum. The fund allows you to exchange your
Class Y shares at net asset value without charging you either an initial or
contingent deferred sales charge.
Before you request an exchange, consider each fund's investment objective and
policies as described in the fund's prospectus.
SELLING
Your Class Y shares will be sold at net asset value per share next calculated
after the fund receives your request in good order. If a signature guarantee is
required, you must submit your request in writing.
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
recently purchased the shares being sold, the fund may delay payment of the sale
proceeds until your payment has cleared. This may take up to 15 calendar days
from the purchase date.
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.
[text box]
GOOD ORDER MEANS THAT:
|X| You have provided adequate instructions
|X| There are no outstanding claims against your account
|X| There are no transaction limitations on your account
|X| If you have any fund share certificates, you submit them and they are
signed by each record owner exactly as the shares are registered
|X| Your request includes a signature guarantee if you:
- Are selling over $100,000 worth of shares and
|X| Want the sale proceeds sent to an address other than your
bank account of record or
|X| Want the sale proceeds to be made payable to someone other than
the account's record owners or
|X| The account registration, address of record or bank account of
record has changed within the last 30 days
- Are selling or exchanging over $5 million worth of shares
- Are transferring the sale proceeds to a Pioneer mutual fund account
with a different registration
[end text box]
[text box: capital icon]
You may have to pay income taxes on a sale or an exchange.
[end text box]
13
<PAGE>
BUYING, EXCHANGING AND SELLING SHARES
BUYING SHARES
EXCHANGING SHARES
IN WRITING, BY MAIL OR BY FAXYou can purchase Class Y shares by MAILING A CHECK
TO THE TRANSFER AGENT. Make your check payable to the fund. Neither initial nor
subsequent investments should be made by third party check. Your check must be
in U.S. dollars and drawn on a U.S. bank. Include in your purchase request the
fund's name, the account number and the name or names in the account
registration.
If you are registering an account in the name of a corporation or other
fiduciary, you must send your completed account set-up forms to the transfer
agent prior to making your initial purchase.
You can exchange Class Y shares by MAILING OR FAXING A LETTER OF INSTRUCTION TO
THE TRANSFER AGENT. You can exchange fund shares directly through the fund only
if your account is registered in your name. However, you may not fax an exchange
request for more than $5 million. Include in your letter:
|X| The name and signature of all registered owners
|X| A signature guarantee for each registered owner if the amount of the
exchange is more than $5 million
|X| The name of the fund out of which you are exchanging and the name of the
fund into which you are exchanging
|X| The dollar amount or number of Class Y shares you are exchanging
BY PHONE OR WIREBY WIRE
If you have an existing Class Y account, you MAY WIRE FUNDS TO PURCHASE CLASS Y
SHARES. Note, however, that:
|X| State Street Bank must receive your wire no later than 11:00 a.m. Eastern
time on the business day after the fund receives your request to
purchase shares
|X| If State Street Bank does not receive your wire by 11:00 a.m. Eastern time
on the next business day, your transaction will be canceled at your expense
and risk
|X| Wire transfers normally take two or more hours to complete and a fee may
be charged by the sending bank
|X| Wire transfers may be restricted on holidays and at certain other times
INSTRUCT YOUR BANK TO WIRE FUNDS TO:
Receiving Bank: State Street Bank
and Trust Company
225 Franklin Street
Boston, MA 02101
ABA Routing No. 011000028
For further credit to: Shareholder Name
Existing Pioneer
Account No.
Pioneer High Yield Fund
BY PHONE
After you establish your Class Y account, YOU CAN EXCHANGE FUND SHARES BY
PHONE IF:
|X| You are using the exchange to establish a new account, provided the new
account has a registration identical to the original account
|X| The fund into which you are exchanging offers Class Y shares
|X| You are not exchanging more than $5 million worth of shares per
account per day
|X| You can provide the proper account identification information
THROUGH YOUR INVESTMENT FIRM
CONSULT YOUR INVESTMENT PROFESSIONAL FOR MORE INFORMATION.
CONSULT YOUR INVESTMENT PROFESSIONAL FOR MORE INFORMATION ABOUT EXCHANGING YOUR
SHARES.
14
<PAGE>
SELLING SHARES
You can sell some or all of your Class Y shares by WRITING DIRECTLY TO THE FUND
only if your account is registered in your name. Include in your request your
name, the fund's name, your fund account number, the dollar amount or number of
Class Y shares to be sold and any other applicable requirements as described
below.
|X| The transfer agent will send the sale proceeds to your address of record
unless you provide other instructions
|X| Your request must be signed by all registered owners
|X| The transfer agent will not process your request until it is received
in good order
BY FAX
|X| You may sell up to $5 million per account per day if the proceeds are
directed to your bank account of record
|X| You may sell up to $100,000 per account per day if the proceeds are not
directed to your bank account of record
BY PHONE
|X| You may sell up to $5 million per account per day if the proceeds are
directed to your bank account of record
|X| You may sell up to $100,000 per account per day if the proceeds are not
directed to your bank account of record
You may sell fund shares held in a retirement plan account by phone only if your
account is an IRA. You may not sell your shares by phone if you have changed
your address (for checks) or your bank information (for wires and transfers) in
the last 30 days.
You may receive your sale proceeds:
|X| By check, provided the check is made payable exactly as your account is
registered
|X| By bank wire or by electronic funds transfer, provided the sale proceeds
are being sent to your bank address of record
CONSULT YOUR INVESTMENT PROFESSIONAL FOR MORE INFORMATION. The fund has
authorized the distributor to act as its agent in the repurchase of fund shares
from qualified investment firms. The fund reserves the right to terminate this
procedure at any time.
[text box] HOW TO CONTACT US
BY PHONE [telephone icon]
For information or to request a telephone transaction between 9:00 a.m. and
6:00 p.m. (Eastern time) by speaking with a shareholder services representative
call
1-888-294-4480
To use FactFoneSM call
1-800-225-4321
BY MAIL [envelope icon]
Send your written instructions to:
PIONEERING SERVICES CORPORATION
P.O. Box 9014
Boston, Massachusetts 02205-9014
BY FAX [fax icon]
Fax your exchange and sale requests to:
1-888-294-4485
[end text box]
[text box]
EXCHANGE PRIVILEGE
The fund and the distributor reserve the right to refuse any exchange request or
restrict, at any time without notice, the number and/or frequency of exchanges
to prevent abuses of the exchange privilege. Abuses include frequent trading in
response to short-term market fluctuations and a pattern of trading that appears
to be an attempt to "time the market." In addition, the fund and the distributor
reserve the right, at any time without notice, 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.
[end text box]
[text box]
OTHER REQUIREMENTS
If you must use a written request to exchange or sell your Class Y shares and
your account is registered in the name of a corporation or other fiduciary you
must include the name of an authorized person and a certified copy of a current
corporate resolution, certificate of incumbency or similar legal document
showing that the named individual is authorized to act on behalf of the record
owner.
[end text box]
15
<PAGE>
BUYING, EXCHANGING AND SELLING SHARES
ACCOUNT OPTIONS
DISTRIBUTION OPTIONS
The fund offers three distribution options. Any fund shares you buy by
reinvesting distributions will be priced at the applicable net asset value per
share.
(1) Unless you indicate another option on your account application, any
dividends and capital gain distributions paid to you by the fund will
automatically be invested in additional fund shares.
(2) You may elect to have the amount of any dividends paid to you in cash
and any capital gain distributions reinvested in additional shares.
(3) You may elect to have the full amount of any dividends and/or capital
gain distributions paid to you in cash.
Options (2) or (3) are not available to retirement plan accounts or accounts
with a current value of less than $500.
If your distribution check is returned to the transfer agent or you do not cash
the check for six months or more, the transfer agent may reinvest the amount of
the check in your account and automatically change the distribution option on
your account to option (1) until you request a different option in writing.
These additional shares will be purchased at the then current net asset value.
SHAREOWNER SERVICES
PIONEER WEBSITE
WWW.PIONEERFUNDS.COM
The website includes a full selection of information on mutual fund investing.
You can also use the website to get:
|X| Your current account information
|X| Prices, returns and yields of all publicly available Pioneer mutual funds
|X| Prospectuses for all the Pioneer mutual funds
FACTFONESM 1-800-225-4321
You can use FactFoneSM to:
|X| Obtain current information on your Pioneer mutual fund accounts
|X| Inquire about the prices and yields of all publicly available Pioneer
mutual funds
|X| Request account statements
If your account is registered in the name of a broker-dealer or other third
party, you may not be able to use FactFoneSM to obtain account information.
CONFIRMATION STATEMENTS
The transfer agent maintains an account for each investment firm or individual
shareowner and records all account transactions. You will be sent confirmation
statements showing the details of your transactions as they occur, except
automatic investment plan transactions, which are confirmed quarterly. If you
have more than one Pioneer mutual fund account registered in your name, the
Pioneer combined account statement will be mailed to you each quarter.
TAX INFORMATION
In January of each year, the fund will mail you information about the tax status
of the dividends and distributions paid to you by the fund.
16
<PAGE>
SHAREOWNER ACCOUNT POLICIES
SIGNATURE GUARANTEES AND OTHER REQUIREMENTS You are required to obtain a
signature guarantee when you are:
|X| Requesting certain types of exchanges or sales of fund shares
|X| Redeeming shares for which you hold a share certificate
|X| 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.
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. On New York Stock Exchange
holidays or on days when the exchange closes early, the telephone center will
adjust its hours accordingly. 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.
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 shareowners at any time.
The fund reserves the right to stop offering Class Y shares.
The fund reserves the right to redeem in kind by delivering portfolio securities
to a redeeming shareowner, provided that the fund must pay redemptions in cash
if a shareowner's aggregate redemptions in a 90-day period are less than
$250,000 or 1% of the fund's net assets.
17
<PAGE>
DIVIDENDS, CAPITAL GAINS AND TAXES
DIVIDENDS AND CAPITAL GAINS
The fund declares a dividend daily. The dividend consists of substantially
all of the fund's net income. You begin to earn dividends on the first business
day following receipt of payment for shares. You continue to earn dividends up
to and including the date of sale. Dividends are normally paid on the last
business day of each month. The fund generally pays any distributtions of net
short- and long-term capital gains in November. The fund may also pay dividends
and capital gain 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 distribution, generally you will pay a higher price per share
and you will pay taxes on the amount of the distribution whether you reinvest
the distribution or receive it as cash.
TAXES
For federal income tax purposes, your distributions from the 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. When you sell or
exchange fund shares you will generally recognize a capital gain or capital loss
in an amount equal to the difference between the net amount of sale proceeds
(or, in the case of an exchange, the fair market value of the shares) that you
receive and your tax basis for the shares that you sell or exchange. In January
of each year the fund will mail to you information about your dividends,
distributions, and any 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 Internal
Revenue Service 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 shareowners.
[text box: capital icon]
Sales and exchanges may be taxable transactions to shareowners.
[end text box]
18
<PAGE>
FINANCIAL HIGHLIGHTS
Financial highlights are not currently available for Class Y shares because they
are a new class of shares. The audited financial statements of Third Avenue High
Yield Fund for the year ended October 31, 1999 appear in the fund's statement of
additional information, which is available without charge upon request.
19
<PAGE>
NOTES
20
<PAGE>
NOTES
21
<PAGE>
PIONEER
HIGH YIELD FUND
YOU CAN OBTAIN MORE FREE INFORMATION about the fund from your investment firm or
by writing to Pioneering Services Corporation, 60 State Street, Boston,
Massachusetts 02109. You may also call 1-888-294-4480.
SHAREOWNER REPORTS
Annual and semiannual reports to shareowners provide information about the
fund's investments. The annual report discusses market conditions and investment
strategies that significantly affected the fund's performance during its last
fiscal year.
STATEMENT OF ADDITIONAL INFORMATION
The statement of additional information provides more detailed information about
the fund. It is incorporated by reference into this prospectus.
VISIT OUR WEBSITE
www.pioneerfunds.com
You can also review the fund's shareowner reports, prospectus and statement of
additional information at the Securities and Exchange Commission's Public
Reference Room in Washington, D.C. Call 1-202-942-8090 for information. The
Commission charges a fee for copies. You can get the same information free from
the Commission'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 Commission's Public Reference Section, Washington, D.C.
20549-0102.
(Investment Company Act file no. 811-09685)
[Pioneer
logo] Pioneer Funds Distributor, Inc.
60 State Street
Boston, MA 02109 7492-00-0200
www.pioneerfunds.com (C) Pioneer Funds Distributor, Inc.
<PAGE>
PIONEER HIGH YIELD FUND
60 State Street
Boston, Massachusetts 02109
STATEMENT OF ADDITIONAL INFORMATION
CLASS A, CLASS B, CLASS C AND CLASS Y SHARES
FEBRUARY 25, 2000
This statement of additional information is not a prospectus. It should be read
in conjunction with the fund's Class A, Class B and Class C shares prospectus
and its Class Y shares prospectus each dated February 25, 2000, as supplemented
or revised from time to time. A copy of each prospectus can be obtained free of
charge by calling Shareholder Services at 1-800-225-6292 or by written request
to the fund at 60 State Street, Boston, Massachusetts 02109. You can also obtain
a copy of the fund's Class A, Class B and Class C shares prospectus from our
website at: www.pioneerfunds.com.
TABLE OF CONTENTS
PAGE
1. Fund History...........................................................2
2. Investment Policies, Risks and Restrictions............................2
3. Management of the Fund................................................23
4. Investment Adviser....................................................27
5. Principal Underwriter and Distribution Plans..........................29
6. Shareholder Servicing/Transfer Agent..................................33
7. Custodian.............................................................33
8. Independent Public Accountants........................................33
9. Portfolio Transactions................................................33
10. Description of Shares.................................................35
11. Sales Charges.........................................................37
12. Redeeming Shares......................................................40
13. Telephone Transactions................................................41
14. Pricing of Shares.....................................................42
15. Tax Status............................................................43
16. Investment Results....................................................47
17. Financial Statements..................................................50
18. Appendix A - Annual Fee, Expense and Other Information................51
19. Appendix B - Description of Short-Term Debt, Corporate Bond
and Preferred Stock Ratings...........................................54
20. Appendix C - Performance Statistics...................................60
21. Appendix D - Other Pioneer Information................................74
<PAGE>
1. FUND HISTORY
The fund is a non-diversified open-end management investment company. The fund
originally was established as Third Avenue High Yield Fund, a series of Third
Avenue Trust, a Delaware business trust. Pursuant to an agreement and plan of
reorganization, the fund was reorganized as Pioneer High Yield Fund, a Delaware
business trust, on February 25, 2000.
2. INVESTMENT POLICIES, RISKS AND RESTRICTIONS
The prospectuses present the investment objective and the principal investment
strategies and risks of the fund. This section supplements the disclosure in the
fund's prospectuses and provides additional information on the fund's investment
policies or restrictions. Restrictions or policies stated as a maximum
percentage of the fund's assets are only applied immediately after a portfolio
investment to which the policy or restriction is applicable (other than the
limitations on borrowing and illiquid securities). Accordingly, any later
increase or decrease resulting from a change in values, net assets or other
circumstances will not be considered in determining whether the investment
complies with the fund's restrictions and policies.
PRIMARY INVESTMENTS
Under normal circumstances, the fund invests at least 65% of its total assets in
below investment grade (high yield) debt securities and preferred stocks.
DEBT SECURITIES RATING CRITERIA
Investment grade debt securities are those rated "BBB" or higher by Standard &
Poor's Ratings Group ("Standard & Poor's") or the equivalent rating of other
nationally recognized securities rating organizations. Debt securities rated BBB
are considered medium grade obligations with speculative characteristics, and
adverse economic conditions or changing circumstances may weaken the issuer's
ability to pay interest and repay principal. If the rating of an investment
grade debt security changes to above medium investment grade, Pioneer will
consider if any action is appropriate in light of the fund's investment
objective and policies.
Below investment grade debt securities are those rated "BB" and below by
Standard & Poor's or the equivalent rating of other nationally recognized
securities rating organizations. See Appendix B for a description of rating
categories. The fund may invest in debt securities rated "D" or better.
Below investment grade debt securities or comparable unrated securities are
commonly referred to as "junk bonds" and are considered predominantly
speculative and may be questionable as to principal and interest payments.
Changes in economic conditions are more likely to lead to a weakened capacity to
make principal payments and interest payments. The amount of high yield
securities outstanding has proliferated as an increasing number of issuers have
used high yield securities for corporate financing. An economic downturn could
severely affect the ability of highly leveraged issuers to service their debt
obligations or to repay their obligations upon maturity. Factors having an
adverse impact on the market value of lower quality securities will have an
adverse effect on the fund's net asset value to the extent that it invests in
such securities. In addition, the fund may incur additional expenses to the
extent it is required to seek recovery upon a default in payment of principal or
interest on its portfolio holdings.
The secondary market for high yield securities may not be as liquid as the
secondary market for more highly rated securities, a factor which may have an
adverse effect on the fund's ability to dispose of a particular security when
necessary to meet its liquidity needs. Under adverse market or economic
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conditions, the secondary market for high yield securities could contract
further, independent of any specific adverse changes in the condition of a
particular issuer. As a result, the fund could find it more difficult to sell
these securities or may be able to sell the securities only at prices lower than
if such securities were widely traded. Prices realized upon the sale of such
lower rated or unrated securities, under these circumstances, may be less than
the prices used in calculating the fund's net asset value.
Since investors generally perceive that there are greater risks associated with
lower quality debt securities of the type in which the fund may invest a portion
of its assets, the yields and prices of such securities may tend to fluctuate
more than those for higher rated securities. In the lower quality segments of
the debt securities market, changes in perceptions of issuers' creditworthiness
tend to occur more frequently and in a more pronounced manner than do changes in
higher quality segments of the debt securities market, resulting in greater
yield and price volatility.
Lower rated and comparable unrated debt securities tend to offer higher yields
than higher rated securities with the same maturities because the historical
financial condition of the issuers of such securities may not have been as
strong as that of other issuers. However, lower rated securities generally
involve greater risks of loss of income and principal than higher rated
securities. Pioneer Investment Management, Inc. ("Pioneer"), the fund's
investment adviser, will attempt to reduce these risks through portfolio
diversification and by analysis of each issuer and its ability to make timely
payments of income and principal, as well as broad economic trends and corporate
developments.
CONVERTIBLE DEBT SECURITIES
The fund may invest in convertible debt securities which are debt obligations
convertible at a stated exchange rate or formula into common stock or other
equity securities of or owned by the issuer. Convertible securities rank senior
to common stocks in an issuer's capital structure and consequently may be of
higher quality and entail less risk than the issuer's common stock. As with all
debt securities, the market values of convertible securities tend to increase
when interest rates decline and, conversely, tend to decline when interest rates
increase.
DEBT OBLIGATIONS OF NON-U.S. GOVERNMENTS
An investment in debt obligations of non-U.S. governments and their political
subdivisions (sovereign debt) involves special risks that are not present in
corporate debt obligations. The non-U.S. issuer of the sovereign debt or the
non-U.S. governmental authorities that control the repayment of the debt may be
unable or unwilling to repay principal or interest when due, and a fund may have
limited recourse in the event of a default. During periods of economic
uncertainty, the market prices of sovereign debt may be more volatile than
prices of debt obligations of U.S. issues. In the past, certain non-U.S.
countries have encountered difficulties in servicing their debt obligations,
withheld payments of principal and interest and declared moratoria on the
payment of principal and interest on their sovereign debt.
A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its non-U.S. currency reserves, the availability of
sufficient non-U.S. exchange, the relative size of the debt service burden, the
sovereign debtor's policy toward its principal international lenders and local
political constraints. Sovereign debtors may also be dependent on expected
disbursements from non-U.S. governments, multilateral agencies and other
entities to reduce principal and interest arrearages on their debt. The failure
of a sovereign debtor to implement economic reforms, achieve specified levels of
economic performance or repay principal or interest when due may result in the
cancellation of third-party commitments to lend funds to the sovereign debtor,
which may further impair such debtor's ability or willingness to service its
debts.
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EURODOLLAR INSTRUMENTS AND SAMURAI AND YANKEE BONDS. The fund may invest in
Eurodollar instruments and Samurai and Yankee bonds. Eurodollar instruments are
bonds of corporate and government issuers that pay interest and principal in
U.S. dollars but are issued in markets outside the United States, primarily in
Europe. Samurai bonds are yen-denominated bonds sold in Japan by non-Japanese
issuers. Yankee bonds are U.S. dollar-denominated bonds typically issued in the
U.S. by non-U.S. governments and their agencies and non-U.S. banks and
corporations. The fund may also invest in Eurodollar Certificates of Deposit
("ECDs"), Eurodollar Time Deposits ("ETDs") and Yankee Certificates of Deposit
("Yankee CDs"). ECDs are U.S. dollar-denominated certificates of deposit issued
by non-U.S. branches of domestic banks; ETDs are U.S. dollar-denominated
deposits in a non-U.S. branch of a U.S. bank or in a non-U.S. bank; and Yankee
CDs are U.S. dollar-denominated certificates of deposit issued by a U.S. branch
of a non-U.S. bank and held in the U.S. These investments involve risks that are
different from investments in securities issued by U.S. issuers, including
potential unfavorable political and economic developments, non-U.S. withholding
or other taxes, seizure of non-U.S. deposits, currency controls, interest
limitations or other governmental restrictions which might affect payment of
principal or interest.
RISKS OF NON-U.S. INVESTMENTS
To the extent that the fund invests in securities of non-U.S. issuers, those
investments involve considerations and risks not typically associated with
investing in the securities of issuers in the U.S. These risks are heightened
with respect to investments in countries with emerging markets and economies.
The risks of investing in securities of non-U.S. issuers or issuers with
significant exposure to non-U.S. markets may be related, among other things, to
(i) differences in size, liquidity and volatility of, and the degree and manner
of regulation of, the securities markets of certain non-U.S. markets compared to
the securities markets in the U.S.; (ii) economic, political and social factors;
and (iii) foreign exchange matters, such as restrictions on the repatriation of
capital, fluctuations in exchange rates between the U.S. dollar and the
currencies in which the fund's portfolio securities are quoted or denominated,
exchange control regulations and costs associated with currency exchange. The
political and economic structures in certain countries, particularly emerging
markets, are expected to undergo significant evolution and rapid development,
and such countries may lack the social, political and economic stability
characteristic of more developed countries. Unanticipated political or social
developments may affect the values of the fund's investments in such countries.
The economies and securities and currency markets of many emerging markets have
experienced significant disruption and declines. There can be no assurances that
these economic and market disruptions will not continue.
NON-U.S. SECURITIES MARKETS AND REGULATIONS. There may be less publicly
available information about non-U.S. markets and issuers than is available with
respect to U.S. securities and issuers. Non-U.S. companies generally are not
subject to accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to U.S. companies. The trading
markets for most non-U.S. securities are generally less liquid and subject to
greater price volatility than the markets for comparable securities in the U.S.
The markets for securities in certain emerging markets are in the earliest
stages of their development. Even the markets for relatively widely traded
securities in certain non-U.S. markets, including emerging market countries, may
not be able to absorb, without price disruptions, a significant increase in
trading volume or trades of a size customarily undertaken by institutional
investors in the U.S. Additionally, market making and arbitrage activities are
generally less extensive in such markets, which may contribute to increased
volatility and reduced liquidity. The less liquid a market, the more difficult
it may be for the fund to price its portfolio securities accurately or to
dispose of such securities at the times determined by Pioneer to be appropriate.
The risks associated with reduced liquidity may be particularly acute in
situations in which the fund's operations require cash, such as in order to meet
redemptions and to pay its expenses.
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ECONOMIC, POLITICAL AND SOCIAL FACTORS. Certain countries, including emerging
markets, may be subject to a greater degree of economic, political and social
instability than is the case in the U.S. and Western European countries. Such
instability may result from, among other things: (i) authoritarian governments
or military involvement in political and economic decision making; (ii) popular
unrest associated with demands for improved economic, political and social
conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring
countries; and (v) ethnic, religious and racial disaffection and conflict. Such
economic, political and social instability could significantly disrupt the
financial markets in such countries and the ability of the issuers in such
countries to repay their obligations. Investing in emerging market countries
also involves the risk of expropriation, nationalization, confiscation of assets
and property or the imposition of restrictions on non-U.S. investments and on
repatriation of capital invested. In the event of such expropriation,
nationalization or other confiscation in any emerging country, the fund could
lose its entire investment in that country.
Certain emerging market countries restrict or control non-U.S. investment in
their securities markets to varying degrees. These restrictions may limit the
fund's investment in those markets and may increase the expenses of the fund. In
addition, the repatriation of both investment income and capital from certain
markets in the region is subject to restrictions such as the need for certain
governmental consents. Even where there is no outright restriction on
repatriation of capital, the mechanics of repatriation may affect certain
aspects of the fund's operation.
Economies in individual countries may differ favorably or unfavorably from the
U.S. economy in such respects as growth of gross domestic product, rates of
inflation, currency valuation, capital reinvestment, resource self-sufficiency
and balance of payments positions. Many countries have experienced substantial,
and in some cases extremely high, rates of inflation for many years. Inflation
and rapid fluctuations in inflation rates have had, and may continue to have,
very negative effects on the economies and securities markets of certain
emerging countries.
Economies in emerging market countries generally are dependent heavily upon
international trade and, accordingly, have been and may continue to be affected
adversely by trade barriers, exchange controls, managed adjustments in relative
currency values and other protectionist measures imposed or negotiated by the
countries with which they trade. These economies also have been, and may
continue to be, affected adversely by economic conditions in the countries with
which they trade.
CURRENCY RISKS. The value of the securities quoted or denominated in
international currencies may be adversely affected by fluctuations in the
relative currency exchange rates and by exchange control regulations. The fund's
investment performance may be negatively affected by a devaluation of a currency
in which the fund's investments are quoted or denominated. Further, the fund's
investment performance may be significantly affected, either positively or
negatively, by currency exchange rates because the U.S. dollar value of
securities quoted or denominated in another currency will increase or decrease
in response to changes in the value of such currency in relation to the U.S.
dollar.
CUSTODIAN SERVICES AND RELATED INVESTMENT COSTS. Custodial services and other
costs relating to investment in international securities markets generally are
more expensive than in the U.S. Such markets have settlement and clearance
procedures that differ from those in the U.S. In certain markets there have been
times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of the fund to make intended securities purchases due to settlement
problems could cause the fund to miss attractive investment opportunities.
Inability to dispose of a portfolio security caused by settlement problems could
result either in losses to the fund due to a subsequent decline in value of the
portfolio security or could result in possible liability to the fund. In
addition, security settlement and clearance procedures in some emerging
countries may not fully protect the fund against loss or theft of its assets.
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WITHHOLDING AND OTHER TAXES. The fund will be subject to taxes, including
withholding taxes, on income (possibly including, in some cases, capital gains)
that are or may be imposed by certain countries with respect to the fund's
investments in such countries. These taxes will reduce the return achieved by
the fund. Treaties between the U.S. and such countries may not be available to
reduce the otherwise applicable tax rates.
ECONOMIC MONETARY UNION (EMU). On January 1, 1999, 11 European countries adopted
a single currency - the Euro. The conversion to the Euro is being phased in over
a three-year period. During this time, valuation, systems and other operational
problems may occur in connection with the fund's investments quoted in the Euro.
For participating countries, EMU will mean sharing a single currency and single
official interest rate and adhering to agreed upon limits on government
borrowing. Budgetary decisions will remain in the hands of each participating
country but will be subject to each country's commitment to avoid "excessive
deficits" and other more specific budgetary criteria. A European Central Bank is
responsible for setting the official interest rate to maintain price stability
within the Euro zone.
EMU is driven by the expectation of a number of economic benefits, including
lower transaction costs, reduced exchange risk, greater competition, and a
broadening and deepening of European financial markets. However, there are a
number of significant risks associated with EMU. Monetary and economic union on
this scale has never been attempted before. There is a significant degree of
uncertainty as to whether participating countries will remain committed to EMU
in the face of changing economic conditions. This uncertainty may increase the
volatility of European markets.
U.S. GOVERNMENT SECURITIES
U.S. government securities in which the fund invests include debt obligations of
varying maturities issued by the U.S. Treasury or issued or guaranteed by an
agency or instrumentality of the U.S. government, including the Federal Housing
Administration, Federal Financing Bank, Farmers Home Administration,
Export-Import Bank of the U.S., Small Business Administration, Government
National Mortgage Association ("GNMA"), General Services Administration, Central
Bank for Cooperatives, Federal Farm Credit Banks, Federal Home Loan Banks,
Federal Home Loan Mortgage Corporation ("FHLMC"), Federal National Mortgage
Association ("FNMA"), Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board, Student Loan Marketing Association,
Resolution Trust Corporation and various institutions that previously were or
currently are part of the Farm Credit System (which has been undergoing
reorganization since 1987). Some U.S. government securities, such as U.S.
Treasury bills, Treasury notes and Treasury bonds, which differ only in their
interest rates, maturities and times of issuance, are supported by the full
faith and credit of the United States. Others are supported by: (i) the right of
the issuer to borrow from the U.S. Treasury, such as securities of the Federal
Home Loan Banks; (ii) the discretionary authority of the U.S. government to
purchase the agency's obligations, such as securities of the FNMA; or (iii) only
the credit of the issuer, such as securities of the Student Loan Marketing
Association. No assurance can be given that the U.S. government will provide
financial support in the future to U.S. government agencies, authorities or
instrumentalities that are not supported by the full faith and credit of the
United States. Securities guaranteed as to principal and interest by the U.S.
government, its agencies, authorities or instrumentalities include: (i)
securities for which the payment of principal and interest is backed by an
irrevocable letter of credit issued by the U.S. government or any of its
agencies, authorities or instrumentalities; and (ii) participations in loans
made to non-U.S. governments or other entities that are so guaranteed. The
secondary market for certain of these participations is limited and, therefore,
may be regarded as illiquid.
U.S. government securities may include zero coupon securities that may be
purchased when yields are attractive and/or to enhance portfolio liquidity. Zero
coupon U.S. government securities are debt
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obligations that are issued or purchased at a significant discount from
face value. The discount approximates the total amount of interest the security
will accrue and compound over the period until maturity or the particular
interest payment date at a rate of interest reflecting the market rate of the
security at the time of issuance. Zero coupon U.S. government securities do not
require the periodic payment of interest. These investments benefit the issuer
by mitigating its need for cash to meet debt service, but generally require a
higher rate of return to attract investors who are willing to defer receipt of
cash. These investments may experience greater volatility in market value than
U.S. government securities that make regular payments of interest. The fund
accrues income on these investments for tax and accounting purposes, which is
distributable to shareholders and which, because no cash is received at the time
of accrual, may require the liquidation of other portfolio securities to satisfy
the fund's distribution obligations, in which case the fund will forego the
purchase of additional income producing assets with these funds. Zero coupon
U.S. government securities include STRIPS and CUBES, which are issued by the
U.S. Treasury as component parts of U.S. Treasury bonds and represent scheduled
interest and principal payments on the bonds.
MUNICIPAL OBLIGATIONS
The fund may purchase municipal obligations when Pioneer believes that they
offer favorable rates of income or capital gain potential when compared to a
taxable investment. The term "municipal obligations" generally is understood to
include debt obligations issued by municipalities to obtain funds for various
public purposes, the interest on which is, in the opinion of bond counsel to the
issuer, excluded from gross income for federal income tax purposes. In addition,
if the proceeds from private activity bonds are used for the construction,
repair or improvement of privately operated industrial or commercial facilities,
the interest paid on such bonds may be excluded from gross income for federal
income tax purposes, although current federal tax laws place substantial
limitations on the size of these issues. The fund's distributions of any
interest it earns on municipal obligations will be taxable to shareholders as
ordinary income.
The two principal classifications of municipal obligations are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its faith, credit, and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenues derived from
a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source, but not from the
general taxing power. Sizable investments in these obligations could involve an
increased risk to the fund should any of the related facilities experience
financial difficulties. Private activity bonds are in most cases revenue bonds
and do not generally carry the pledge of the credit of the issuing municipality.
There are, of course, variations in the security of municipal obligations, both
within a particular classification and between classifications.
The mortgage derivatives that the fund may invest in include interests in
collateralized mortgage obligations, real estate mortgage investment conduits
and stripped mortgage-backed securities.
MORTGAGE-BACKED SECURITIES
The fund may invest in mortgage pass-through certificates and multiple-class
pass-through securities, and mortgage derivative securities such as real estate
mortgage investment conduits ("REMIC") pass-through certificates, collateralized
mortgage obligations and stripped mortgage-backed securities ("SMBS"), interest
only mortgage-backed securities and principal only mortgage-backed securities
and other types of mortgage-backed securities that may be available in the
future. A mortgage-backed security is an obligation of the issuer backed by a
mortgage or pool of mortgages or a direct interest in an underlying pool of
mortgages. Some mortgage-backed securities, such as collateralized mortgage
obligations (CMOs), make payments of both principal and interest at a variety of
intervals; others make semiannual
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interest payments at a predetermined rate and repay principal at maturity
(like a typical bond). Mortgage-backed securities are based on different types
of mortgages including those on commercial real estate or residential
properties. Mortgage-backed securities often have stated maturities of up to
thirty years when they are issued, depending upon the length of the mortgages
underlying the securities. In practice, however, unscheduled or early payments
of principal and interest on the underlying mortgages may make the securities'
effective maturity shorter than this, and the prevailing interest rates may be
higher or lower than the current yield of the fund's portfolio at the time the
fund receives the payments for reinvestment. Mortgage-backed securities may have
less potential for capital appreciation than comparable fixed income securities,
due to the likelihood of increased prepayments of mortgages as interest rates
decline. If the fund buys mortgage-backed securities at a premium, mortgage
foreclosures and prepayments of principal by mortgagors (which may be made at
any time without penalty) may result in some loss of the fund's principal
investment to the extent of the premium paid.
The value of mortgage-backed securities may also change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities markets as a whole. Non-governmental
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
governmental issues.
GUARANTEED MORTGAGE PASS-THROUGH SECURITIES. Guaranteed mortgage pass-through
securities represent participation interests in pools of residential mortgage
loans and are issued by U.S. governmental or private lenders and guaranteed by
the U.S. government or one of its agencies or instrumentalities, including but
not limited to GNMA, FNMA and FHLMC. GNMA certificates are guaranteed by the
full faith and credit of the U.S. government for timely payment of principal and
interest on the certificates. FNMA certificates are guaranteed by FNMA, a
federally chartered and privately owned corporation, for full and timely payment
of principal and interest on the certificates. FHLMC certificates are guaranteed
by FHLMC, a corporate instrumentality of the U.S. government, for timely payment
of interest and the ultimate collection of all principal of the related mortgage
loans.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers may,
in addition, be the originators and/or servicers of the underlying mortgage
loans as well as the guarantors of the mortgage-related securities. Because
there are no direct or indirect government or agency guarantees of payments in
pools created by such non-governmental issuers, they generally offer a higher
rate of interest than government and government-related pools. Timely payment of
interest and principal of these pools may be supported by insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit. The insurance and guarantees are issued by governmental
entities, private insurers and the mortgage poolers. There can be no assurance
that the private insurers or guarantors can meet their obligations under the
insurance policies or guarantee arrangements.
Mortgage-related securities without insurance or guarantees may be purchased if
Pioneer determines that the securities meet the fund's quality standards.
Mortgage-related securities issued by certain private organizations may not be
readily marketable.
MULTIPLE-CLASS PASS-THROUGH SECURITIES AND COLLATERALIZED MORTGAGE OBLIGATIONS.
CMOs and REMIC pass-through or participation certificates may be issued by,
among others, U.S. government agencies and instrumentalities as well as private
issuers. REMICs are CMO vehicles that qualify for special tax treatment under
the Internal Revenue Code of 1986, as amended (the "Code") and invest in
mortgages principally secured by interests in real property and other
investments permitted by the Code. CMOs and REMIC certificates are issued in
multiple classes and the principal of and interest on the mortgage assets may be
allocated among the several classes of CMOs or REMIC certificates in various
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ways. Each class of CMO or REMIC certificate, often referred to as a "tranche,"
is issued at a specific adjustable or fixed interest rate and must be fully
retired no later than its final distribution date. Generally, interest is paid
or accrues on all classes of CMOs or REMIC certificates on a monthly basis.
Typically, CMOs are collateralized by GNMA, FNMA or FHLMC certificates but also
may be collateralized by other mortgage assets such as whole loans or private
mortgage pass-through securities. Debt service on CMOs is provided from payments
of principal and interest on collateral of mortgaged assets and any reinvestment
income thereon.
STRIPPED MORTGAGE-BACKED SECURITIES. SMBS are multiple-class mortgage-backed
securities that are created when a U.S. government agency or a financial
institution separates the interest and principal components of a mortgage-backed
security and sells them as individual securities. The fund invests in SMBS that
are usually structured with two classes that receive different proportions of
interest and principal distributions on a pool of mortgage assets. A typical
SMBS will have one class receiving some of the interest and most of the
principal, while the other class will receive most of the interest and the
remaining principal. The holder of the "principal-only" security (PO) receives
the principal payments made by the underlying mortgage-backed security, while
the holder of the "interest-only" security (IO) receives interest payments from
the same underlying security. The prices of stripped mortgage-backed securities
may be particularly affected by changes in interest rates. As interest rates
fall, prepayment rates tend to increase, which tends to reduce prices of IOs and
increase prices of POs. Rising interest rates can have the opposite effect.
Although the market for these securities is increasingly liquid, Pioneer may
determine that certain stripped mortgage-backed securities issued by the U.S.
government, its agencies or instrumentalities are not readily marketable. If so,
these securities, together with privately-issued stripped mortgage-backed
securities, will be considered illiquid for purposes of the fund's limitation on
investments in illiquid securities. The yields and market risk of interest only
and principal only SMBS, respectively, may be more volatile than those of other
fixed income securities.
The fund also may invest in planned amortization class ("PAC") and target
amortization class ("TAC") CMO bonds which involve less exposure to prepayment,
extension and interest rate risks than other mortgage-backed securities,
provided that prepayment rates remain within expected prepayment ranges or
"collars." To the extent that the prepayment rates remain within these
prepayment ranges, the residual or support tranches of PAC and TAC CMOs assume
the extra prepayment, extension and interest rate risks associated with the
underlying mortgage assets.
RISK FACTORS ASSOCIATED WITH MORTGAGE-BACKED SECURITIES. Investing in
mortgage-backed securities involves certain risks, including the failure of a
counterparty to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. In addition, investing in the
lowest tranche of CMOs and REMIC certificates involves risks similar to those
associated with investing in equity securities. However, due to adverse tax
consequences under current tax laws, the fund does not intend to acquire
"residual" interests in REMICs. Further, the yield characteristics of
mortgage-backed securities differ from those of traditional fixed income
securities. The major differences typically include more frequent interest and
principal payments (usually monthly), the adjustability of interest rates of the
underlying instrument, and the possibility that prepayments of principal may be
made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, the fund may fail to recoup fully its
investment in mortgage-backed securities notwithstanding any direct or indirect
governmental,
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agency or other guarantee. When the fund reinvests amounts representing
payments and unscheduled prepayments of principal, it may obtain a rate of
interest that is lower than the rate on existing adjustable rate mortgage
pass-through securities. Thus, mortgage-backed securities, and adjustable rate
mortgage pass-through securities in particular, may be less effective than other
types of U.S. government securities as a means of "locking in" interest rates.
STRUCTURED SECURITIES
The fund may invest in structured securities. The value of the principal and/or
interest on such securities is determined by reference to changes in the value
of specific currencies, interest rates, commodities, indices or other financial
indicators (the "Reference") or the relative change in two or more References.
The interest rate or the principal amount payable upon maturity or redemption
may be increased or decreased depending upon changes in the Reference. The terms
of the structured securities may provide in certain circumstances that no
principal is due at maturity and, therefor may result in a loss of the fund's
investment. Changes in the interest rate or principal payable at maturity may be
a multiple of the changes in the value of the Reference. Consequently,
structured securities may entail a greater degree of market risk than other
types of fixed income securities.
ASSET-BACKED SECURITIES
The fund may invest in asset-backed securities, which are securities that
represent a participation in, or are secured by and payable from, a stream of
payments generated by particular assets, most often a pool or pools of similar
assets (e.g., trade receivables). The credit quality of these securities depends
primarily upon the quality of the underlying assets and the level of credit
support and/or enhancement provided.
The underlying assets (e.g., loans) are subject to prepayments which shorten the
securities' weighted average maturity and may lower their return. If the credit
support or enhancement is exhausted, losses or delays in payment may result if
the required payments of principal and interest are not made. The value of these
securities also may change because of changes in the market's perception of the
creditworthiness of the servicing agent for the pool, the originator of the
pool, or the financial institution or trust providing the credit support or
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The fund may purchase securities, including U.S. government securities, on a
when-issued basis or may purchase or sell securities for delayed delivery. In
such transactions, delivery of the securities occurs beyond the normal
settlement period, but no payment or delivery is made by the fund prior to the
actual delivery or payment by the other party to the transaction. The fund will
not earn income on these securities until delivered. The purchase of securities
on a when-issued or delayed delivery basis involves the risk that the value of
the securities purchased will decline prior to the settlement date. The sale of
securities for delayed delivery involves the risk that the prices available in
the market on the delivery date may be greater than those obtained in the sale
transaction. When-issued and delayed delivery transactions will be fully
collateralized by segregated liquid assets. See "Asset Segregation."
WARRANTS
The fund may invest in warrants, which are securities permitting, but not
obligating, their holder to subscribe for other securities. Warrants do not
carry with them the right to dividends or voting rights with respect to the
securities that they entitle their holders to purchase, and they do not
represent any rights in the assets of the issuer. As a result, an investment in
warrants may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with the
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value of the underlying securities, and a warrant expires worthless if
it is not exercised on or prior to its expiration date.
PREFERRED SHARES
The fund may invest in preferred shares of beneficial interest of trust
instruments. Preferred shares are equity securities, but they have many
characteristics of fixed income securities, such as a fixed dividend payment
rate and/or a liquidity preference over the issuer's common shares. However,
because preferred shares are equity securities, they may be more susceptible to
risks traditionally associated with equity investments than the fund's fixed
income securities.
ILLIQUID SECURITIES
The fund will not invest more than 15% of its net assets in illiquid and other
securities that are not readily marketable. Repurchase agreements maturing in
more than seven days will be included for purposes of the foregoing limit.
Securities subject to restrictions on resale under the Securities Act of 1933,
as amended (the "1933 Act"), are considered illiquid unless they are eligible
for resale pursuant to Rule 144A or another exemption from the registration
requirements of the 1933 Act and are determined to be liquid by Pioneer. Pioneer
determines the liquidity of Rule 144A and other restricted securities according
to procedures adopted by the Board of Trustees. The Board of Trustees monitors
Pioneer's application of these guidelines and procedures. The inability of the
fund to dispose of illiquid investments readily or at reasonable prices could
impair the fund's ability to raise cash for redemptions or other purposes. If
the fund sold restricted securities other than pursuant to an exception from
registration under the 1933 Act such as Rule 144A, it may be deemed to be acting
as an underwriter and subject to liability under the 1933 Act.
REAL ESTATE INVESTMENT TRUSTS ("REITS") AND ASSOCIATED RISK FACTORS
REITs are pooled investment vehicles which invest primarily in income producing
real estate or real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs or a combination of equity and
mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that have appreciated
in value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments. REITs are
not taxed on income distributed to shareholders provided they comply with the
applicable requirements of the Code. Debt securities issued by REITs, for the
most part, are general and unsecured obligations and are subject to risks
associated with REITs.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. An equity REIT
may be affected by changes in the value of the underlying properties owned by
the REIT. A mortgage REIT may be affected by changes in interest rates and the
ability of the issuers of its portfolio mortgages to repay their obligations.
REITs are dependent upon the skills of their managers and are not diversified.
REITs are generally dependent upon maintaining cash flows to repay borrowings
and to make distributions to shareholders and are subject to the risk of default
by lessees or borrowers. REITs whose underlying assets are concentrated in
properties used by a particular industry, such as health care, are also subject
to risks associated with such industry.
REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. If the REIT invests in adjustable rate mortgage loans the interest
rates on which are reset periodically, yields
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on a REIT's investments in such loans will gradually align themselves to
reflect changes in market interest rates. This causes the value of such
investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
REITs may have limited financial resources, may trade less frequently and in a
limited volume and may be subject to more abrupt or erratic price movements than
larger company securities. Historically REITs have been more volatile in price
than the larger capitalization stocks included in Standard & Poor's 500 Stock
Index (the "S&P 500").
OTHER INVESTMENT COMPANIES
The fund may invest in the securities of other investment companies to the
extent that such investments are consistent with the fund's investment objective
and policies and permissible under the Investment Company Act of 1940, as
amended (the "1940 Act"). Under the 1940 Act, the fund may not acquire the
securities of other domestic or non-U.S. investment companies if, as a result,
(i) more than 10% of the fund's total assets would be invested in securities of
other investment companies, (ii) such purchase would result in more than 3% of
the total outstanding voting securities of any one investment company being held
by the fund, or (iii) more than 5% of the fund's total assets would be invested
in any one investment company. These limitations do not apply to the purchase of
shares of any investment company in connection with a merger, consolidation,
reorganization or acquisition of substantially all the assets of another
investment company. The fund will not invest in other investment companies for
which Pioneer or any of its affiliates act as an investment adviser or
distributor.
The fund, as a holder of the securities of other investment companies, will bear
its pro rata portion of the other investment companies' expenses, including
advisory fees. These expenses are in addition to the direct expenses of the
fund's own operations.
REPURCHASE AGREEMENTS
The fund may enter into repurchase agreements with broker-dealers, member banks
of the Federal Reserve System and other financial institutions. Repurchase
agreements are arrangements under which the fund purchases securities and the
seller agrees to repurchase the securities within a specific time and at a
specific price. The repurchase price is generally higher than the fund's
purchase price, with the difference being income to the fund. The Board of
Trustees reviews and monitors the creditworthiness of any institution which
enters into a repurchase agreement with the fund. The counterparty's obligations
under the repurchase agreement are collateralized with U.S. Treasury and/or
agency obligations with a market value of not less than 100% of the obligations,
valued daily. Collateral is held by the fund's custodian in a segregated,
safekeeping account for the benefit of the fund. Repurchase agreements afford
the fund an opportunity to earn income on temporarily available cash at low
risk. In the event of commencement of bankruptcy or insolvency proceedings with
respect to the seller of the security before repurchase of the security under a
repurchase agreement, the fund may encounter delay and incur costs before being
able to sell the security. Such a delay may involve loss of interest or a
decline in price of the security. If the court characterizes the transaction as
a loan and the fund has not perfected a security interest in the security, the
fund may be required to return the security to the seller's estate and be
treated as an unsecured creditor of the seller. As an unsecured creditor, the
fund would be at risk of losing some or all of the principal and interest
involved in the transaction.
SHORT SALES AGAINST THE BOX
The fund may sell securities "short against the box." A short sale involves the
fund borrowing securities from a broker and selling the borrowed securities. The
fund has an obligation to return securities identical
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to the borrowed securities to the broker. In a short sale against the box,
the fund at all times owns an equal amount of the security sold short or
securities convertible into or exchangeable for, with or without payment of
additional consideration, an equal amount of the security sold short. The fund
intends to use short sales against the box to hedge. For example, when the fund
believes that the price of a current portfolio security may decline, the fund
may use a short sale against the box to lock in a sale price for a security
rather than selling the security immediately. In such a case, any future losses
in the fund's long position should be offset by a gain in the short position
and, conversely, any gain in the long position should be reduced by a loss in
the short position.
If the fund effects a short sale against the box at a time when it has an
unrealized gain on the security, it may be required to recognize that gain as if
it had actually sold the security (a "constructive sale") on the date it effects
the short sale. However, such constructive sale treatment may not apply if the
fund closes out the short sale with securities other than the appreciated
securities held at the time of the short sale provided that certain other
conditions are satisfied. Uncertainty regarding certain tax consequences of
effecting short sales may limit the extent to which the fund may make short
sales against the box.
ASSET SEGREGATION
The 1940 Act requires that the fund segregate assets in connection with certain
types of transactions that may have the effect of leveraging the fund's
portfolio. If the fund enters into a transaction requiring segregation, such as
a forward commitment, the custodian or Pioneer will segregate liquid assets in
an amount required to comply with the 1940 Act. Such segregated assets will be
valued at market daily. If the aggregate value of such segregated assets
declines below the aggregate value required to satisfy the 1940 Act, additional
liquid assets will be segregated.
PORTFOLIO TURNOVER
Although it is the policy of the fund not to engage in trading for short-term
profits, portfolio turnover rate is not considered a limiting factor in the
execution of investment decisions for the fund and the fund's policy may result
in the fund having a high level of portfolio turnover. See Appendix A for the
fund's annual portfolio turnover rate.
FOREIGN CURRENCY TRANSACTIONS
The fund may engage in foreign currency transactions. These transactions may be
conducted at the prevailing spot rate for purchasing or selling currency in the
foreign exchange market. The fund also has authority to enter into forward
foreign currency exchange contracts involving currencies of the different
countries in which the fund invests as a hedge against possible variations in
the foreign exchange rates between these currencies and the U.S. dollar. This is
accomplished through contractual agreements to purchase or sell a specified
currency at a specified future date and price set at the time of the contract.
Transaction hedging is the purchase or sale of forward foreign currency
contracts with respect to specific receivables or payables of the fund, accrued
in connection with the purchase and sale of its portfolio securities quoted in
foreign currencies. Portfolio hedging is the use of forward foreign currency
contracts to offset portfolio security positions denominated or quoted in such
foreign currencies. There is no guarantee that the fund will be engaged in
hedging activities when adverse exchange rate movements occur. The fund will not
attempt to hedge all of its foreign portfolio positions and will enter into such
transactions only to the extent, if any, deemed appropriate by Pioneer.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also limit
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the opportunity for gain if the value of the hedged currency should rise.
Moreover, it may not be possible for the fund to hedge against a devaluation
that is so generally anticipated that the fund is not able to contract to sell
the currency at a price above the devaluation level it anticipates.
The cost to the fund of engaging in foreign currency transactions varies with
such factors as the currency involved, the size of the contract, the length of
the contract period, differences in interest rates between the two currencies
and the market conditions then prevailing. Since transactions in foreign
currency and forward contracts are usually conducted on a principal basis, no
fees or commissions are involved. The fund may close out a forward position in a
currency by selling the forward contract or by entering into an offsetting
forward contract.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the
contract is entered into and the date it matures. Using forward contracts to
protect the value of the fund's portfolio securities against a decline in the
value of a currency does not eliminate fluctuations in the underlying prices of
the securities. It simply establishes a rate of exchange which the fund can
achieve at some future point in time. The precise projection of short-term
currency market movements is not possible, and short-term hedging provides a
means of fixing the U.S. dollar value of only a portion of the fund's foreign
assets.
While the fund will enter into forward contracts to reduce currency exchange
rate risks, transactions in such contracts involve certain other risks. While
the fund may benefit from such transactions, unanticipated changes in currency
prices may result in a poorer overall performance for the fund than if it had
not engaged in any such transactions. Moreover, there may be imperfect
correlation between the fund's portfolio holdings of securities quoted or
denominated in a particular currency and forward contracts entered into by the
fund. Such imperfect correlation may cause the fund to sustain losses which will
prevent the fund from achieving a complete hedge or expose the fund to risk of
foreign exchange loss.
Over-the-counter markets for trading foreign forward currency contracts offer
less protection against defaults than is available when trading in currency
instruments on an exchange. Since a forward foreign currency exchange contract
is not guaranteed by an exchange or clearinghouse, a default on the contract
would deprive the fund of unrealized profits or force the fund to cover its
commitments for purchase or resale, if any, at the current market price.
If the fund enters into a forward contract to purchase foreign currency, the
custodian or Pioneer will segregate liquid assets. See "Asset Segregation."
OPTIONS ON FOREIGN CURRENCIES
The fund may purchase and write options on foreign currencies for hedging
purposes in a manner similar to that of transactions in forward contracts. For
example, a decline in the dollar value of a foreign currency in which portfolio
securities are quoted or denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In an
attempt to protect against such decreases in the value of portfolio securities,
the fund may purchase put options on the foreign currency. If the value of the
currency declines, the fund will have the right to sell such currency for a
fixed amount of dollars which exceeds the market value of such currency. This
would result in a gain that may offset, in whole or in part, the negative effect
of currency depreciation on the value of the fund's securities quoted or
denominated in that currency.
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Conversely, if a rise in the dollar value of a currency is projected for those
securities to be acquired, thereby increasing the cost of such securities, the
fund may purchase call options on such currency. If the value of such currency
increases, the purchase of such call options would enable the fund to purchase
currency for a fixed amount of dollars which is less than the market value of
such currency. Such a purchase would result in a gain that may offset, at least
partially, the effect of any currency related increase in the price of
securities the fund intends to acquire. As in the case of other types of options
transactions, however, the benefit the fund derives from purchasing foreign
currency options will be reduced by the amount of the premium and related
transaction costs. In addition, if currency exchange rates do not move in the
direction or to the extent anticipated, the fund could sustain losses on
transactions in foreign currency options which would deprive it of a portion or
all of the benefits of advantageous changes in such rates.
The fund may also write options on foreign currencies for hedging purposes. For
example, if the fund anticipated a decline in the dollar value of securities
quoted or denominated in a foreign currency because of declining exchange rates,
it could, instead of purchasing a put option, write a covered call option on the
relevant currency. If the expected decline occurs, the option will most likely
not be exercised, and the decrease in value of portfolio securities will be
partially offset by the amount of the premium received by the fund.
Similarly, the fund could write a put option on the relevant currency, instead
of purchasing a call option, to hedge against an anticipated increase in the
dollar cost of securities to be acquired. If exchange rates move in the manner
projected, the put option will expire unexercised and allow the fund to offset
such increased cost up to the amount of the premium. However, as in the case of
other types of options transactions, the writing of a foreign currency option
will constitute only a partial hedge up to the amount of the premium, only if
rates move in the expected direction. If unanticipated exchange rate
fluctuations occur, the option may be exercised and the fund would be required
to purchase or sell the underlying currency at a loss which may not be fully
offset by the amount of the premium. As a result of writing options on foreign
currencies, the fund also may be required to forego all or a portion of the
benefits which might otherwise have been obtained from favorable movements in
currency exchange rates.
A call option written on foreign currency by the fund is "covered" if the fund
owns the underlying foreign currency subject to the call, or if it has an
absolute and immediate right to acquire that foreign currency without additional
cash consideration. A call option is also covered if the fund holds a call on
the same foreign currency for the same principal amount as the call written
where the exercise price of the call held is (a) equal to or less than the
exercise price of the call written or (b) greater than the exercise price of the
call written if the amount of the difference is maintained by the fund in cash
or liquid securities. See "Asset Segregation."
The fund may close out its position in a currency option by either selling the
option it has purchased or entering into an offsetting option. An
exchange-traded options position may be closed out only on an options exchange
which provides a secondary market for an option of the same series. Although the
fund will generally purchase or write only those options for which there appears
to be an active secondary market, there is no assurance that a liquid secondary
market on an exchange will exist for any particular option, or at any particular
time. For some options no secondary market on an exchange may exist. In such
event, it might not be possible to effect closing transactions in particular
options, with the result that the fund would have to exercise its options in
order to realize any profit and would incur transaction costs upon the sale of
underlying currencies pursuant to the exercise of put options. If the fund as a
covered call option writer is unable to effect a closing purchase transaction in
a secondary market, it will not be able to sell the underlying currency (or
security quoted or denominated in that currency) until the option expires or it
delivers the underlying currency upon exercise.
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The fund may purchase and write over-the-counter options to the extent
consistent with its limitation on investments in illiquid securities. Trading in
over-the-counter options is subject to the risk that the other party will be
unable or unwilling to close out options purchased or written by the fund.
OPTIONS ON SECURITIES AND SECURITIES INDICES
The fund may purchase put and call options on any security in which it may
invest or options on any securities index based on securities in which it may
invest. The fund would also be able to enter into closing sale transactions in
order to realize gains or minimize losses on options it has purchased.
WRITING CALL AND PUT OPTIONS ON SECURITIES. A call option written by the fund
obligates the fund to sell specified securities to the holder of the option at a
specified price if the option is exercised at any time before the expiration
date. All call options written by the fund are covered, which means that the
fund will own the securities subject to the options as long as the options are
outstanding, or the fund will use the other methods described below. The fund's
purpose in writing covered call options is to realize greater income than would
be realized on portfolio securities transactions alone. However, the fund may
forego the opportunity to profit from an increase in the market price of the
underlying security.
A put option written by the fund would obligate the fund to purchase specified
securities from the option holder at a specified price if the option is
exercised at any time before the expiration date. All put options written by the
fund would be covered, which means that the fund would have segregated assets
with a value at least equal to the exercise price of the put option. The purpose
of writing such options is to generate additional income for the fund. However,
in return for the option premium, the fund accepts the risk that it may be
required to purchase the underlying security at a price in excess of its market
value at the time of purchase.
Call and put options written by the fund will also be considered to be covered
to the extent that the fund's liabilities under such options are wholly or
partially offset by its rights under call and put options purchased by the fund.
In addition, a written call option or put may be covered by entering into an
offsetting forward contract and/or by purchasing an offsetting option or any
other option which, by virtue of its exercise price or otherwise, reduces the
fund's net exposure on its written option position.
WRITING CALL AND PUT OPTIONS ON SECURITIES INDICES. The fund may also write
(sell) covered call and put options on any securities index composed of
securities in which it may invest. Options on securities indices are similar to
options on securities, except that the exercise of securities index options
requires cash payments and does not involve the actual purchase or sale of
securities. In addition, securities index options are designed to reflect price
fluctuations in a group of securities or segments of the securities market
rather than price fluctuations in a single security.
The fund may cover call options on a securities index by owning securities whose
price changes are expected to be similar to those of the underlying index, or by
having an absolute and immediate right to acquire such securities without
additional cash consideration (or for additional consideration if cash in such
amount is segregated) upon conversion or exchange of other securities in its
portfolio. The fund may cover call and put options on a securities index with
segregated assets with a value equal to the exercise price.
PURCHASING CALL AND PUT OPTIONS. The fund would normally purchase call options
in anticipation of an increase in the market value of securities of the type in
which it may invest. The purchase of a call option would entitle the fund, in
return for the premium paid, to purchase specified securities at a specified
price during the option period. The fund would ordinarily realize a gain if,
during the option period, the value
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of such securities exceeded the sum of the exercise price, the premium paid
and transaction costs; otherwise the fund would realize either no gain or a loss
on the purchase of the call option.
The fund would normally purchase put options in anticipation of a decline in the
market value of securities in its portfolio ("protective puts") or in securities
in which it may invest. The purchase of a put option would entitle the fund, in
exchange for the premium paid, to sell specified securities at a specified price
during the option period. The purchase of protective puts is designed to offset
or hedge against a decline in the market value of the fund's securities. Put
options may also be purchased by the fund for the purpose of affirmatively
benefiting from a decline in the price of securities which it does not own. The
fund would ordinarily realize a gain if, during the option period, the value of
the underlying securities decreased below the exercise price sufficiently to
more than cover the premium and transaction costs; otherwise the fund would
realize either no gain or a loss on the purchase of the put option. Gains and
losses on the purchase of protective put options would tend to be offset by
countervailing changes in the value of the underlying portfolio securities.
The fund may terminate its obligations under an exchange-traded call or put
option by purchasing an option identical to the one it has written. Obligations
under over-the-counter options may be terminated only by entering into an
offsetting transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase transactions."
RISKS OF TRADING OPTIONS. There is no assurance that a liquid secondary market
on an options exchange will exist for any particular exchange-traded option, or
at any particular time. If the fund is unable to effect a closing purchase
transaction with respect to covered options it has written, the fund will not be
able to sell the underlying securities or dispose of its segregated assets until
the options expire or are exercised. Similarly, if the fund is unable to effect
a closing sale transaction with respect to options it has purchased, it will
have to exercise the options in order to realize any profit and will incur
transaction costs upon the purchase or sale of underlying securities.
Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening or closing
transactions or both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options; (iv) unusual
or unforeseen circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or the Options Clearing Corporation (the "OCC")
may not at all times be adequate to handle current trading volume; or (vi) one
or more exchanges could, for economic or other reasons, decide or be compelled
at some future date to discontinue the trading of options (or a particular class
or series of options), in which event the secondary market on that exchange (or
in that class or series of options) would cease to exist, although outstanding
options on that exchange, if any, that had been issued by the OCC as a result of
trades on that exchange would continue to be exercisable in accordance with
their terms.
The fund may purchase and sell both options that are traded on U.S. and non-U.S.
exchanges and options traded over the counter with broker-dealers who make
markets in these options. The ability to terminate over-the-counter options is
more limited than with exchange-traded options and may involve the risk that
broker-dealers participating in such transactions will not fulfill their
obligations. Until such time as the staff of the Securities and Exchange
Commission (the "SEC") changes its position, the fund will treat purchased
over-the-counter options and all assets used to cover written over-the-counter
options as illiquid securities, except that with respect to options written with
primary dealers in U.S. government securities pursuant to an agreement requiring
a closing purchase transaction at a formula price, the amount of illiquid
securities may be calculated with reference to the formula.
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Transactions by the fund in options on securities and indices will be subject to
limitations established by each of the exchanges, boards of trade or other
trading facilities governing the maximum number of options in each class which
may be written or purchased by a single investor or group of investors acting in
concert. Thus, the number of options which the fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
Pioneer. An exchange, board of trade or other trading facility may order the
liquidations of positions found to be in excess of these limits, and it may
impose certain other sanctions.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of protective
puts for hedging purposes depends in part on Pioneer's ability to predict future
price fluctuations and the degree of correlation between the options and
securities markets.
The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price movements
can take place in the underlying markets that cannot be reflected in the options
markets.
In addition to the risks of imperfect correlation between the fund's portfolio
and the index underlying the option, the purchase of securities index options
involves the risk that the premium and transaction costs paid by the fund in
purchasing an option will be lost. This could occur as a result of unanticipated
movements in the price of the securities comprising the securities index on
which the option is based.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
To hedge against changes in securities prices or currency exchange rates or to
seek to increase total return, the fund may purchase and sell various kinds of
futures contracts, and purchase and write (sell) call and put options on any of
such futures contracts. The fund may also enter into closing purchase and sale
transactions with respect to any of such contracts and options. The futures
contracts may be based on various securities (such as U.S. government
securities), securities indices, non-U.S. currencies and other financial
instruments and indices. The fund will engage in futures and related options
transactions for bona fide hedging and non-hedging purposes as described below.
All futures contracts entered into by the fund are traded on U.S. exchanges or
boards of trade that are licensed and regulated by the Commodity Futures Trading
Commission (the "CFTC") or on non-U.S. exchanges.
FUTURES CONTRACTS. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments for an
agreed price during a designated month (or to deliver the final cash settlement
price, in the case of a contract relating to an index or otherwise not calling
for physical delivery at the end of trading in the contract).
When interest rates are rising or securities prices are falling, the fund can
seek to offset a decline in the value of its current portfolio securities
through the sale of futures contracts. When interest rates are falling or
securities prices are rising, the fund, through the purchase of futures
contracts, can attempt to secure better rates or prices than might later be
available in the market when it effects anticipated purchases. Similarly, the
fund can sell futures contracts on a specified currency to protect against a
decline in the value of such currency and a decline in the value of its
portfolio securities which are denominated in such currency. The fund can
purchase futures contracts on a non-U.S. currency to establish the price in U.S.
dollars of a security denominated in such currency that the fund has acquired or
expects to acquire.
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities or
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currency will usually be liquidated in this manner, the fund may instead
make, or take, delivery of the underlying securities or currency whenever it
appears economically advantageous to do so. A clearing corporation associated
with the exchange on which futures on securities or currency are traded
guarantees that, if still open, the sale or purchase will be performed on the
settlement date.
HEDGING STRATEGIES. Hedging, by use of futures contracts, seeks to establish
with more certainty the effective price, rate of return and currency exchange
rate on portfolio securities and securities that the fund owns or proposes to
acquire. The fund may, for example, take a "short" position in the futures
market by selling futures contracts in order to hedge against an anticipated
rise in interest rates or a decline in market prices or non-U.S. currency rates
that would adversely affect the value of the fund's portfolio securities. Such
futures contracts may include contracts for the future delivery of securities
held by the fund or securities with characteristics similar to those of the
fund's portfolio securities. Similarly, the fund may sell futures contracts in a
non-U.S. currency in which its portfolio securities are denominated or in one
currency to hedge against fluctuations in the value of securities denominated in
a different currency if there is an established historical pattern of
correlation between the two currencies. If, in the opinion of Pioneer, there is
a sufficient degree of correlation between price trends for the fund's portfolio
securities and futures contracts based on other financial instruments,
securities indices or other indices, the fund may also enter into such futures
contracts as part of its hedging strategies. Although under some circumstances
prices of securities in the fund's portfolio may be more or less volatile than
prices of such futures contracts, Pioneer will attempt to estimate the extent of
this volatility difference based on historical patterns and compensate for any
such differential by having the fund enter into a greater or lesser number of
futures contracts or by attempting to achieve only a partial hedge against price
changes affecting the fund's portfolio securities. When hedging of this
character is successful, any depreciation in the value of portfolio securities
will be substantially offset by appreciation in the value of the futures
position. On the other hand, any unanticipated appreciation in the value of the
fund's portfolio securities would be substantially offset by a decline in the
value of the futures position.
On other occasions, the fund may take a "long" position by purchasing futures
contracts. This may be done, for example, when the fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency exchange rates then available in the applicable
market to be less favorable than prices or rates that are currently available.
OPTIONS ON FUTURES CONTRACTS. The acquisition of put and call options on futures
contracts will give the fund the right (but not the obligation) for a specified
price to sell or to purchase, respectively, the underlying futures contract at
any time during the option period. As the purchaser of an option on a futures
contract, the fund obtains the benefit of the futures position if prices move in
a favorable direction but limits its risk of loss in the event of an unfavorable
price movement to the loss of the premium and transaction costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of the fund's assets. By writing a call
option, the fund becomes obligated, in exchange for the premium, to sell a
futures contract (if the option is exercised), which may have a value higher
than the exercise price. Conversely, the writing of a put option on a futures
contract generates a premium which may partially offset an increase in the price
of securities that the fund intends to purchase. However, the fund becomes
obligated to purchase a futures contract (if the option is exercised) which may
have a value lower than the exercise price. Thus, the loss incurred by the fund
in writing options on futures is potentially unlimited and may exceed the amount
of the premium received. The fund will incur transaction costs in connection
with the writing of options on futures.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same series. There
is no guarantee that such closing transactions can be
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effected. The fund's ability to establish and close out positions on such
options will be subject to the development and maintenance of a liquid market.
OTHER CONSIDERATIONS. The fund will engage in futures and related options
transactions only for bona fide hedging or non-hedging purposes in accordance
with CFTC regulations which permit principals of an investment company
registered under the 1940 Act to engage in such transactions without registering
as commodity pool operators. The fund will determine that the price fluctuations
in the futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities held by the fund or
which the fund expects to purchase. Except as stated below, the fund's futures
transactions will be entered into for traditional hedging purposes--i.e.,
futures contracts will be sold to protect against a decline in the price of
securities (or the currency in which they are denominated) that the fund owns,
or futures contracts will be purchased to protect the fund against an increase
in the price of securities (or the currency in which they are denominated) it
intends to purchase. As evidence of this hedging intent, the fund expects that
on 75% or more of the occasions on which it takes a long futures or option
position (involving the purchase of futures contracts), the fund will have
purchased, or will be in the process of purchasing, equivalent amounts of
related securities or assets denominated in the related currency in the cash
market at the time when the futures or option position is closed out. However,
in particular cases, when it is economically advantageous for the fund to do so,
a long futures position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.
As an alternative to literal compliance with the bona fide hedging definition, a
CFTC regulation permits the fund to elect to comply with a different test, under
which the sum of the amounts of initial margin deposits on the fund's existing
non-hedging futures contracts and premiums paid for options on futures entered
into for non-hedging purposes (net of the amount the positions are "in the
money") would not exceed 5% of the market value of the fund's total assets. The
fund will engage in transactions in futures contracts and related options only
to the extent such transactions are consistent with the requirements of the Code
for maintaining its qualification as a regulated investment company for federal
income tax purposes.
Futures contracts and related options involve brokerage costs, require margin
deposits and, in the case of contracts and options obligating the fund to
purchase securities or currencies, require the fund to segregate assets to cover
such contracts and options.
While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
while the fund may benefit from the use of futures and options on futures,
unanticipated changes in interest rates, securities prices or currency exchange
rates may result in a poorer overall performance for the fund than if it had not
entered into any futures contracts or options transactions. In the event of an
imperfect correlation between a futures position and a portfolio position which
is intended to be protected, the desired protection may not be obtained and the
fund may be exposed to risk of loss. It is not possible to hedge fully or
perfectly against the effect of currency fluctuations on the value of non-U.S.
securities because currency movements impact the value of different securities
in differing degrees.
LENDING OF PORTFOLIO SECURITIES
The fund may lend portfolio securities to member firms of the New York Stock
Exchange (the "Exchange") under agreements which require that the loans be
secured continuously by collateral in cash, cash equivalents or U.S. Treasury
bills maintained on a current basis at an amount at least equal to the market
value of the securities loaned. The fund continues to receive the equivalent of
the interest or dividends paid by the issuer on the securities loaned as well as
the benefit of an increase and the detriment of any decrease in the market value
of the securities loaned and would also receive compensation based
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on investment of the collateral. The fund would not, however, have the
right to vote any securities having voting rights during the existence of the
loan, but would call the loan in anticipation of an important vote to be taken
among holders of the securities or of the giving or withholding of consent on a
material matter affecting the investment.
As with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the collateral should the borrower of the securities fail
financially. The fund will lend portfolio securities only to firms that have
been approved in advance by the Board of Trustees, which will monitor the
creditworthiness of any such firms. At no time would the value of the securities
loaned exceed 33 1/3% of the value of the fund's total assets.
LOAN PARTICIPATIONS
The fund may invest a portion of its assets in loan participations
("Participations") and other direct claims against a borrower. By purchasing a
Participation, the fund acquires some or all of the interest of a bank or other
lending institution in a loan to a corporate or government borrower. The
Participations typically will result in the fund having a contractual
relationship only with the lender not the borrower. The fund will have the right
to receive payments of principal, interest and any fees to which it is entitled
only from the lender selling the Participation and only upon receipt by the
lender of the payments from the borrower. Many such loans are secured, although
some may be unsecured. Such loans may be in default at the time of purchase.
Loans that are fully secured offer a fund more protection than an unsecured loan
in the event of non-payment of scheduled interest or principal. However, there
is no assurance that the liquidation of collateral from a secured loan would
satisfy the corporate borrower's obligation, or that the collateral can be
liquidated.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS
The fund may invest in loans and other direct debt instruments owed by a
borrower to another party and may also from time to time make loans. These
instruments represent amounts owed to lenders or lending syndicates (loans and
loan participations) or to other parties. Direct debt instruments may involve a
risk of loss in case of default or insolvency of the borrower and may offer less
legal protection to the fund in the event of fraud or misrepresentation. In
addition, loan participations involve a risk of insolvency of the lending bank
or other financial intermediary. The markets in loans are not regulated by
federal securities laws or the SEC.
MORTGAGE DOLLAR ROLLS
The fund may enter into mortgage "dollar rolls" in which the fund sells
securities for delivery in the current month and simultaneously contracts with
the same counterparty to repurchase similar (same type, coupon and maturity),
but not identical securities on a specified future date. During the roll period,
the fund loses the right to receive principal and interest paid on the
securities sold. However, the fund would benefit to the extent of any difference
between the price received for the securities sold and the lower forward price
for the future purchase (often referred to as the "drop") or fee income plus the
interest earned on the cash proceeds of the securities sold until the settlement
date of the forward purchase. Unless such benefits exceed the income, capital
appreciation and gain or loss due to mortgage prepayments that would have been
realized on the securities sold as part of the mortgage dollar roll, the use of
this technique will diminish the investment performance of the fund compared
with what such performance would have been without the use of mortgage dollar
rolls. All cash proceeds will be invested in instruments that are permissible
investments for the fund. The fund will hold and maintain in a segregated
account until the settlement date cash or liquid securities in an amount equal
to its forward purchase price.
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For financial reporting and tax purposes, the fund treats mortgage dollar rolls
as two separate transactions; one involving the purchase of a security and a
separate transaction involving a sale. The fund does not currently intend to
enter into mortgage dollar rolls that are accounted for as financings.
Mortgage dollar rolls involve certain risks including the following: if the
broker-dealer to whom the fund sells the security becomes insolvent, the fund's
right to purchase or repurchase the mortgage-related securities subject to the
mortgage dollar roll may be restricted and the instrument which the fund is
required to repurchase may be worth less than an instrument which the fund
originally held. Successful use of mortgage dollar rolls will depend upon
Pioneer's ability to manage its interest rate and mortgage prepayments exposure.
For these reasons, there is no assurance that mortgage dollar rolls can be
successfully employed.
MONEY MARKET INSTRUMENTS
The fund may invest in short-term money market instruments including
commercial bank obligations and commercial paper. These instruments may be
denominated in both U.S. and non-U.S. currency. The fund's investment in
commercial bank obligations include certificates of deposit ("CDs"), time
deposits ("TDs") and bankers' acceptances. Obligations of non-U.S. branches of
U.S. banks and of non-U.S. banks may be general obligations of the parent bank
in addition to the issuing bank, or may be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of non-U.S. branches of
U.S. banks and of non-U.S. banks may subject the fund to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers.
The fund's investments in commercial paper consist of short-term (usually from 1
to 270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. The fund may also invest in variable amount
master demand notes (which is a type of commercial paper) which represents a
direct borrowing arrangement involving periodically fluctuating rates of
interest under a letter agreement between a commercial paper issuer and an
institutional lender, pursuant to which the lender may determine to invest
varying amounts. Transfer of such notes is usually restricted by the issuer, and
there is no secondary trading market for such notes. To the extent the fund
invests in master demand notes, these investments will be included in the fund's
limitation on illiquid securities.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS. The fund has adopted certain investment
restrictions which, along with the fund's investment objective, may not be
changed without the affirmative vote of the holders of a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of the fund.
Statements in italics are not part of the restriction. For this purpose, a
majority of the outstanding shares of the fund means the vote of the lesser of:
(i) 67% or more of the shares represented at a meeting, if the holders of more
than 50% of the outstanding shares are present in person or by proxy, or
(ii) more than 50% of the outstanding shares of the fund.
The fund may not:
(1) Issue senior securities, except as permitted by the 1940 Act and the rules
and interpretive positions of the SEC thereunder. SENIOR SECURITIES THAT THE
FUND MAY ISSUE IN ACCORDANCE WITH THE 1940 ACT INCLUDE
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BORROWING, FUTURES, WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD
FOREIGN CURRENCY EXCHANGE TRANSACTIONS.
(2) Borrow money, except the fund may: (a) borrow from banks or through reverse
repurchase agreements in an amount up to 33 1/3% of the fund's total assets
(including the amount borrowed); (b) to the extent permitted by applicable law,
borrow up to an additional 5% of the fund's assets for temporary purposes; (c)
obtain such short-term credits as are necessary for the clearance of portfolio
transactions; (d) the fund may purchase securities on margin to the extent
permitted by applicable law; and (e) engage in transactions in mortgage dollar
rolls that are accounted for as financings. THE SEC HAS AUTHORITY TO ADOPT RULES
RESTRICTING THE FUND FROM PURCHASING SECURITIES ON MARGIN BUT CURRENTLY HAS NO
RULE RESTRICTING MARGIN PURCHASES.
(3) Invest in real estate, except that the fund may invest in securities of
issuers that invest in real estate or interests therein, securities that are
secured by real estate or interests therein, securities of real estate
investment trusts and mortgage-backed securities.
(4) Make loans, except by the purchase of debt obligations, by entering into
repurchase agreements or through the lending of portfolio securities.
(5) Invest in commodities or commodity contracts, except that the fund may
invest in currency instruments and contracts and financial instruments and
contracts that might be deemed to be commodities and commodity contracts. A
FUTURES CONTRACT, FOR EXAMPLE, MAY BE DEEMED TO BE A COMMODITY CONTRACT.
(6) Act as an underwriter, except as it may be deemed to be an underwriter in a
sale of restricted securities held in its portfolio.
It is the fundamental policy of the fund not to concentrate its investments in
securities of companies in any particular industry. In the opinion of the SEC,
investments are concentrated in a particular industry if such investments
aggregate 25% or more of the fund's total assets. The fund's policy does not
apply to investments in U.S. government securities. Although the fund is
classified as non-diversified for purposes of the 1940 Act, the fund will comply
with the diversification requirements of the Code applicable to regulated
investment companies.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The following restriction has been
designated as non-fundamental and may be changed by a vote of the fund's Board
of Trustees without approval of shareholders.
The fund may not:
(1) Purchase securities while borrowings are in excess of 5% of total assets.
3. MANAGEMENT OF THE FUND
The fund's Board of Trustees provides broad supervision over the affairs of the
fund. The officers of the fund are responsible for the fund's operations. The
Trustees and executive officers of the fund are listed below, together with
their principal occupations during the past five years. An asterisk indicates
those Trustees who are interested persons of the fund within the meaning of the
1940 Act.
JOHN F. COGAN, JR.*, CHAIRMAN OF THE BOARD, PRESIDENT AND TRUSTEE,
DOB: JUNE 1926
President, Chief Executive Officer and a Director of The Pioneer Group,
Inc. ("PGI"); Chairman and a Director of Pioneer, Pioneer Funds Distributor,
Inc. ("PFD"), Pioneer Goldfields Limited, Teberebie Goldfields Limited, Closed
Joint-Stock Company "Amgun-Forest," Closed Joint-Stock Company
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"Udinskoye" and Closed Joint-Stock Company "Tas-Yurjah" Mining 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 Of Counsel, Hale
and Dorr LLP (counsel to PGI and the fund).
MARY K. BUSH, TRUSTEE, DOB: APRIL 1948
4201 CATHEDRAL AVENUE, NW, WASHINGTON, DC 20016
President, Bush & Co. (international financial advisory firm); Director and/or
Trustee of Mortgage Guaranty Insurance Corporation, Novecon Management Company,
Hoover Institution, Folger Shakespeare Library, March of Dimes, Project 2000,
Inc. (not-for-profit educational organization), Wilberforce 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., TRUSTEE, DOB: DECEMBER 1926
BOSTON UNIVERSITY HEALTH POLICY INSTITUTE, 53 BAY STATE ROAD, BOSTON, MA 02215
Alexander Graham Bell Professor of Health Care Entrepreneurship, Boston
University; Professor of Management, Boston University School of Management;
Professor of Public Health, Boston University School of Public Health; Professor
of Surgery, Boston University School of Medicine; University Professor, Boston
University; Director, Boston University Health Policy Institute, Boston
University Program for Health Care Entrepreneurship, CORE (management of
workers' 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, TRUSTEE, DOB: MAY 1947
THE KEEP, P.O. BOX 110, LITTLE DEER ISLE, ME 04650
Founding Director, The Winthrop Group, Inc. (consulting firm); Manager of
Research Operations, Xerox Palo Alto Research Center, from 1991 to 1994;
formerly Professor of Operations Management and Management of Technology and
Associate Dean, Boston University School of Management; and Trustee of all of
the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
JOHN W. KENDRICK, TRUSTEE, DOB: JULY 1917
6363 WATERWAY DRIVE, FALLS CHURCH, VA 22044
Professor Emeritus, George Washington University; Director, American
Productivity and Quality Center; Adjunct Scholar, American Enterprise Institute;
Economic Consultant; and Trustee of all of the Pioneer mutual funds, except
Pioneer Variable Contracts Trust.
MARGUERITE A. PIRET, TRUSTEE, DOB: MAY 1948
ONE BOSTON PLACE, 26TH FLOOR, BOSTON, MA 02108
President, Newbury, Piret & Company, Inc. (merchant banking firm); Trustee
of Boston Medical Center; Member of the Board of Governors of the Investment
Company Institute; Director, Organogenesis Inc. (tissue engineering company);
and Trustee of all of the Pioneer mutual funds.
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DAVID D. TRIPPLE*, TRUSTEE AND EXECUTIVE VICE PRESIDENT, DOB: FEBRUARY 1944
Executive Vice President and a Director of PGI; President and a Director of
Pioneer and PFD; Director of Pioneering Services Corporation ("PSC"), PIntl,
PREA, Pioneer Omega, PMIL, Pioneer First Investment Fund and the Irish Funds;
Member of the Supervisory Board of Pioneer First Polish and Pioneer Czech; and
Executive Vice President and Trustee of all of the Pioneer mutual funds.
STEPHEN K. WEST, TRUSTEE, DOB: SEPTEMBER 1928
125 BROAD STREET, NEW YORK, NY 10004
Of Counsel, Sullivan & Cromwell (law firm); Director, Kleinwort Benson
Australian Income Fund, Inc. since May 1997 and The Swiss Helvetia Fund, Inc.
since 1995 (investment companies), AMVESCAP PLC (investment managers) since 1997
and ING American Insurance Holdings, Inc; Trustee, The Winthrop Focus Funds
(investment companies); and Trustee of all of the Pioneer mutual funds.
JOHN WINTHROP, TRUSTEE, DOB: JUNE 1936
ONE NORTH ADGERS WHARF, CHARLESTON, SC 29401
President, John Winthrop & Co., Inc. (private investment firm); Director of
NUI Corp. (energy sales, services and distribution); and Trustee of all of the
Pioneer mutual funds, except Pioneer Variable Contracts Trust.
ERIC W. RECKARD, TREASURER, DOB: JUNE 1956
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).
JOSEPH P. BARRI, SECRETARY, DOB: AUGUST 1946
Corporate Secretary of PGI and most of its subsidiaries; Secretary of all of the
Pioneer mutual funds; and Partner, Hale and Dorr LLP.
VINCENT NAVE, ASSISTANT TREASURER, DOB: JUNE 1945
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.
ROBERT P. NAULT, ASSISTANT SECRETARY, DOB: MARCH 1964
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.
The business address of all officers is 60 State Street, Boston, Massachusetts
02109.
All of the outstanding capital stock of PFD, Pioneer and PSC is owned, directly
or indirectly, by PGI, a publicly owned Delaware corporation. Pioneer, the
fund's investment adviser, serves as the investment adviser for the Pioneer
mutual funds and manages the investments of certain institutional accounts.
The table below lists all of the U.S.-registered Pioneer mutual funds currently
offered to the public and the investment adviser and principal underwriter for
each fund.
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INVESTMENT ADVISER PRINCIPAL
FUND NAME UNDERWRITER
Pioneer International Growth Fund Pioneer PFD
Pioneer Europe Fund Pioneer PFD
Pioneer World Equity Fund Pioneer PFD
Pioneer Emerging Markets Fund Pioneer PFD
Pioneer Indo-Asia Fund Pioneer PFD
Pioneer Capital Growth Fund Pioneer PFD
Pioneer Mid-Cap Fund Pioneer PFD
Pioneer Growth Shares Pioneer PFD
Pioneer Small Company Fund Pioneer PFD
Pioneer Independence Fund Pioneer Note 1
Pioneer Micro-Cap Fund Pioneer PFD
Pioneer Balanced Fund Pioneer PFD
Pioneer Equity-Income Fund Pioneer PFD
Pioneer Fund Pioneer PFD
Pioneer II Pioneer PFD
Pioneer Real Estate Shares Pioneer PFD
Pioneer Limited Maturity Bond Fund Pioneer PFD
Pioneer America Income Trust Pioneer PFD
Pioneer Bond Fund Pioneer PFD
Pioneer Tax-Free Income Fund Pioneer PFD
Pioneer Cash Reserves Fund Pioneer PFD
Pioneer Interest Shares Pioneer Note 2
Pioneer Variable Contracts Trust Pioneer Note 3
Pioneer Strategic Income Fund Pioneer PFD
Pioneer Tax-Managed Fund Pioneer PFD
Pioneer High Yield Fund Pioneer PFD
Note 1 This fund is available to the general public only through Pioneer
Independence Plans, a systematic investment plan sponsored by PFD.
Note 2 This fund is a closed-end fund.
Note 3 This is a series of 13 separate portfolios designed to provide investment
vehicles for the variable annuity and variable life insurance contracts of
various insurance companies or for certain qualified pension plans.
SHARE OWNERSHIP
See Appendix A for annual information on the ownership of fund shares by the
Trustees, the fund's officers and owners in excess of 5% of any class of shares
of the fund.
COMPENSATION OF OFFICERS AND TRUSTEES
The fund pays no salaries or compensation to any of its officers. The fund
compensates each Trustee who is not affiliated with PGI, Pioneer, PFD or PSC
with a base fee, a variable fee calculated on the basis of average net assets of
the fund, per meeting fees, and annual committee participation fees for each
committee member or chairperson that are based on percentages of his or her
aggregate annual fee. See the fee table in Appendix A.
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SALES LOADS. Current and former Trustees and officers of the fund and other
qualifying persons may purchase the fund's Class A shares without an initial
sales charge.
4. INVESTMENT ADVISER
The fund has contracted with Pioneer to act as its investment adviser. Pioneer
is a wholly owned subsidiary of PGI. PGI is engaged in the financial services
business in the U.S. and other countries. Certain Trustees or officers of the
fund are also directors and/or officers of PGI and its subsidiaries (see
management biographies above).
As the 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 the 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 to
be paid by the fund: (a) charges and expenses for fund accounting, pricing and
appraisal services and related overhead, including, to the extent such services
are performed by personnel of 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 SEC, state or
blue sky securities agencies and non-U.S. 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) any
distribution fees paid by the fund in accordance with Rule 12b-1 promulgated by
the SEC pursuant to the 1940 Act; (j) compensation of those Trustees of the fund
who are not affiliated with or interested persons of Pioneer, the fund (other
than as Trustees), PGI or PFD; (k) the cost of preparing and printing share
certificates; and (l) interest on borrowed money, if any. In addition, the fund
shall pay 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.
ADVISORY FEE. As compensation for its management services and expenses incurred,
the fund pays Pioneer an annual fee at the rate of 0.70% of the fund's average
daily net assets up to $500 million; 0.65% of the next $500 million; and 0.60%
of the excess over $1 billion. This fee is computed and accrued daily and paid
monthly.
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Prior to the reorganization of Third Avenue High Yield Fund into the fund, Third
Avenue High Yield Fund's investment adviser was EQSF Advisers, Inc. ("EQSF").
The investment advisory services of EQSF were performed under an investment
advisory agreement, pursuant to which the fund paid EQSF a monthly fee equal to
1/12 of 0.90% of the average daily net assets of the fund during the prior month
(an annual rate of 0.90%). See the table in Appendix A for management fees paid
during recently completed fiscal years.
ADMINISTRATION AGREEMENT. The 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.
Prior to the reorganization of Third Avenue High Yield Fund into the fund, Third
Avenue High Yield Fund had entered into an administration agreement with PNC
Financial Processing Corporation, Inc. ("PFPC"). The administration agreement
provided that PFPC would provide all administrative services to the fund other
than those relating to the investment portfolio of the fund, the distribution of
the fund and the maintenance of the fund's financial records. Third Avenue Trust
had agreed to pay PFPC an amount equal to $186,000 per annum plus 0.01% of
aggregate assets of its series in excess of $1 billion. See Appendix A for fees
the fund paid for administration and related services.
EXPENSE LIMIT. Pioneer has agreed to waive all or part of its management fee or
to reimburse the fund for other expenses (other than extraordinary expenses) to
the extent the fund's expenses exceed 0.75% of average daily net assets until
such time as the net assets of the fund exceed $25 million. This agreement may
be 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. Based on
estimated expenses and fund assets for the current fiscal year, the fund does
not currently expect to reimburse Pioneer pursuant to this arrangement during
the current fiscal year.
POTENTIAL CONFLICT OF INTEREST. The fund is managed by Pioneer which also serves
as investment adviser to other Pioneer mutual funds and private accounts with
investment objectives identical or similar to those of the fund. Securities
frequently meet the investment objectives of the fund, the other Pioneer mutual
funds and such private accounts. In such cases, the decision to recommend a
purchase to one fund or account rather than another is based on a number of
factors. The determining factors in most cases are the amount of securities of
the issuer then outstanding, the value of those securities and the market for
them. Other factors considered in the investment recommendations include other
investments which each fund or account presently has in a particular industry
and the availability of investment funds in each fund or account.
It is possible that at times identical securities will be held by more than one
fund and/or account. However, positions in the same issue may vary and the
length of time that any fund or account may choose to hold its investment in the
same issue may likewise vary. To the extent that more than one of the Pioneer
mutual funds or a private account managed by Pioneer seeks to acquire the same
security at about the same time, the fund may not be able to acquire as large a
position in such security as it desires or it may have to pay a higher price for
the security. Similarly, the fund may not be able to obtain as large an
execution of an order to sell or as high a price for any particular portfolio
security if Pioneer decides to sell on behalf of another account the same
portfolio security at the same time. On the other hand, if the same securities
are bought or sold at the same time by more than one fund or account, the
resulting participation in volume transactions could produce better executions
for the fund. In the event more than one account purchases or sells the same
security on a given date, the purchases and sales will normally be made as
nearly as practicable on a pro rata basis in proportion to the amounts desired
to be purchased or
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sold by each account. Although the other Pioneer mutual funds
may have the same or similar investment objectives and policies as the fund,
their portfolios do not generally consist of the same investments as the fund or
each other, and their performance results are likely to differ from those of the
fund.
PERSONAL SECURITIES TRANSACTIONS. In an effort to avoid conflicts of interest
with the fund, the fund and Pioneer have adopted a code of ethics that is
designed to maintain a high standard of personal conduct by directing that all
personnel defer to the interests of the fund and its shareholders in making
personal securities transactions.
5. PRINCIPAL UNDERWRITER AND DISTRIBUTION PLANS
PRINCIPAL UNDERWRITER
PFD, 60 State Street, Boston, Massachusetts 02109, is the principal underwriter
for the fund in connection with the continuous offering of its shares. PFD is an
indirect wholly owned subsidiary of PGI.
The fund entered into an underwriting agreement with PFD which provides that PFD
will bear expenses for the distribution of the fund's shares, except for
expenses incurred by PFD for which it is reimbursed or compensated by the fund
under the distribution plans (discussed below). PFD bears all expenses it incurs
in providing services under the underwriting agreement. Such expenses include
compensation to its employees and representatives and to securities dealers for
distribution-related services performed for the fund. PFD also pays certain
expenses in connection with the distribution of the fund's shares, including the
cost of preparing, printing and distributing advertising or promotional
materials, and the cost of printing and distributing prospectuses and
supplements to prospective shareholders. The fund bears the cost of registering
its shares under federal and state securities law and the laws of certain
non-U.S. countries. Under the underwriting agreement, PFD will use its best
efforts in rendering services to the fund.
See "Class A Share Sales Charges" for the schedule of initial sales charge
reallowed to dealers as a percentage of the offering price of the fund's Class A
shares.
See the tables in Appendix A for commissions retained by PFD and reallowed to
dealers in connection with PFD's offering of the fund's Class A shares during
recently completed fiscal years.
The fund will not generally issue fund shares for consideration other than cash.
At the fund's sole discretion, however, it may issue fund shares for
consideration other than cash in connection with a bona fide reorganization,
statutory merger or other acquisition of portfolio securities.
The redemption price of shares of beneficial interest of the fund may, at
Pioneer's discretion, be paid in cash or portfolio securities. The fund has,
however, elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which the fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the fund's net asset value during any 90-day period for any
one shareholder. Should the amount of redemptions by any shareholder exceed such
limitation, the fund will have the option of redeeming the excess in cash or
portfolio securities. In the latter case, the securities are taken at their
value employed in determining the fund's net asset value. A shareholder whose
shares are redeemed in-kind may incur brokerage charges in selling the
securities received in-kind. The selection of such securities will be made in
such manner as the Board of Trustees deems fair and reasonable.
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DISTRIBUTION PLANS
The fund has adopted a plan of distribution pursuant to Rule 12b-1 under the
1940 Act with respect to its Class A shares (the "Class A Plan"), a plan of
distribution with respect to its Class B shares (the "Class B Plan") and a plan
of distribution with respect to its Class C shares (the "Class C Plan")
(together, the "Plans"), pursuant to which certain distribution and service fees
are paid to PFD. The fund has not adopted a plan of distribution with respect to
its Class Y shares. Because of the Plans, long-term shareholders may pay more
than the economic equivalent of the maximum sales charge permitted by the
National Association of Securities Dealers, Inc. (the "NASD") regarding
investment companies.
CLASS A PLAN. Pursuant to the Class A Plan the fund reimburses PFD for its
actual expenditures to finance any activity primarily intended to result in the
sale of Class A shares or to provide services to holders of Class A shares,
provided the categories of expenses for which reimbursement is made are approved
by the Board of Trustees. The 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 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 Class A 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 Class A Plan does not provide for the carryover of reimbursable expenses
beyond 12 months from the time the fund is first invoiced for an expense. The
limited carryover provision in the Class A 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 Class A 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. See Appendix A for the amount, if any, of
carryover of distribution expenses as of the end of the most recent calendar
year.
CLASS B PLAN. Commissions on the sale of Class B shares equal to 3.75% of the
amount invested are paid to broker-dealers who have sales agreements with PFD.
PFD may also advance to dealers the first-year service fee payable under the
Class B Plan at a rate up to 0.25% of the purchase price of such shares. As
compensation for such advance of the service fee, PFD may retain the service fee
paid by the fund with respect to such shares for the first year after purchase.
The Class B Plan provides that the fund shall pay PFD, as the fund's distributor
for its Class B shares, a daily distribution fee equal on an annual basis to
0.75% of the fund's average daily net assets attributable to Class B shares and
will pay PFD a service fee equal to 0.25% of the fund's average daily net assets
attributable to Class B shares (which PFD will in turn pay to securities dealers
which enter into a sales agreement with PFD at a rate of up to 0.25% of the
fund's average daily net assets attributable to Class B shares owned by
investors for whom that securities dealer is the holder or dealer of record).
This service fee is intended to be in consideration of personal services and/or
account maintenance services rendered by the dealer with respect to Class B
shares. Commencing in the 13th month following the purchase of Class B shares,
dealers will become eligible for additional annual service fees of up to 0.25%
of the net asset value of such shares. Dealers may from time to time be required
to meet certain other criteria in order to receive service fees. PFD or its
affiliates are entitled to retain all service fees payable under the
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Class B Plan for which there is no dealer of record or for which
qualification standards have not been met as partial consideration for personal
services and/or account maintenance services performed by PFD or its affiliates
for shareholder accounts.
The purpose of distribution payments to PFD under the Class B Plan is to
compensate PFD for its distribution services with respect to Class B shares of
the fund. PFD pays commissions to dealers as well as expenses of printing
prospectuses and reports used for sales purposes, expenses with respect to the
preparation and printing of sales literature and other distribution-related
expenses, including, without limitation, the cost necessary to provide
distribution-related services, or personnel, travel, office expenses and
equipment. The Class B Plan also provides that PFD will receive all contingent
deferred sales charges ("CDSCs") attributable to Class B shares. When a
broker-dealer sells Class B shares and elects, with PFD's approval, to waive its
right to receive the commission normally paid at the time of the sale, PFD may
cause all or a portion of the distribution fees described above to be paid to
the broker-dealer.
The Class B Plan and underwriting agreement permit PFD to sell its right to
receive distribution fees under the Class B Plan and CDSCs to third parties. PFD
enters into such transactions to finance the payment of commissions to brokers
at the time of sale and other distribution-related expenses. In connection with
such arrangements, the fund has agreed that the distribution fee will not be
terminated or modified (including a modification by change in the rules relating
to the conversion of Class B shares into Class A shares) with respect to Class B
shares (a) issued prior to the date of any termination or modification or (b)
attributable to Class B shares issued through one or a series of exchanges of
shares of another investment company for which PFD acts as principal underwriter
which were initially issued prior to the date of such termination or
modification or (c) issued as a dividend or distribution upon Class B shares
initially issued or attributable to Class B shares issued prior to the date of
any such termination or modification except:
(i) to the extent required by a change in the 1940 Act, the rules or
regulations under the 1940 Act, the Conduct Rules of the NASD or an order of
any court or governmental agency;
(ii) in connection with a Complete Termination (as defined in the
Class B Plan); or
(iii) on a basis, determined by the Board of Trustees acting in good
faith, so long as from and after the effective date of such modification or
termination: neither the fund, the adviser nor certain affiliates pay, directly
or indirectly, a fee to any person for the provision of personal and account
maintenance services (as such terms are used in the Conduct Rules of the NASD)
to the holders of Class B shares of the fund and the termination or modification
of the distribution fee applies with equal effect to all Class B shares
outstanding from time to time.
The Class B Plan also provides that PFD shall be deemed to have performed all
services required to be performed in order to be entitled to receive the
distribution fee, if any, payable with respect to Class B shares sold through
PFD upon the settlement date of the sale of such Class B shares or in the case
of Class B shares issued through one or a series of exchanges of shares of
another investment company for which PFD acts as principal underwriter or issued
as a dividend or distribution upon Class B shares, on the settlement date of the
first sale on a commission basis of a Class B share from which such Class B
share was derived.
In the underwriting agreement, the fund agreed that subsequent to the issuance
of a Class B share, it would not take any action to waive or change any CDSC
(including a change in the rules applicable to conversion of Class B shares into
another class) in respect of such Class B shares, except (i) as provided in the
fund's prospectus or statement of additional information, or (ii) as required by
a change in the
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1940 Act and the rules and regulations thereunder, the Conduct Rules of the
NASD or any order of any court or governmental agency.
CLASS C PLAN. Commissions on the sale of Class C shares of up to 0.75% of the
amount invested in Class C shares are paid to broker-dealers who have sales
agreements with PFD. PFD may also advance to dealers the first-year service fee
payable under the Class C Plan at a rate up to 0.25% of the purchase price of
such shares. As compensation for such advance of the service fee, PFD may retain
the service fee paid by the fund with respect to such shares for the first year
after purchase.
The Class C Plan provides that the fund will pay PFD, as the fund's distributor
for its Class C shares, a distribution fee accrued daily and paid quarterly,
equal on an annual basis to 0.75% of the fund's average daily net assets
attributable to Class C shares and will pay PFD a service fee equal to 0.25% of
the fund's average daily net assets attributable to Class C shares. PFD will in
turn pay to securities dealers which enter into a sales agreement with PFD a
distribution fee and a service fee at rates of up to 0.75% and 0.25%,
respectively, of the fund's average daily net assets attributable to Class C
shares owned by investors for whom that securities dealer is the holder or
dealer of record. The service fee is intended to be in consideration of personal
services and/or account maintenance services rendered by the dealer with respect
to Class C shares. PFD will advance to dealers the first-year service fee at a
rate equal to 0.25% of the amount invested. As compensation therefor, PFD may
retain the service fee paid by the fund with respect to such shares for the
first year after purchase. Commencing in the 13th month following the purchase
of Class C shares, dealers will become eligible for additional annual
distribution fees and service fees of up to 0.75% and 0.25%, respectively, of
the net asset value of such shares. Dealers may from time to time be required to
meet certain other criteria in order to receive service fees. PFD or its
affiliates are entitled to retain all service fees payable under the Class C
Plan for which there is no dealer of record or for which qualification standards
have not been met as partial consideration for personal services and/or account
maintenance services performed by PFD or its affiliates for shareholder
accounts.
The purpose of distribution payments to PFD under the Class C Plan is to
compensate PFD for its distribution services with respect to Class C shares of
the fund. PFD pays commissions to dealers as well as expenses of printing
prospectuses and reports used for sales purposes, expenses with respect to the
preparation and printing of sales literature and other distribution-related
expenses, including, without limitation, the cost necessary to provide
distribution-related services, or personnel, travel, office expenses and
equipment. The Class C Plan also provides that PFD will receive all CDSCs
attributable to Class C shares. When a broker-dealer sells Class C shares and
elects, with PFD's approval, to waive its right to receive the commission
normally paid at the time of the sale, PFD may cause all or a portion of the
distribution fees described above to be paid to the broker-dealer.
GENERAL
In accordance with the terms of each Plan, PFD provides to the fund for review
by the Trustees a quarterly written report of the amounts expended under the
Plan and the purposes for which such expenditures were made. In the Trustees'
quarterly review of the Plans, they will consider the continued appropriateness
and the level of reimbursement or compensation the Plans provide.
No interested person of the fund, nor any Trustee of the fund who is not an
interested person of the fund, has any direct or indirect financial interest in
the operation of the Plans except to the extent that PFD and certain of its
employees may be deemed to have such an interest as a result of receiving a
portion of the amounts expended under the Plans by the fund and except to the
extent certain officers may have an interest in PFD's ultimate parent, PGI.
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Each Plan's adoption, terms, continuance and termination are governed by Rule
12b-1 under the 1940 Act. The Board of Trustees believes that there is a
reasonable likelihood that the Plans will benefit the fund and its current and
future shareholders. The Plans may not be amended to increase materially the
annual percentage limitation of average net assets which may be spent for the
services described therein without approval of the shareholders of the fund
affected thereby, and material amendments of the Plans must also be approved by
the Trustees as provided in Rule 12b-1.
See Appendix A for fund expenses under the Class A Plan, Class B Plan and Class
C Plan and CDSCs paid to PFD for the most recently completed fiscal year.
Upon redemption, Class A shares may be subject to a 1% CDSC, Class B shares are
subject to a CDSC at a rate declining from a maximum 4% of the lower of the cost
or market value of the shares and Class C shares may be subject to a 1% CDSC.
6. SHAREHOLDER SERVICING/TRANSFER AGENT
The fund has contracted with PSC, 60 State Street, Boston, Massachusetts 02109,
to act as shareholder servicing and transfer agent for the fund.
Under the terms of its contract with the fund, PSC services shareholder
accounts, and its duties include: (i) processing sales, redemptions and
exchanges of shares of the fund; (ii) distributing dividends and capital gains
associated with the fund's portfolio; and (iii) maintaining account records and
responding to shareholder inquiries.
PSC receives an annual fee of $33.00 for each Class A, Class B, Class C and
Class Y shareholder account from the fund as compensation for the services
described above. PSC is also reimbursed by the fund for its cash out-of-pocket
expenditures. The fund may compensate entities which have agreed to provide
certain sub-accounting services such as specific transaction processing and
recordkeeping services. Any such payments by the fund would be in lieu of the
per account fee which would otherwise be paid by the fund to PSC.
7. CUSTODIAN
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts 02109, is
the custodian of the fund's assets. The custodian's responsibilities include
safekeeping and controlling the fund's cash and securities, handling the receipt
and delivery of securities, and collecting interest and dividends on the fund's
investments.
8. INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, 225 Franklin Street, Boston, Massachusetts 02110, the
fund's independent public accountants, provides audit services, tax return
review, and assistance and consultation with respect to the preparation of
filings with the SEC.
9. PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on behalf
of the fund by Pioneer pursuant to authority contained in the fund's management
contract. Securities purchased and sold on behalf of the fund normally will be
traded in the over-the counter market on a net basis (I.E. without commission)
through dealers acting for their own account and not as brokers or otherwise
through transactions directly with the issuer of the instrument. The cost of
securities purchased from underwriters
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includes an underwriter's commission or concession, and the prices at which
securities are purchased and sold from and to dealers include a dealer's markup
or markdown. Pioneer normally seeks to deal directly with the primary market
makers unless, in its opinion, better prices are available elsewhere. Some
securities are purchased and sold on an exchange or in over-the-counter
transactions conducted on an agency basis involving a commission. Pioneer seeks
to obtain the best execution on portfolio trades. The price of securities and
any commission rate paid are always factors, but frequently not the only
factors, in judging best execution. In selecting brokers or dealers, Pioneer
considers various relevant factors, including, but not limited to, the size and
type of the transaction; the nature and character of the markets for the
security to be purchased or sold; the execution efficiency, settlement
capability and financial condition of the dealer; the dealer's execution
services rendered on a continuing basis; and the reasonableness of any dealer
spreads. Transactions in non-U.S. equity securities are executed by
broker-dealers in non-U.S. countries in which commission rates may be fixed and,
therefore, are not negotiable (as such rates are in the U.S.).
Pioneer may select broker-dealers that provide brokerage and/or research
services to the fund and/or other investment companies or other accounts managed
by Pioneer. In addition, consistent with Section 28(e) of the Securities
Exchange Act of 1934, as amended, if Pioneer determines in good faith that the
amount of commissions charged by a broker-dealer is reasonable in relation to
the value of the brokerage and research services provided by such broker, the
fund may pay commissions to such broker-dealer in an amount greater than the
amount another firm may charge. Such services may include advice concerning the
value of securities; the advisability of investing in, purchasing or selling
securities; the availability of securities or the purchasers or sellers of
securities; providing stock quotation services, credit rating service
information and comparative fund statistics; furnishing analyses, electronic
information services, manuals and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy, and performance of
accounts and particular investment decisions; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement). Pioneer maintains a listing of broker-dealers who provide such
services on a regular basis. However, because many transactions on behalf of the
fund and other investment companies or accounts managed by Pioneer are placed
with broker-dealers (including broker-dealers on the listing) without regard to
the furnishing of such services, it is not possible to estimate the proportion
of such transactions directed to such dealers solely because such services were
provided. Pioneer believes that no exact dollar value can be calculated for such
services.
The research received from broker-dealers may be useful to Pioneer in rendering
investment management services to the fund as well as other investment companies
or other accounts managed by Pioneer, although not all such research may be
useful to the fund. Conversely, such information provided by brokers or dealers
who have executed transaction orders on behalf of such other accounts may be
useful to Pioneer in carrying out its obligations to the fund. The receipt of
such research has not reduced Pioneer's normal independent research activities;
however, it enables Pioneer to avoid the additional expenses which might
otherwise be incurred if it were to attempt to develop comparable information
through its own staff.
In circumstances where two or more broker-dealers offer comparable prices and
executions, preference may be given to a broker-dealer which has sold shares of
the fund as well as shares of other investment companies managed by Pioneer.
This policy does not imply a commitment to execute all portfolio transactions
through all broker-dealers that sell shares of the fund.
The Pioneer funds have entered into third-party brokerage and/or expense offset
arrangements to reduce the funds' total operating expenses. Pursuant to
third-party brokerage arrangements, certain of the funds that invest primarily
in U.S. equity securities may incur lower custody fees by directing brokerage to
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third-party broker-dealers. Pursuant to expense offset arrangements, the funds
incur lower transfer agency expenses by maintaining their cash balances with the
custodian.
See the table in Appendix A for aggregate brokerage and underwriting commissions
paid by the fund in connection with its portfolio transactions during recently
completed fiscal years. The Board of Trustees periodically reviews Pioneer's
performance of its responsibilities in connection with the placement of
portfolio transactions on behalf of the fund.
10. DESCRIPTION OF SHARES
As an open-end management investment company, the fund continuously offers its
shares to the public and under normal conditions must redeem its shares upon the
demand of any shareholder at the next determined net asset value per share less
any applicable CDSC. See "Sales Charges." When issued and paid for in accordance
with the terms of the prospectus and statement of additional information, shares
of the fund are fully paid and non-assessable. Shares will remain on deposit
with the fund's transfer agent and certificates will not normally be issued. The
fund reserves the right to charge a fee for the issuance of Class A share
certificates; certificates will not be issued for Class B, Class C or Class Y
shares.
The fund's Agreement and Declaration of Trust, dated August 3, 1999 (the
"Declaration"), permits the Board of Trustees to authorize the issuance of an
unlimited number of full and fractional shares of beneficial interest which may
be divided into such separate series as the Trustees may establish. Currently,
the fund consists of only one series. The Trustees may, however, establish
additional series of shares and may divide or combine the shares into a greater
or lesser number of shares without thereby changing the proportionate beneficial
interests in the fund. The Declaration further authorizes the Trustees to
classify or reclassify any series of the shares into one or more classes.
Pursuant thereto, the Trustees have authorized the issuance of Class A shares,
Class B shares, Class C shares and Class Y shares. Each share of a class of the
fund represents an equal proportionate interest in the assets of the fund
allocable to that class. Upon liquidation of the fund, shareholders of each
class of the fund are entitled to share pro rata in the fund's net assets
allocable to such class available for distribution to shareholders. The fund
reserves the right to create and issue additional series or classes of shares,
in which case the shares of each class of a series would participate equally in
the earnings, dividends and assets allocable to that class of the particular
series.
The shares of each class represent an interest in the same portfolio of
investments of the fund. Each class has equal rights as to voting, redemption,
dividends and liquidation, except that each class bears different distribution
and transfer agent fees and may bear other expenses properly attributable to the
particular class. Class A, Class B and Class C shareholders have exclusive
voting rights with respect to the Rule 12b-1 Plans adopted by holders of those
shares in connection with the distribution of shares.
Shareholders are entitled to one vote for each share held and may vote in the
election of Trustees and on other matters submitted to a meeting of
shareholders. Although Trustees are not elected annually by the shareholders,
shareholders have, under certain circumstances, the right to remove one or more
Trustees. The fund is not required, and does not intend, to hold annual
shareholder meetings although special meetings may be called for the purpose of
electing or removing Trustees, changing fundamental investment restrictions or
approving a management contract.
The shares of each series of the fund are entitled to vote separately to approve
investment advisory agreements or changes in investment restrictions, but
shareholders of all series vote together in the election and selection of
Trustees and accountants. Shares of all series of the fund vote together as a
class on matters that affect all series of the fund in substantially the same
manner. As to matters affecting a single series or class, shares of such series
or class will vote separately. No amendment adversely
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affecting the rights of shareholders may be made to the Declaration without
the affirmative vote of a majority of the fund's shares. Shares have no
preemptive or conversion rights except that under certain circumstances Class B
shares may convert to Class A shares.
As a Delaware business trust, the fund's operations are governed by the
Declaration. Generally, Delaware business trust shareholders are not personally
liable for obligations of the Delaware business trust under Delaware law. The
Delaware Business Trust Act (the "Delaware Act") provides that a shareholder of
a Delaware business trust shall be entitled to the same limitation of liability
extended to shareholders of private for-profit corporations. The Declaration
expressly provides that the fund is organized under the Delaware Act and that
the Declaration is to be governed by Delaware law. There is nevertheless a
possibility that a Delaware business trust, such as the fund, might become a
party to an action in another state whose courts refused to apply Delaware law,
in which case the fund's shareholders could become subject to personal
liability.
To guard against this risk, the Declaration (i) contains an express disclaimer
of shareholder liability for acts or obligations of the fund and provides that
notice of such disclaimer may be given in each agreement, obligation or
instrument entered into or executed by the fund or its Trustees, (ii) provides
for the indemnification out of fund property of any shareholders held personally
liable for any obligations of the fund or any series of the fund and (iii)
provides that the fund shall, upon request, assume the defense of any claim made
against any shareholder for any act or obligation of the fund and satisfy any
judgment thereon. Thus, the risk of a shareholder incurring financial loss
beyond his or her investment because of shareholder liability is limited to
circumstances in which all of the following factors are present: (1) a court
refused to apply Delaware law; (2) the liability arose under tort law or, if
not, no contractual limitation of liability was in effect; and (3) the fund
itself would be unable to meet its obligations. In light of Delaware law, the
nature of the fund's business and the nature of its assets, the risk of personal
liability to a fund shareholder is remote.
In addition to the requirements under Delaware law, the Declaration provides
that a shareholder of the fund may bring a derivative action on behalf of the
fund only if the following conditions are met: (a) shareholders eligible to
bring such derivative action under Delaware law who hold at least 10% of the
outstanding shares of the fund, or 10% of the outstanding shares of the series
or class to which such action relates, shall join in the request for the
Trustees to commence such action; and (b) the Trustees must be afforded a
reasonable amount of time to consider such shareholder request and investigate
the basis of such claim. The Trustees shall be entitled to retain counsel or
other advisers in considering the merits of the request and shall require an
undertaking by the shareholders making such request to reimburse the fund for
the expense of any such advisers in the event that the Trustees determine not to
bring such action.
The Declaration further provides that the fund shall indemnify each of its
Trustees and officers against liabilities and expenses reasonably incurred by
them in connection with, or arising out of, any action, suit or proceeding,
threatened against or otherwise involving such Trustee or officer, directly or
indirectly, by reason of being or having been a Trustee or officer of the fund.
The Declaration does not authorize the fund to indemnify any Trustee or officer
against any liability to which he or she would otherwise be subject by reason of
or for willful misfeasance, bad faith, gross negligence or reckless disregard of
such person's duties.
The Declaration provides that any Trustee who is not an "interested person" of
Pioneer shall be considered to be independent for purposes of Delaware law
notwithstanding the fact that such Trustee receives compensation for serving as
a trustee of the fund or other investment companies for which Pioneer acts as
investment adviser.
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11. SALES CHARGES
The fund continuously offers four classes of shares designated as Class A, Class
B, Class C and Class Y shares as described in the prospectus.
CLASS A SHARE SALES CHARGES
You may buy Class A shares at the public offering price, including a sales
charge, as follows:
SALES CHARGE AS A % OF
OFFERING NET AMOUNT DEALER
AMOUNT OF PURCHASE PRICE INVESTED REALLOWANCE
Less than $100,000 4.50 4.71 4.00
$100,000 but less than $250,000 3.50 3.63 3.00
$250,000 but less than $500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.75
$1,000,000 or more 0.00 0.00 see below
The schedule of sales charges above is applicable to purchases of Class A shares
of the fund by (i) an individual, (ii) an individual and his or her spouse and
children under the age of 21 and (iii) a trustee or other fiduciary of a trust
estate or fiduciary account or related trusts or accounts including pension,
profit-sharing and other employee benefit trusts qualified under Sections 401 or
408 of the Code although more than one beneficiary is involved. The sales
charges applicable to a current purchase of Class A shares of the fund by a
person listed above is determined by adding the value of shares to be purchased
to the aggregate value (at the then current offering price) of shares of any of
the other Pioneer mutual funds previously purchased and then owned, provided PFD
is notified by such person or his or her broker-dealer each time a purchase is
made which would qualify. Pioneer mutual funds include all mutual funds for
which PFD serves as principal underwriter. At the sole discretion of PFD,
holdings of funds domiciled outside the U.S., but which are managed by
affiliates of Pioneer, may be included for this purpose.
No sales charge is payable at the time of purchase on investments of $1 million
or more, or for purchases by participants in certain group plans described below
subject to a CDSC of 1% which may be imposed in the event of a redemption of
Class A shares within 12 months of purchase. PFD may, in its discretion, pay a
commission to broker-dealers who initiate and are responsible for such purchases
as follows: 1% on the first $5 million invested; 0.50% on the next $45 million
invested; and 0.25% on the excess over $50 million invested. These commissions
shall not be payable if the purchaser is affiliated with the broker-dealer or if
the purchase represents the reinvestment of a redemption made during the
previous 12 calendar months. Broker-dealers who receive a commission in
connection with Class A share purchases at net asset value by 401(a) or 401(k)
retirement plans with 1,000 or more eligible participants or with at least $10
million in plan assets will be required to return any commissions paid or a pro
rata portion thereof if the retirement plan redeems its shares within 12 months
of purchase. Contingent upon the achievement of certain sales objectives, PFD
may pay to Mutual of Omaha Investor Services, Inc. 50% of PFD's retention of any
sales commission on sales of the fund's Class A shares through such dealer. From
time to time, PFD may elect to reallow the entire initial sales charge to
participating dealers for all Class A sales with respect to which orders are
placed during a particular period. Dealers to whom substantially the entire
sales charge is reallowed may be deemed to be underwriters under the federal
securities laws.
PFD will reallow to A.G. Edwards & Sons, Inc. the entire sales charge for all
Class A shares of any Pioneer mutual fund to IRA accounts if the order is placed
from January 1, 2000 through April 17, 2000. PFD
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will reallow to Citicorp Investment Services the entire sales charge for all
Class A share sales of any Pioneer mutual fund if the order is placed from
March 1, 2000 through June 30, 2000.
LETTER OF INTENT ("LOI"). Reduced sales charges are available for purchases of
$50,000 or more of Class A shares (excluding any reinvestments of dividends and
capital gain distributions) made within a 13-month period pursuant to an LOI
which may be established by completing the Letter of Intent section of the
Account Application. The reduced sales charge will be the charge that would be
applicable to the purchase of the specified amount of Class A shares as if the
shares had all been purchased at the same time. A purchase not made pursuant to
an LOI may be included if the LOI is submitted to PSC within 90 days of such
purchase. You may also obtain the reduced sales charge by including the value
(at current offering price) of all your Class A shares in the fund and all other
Pioneer mutual funds held of record as of the date of your LOI in the amount
used to determine the applicable sales charge for the Class A shares to be
purchased under the LOI. Five percent of your total intended purchase amount
will be held in escrow by PSC, registered in your name, until the terms of the
LOI are fulfilled. When you sign the Account Application, you agree to
irrevocably appoint PSC your attorney-in-fact to surrender for redemption any or
all shares held in escrow with full power of substitution. An LOI is not a
binding obligation upon the investor to purchase, or the fund to sell, the
amount specified in the LOI.
If the total purchases, less redemptions, exceed the amount specified under the
LOI and are in an amount which would qualify for a further quantity discount,
all transactions will be recomputed on the expiration date of the LOI to effect
the lower sales charge. Any difference in the sales charge resulting from such
recomputation will be either delivered to you in cash or invested in additional
shares at the lower sales charge. The dealer, by signing the Account
Application, agrees to return to PFD, as part of such retroactive adjustment,
the excess of the commission previously reallowed or paid to the dealer over
that which is applicable to the actual amount of the total purchases under the
LOI.
If the total purchases, less redemptions, are less than the amount specified
under the LOI, you must remit to PFD any difference between the sales charge on
the amount actually purchased and the amount originally specified in the LOI.
When the difference is paid, the shares held in escrow will be deposited to your
account. If you do not pay the difference in sales charge within 20 days after
written request from PFD or your dealer, PSC, after receiving instructions from
PFD, will redeem the appropriate number of shares held in escrow to realize the
difference and release any excess.
CLASS B SHARES
You may buy Class B shares at the net asset value per share next computed after
receipt of a purchase order without the imposition of an initial sales charge;
however, Class B shares redeemed within six years of purchase will be subject to
a CDSC at the rates shown in the table below. The charge will be assessed on the
amount equal to the lesser of the current market value or the original purchase
cost of the shares being redeemed. No CDSC will be imposed on increases in
account value above the initial purchase price, including shares derived from
the reinvestment of dividends or capital gain distributions.
The amount of the CDSC, if any, will vary depending on the number of years from
the time of purchase until the time of redemption of Class B shares. For the
purpose of determining the number of years from the time of any purchase after
September 30, 1998, all payments during a month will be aggregated and deemed to
have been made on the first day of that month. For the purpose of determining
the number of years from the time of any purchase made prior to October 1, 1998,
all payments during a quarter will be aggregated and deemed to have been made on
the first day of that quarter. In processing redemptions of Class B shares, the
fund will first redeem shares not subject to any CDSC and then shares held
longest during the six-year period. As a result, you will pay the lowest
possible CDSC.
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The CDSC for Class B shares subject to a CDSC upon redemption will be determined
as follows:
CDSC AS A % OF DOLLAR
YEAR SINCE PURCHASE AMOUNT SUBJECT TO CDSC
First 4.0
Second 4.0
Third 3.0
Fourth 3.0
Fifth 2.0
Sixth 1.0
Seventh and thereafter 0.0
Proceeds from the CDSC are paid to PFD and are used in whole or in part to
defray PFD's expenses related to providing distribution-related services to the
fund in connection with the sale of Class B shares, including the payment of
compensation to broker-dealers.
Class B shares will automatically convert into Class A shares at the beginning
of the calendar month (or the calendar quarter for purchases made prior to
October 1, 1998) that is eight years after the purchase date, except as noted
below. Class B shares acquired by exchange from Class B shares of another
Pioneer mutual fund will convert into Class A shares based on the date of the
initial purchase and the applicable CDSC. Class B shares acquired through
reinvestment of distributions will convert into Class A shares based on the date
of the initial purchase to which such shares relate. For this purpose, Class B
shares acquired through reinvestment of distributions will be attributed to
particular purchases of Class B shares in accordance with such procedures as the
Trustees may determine from time to time. The conversion of Class B shares to
Class A shares is subject to the continuing availability of a ruling from the
Internal Revenue Service (the "IRS") or an opinion of counsel that such
conversions will not constitute taxable events for federal tax purposes. The
conversion of Class B shares to Class A shares will not occur if such ruling or
opinion is not available and, therefore, Class B shares would continue to be
subject to higher expenses than Class A shares for an indeterminate period.
CLASS C SHARES
You may buy Class C shares at net asset value per share next computed after
receipt of a purchase order without the imposition of an initial sales charge;
however, Class C shares redeemed within one year of purchase will be subject to
a CDSC of 1%. The charge will be assessed on the amount equal to the lesser of
the current market value or the original purchase cost of the shares being
redeemed. No CDSC will be imposed on increases in account value above the
initial purchase price, including shares derived from the reinvestment of
dividends or capital gain distributions. Class C shares do not convert to any
other class of fund shares.
For the purpose of determining the time of any purchase after September 30,
1998, all payments during a month will be aggregated and deemed to have been
made on the first day of that month. For the purpose of determining the time of
any purchase made prior to October 1, 1998, all payments during a calendar
quarter will be aggregated and deemed to have been made on the first day of that
quarter. In processing redemptions of Class C shares, the fund will first redeem
shares not subject to any CDSC and then shares held for the shortest period of
time during the one-year period. As a result, you will pay the lowest possible
CDSC.
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Proceeds from the CDSC are paid to PFD and are used in whole or in part to
defray PFD's expenses related to providing distribution-related services to the
fund in connection with the sale of Class C shares, including the payment of
compensation to broker-dealers.
12. REDEEMING SHARES
Redemptions may be suspended or payment postponed during any period in which any
of the following conditions exist: the Exchange is closed or trading on the
Exchange is restricted; an emergency exists as a result of which disposal by the
fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the fund to fairly determine the value of the net
assets of its portfolio; or the SEC, by order, so permits.
Redemptions and repurchases are taxable transactions for shareholders that are
subject to U.S. federal income tax. The net asset value per share received upon
redemption or repurchase may be more or less than the cost of shares to an
investor, depending on the market value of the portfolio at the time of
redemption or repurchase.
SYSTEMATIC WITHDRAWAL PLAN(S) ("SWP") (CLASS A, CLASS B AND CLASS C SHARES). A
SWP is designed to provide a convenient method of receiving fixed payments at
regular intervals from fund share accounts having a total value of not less than
$10,000. You must also be reinvesting all dividends and capital gain
distributions to use the SWP option.
Periodic payments of $50 or more will be deposited monthly, quarterly,
semiannually or annually directly into a bank account designated by the
applicant or will be sent by check to the applicant, or any person designated by
the applicant. Payments can be made either by check or electronic funds transfer
to a bank account designated by you. Class B accounts must meet the minimum
initial investment requirement prior to establishing a SWP. Withdrawals from
Class B and Class C share accounts are limited to 10% of the value of the
account at the time the SWP is established. See "Qualifying for a reduced sales
charge" in the prospectus. If you direct that withdrawal payments be paid to
another person, want to change the bank where payments are sent or designate an
address that is different from the account's address of record after you have
opened your account, a signature guarantee must accompany your instructions.
Withdrawals under the SWP are redemptions that may have tax consequences for
you.
Purchases of Class A shares of the fund at a time when you have a SWP in effect
may result in the payment of unnecessary sales charges and may, therefore, be
disadvantageous. SWP redemptions reduce and may ultimately exhaust the number of
shares in your account. In addition, the amounts received by a shareholder
cannot be considered as yield or income on his or her investment because part of
such payments may be a return of his or her investment.
A SWP may be terminated at any time (1) by written notice to PSC or from PSC to
the shareholder; (2) upon receipt by PSC of appropriate evidence of the
shareholder's death; or (3) when all shares in the shareholder's account have
been redeemed.
You may obtain additional information by calling PSC at 1-800-225-6292.
REINSTATEMENT PRIVILEGE (CLASS A SHARES). If you redeem all or part of your
Class A shares of the fund, you may reinvest all or part of the redemption
proceeds without a sales charge in Class A shares of the fund if you send a
written request to PSC not more than 90 days after your shares were redeemed.
Your redemption proceeds will be reinvested at the next determined net asset
value of the Class A shares of the fund after receipt of the written request for
reinstatement. You may realize a gain or loss for federal income tax purposes as
a result of the redemption, and special tax rules may apply if a reinstatement
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occurs. For example, if a redemption resulted in a loss and an investment is
made in shares of the fund within 30 days before or after the redemption, you
may not be able to recognize the loss for federal income tax purposes. Subject
to the provisions outlined in the prospectus, you may also reinvest in Class A
shares of other Pioneer mutual funds; in this case you must meet the minimum
investment requirements for each fund you enter.
The 90-day reinstatement period may be extended by PFD for periods of up to one
year for shareholders living in areas that have experienced a natural disaster,
such as a flood, hurricane, tornado or earthquake.
13. TELEPHONE TRANSACTIONS
You may purchase, exchange or sell Class A, Class B or Class C shares by
telephone. Class Y shares may not be purchased by telephone. See the prospectus
for more information. For personal assistance, call 1-800-225-6292 between 8:00
a.m. and 9:00 p.m. (Class Y account holders should contact Pioneer's Group Plans
Department at 1-888-294-4480 between 9:00 a.m. and 6:00 p.m.) Eastern time on
weekdays. Computer-assisted transactions may be available to shareholders who
have prerecorded certain bank information (see "FactFoneSM"). YOU ARE STRONGLY
URGED TO CONSULT WITH YOUR INVESTMENT PROFESSIONAL PRIOR TO REQUESTING ANY
TELEPHONE TRANSACTION.
To confirm that each transaction instruction received by telephone is genuine,
the fund will record each telephone transaction, require the caller to provide
the personal identification number ("PIN") for the account and send you a
written confirmation of each telephone transaction. Different procedures may
apply to accounts that are registered to non-U.S. citizens or that are held in
the name of an institution or in the name of an investment broker-dealer or
other third party. If reasonable procedures, such as those described above, are
not followed, the fund may be liable for any loss due to unauthorized or
fraudulent instructions. The fund may implement other procedures from time to
time. In all other cases, neither the fund, PSC nor PFD will be responsible for
the authenticity of instructions received by telephone; therefore, you bear the
risk of loss for unauthorized or fraudulent telephone transactions.
During times of economic turmoil or market volatility or as a result of severe
weather or a natural disaster, it may be difficult to contact the fund by
telephone to institute a purchase, exchange or redemption. You should
communicate with the fund in writing if you are unable to reach the fund by
telephone.
FACTFONESM. FactFoneSM is an automated inquiry and telephone transaction system
available to Pioneer mutual fund shareholders by dialing 1-800-225-4321.
FactFoneSM allows shareholder access to current information on Pioneer mutual
fund accounts and to the prices and yields of all publicly available Pioneer
mutual funds. In addition, you may use FactFoneSM to make computer-assisted
telephone purchases, exchanges or redemptions from your Pioneer mutual fund
accounts, access your account balances and last three transactions and order a
duplicate statement if you have activated your PIN. Telephone purchases or
redemptions require the establishment of a bank account of record.
Computer-assisted Class Y share telephone purchases, exchanges and redemptions
and certain other FactFoneSM features for Class Y shareholders are not currently
available through FactFoneSM. YOU ARE STRONGLY URGED TO CONSULT WITH YOUR
INVESTMENT PROFESSIONAL PRIOR TO REQUESTING ANY TELEPHONE TRANSACTION.
Shareholders whose accounts are registered in the name of a broker-dealer or
other third party may not be able to use FactFoneSM. Call PSC for assistance.
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FactFoneSM allows shareholders to hear the following recorded fund information:
o net asset value prices for all Pioneer mutual funds;
o annualized 30-day yields on Pioneer's fixed income funds;
o annualized 7-day yields and 7-day effective (compound) yields for
Pioneer's money market fund; and
o dividends and capital gain distributions on all Pioneer mutual funds.
Yields are calculated in accordance with SEC mandated standard formulas.
All performance numbers communicated through FactFoneSM represent past
performance, and figures include the maximum applicable sales charge. A
shareholder's actual yield and total return will vary with changing market
conditions. The value of Class A, Class B, Class C and Class Y shares (except
for Pioneer Cash Reserves Fund, which seeks to maintain a stable $1.00 share
price) will also vary, and such shares may be worth more or less at redemption
than their original cost.
14. PRICING OF SHARES
The net asset value per share of each class of the fund is determined as of the
close of regular trading on the Exchange (normally 4:00 p.m. Eastern time) on
each day on which the Exchange is open for trading. As of the date of this
statement of additional information, the Exchange is open for trading every
weekday except for the following holidays: New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the fund is also determined on any other day on which the level of
trading in its portfolio securities is sufficiently high that the current net
asset value per share might be materially affected by changes in the value of
its portfolio securities. The fund is not required to determine its net asset
value per share on any day on which no purchase orders in good order for fund
shares are received and no shares are tendered and accepted for redemption.
Ordinarily, investments in debt securities are valued on the basis of
information furnished by a pricing service which utilizes primarily a matrix
system (which reflects such factors as security prices, yields, maturities and
ratings), supplemented by dealer and exchange quotations, to recommend
valuations for normal institutional-sized trading units of debt securities.
Securities are valued at the last sale price on the principal exchange or market
where they are traded. Securities which have not traded on the date of valuation
or securities for which sales prices are not generally reported are valued at
the mean between the current bid and asked prices. Securities quoted in non-U.S.
currencies are converted to U.S. dollars utilizing non-U.S. exchange rates
employed by the fund's independent pricing services. Generally, trading in
non-U.S. securities is substantially completed each day at various times prior
to the close of regular trading on the Exchange. The values of such securities
used in computing the net asset value of the fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of regular trading on the Exchange. Occasionally, events which
affect the values of such securities and such exchange rates may occur between
the times at which they are determined and the close of regular trading on the
Exchange and will therefore not be reflected in the computation of the fund's
net asset value. If events materially affecting the value of such securities
occur during such period, then these securities may be valued at their fair
value as determined in good faith by the Trustees. All assets of the fund for
which there is no other readily available valuation method are valued at their
fair value as determined in good faith by the Trustees, although the actual
computations may be made by persons acting pursuant to the direction of the
Board of Trustees.
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The net asset value per share of each class of the fund is computed by taking
the value of all of the fund's assets attributable to a class, less the fund's
liabilities attributable to that class, and dividing the result by the number of
outstanding shares of that class. For purposes of determining net asset value,
expenses of the classes of the fund are accrued daily and taken into account.
The fund's maximum offering price per Class A share is determined by adding the
maximum sales charge to the net asset value per Class A share. Class B, Class C
and Class Y shares are offered at net asset value without the imposition of an
initial sales charge (Class B and Class C shares may be subject to a CDSC).
15. TAX STATUS
The fund intends to elect to be treated and to qualify each year as a "regulated
investment company" under Subchapter M of the Code so that it will not pay U.S.
federal income tax on income and capital gains distributed to shareholders. If
the fund did not qualify as a regulated investment company, it would be treated
as a U.S. corporation subject to federal income tax. Under the Code, the fund
will be subject to a nondeductible 4% federal excise tax on a portion of its
undistributed ordinary income and capital gains if it fails to meet certain
distribution requirements with respect to each calendar year. The fund intends
to make distributions in a timely manner and accordingly does not expect to be
subject to the excise tax.
The fund declares a dividend from any net investment income each business day.
Dividends are normally paid on the last business day of the month or shortly
thereafter. The fund distributes net short- and long-term capital gains, if any,
in November. Dividends from income and/or capital gains may also be paid at such
other times as may be necessary for the fund to avoid federal income or excise
tax.
In order to qualify as a regulated investment company under Subchapter M, the
fund must, among other things, derive at least 90% of its gross income for each
taxable year from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock, securities or non-U.S.
currencies, or other income (including gains from options, futures and forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "90% income test") and satisfy certain annual
distribution and quarterly diversification requirements. For purposes of the 90%
income test, the character of income earned by certain entities in which the
fund invests that are not treated as corporations (e.g., partnerships or trusts)
for U.S. tax purposes will generally pass through to the fund. Consequently, the
fund may be required to limit its equity investments in such entities that earn
fee income, rental income or other nonqualifying income.
Unless shareholders specify otherwise, all distributions will be automatically
reinvested in additional full and fractional shares of the fund. For U.S.
federal income tax purposes, all dividends are taxable whether a shareholder
takes them in cash or reinvests them in additional shares of the fund. Dividends
from investment company taxable income, which includes net investment income,
net short-term capital gain in excess of net long-term capital loss and certain
net non-U.S. exchange gains, are taxable as ordinary income. Dividends from net
long-term capital gain in excess of net short-term capital loss ("net capital
gain"), if any, are taxable to the fund's shareholders as long-term capital
gains for federal income tax purposes without regard to the length of time the
shareholder has held shares of the fund. The U.S. federal income tax status of
all distributions will be reported to shareholders annually.
Any dividend declared by the fund as of a record date in October, November or
December and paid during the following January will be treated for U.S. federal
income tax purposes as received by shareholders on December 31 of the calendar
year in which it is declared.
Non-U.S. exchange gains and losses realized by the fund in connection with
certain transactions involving non-U.S. currency-denominated debt securities,
certain options and futures contracts relating to non-U.S.
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currency, non-U.S. currency forward contracts, non-U.S. currencies, or
payables or receivables denominated in a non-U.S. currency are subject to
Section 988 of the Code, which generally causes such gains and losses to be
treated as ordinary income and losses and may affect the amount, timing and
character of distributions to shareholders. Under future regulations, any such
transactions that are not directly related to the fund's investments in stock or
securities (or its options contracts or futures contracts with respect to stock
or securities) may have to be limited in order to enable the fund to satisfy the
90% income test. If the net non-U.S. exchange loss for a year were to exceed the
fund's investment company taxable income (computed without regard to such loss),
the resulting ordinary loss for such year would not be deductible by the fund or
its shareholders in future years.
If the fund acquires any equity interest (under future regulations, generally
including not only stock but also an option to acquire stock such as is inherent
in a convertible bond) in certain non-U.S. corporations that receive at least
75% of their annual gross income from passive sources (such as interest,
dividends, certain rents and royalties, or capital gains) or hold at least 50%
of their assets in investments producing such passive income ("passive foreign
investment companies"), the fund could be subject to federal income tax and
additional interest charges on "excess distributions" received from such
companies or on gain from the sale of stock in such companies, even if all
income or gain actually received by the fund is timely distributed to its
shareholders. The fund would not be able to pass through to its shareholders any
credit or deduction for such a tax. An election may generally be available that
would ameliorate these adverse tax consequences, but any such election could
require the fund to recognize taxable income or gain (subject to tax
distribution requirements) without the concurrent receipt of cash. These
investments could also result in the treatment of associated capital gains as
ordinary income. The fund may limit and/or manage its holdings in passive
foreign investment companies to limit its tax liability or maximize its return
from these investments.
The fund may invest to a significant extent in debt obligations that are in the
lowest rating categories or are unrated, including debt obligations of issuers
not currently paying interest or who are in default. Investments in debt
obligations that are at risk of or in default present special tax issues for the
fund. Tax rules are not entirely clear about issues such as when the fund may
cease to accrue interest, original issue discount or market discount, when and
to what extent deductions may be taken for bad debts or worthless securities,
how payments received on obligations in default should be allocated between
principal and income and whether exchanges of debt obligations in a workout
context are taxable. These and other issues will be addressed by the fund, in
the event it invests in such securities, in order to seek to ensure that it
distributes sufficient income to preserve its status as a regulated investment
company and does not become subject to U.S. federal income or excise tax.
If the fund invests in certain pay-in-kind securities, zero coupon securities,
deferred interest securities or, in general, any other securities with original
issue discount (or with market discount if the fund elects to include market
discount in income currently), the fund must accrue income on such investments
for each taxable year, which generally will be prior to the receipt of the
corresponding cash payments. However, the fund must distribute, at least
annually, all or substantially all of its net income, including such accrued
income, to shareholders to qualify as a regulated investment company under the
Code and avoid U.S. federal income and excise taxes. Therefore, the fund may
have to dispose of its portfolio securities under disadvantageous circumstances
to generate cash, or may have to leverage itself by borrowing the cash, to
satisfy distribution requirements.
For U.S. federal income tax purposes, the fund is permitted to carry forward a
net capital loss for any year to offset its capital gains, if any, during the
eight years following the year of the loss. To the extent subsequent capital
gains are offset by such losses, they would not result in federal income tax
liability to the fund and are not expected to be distributed as such to
shareholders. See Appendix A for the fund's available capital loss
carryforwards.
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At the time of an investor's purchase of fund shares, a portion of the purchase
price may be attributable to realized or unrealized appreciation in the fund's
portfolio or undistributed taxable income of the fund. Consequently, subsequent
distributions by the fund with respect to these shares from such appreciation or
income may be taxable to such investor even if the net asset value of the
investor's shares is, as a result of the distributions, reduced below the
investor's cost for such shares and the distributions economically represent a
return of a portion of the investment.
Redemptions and exchanges are taxable events for shareholders that are subject
to tax. Shareholders should consult their own tax advisers with reference to
their individual circumstances to determine whether any particular transaction
in fund shares is properly treated as a sale for tax purposes, as the following
discussion assumes, and the tax treatment of any gains or losses recognized in
such transactions. Any loss realized by a shareholder upon the redemption,
exchange or other disposition of shares with a tax holding period of six months
or less will be treated as a long-term capital loss to the extent of any amounts
treated as distributions of long-term capital gain with respect to such shares.
In addition, if Class A shares redeemed or exchanged have been held for less
than 91 days, (1) in the case of a reinvestment in the fund or another mutual
fund at net asset value pursuant to the reinstatement privilege, or (2) in the
case of an exchange, all or a portion of the sales charge paid on such shares is
not included in their tax basis under the Code, to the extent a sales charge
that would otherwise apply to the shares received is reduced pursuant to the
reinstatement or exchange privilege. In either case, the portion of the sales
charge not included in the tax basis of the shares redeemed or surrendered in an
exchange is included in the tax basis of the shares acquired in the reinvestment
or exchange. Losses on redemptions or other dispositions of shares may be
disallowed under "wash sale" rules in the event of other investments in the fund
(including those made pursuant to reinvestment of dividends and/or capital gain
distributions) within a period of 61 days beginning 30 days before and ending 30
days after a redemption or other disposition of shares. In such a case, the
disallowed portion of any loss generally would be included in the federal tax
basis of the shares acquired in the other investments.
Options written or purchased and futures contracts entered into by the fund on
certain securities, indices and non-U.S. currencies, as well as certain forward
foreign currency contracts, may cause the fund to recognize gains or losses from
marking-to-market even though such options may not have lapsed, been closed out,
or exercised, or such futures or forward contracts may not have been performed
or closed out. The tax rules applicable to these contracts may affect the
characterization of some capital gains and losses realized by the fund as
long-term or short-term. Certain options, futures and forward contracts relating
to non-U.S. currency may be subject to Section 988, as described above, and
accordingly may produce ordinary income or loss. Additionally, the fund may be
required to recognize gain if an option, futures contract, forward contract,
short sale or other transaction that is not subject to the mark-to-market rules
is treated as a "constructive sale" of an "appreciated financial position" held
by the fund under Section 1259 of the Code. Any net mark-to-market gains and/or
gains from constructive sales may also have to be distributed to satisfy the
distribution requirements referred to above even though the fund may receive no
corresponding cash amounts, possibly requiring the disposition of portfolio
securities or borrowing to obtain the necessary cash. Losses on certain options,
futures or forward contracts and/or offsetting positions (portfolio securities
or other positions with respect to which the fund's risk of loss is
substantially diminished by one or more options, futures or forward contracts)
may also be deferred under the tax straddle rules of the Code, which may also
affect the characterization of capital gains or losses from straddle positions
and certain successor positions as long-term or short-term. Certain tax
elections may be available that would enable the fund to ameliorate some adverse
effects of the tax rules described in this paragraph. The tax rules applicable
to options, futures, forward contracts and straddles may affect the amount,
timing and character of the fund's income and gains or losses and hence of its
distributions to shareholders.
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Dividends received by the fund from U.S. corporations in respect of any share of
stock with a tax holding period of at least 46 days (91 days in the case of
certain preferred stock) extending before and after each dividend held in an
unleveraged position and distributed and designated by the fund (except for
capital gain dividends received from a regulated investment company) may be
eligible for the 70% dividends-received deduction generally available to
corporations under the Code. Any corporate shareholder should consult its tax
adviser regarding the possibility that its tax basis in its shares may be
reduced, for federal income tax purposes, by reason of "extraordinary dividends"
received with respect to the shares and, to the extent such basis would be
reduced below zero, current recognition of income may be required. In order to
qualify for the deduction, corporate shareholders must meet the minimum holding
period requirement stated above with respect to their fund shares, taking into
account any holding period reductions from certain hedging or other transactions
or positions that diminish their risk of loss with respect to their fund shares,
and, if they borrow to acquire or otherwise incur debt attributable to fund
shares, they may be denied a portion of the dividends-received deduction. The
entire dividend, including the otherwise deductible amount, will be included in
determining the excess, if any, of a corporation's adjusted current earnings
over its alternative minimum taxable income, which may increase a corporation's
alternative minimum tax liability.
The fund may be subject to withholding and other taxes imposed by countries
other than the U.S., including taxes on interest, dividends and capital gains
with respect to its investments in those countries, which would, if imposed,
reduce the yield on or return from those investments. Tax conventions between
certain countries and the U.S. may reduce or eliminate such taxes in some cases.
The fund does not expect to satisfy the requirements for passing through to its
shareholders their pro rata shares of qualified non-U.S. taxes paid by the fund,
with the result that shareholders will not include such taxes in their gross
incomes and will not be entitled to a tax deduction or credit for such taxes on
their own tax returns.
A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent the fund's distributions are
derived from interest on (or, in the case of intangible property taxes, the
value of its assets is attributable to) certain U.S. government obligations,
provided, in some states, that certain thresholds for holdings of such
obligations and/or reporting requirements are satisfied. The fund will not seek
to satisfy any threshold or reporting requirements that may apply in particular
taxing jurisdictions, although the fund may in its sole discretion provide
relevant information to shareholders.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions and certain
prohibited transactions, is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
Federal law requires that the fund withhold (as "backup withholding") 31% of
reportable payments, including dividends, capital gain distributions and the
proceeds of redemptions (and exchanges) or repurchases of fund shares paid to
shareholders who have not complied with IRS regulations. In order to avoid this
withholding requirement, shareholders must certify on their Account
Applications, or on separate IRS Forms W-9, that the Social Security Number or
other Taxpayer Identification Number they provide is their correct number and
that they are not currently subject to backup withholding, or that they are
exempt from backup withholding. The fund may nevertheless be required to
withhold if it receives notice from the IRS or a broker that the number provided
is incorrect or backup withholding is applicable as a result of previous
underreporting of interest or dividend income.
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If, as anticipated, the fund qualifies as a regulated investment company under
the Code, it will not be required to pay any Massachusetts income, corporate
excise or franchise taxes or any Delaware corporation income tax.
The description of certain federal tax provisions above relates only to
U.S. federal income tax consequences for shareholders who are U.S. persons,
i.e., U.S. citizens or residents or U.S. corporations, partnerships, trusts or
estates, and who are subject to U.S. federal income tax. This description does
not address the special tax rules that may be applicable to particular types of
investors, such as financial institutions, insurance companies, securities
dealers, or tax-exempt or tax-deferred plans, accounts or entities. Investors
other than U.S. persons may be subject to different U.S. tax treatment,
including a non-resident alien U.S. withholding tax at the rate of 30% or at a
lower treaty rate on amounts treated as ordinary dividends from the fund and,
unless an effective IRS Form W-8, Form W-8BEN or other authorized withholding
certificate is on file, to 31% backup withholding on certain other payments from
the fund. Shareholders should consult their own tax advisers on these matters
and on state, local and other applicable tax laws.
16. INVESTMENT RESULTS
QUOTATIONS, COMPARISONS AND GENERAL INFORMATION
From time to time, in advertisements, in sales literature or in reports to
shareholders, the past performance of the fund may be illustrated and/or
compared with that of other mutual funds with similar investment objectives and
to stock or other relevant indices. For example, total return of the fund's
classes may be compared to averages or rankings prepared by Lipper, Inc., a
widely recognized independent service which monitors mutual fund performance;
the Merrill Lynch High Yield Master II Index and the Merrill Lynch Index of
Convertible Bonds (Speculative Quality), recognized measures of the performance
of high yield securities; the S&P 500, an index of unmanaged groups of common
stock; or any other appropriate index.
In addition, the performance of the classes of the fund may be compared to
alternative investment or savings vehicles and/or to indices or indicators of
economic activity, e.g., inflation or interest rates. The fund may also include
securities industry or comparative performance information generally and in
advertising or materials marketing the fund's shares. Performance rankings and
listings reported in newspapers or national business and financial publications,
such as BARRON'S, BUSINESS WEEK, CONSUMERS DIGEST, CONSUMER REPORTS, FINANCIAL
WORLD, FORBES, FORTUNE, INVESTORS BUSINESS DAILY, KIPLINGER'S PERSONAL FINANCE
MAGAZINE, MONEY MAGAZINE, NEW YORK TIMES, SMART MONEY, USA TODAY, U.S. NEWS AND
WORLD REPORT, THE WALL STREET JOURNAL and WORTH, may also be cited (if the fund
is listed in any such publication) or used for comparison, as well as
performance listings and rankings from various other sources including Bloomberg
Financial Markets, CDA/Wiesenberger, Donoghue's Mutual Fund Almanac, Ibbotson
Associates, Investment Company Data, Inc., Johnson's Charts, Kanon Bloch Carre
and Co., Lipper, Inc., Micropal, Inc., Morningstar, Inc., Schabacker Investment
Management and Towers Data Systems, Inc.
In addition, from time to time quotations from articles from financial
publications such as those listed above may be used in advertisements, in sales
literature or in reports to shareholders of the fund.
The fund may also present, from time to time, historical information depicting
the value of a hypothetical account in one or more classes of the fund since
inception.
In presenting investment results, the fund may also include references to
certain financial planning concepts, including (a) an investor's need to
evaluate his financial assets and obligations to determine
47
<PAGE>
how much to invest; (b) his need to analyze the objectives of various
investments to determine where to invest; and (c) his need to analyze his time
frame for future capital needs to determine how long to invest. The investor
controls these three factors, all of which affect the use of investments in
building assets.
STANDARDIZED YIELD QUOTATIONS
The yield of a class is computed by dividing the class' net investment income
per share during a base period of 30 days, or one month, by the maximum offering
price per share of the class on the last day of such base period in accordance
with the following formula:
a-b
YIELD = 2[ ( ----- +1)6-1]
cd
Where:
a = interest earned during the period
b = net expenses accrued for the period
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the period
For purposes of calculating interest earned on debt obligations as provided in
item "a" above:
(i) The yield to maturity of each obligation held by the fund is
computed based on the market value of the obligation (including actual accrued
interest, if any) at the close of business each day during the 30-day base
period, or, with respect to obligations purchased during the month, the purchase
price (plus actual accrued interest, if any) on settlement date, and with
respect to obligations sold during the month the sale price (plus actual accrued
interest, if any) between the trade and settlement dates.
(ii) The yield to maturity of each obligation is then divided by 360
and the resulting quotient is multiplied by the market value of the obligation
(including actual accrued interest, if any) to determine the interest income on
the obligation for each day. The yield to maturity calculation has been made on
each obligation during the 30 day base period.
(iii) Interest earned on all debt obligations during the 30-day or one
month period is then totaled.
(iv) The maturity of an obligation with a call provision(s) is the next
call date on which the obligation reasonably may be expected to be called or, if
none, the maturity date.
With respect to the treatment of discount and premium on mortgage- or other
receivables-backed obligations which are expected to be subject to monthly
payments of principal and interest ("pay downs"), the fund accounts for gain or
loss attributable to actual monthly pay downs as an increase or decrease to
interest income during the period. In addition, the fund may elect (i) to
amortize the discount or premium remaining on a security, based on the cost of
the security, to the weighted average maturity date, if such information is
available, or to the remaining term of the security, if the weighted average
maturity date is not available, or (ii) not to amortize the remaining discount
or premium on a security.
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For purposes of computing yield, interest income is recognized by accruing 1/360
of the stated interest rate of each obligation in the fund's portfolio each day
that the obligation is in the portfolio. Expenses of Class A and Class B accrued
during any base period, if any, pursuant to the respective Distribution Plans
are included among the expenses accrued during the base period.
See Appendix A for the standardized yield quotation for each class of fund
shares as of the most recently completed fiscal year.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS
One of the primary methods used to measure the performance of a class of the
fund is "total return." Total return will normally represent the percentage
change in value of an account, or of a hypothetical investment in a class of the
fund, over any period up to the lifetime of that class of the fund. Total return
calculations will usually assume the reinvestment of all dividends and capital
gain distributions and will be expressed as a percentage increase or decrease
from an initial value for the entire period or for one or more specified periods
within the entire period. Total return percentages for periods of less than one
year will usually be annualized; total return percentages for periods longer
than one year will usually be accompanied by total return percentages for each
year within the period and/or by the average annual compounded total return for
the period. The income and capital components of a given return may be separated
and portrayed in a variety of ways in order to illustrate their relative
significance. Performance may also be portrayed in terms of cash or investment
values without percentages. Past performance cannot guarantee any particular
future result.
The fund's average annual total return quotations for each of its classes as
that information may appear in the fund's prospectus, this statement of
additional information or in advertising are calculated by standard methods
prescribed by the SEC.
Average annual total return quotations for each class of shares are computed by
finding the average annual compounded rates of return that would cause a
hypothetical investment in the class made on the first day of a designated
period (assuming all dividends and distributions are reinvested) to equal the
ending redeemable value of such hypothetical investment on the last day of the
designated period in accordance with the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial payment of $1,000, less the
maximum sales load of $57.50 for Class A shares or
the deduction of the CDSC for Class B and Class C
shares at the end of the period; for Class Y shares,
no sales load or CDSC applies
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000
initial payment made at the beginning of the designated
period (or fractional portion thereof)
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For purposes of the above computation, it is assumed that all dividends and
distributions made by the fund are reinvested at net asset value during the
designated period. The average annual total return quotation is determined to
the nearest 1/100 of 1%.
In determining the average annual total return (calculated as provided above),
recurring fees, if any, that are charged to all shareholder accounts of a
particular class of shares are taken into consideration. For any account fees
that vary with the size of the account, the account fee used for purposes of the
above computation is assumed to be the fee that would be charged to the class'
mean account size.
See Appendix A for the annual total returns for each class of fund shares as of
the most recently completed fiscal year.
17. FINANCIAL STATEMENTS
Third Avenue High Yield Fund's audited financial statements for the period ended
October 31, 1999 are included herein. The financial statements, including the
financial highlights in the fund's Class A, Class B and Class C shares
prospectus, have been audited by PricewaterhouseCoopers LLP, independent
accountants, as indicated in their report with respect to those financial
statements and are included in reliance upon the authority of
PricewaterhouseCoopers LLP as experts in accounting and auditing in giving their
report.
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18. APPENDIX A - ANNUAL FEE, EXPENSE AND OTHER INFORMATION
PORTFOLIO TURNOVER
The fund's annual portfolio turnover rate was 64% for the fiscal period ended
October 31, 1999.
SHARE OWNERSHIP
Not applicable.
<TABLE>
<CAPTION>
COMPENSATION OF OFFICERS AND TRUSTEES
The following table sets forth certain information with respect to the
compensation of each Trustee of the fund.
PENSION OR RETIREMENT
BENEFITS ACCRUED AS TOTAL COMPENSATION FROM
AGGREGATE PART OF FUND EXPENSES OTHER PIONEER MUTUAL
COMPENSATION FROM FUNDS**
NAME OF TRUSTEE FUND*
<S> <C> <C> <C>
John F. Cogan, Jr.*** $ 750.00 $0 $18,000.00
Mary K. Bush 1,806.00 0 93,500.00
Richard H. Egdahl, M.D. 1,806.00 0 95,500.00
Margaret B.W. Graham 1,812.00 0 102,000.00
John W. Kendrick 1,456.00 0 82,500.00
Marguerite A. Piret 1,906.00 0 116,750.00
David D. Tripple*** 750.00 0 18,000.00
Stephen K. West 1,731.00 0 108,250.00
John Winthrop 1,906.00 0 98,400.00
-------- - ---------
$13,923.00 $0 $732,900.00
- ------------------------
* Estimated for the fiscal year ended October 31, 2000.
** For the calendar year ended December 31, 1999.
*** Under the management contract, Pioneer reimburses the fund for any
Trustees fees paid by the fund.
</TABLE>
APPROXIMATE MANAGEMENT FEES THE FUND PAID OR OWED PIONEER (OR EQSF)
FOR THE FISCAL PERIODS ENDED OCTOBER 31,
1999 1998*
$0** $0**
* Period from February 12, 1998 (commencement of investment operations) to
October 31, 1998.
** Paid to EQSF. An expense limitation was in effect for these periods. In the
absence of the expense limitation, the fund would have paid $74,907 and $50,472
in management fees for such periods.
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<PAGE>
FEES THE FUND PAID TO PIONEER OR PFPC UNDER THE ADMINISTRATION AGREEMENTS
FOR THE FISCAL PERIODS ENDED OCTOBER 31,
1999 1998
$12,272* $9,207*
* Paid to PFPC. An expense limitation was in effect for these periods. In the
absence of the expense limitation, the fund would have paid $56,596 and $28,253
in administration fees for such periods.
CARRYOVER OF DISTRIBUTION PLAN EXPENSES
Not applicable.
APPROXIMATE NET UNDERWRITING COMMISSIONS RETAINED BY PFD
Not applicable.
APPROXIMATE COMMISSIONS REALLOWED TO DEALERS
Not applicable.
FUND EXPENSES UNDER THE DISTRIBUTION PLANS
Not applicable.
CDSCS
Not applicable.
APPROXIMATE BROKERAGE AND UNDERWRITING COMMISSIONS (PORTFOLIO TRANSACTIONS)
1999 1998
$800 $600
CAPITAL LOSS CARRYFORWARDS
As of the end of its most recent taxable year, the fund had no capital loss
carryforwards.
AVERAGE ANNUAL TOTAL RETURNS (OCTOBER 31, 1999)
AVERAGE ANNUAL TOTAL RETURN (%)
SINCE INCEPTION
CLASS OF SHARES ONE YEAR INCEPTION DATE
Class A Shares 16.43 1.07 02/12/98
Class B Shares 17.03 0.81 02/12/98
Class C Shares 21.03 3.03 02/12/98
Class Y Shares 22.20 4.06 02/12/98
The fund has recalculated performance prior to February 25, 2000 to reflect Rule
12b-1 distribution fees and applicable sales charges.
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STANDARDIZED 30-DAY YIELD (OCTOBER 31, 1999)
CLASS OF SHARES YIELD (%)
Class A Shares 9.65
Class B Shares 8.90
Class C Shares 8.90
Class Y Shares 9.90
STANDARDIZED 30-DAY YIELD (OCTOBER 31, 1999)
(ABSENT EXPENSE LIMITATION)
CLASS OF SHARES YIELD (%)
Class A Shares 7.88
Class B Shares n/a
Class C Shares n/a
Class Y Shares 8.13
The fund has recalculated performance prior to February 25, 2000 to reflect Rule
12b-1 distribution fees and applicable sales charges.
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19. APPENDIX B - DESCRIPTION OF SHORT-TERM DEBT, CORPORATE BOND AND
PREFERRED STOCK RATINGS(1)
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") SHORT-TERM PRIME RATING SYSTEM
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
Prime-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
Leading market positions in well-established industries.
High rates of return on funds employed.
Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Prime-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
Not Prime: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Obligations of a branch of a bank are considered to be domiciled in the country
in which the branch is located. Unless noted as an exception, Moody's rating on
a bank's ability to repay senior obligations extends only to branches located in
countries which carry a Moody's Sovereign Rating for Bank Deposits. Such branch
obligations are rated at the lower of the bank's rating or Moody's Sovereign
Rating for Bank Deposits for the country in which the branch is located.
When the currency in which an obligation is denominated is not the same as the
currency of the country in which the obligation is domiciled, Moody's ratings do
not incorporate an opinion as to whether
- --------
(1)The ratings indicated herein are believed to be the most recent ratings
available at the date of this statement of additional information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such ratings,
they undertake no obligation to do so, and the ratings indicated do not
necessarily represent ratings which will be given to these securities on the
date of the fund's fiscal year-end.
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<PAGE>
payment of the obligation will be affected by actions of the government
controlling the currency of denomination. In addition, risks associated with
bilateral conflicts between an investor's home country and either the issuer's
home country or the country where an issuer's branch is located are not
incorporated into Moody's short-term debt ratings.
If an issuer represents to Moody's that its short-term debt obligations are
supported by the credit of another entity or entities, then the name or names of
such supporting entity or entities are listed within the parenthesis beneath the
name of the issuer, or there is a footnote referring the reader to another page
for the name or names of the supporting entity or entities. In assigning ratings
to such issuers, Moody's evaluates the financial strength of the affiliated
corporations, commercial banks, insurance companies, foreign governments or
other entities, but only as one factor in the total rating assessment.
MOODY'S DEBT RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
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<PAGE>
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's bond ratings, where specified, are applicable to financial contracts,
senior bank obligations and insurance company senior policyholder and claims
obligations with an original maturity in excess of one year. Obligations relying
upon support mechanisms such as letters-of-credit and bonds of indemnity are
excluded unless explicitly rated. Obligations of a branch of a bank are
considered to be domiciled in the country in which the branch is located.
Unless noted as an exception, Moody's rating on a bank's ability to repay senior
obligations extends only to branches located in countries which carry a Moody's
Sovereign Rating for Bank Deposits. Such branch obligations are rated at the
lower of the bank's rating or Moody's Sovereign Rating for the Bank Deposits for
the country in which the branch is located. When the currency in which an
obligation is denominated is not the same as the currency of the country in
which the obligation is domiciled, Moody's ratings do not incorporate an opinion
as to whether payment of the obligation will be affected by the actions of the
government controlling the currency of denomination. In addition, risk
associated with bilateral conflicts between an investor's home country and
either the issuer's home country or the country where an issuer branch is
located are not incorporated into Moody's ratings.
Moody's makes no representation that rated bank obligations or insurance company
obligations are exempt from registration under the 1933 Act or issued in
conformity with any other applicable law or regulation. Nor does Moody's
represent any specific bank or insurance company obligation is legally
enforceable or a valid senior obligation of a rated issuer.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
MOODY'S PREFERRED STOCK RATINGS
Because of the fundamental differences between preferred stocks and bonds, a
variation of Moody's familiar bond rating symbols is used in the quality ranking
of preferred stock. The symbols, presented below, are designed to avoid
comparison with bond quality in absolute terms. It should always be borne in
mind that preferred stock occupies a junior position to bonds within a
particular capital structure and that these securities are rated within the
universe of preferred stocks.
aaa: An issue which is rated aaa is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.
aa: An issue which is rated aa is considered a high-grade preferred stock. This
rating indicates that there is a reasonable assurance the earnings and asset
protection will remain relatively well maintained in the foreseeable future.
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<PAGE>
a: An issue which is rated a is considered to be an upper-medium grade preferred
stock. While risks are judged to be somewhat greater then in the aaa and aa
classification, earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.
baa: An issue which is rated baa is considered to be a medium-grade preferred
stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time.
ba: An issue which is rated ba is considered to have speculative elements and
its future cannot be considered well assured. Earnings and asset protection may
be very moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.
b: An issue which is rated b generally lacks the characteristics of a desirable
investment. Assurance of dividend payments and maintenance of other terms of the
issue over any long period of time may be small.
caa: An issue which is rated caa is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.
ca: An issue which is rated ca is speculative in a high degree and is likely to
be in arrears on dividends with little likelihood of eventual payments.
c: This is the lowest rated class of preferred or preference stock. Issues so
rated can thus be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification: the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
STANDARD & POOR'S SHORT-TERM ISSUE CREDIT RATINGS
A-1: A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B: A short-term obligation rated B is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
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<PAGE>
C: A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
STANDARD & POOR'S LONG-TERM ISSUE CREDIT RATINGS
Issue credit ratings are based, in varying degrees, on the following
considerations:
Likelihood of payment-capacity and willingness of the obligor to meet
its financial commitment on an obligation in accordance with the terms
of the obligation;
Nature of and provisions of the obligation;
Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the
laws of bankruptcy and other laws affecting creditors' rights.
The issue rating definitions are expressed in terms of default risk. As such,
they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority in
bankruptcy, as noted above. (Such differentiation applies when an entity has
both senior and subordinated obligations, secured and unsecured obligations, or
operating company and holding company obligations.) Accordingly, in the case of
junior debt, the rating may not conform exactly with the category definition.
AAA: An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA: An obligation rated AA differs from the highest-rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
58
<PAGE>
BB: An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: A subordinated debt or preferred stock obligation rated C is CURRENTLY HIGHLY
VULNERABLE to nonpayment. The C rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action taken, but payments on this
obligation are being continued. A C also will be assigned to a preferred stock
issue in arrears on dividends or sinking fund payments but that is currently
paying.
D: An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
Plus (+) or Minus (-): The rating from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
r: This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk, such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
N.R.: This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular obligation as a matter of policy.
LOCAL CURRENCY AND FOREIGN CURRENCY RISKS
Country risk considerations are a standard part of Standard & Poor's analysis
for credit ratings on any issuer or issue. Currency of repayment is a key factor
in this analysis. An obligor's capacity to repay foreign currency obligations
may be lower than its capacity to repay obligations in its local currency due to
the sovereign government's own relatively lower capacity to repay external
versus domestic debt. These sovereign risk considerations are incorporated in
the debt ratings assigned to specific issues. Foreign currency issuer ratings
are also distinguished from local currency issuer ratings to identify those
instances where sovereign risks make them different for the same issuer.
59
<PAGE>
<TABLE>
<CAPTION>
20. APPENDIX C - PERFORMANCE STATISTICS
PIONEER HIGH YIELD FUND
CLASS A SHARES
SALES CHARGE NET ASSET INITIAL NET
INITIAL OFFERING PRICE INCLUDED SHARES VALUE PER ASSET VALUE
DATE INVESTMENT PURCHASED SHARE
<S> <C> <C> <C> <C> <C> <C>
2/12/98 $10,000.00 $10.471 4.50% 955.000 $10.00 $9,550.00
<CAPTION>
VALUE OF SHARES
(DIVIDENDS AND CAPITAL GAINS REINVESTED)
FROM INVESTMENT FROM CAPITAL GAINS FROM DIVIDENDS
DATE REINVESTED REINVESTED TOTAL VALUE
<S> <C> <C> <C> <C>
12/31/98 $8,490 $0 $421 $8,911
12/31/99 $9,922 $160 $1,244 $11,326
<CAPTION>
CLASS B SHARES
SALES CHARGE NET ASSET INITIAL NET
INITIAL OFFERING PRICE INCLUDED SHARES VALUE PER ASSET VALUE
DATE INVESTMENT PURCHASED SHARE
<S> <C> <C> <C> <C> <C> <C>
2/12/98 $10,000.00 $10.00 0.00% 1,000.000 $10.00 $10,000.00
<CAPTION>
VALUE OF SHARES
(DIVIDENDS AND CAPITAL GAINS REINVESTED)
FROM CAPITAL FROM CONTINGENT
FROM INVESTMENT GAINS REINVESTED DIVIDENDS DEFERRED SALES TOTAL VALUE
DATE REINVESTED CHARGE CDSC (%)
<S> <C> <C> <C> <C> <C> <C>
12/31/98 $8,900 $0 $380 $356 $8,924 4.00
12/31/99 $10,400 $165 $1,141 $400 $11,306 4.00
The fund has recalculated performance prior to February 25, 2000 to reflect Rule
12b-1 distribution fees and applicable sales charges. Past performance does not
guarantee future results. Return and share price fluctuate and your shares when
redeemed may be worth more or less than your original cost.
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
PIONEER HIGH YIELD FUND
CLASS C SHARES
SALES CHARGE NET ASSET INITIAL NET
INITIAL OFFERING PRICE INCLUDED SHARES VALUE PER ASSET VALUE
DATE INVESTMENT PURCHASED SHARE
<S> <C> <C> <C> <C> <C> <C>
2/12/98 $10,000.00 $10.00 0.00% 1,000.000 $10.00 $10,000.00
<CAPTION>
VALUE OF SHARES
(DIVIDENDS AND CAPITAL GAINS REINVESTED)
FROM CAPITAL FROM CONTINGENT
FROM INVESTMENT GAINS REINVESTED DIVIDENDS DEFERRED SALES TOTAL VALUE
DATE REINVESTED CHARGE CDSC (%)
<S> <C> <C> <C> <C> <C> <C>
12/31/98 $8,900 $0 $380 $89 $9,191 1.00
12/31/99 $10,400 $165 $1,141 $0 $11,706 0.00
<CAPTION>
CLASS Y SHARES
SALES CHARGE NET ASSET INITIAL NET
INITIAL OFFERING PRICE INCLUDED SHARES VALUE PER ASSET VALUE
DATE INVESTMENT PURCHASED SHARE
<S> <C> <C> <C> <C> <C> <C>
2/12/98 $10,000.00 $10.00 0.00% 1,000.000 $10.00 $10,000.00
<CAPTION>
VALUE OF SHARES
(DIVIDENDS AND CAPITAL GAINS REINVESTED)
FROM CAPITAL FROM
FROM INVESTMENT GAINS REINVESTED DIVIDENDS
DATE REINVESTED TOTAL VALUE
<S> <C> <C> <C> <C>
12/31/98 $8,900 $0 $462 $9,362
12/31/99 $10,400 $168 $1,356 $11,924
The fund has recalculated performance prior to February 25, 2000 to reflect Rule
12b-1 distribution fees and applicable sales charges. Past performance does not
guarantee future results. Return and share price fluctuate and your shares when
redeemed may be worth more or less than your original cost.
</TABLE>
61
<PAGE>
COMPARATIVE PERFORMANCE INDEX DESCRIPTIONS
The following securities indices are well known, unmanaged measures of market
performance. Advertisements and sales literature for the fund may refer to these
indices or may present comparisons between the performance of the fund and one
or more of the indices. Other indices may also be used, if appropriate. The
indices are not available for direct investment. The data presented are not
meant to be indicative of the performance of the fund, do not reflect past
performance and do not guarantee future results.
S&P 500. This index is a readily available, carefully constructed, market value
weighted benchmark of common stock performance. Currently, the S&P 500 includes
500 of the largest stocks (in terms of stock market value) in the U.S.
DOW JONES INDUSTRIAL AVERAGE. This is a total return index based on the
performance of stocks of 30 blue chip companies widely held by individuals and
institutional investors. The 30 stocks represent about a fifth of the $8
trillion-plus market value of all U.S. stocks and about a fourth of the value of
stocks listed on the New York Stock Exchange (NYSE).
U.S. SMALL STOCK INDEX. This index is a market value weighted index of the ninth
and tenth deciles of the NYSE, plus stocks listed on the American Stock Exchange
and over the counter with the same or less capitalization as the upper bound of
the NYSE ninth decile.
U.S. INFLATION. The Consumer Price Index for All Urban Consumers (CPI-U), not
seasonally adjusted, is used to measure inflation, which is the rate of change
of consumer goods prices. Unfortunately, the inflation rate as derived by the
CPI is not measured over the same period as the other asset returns. All of the
security returns are measured from one month-end to the next month-end. CPI
commodity prices are collected during the month. Thus, measured inflation rates
lag the other series by about one-half month. Prior to January 1978, the CPI (as
compared with CPI-U) was used. Both inflation measures are constructed by the
U.S. Department of Labor, Bureau of Labor Statistics, Washington, DC.
S&P/BARRA INDEXES. The S&P/BARRA Growth and Value Indexes are constructed by
dividing the stocks in the S&P 500 according to price-to-book ratios. The Growth
Index contains stocks with higher price-to-book ratios, and the Value Index
contains stocks with lower price-to-book ratios. Both indexes are market
capitalization weighted.
MERRILL LYNCH MICRO-CAP INDEX. The Merrill Lynch Micro-Cap Index represents the
performance of 1,980 stocks ranging in market capitalization from $50 million to
$125 million. Index returns are calculated monthly.
MERRILL LYNCH HIGH YIELD MASTER II INDEX. This index is a market capitalization
weighted total return index covering U.S. dollar-denominated high-yield bonds.
Qualifying bonds must have at least $100 million par amount outstanding, a
remaining term to maturity greater than or equal to one year, and a credit
rating less than BBB3 but not in default (based on the composite of Moody's and
Standard & Poor's). The index includes deferred interest and pay-in-kind bonds,
but excludes structured notes, floating rate notes and other variable coupon
securities. The index also excludes emerging markets debt (issuers domiciled in
below investment grade rated countries). Index constituents are rebalanced
monthly on the last calendar day of the month. Index values are calculated
daily.
MERRILL LYNCH INDEX OF CONVERTIBLE BONDS (SPECULATIVE QUALITY). This is a market
capitalization weighted index including all mandatory and non-mandatory domestic
corporate convertible securities with at least an original par of $50 million or
a $50 million market value; securities dropping below a market value of $40
million are excluded. Returns are calculated weekly based on Thursday's closing
prices and are linked monthly. All securities must be convertible to common
stock only. Quality range is D3-BB1 based on composite Moody's and Standard
&Poor's ratings.
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<PAGE>
LONG-TERM U.S. GOVERNMENT BONDS. The total returns on long-term government bonds
after 1977 are constructed with data from The Wall Street Journal and are
calculated as the change in the flat price or and-interest price. From 1926 to
1976, data are obtained from the government bond file at the Center for Research
in Security Prices (CRSP), Graduate School of Business, University of Chicago.
Each year, a one-bond portfolio with a term of approximately 20 years and a
reasonably current coupon was used and whose returns did not reflect potential
tax benefits, impaired negotiability or special redemption or call privileges.
Where callable bonds had to be used, the term of the bond was assumed to be a
simple average of the maturity and first call dates minus the current date. The
bond was "held" for the calendar year and returns were computed.
INTERMEDIATE-TERM U.S. GOVERNMENT BONDS. Total returns of intermediate-term
government bonds after 1987 are calculated from The Wall Street Journal prices,
using the change in flat price. Returns from 1934 to 1986 are obtained from the
CRSP government bond file.
Each year, one-bond portfolios are formed, the bond chosen is the shortest
noncallable bond with a maturity not less than five years, and this bond is
"held" for the calendar year. Monthly returns are computed. (Bonds with impaired
negotiability or special redemption privileges are omitted, as are partially or
fully tax-exempt bonds starting with 1943.) From 1934 to 1942, almost all bonds
with maturities near five years were partially or fully tax-exempt and were
selected using the rules described above. Personal tax rates were generally low
in that period, so that yields on tax-exempt bonds were similar to yields on
taxable bonds. From 1926 to 1933, there are few bonds suitable for construction
of a series with a five-year maturity. For this period, five-year bond yield
estimates are used.
MORGAN STANLEY CAPITAL INTERNATIONAL ("MSCI"). These indices are in U.S. dollar
terms with gross dividends reinvested and measure the performance of developed
and emerging stock markets around the world. MSCI All Country indices represent
both the developed and the emerging markets for a particular region. These
indices are unmanaged. The free indices exclude shares which are not readily
purchased by non-local investors. MSCI covers over 1,500 securities in 28
emerging markets and 2,300 securities in 23 developed markets, totaling over $20
trillion in market capitalization.
Countries in the MSCI EAFE Index are: Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland and United Kingdom.
Countries in the MSCI Emerging Markets Free Index are: Argentina, Brazil, Chile,
China Free, Colombia, Czech Republic, Greece, Hungary, India, Indonesia Free,
Israel, Jordan, Korea (at 50%), Malaysia Free, Mexico Free, Pakistan, Peru,
Philippines Free, Poland, Russia, South Africa, Sri Lanka, Taiwan (at 50%),
Thailand Free, Turkey and Venezuela.
MSCI All Country (AC) Asia Free ex Japan: This index is made up of the following
12 countries: China Free, Hong Kong, India, Indonesia Free, Korea @50%, Malaysia
Free, Pakistan, Philippines Free, Singapore Free, Sri Lanka, Taiwan @50% and
Thailand Free.
MSCI All Country (AC) Asia Pacific Free ex Japan: This index is made up of the
following 14 countries: Australia, China Free, Hong Kong, India, Indonesia Free,
Korea @50%, Malaysia Free, New Zealand, Pakistan, Philippines Free, Singapore
Free, Sri Lanka, Taiwan @50% and Thailand Free.
63
<PAGE>
6-MONTH CDS. Data sources include the Federal Reserve Bulletin and The Wall
Street Journal.
LONG-TERM U.S. CORPORATE BONDS. Since 1969, corporate bond total returns are
represented by the Salomon Brothers Long-Term High-Grade Corporate Bond Index.
As most large corporate bond transactions take place over the counter, a major
dealer is the natural source of these data. The index includes nearly all Aaa-
and Aa-rated bonds with at least 10 years to maturity. If a bond is downgraded
during a particular month, its return for the month is included in the index
before removing the bond from future portfolios.
From 1926 to 1968 the total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946 to 1968,
Ibbotson and Sinquefield backdated the Salomon Brothers' index, using Salomon
Brothers' monthly yield data with a methodology similar to that used by Salomon
Brothers for 1969 to 1995. Capital appreciation returns were calculated from
yields assuming (at the beginning of each monthly holding period) a 20-year
maturity, a bond price equal to par, and a coupon equal to the
beginning-of-period yield. For the period 1926 to 1945, Standard & Poor's
monthly high-grade corporate composite yield data were used, assuming a 4%
coupon and a 20-year maturity. The conventional present-value formula for bond
price for the beginning and end-of-month prices was used. (This formula is
presented in Ross, Stephen A., and Westerfield, Randolph W., Corporate Finance,
Times Mirror/Mosby, St. Louis, 1990, p. 97 ["Level-Coupon Bonds"].) The monthly
income return was assumed to be one-twelfth the coupon.
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX - INTERMEDIATE. This index is
comprised of securities with one to ten years to maturity. It includes Treasury
and government agency securities, investment-grade corporate bonds and Yankee
bonds.
U.S. (30-DAY) TREASURY BILLS. For the U.S. Treasury Bill Index, data from The
Wall Street Journal are used after 1977; the CRSP government bond file is the
source until 1976. Each month a one-bill portfolio containing the shortest-term
bill having not less than one month to maturity is constructed. (The bill's
original term to maturity is not relevant.) To measure holding period returns
for the one-bill portfolio, the bill is priced as of the last trading day of the
previous month-end and as of the last trading day of the current month.
NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT TRUSTS ("NAREIT") EQUITY REIT
INDEX. All of the data are based upon the last closing price of the month for
all tax-qualified REITs listed on the NYSE, AMEX and NASDAQ. The data are
market-value-weighted. Prior to 1987 REITs were added to the index the January
following their listing. Since 1987 newly formed or listed REITs are added to
the total shares outstanding figure in the month that the shares are issued.
Only common shares issued by the REIT are included in the index. The total
return calculation is based upon the weighting at the beginning of the period.
Only those REITs listed for the entire period are used in the total return
calculation. Dividends are included in the month based upon their payment date.
There is no smoothing of income. Liquidating dividends, whether full or partial,
are treated as income.
RUSSELL U.S. EQUITY INDEXES. The Russell 3000(R) Index (the "Russell 3000") is
comprised of the 3,000 largest U.S. companies as determined by market
capitalization representing approximately 98% of the U.S. equity market. The
64
<PAGE>
average market capitalization is approximately $4.4 billion. The Russell 2500TM
Index measures performance of the 2,500 smallest companies in the Russell 3000.
The average market capitalization is approximately $876 million, and the largest
company in the index has an approximate market capitalization of $3.8 billion.
The Russell 2000(R) Index measures performance of the 2,000 smallest stocks in
the Russell 3000; the largest company in the index has a market capitalization
of approximately $1.3 billion. The Russell 1000(R) Index (the "Russell 1000")
measures the performance of the 1,000 largest companies in the Russell 3000. The
average market capitalization is approximately $12.1 billion. The smallest
company in the index has an approximate market capitalization of $1.3 billion.
The Russell MidcapTM Index measures performance of the 800 smallest companies in
the Russell 1000. The largest company in the index has an approximate market
capitalization of $11.2 billion.
The Russell indexes are reconstituted annually as of June 30, based on May 31
market capitalizations.
WILSHIRE REAL ESTATE SECURITIES INDEX. The Wilshire Real Estate Securities Index
is a broad measure of the performance of publicly traded real estate securities,
such as REITs and real estate operating companies ("REOCs"). The index is
capitalization-weighted. As of March 31, 1999, 119 companies were included in
the index, with a total market cap of $116.97 billion. At September 30, 1999,
the companies in the index were 92.31% equity and hybrid REITs and 7.69% REOCs.
STANDARD & POOR'S MIDCAP 400 INDEX. The S&P 400 is a
market-capitalization-weighted index. The performance data for the index were
calculated by taking the stocks presently in the index and tracking them
backwards in time as long as there were prices reported. No attempt was made to
determine what stocks "might have been" in the S&P 400 five or ten years ago had
it existed. Dividends are reinvested on a monthly basis prior to June 30, 1991,
and are reinvested daily thereafter.
LIPPER INDEXES. These indexes represent equally weighted performance, adjusted
for capital gain distributions and income dividends, of mutual funds that are
considered peers of the Pioneer mutual funds. Lipper, Inc. is an independent
firm that tracks mutual fund performance.
LEHMAN BROTHERS AGGREGATE BOND INDEX. The Lehman Brothers Aggregate Bond Index
is composed of the Lehman Brothers Government/Corporate Index, the Lehman
Brothers Mortgage-Backed Securities Index and the Lehman Brothers Asset-Backed
Securities Index. The index includes fixed rate debt issues rated investment
grade or higher by Moody's Investors Service, Standard & Poor's Corporation or
Fitch Investors Service, in that order. All issues have at least one year to
maturity with intermediate indices including bonds with maturities up to ten
years and long-term indices composed of bonds with maturities longer than ten
years. All returns are market value weighted inclusive of accrued interest.
BANK SAVINGS ACCOUNT. Data sources include the U.S. League of Savings
Institutions Sourcebook; average annual yield on savings deposits in FSLIC
[FDIC] insured savings institutions for the years 1963 to 1987; and The Wall
Street Journal thereafter.
Sources: Ibbotson Associates, Towers Data Systems, Lipper, Inc. and PGI
65
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
DOW U.S. S&P/ S&P/ MERRILL
JONES SMALL BARRA BARRA LYNCH
S&P INDUSTRIAL STOCK U.S. 500 500 MICRO-CAP
500 AVERAGE INDEX INFLATION GROWTH VALUE INDEX
- --------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 11.62 N/A 0.28 -1.49 N/A N/A N/A
Dec 1927 37.49 N/A 22.10 -2.08 N/A N/A N/A
Dec 1928 43.61 55.38 39.69 -0.97 N/A N/A N/A
Dec 1929 -8.42 -13.64 -51.36 0.20 N/A N/A N/A
Dec 1930 -24.90 -30.22 -38.15 -6.03 N/A N/A N/A
Dec 1931 -43.34 -49.02 -49.75 -9.52 N/A N/A N/A
Dec 1932 -8.19 -16.88 -5.39 -10.30 N/A N/A N/A
Dec 1933 53.99 73.72 142.87 0.51 N/A N/A N/A
Dec 1934 -1.44 8.08 24.22 2.03 N/A N/A N/A
Dec 1935 47.67 43.77 40.19 2.99 N/A N/A N/A
Dec 1936 33.92 30.23 64.80 1.21 N/A N/A N/A
Dec 1937 -35.03 -28.88 -58.01 3.10 N/A N/A N/A
Dec 1938 31.12 33.16 32.80 -2.78 N/A N/A N/A
Dec 1939 -0.41 1.31 0.35 -0.48 N/A N/A N/A
Dec 1940 -9.78 -7.96 -5.16 0.96 N/A N/A N/A
Dec 1941 -11.59 -9.88 -9.00 9.72 N/A N/A N/A
Dec 1942 20.34 14.13 44.51 9.29 N/A N/A N/A
Dec 1943 25.90 19.06 88.37 3.16 N/A N/A N/A
Dec 1944 19.75 17.19 53.72 2.11 N/A N/A N/A
Dec 1945 36.44 31.60 73.61 2.25 N/A N/A N/A
Dec 1946 -8.07 -4.40 -11.63 18.16 N/A N/A N/A
Dec 1947 5.71 7.61 0.92 9.01 N/A N/A N/A
Dec 1948 5.50 4.27 -2.11 2.71 N/A N/A N/A
Dec 1949 18.79 20.92 19.75 -1.80 N/A N/A N/A
Dec 1950 31.71 26.40 38.75 5.79 N/A N/A N/A
Dec 1951 24.02 21.77 7.80 5.87 N/A N/A N/A
Dec 1952 18.37 14.58 3.03 0.88 N/A N/A N/A
Dec 1953 -0.99 2.02 -6.49 0.62 N/A N/A N/A
Dec 1954 52.62 51.25 60.58 -0.50 N/A N/A N/A
Dec 1955 31.56 26.58 20.44 0.37 N/A N/A N/A
Dec 1956 6.56 7.10 4.28 2.86 N/A N/A N/A
Dec 1957 -10.78 -8.63 -14.57 3.02 N/A N/A N/A
Dec 1958 43.36 39.31 64.89 1.76 N/A N/A N/A
Dec 1959 11.96 20.21 16.40 1.50 N/A N/A N/A
Dec 1960 0.47 -6.14 -3.29 1.48 N/A N/A N/A
Dec 1961 26.89 22.60 32.09 0.67 N/A N/A N/A
Dec 1962 -8.73 -7.43 -11.90 1.22 N/A N/A N/A
Dec 1963 22.80 20.83 23.57 1.65 N/A N/A N/A
</TABLE>
66
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
DOW S&P/ S&P/ MERRILL
JONES U.S. SMALL BARRA BARRA LYNCH
S&P INDUSTRIAL STOCK U.S. 500 500 MICRO-CAP
500 AVERAGE INDEX INFLATION GROWTH VALUE INDEX
- --------------------------------------------------------------------------------------------------------
Dec 1964 16.48 18.85 23.52 1.19 N/A N/A N/A
Dec 1965 12.45 14.39 41.75 1.92 N/A N/A N/A
Dec 1966 -10.06 -15.78 -7.01 3.35 N/A N/A N/A
Dec 1967 23.98 19.16 83.57 3.04 N/A N/A N/A
Dec 1968 11.06 7.93 35.97 4.72 N/A N/A N/A
Dec 1969 -8.50 -11.78 -25.05 6.11 N/A N/A N/A
Dec 1970 4.01 9.21 -17.43 5.49 N/A N/A N/A
Dec 1971 14.31 9.83 16.50 3.36 N/A N/A N/A
Dec 1972 18.98 18.48 4.43 3.41 N/A N/A N/A
Dec 1973 -14.66 -13.28 -30.90 8.80 N/A N/A N/A
Dec 1974 -26.47 -23.58 -19.95 12.20 N/A N/A N/A
Dec 1975 37.20 44.75 52.82 7.01 31.72 43.38 N/A
Dec 1976 23.84 22.82 57.38 4.81 13.84 34.93 N/A
Dec 1977 -7.18 -12.84 25.38 6.77 -11.82 -2.57 N/A
Dec 1978 6.56 2.79 23.46 9.03 6.78 6.16 27.76
Dec 1979 18.44 10.55 43.46 13.31 15.72 21.16 43.18
Dec 1980 32.42 22.17 39.88 12.40 39.40 23.59 32.32
Dec 1981 -4.91 -3.57 13.88 8.94 -9.81 0.02 9.18
Dec 1982 21.41 27.11 28.01 3.87 22.03 21.04 33.62
Dec 1983 22.51 25.97 39.67 3.80 16.24 28.89 42.44
Dec 1984 6.27 1.31 -6.67 3.95 2.33 10.52 -14.97
Dec 1985 32.16 33.55 24.66 3.77 33.31 29.68 22.89
Dec 1986 18.47 27.10 6.85 1.13 14.50 21.67 3.45
Dec 1987 5.23 5.48 -9.30 4.41 6.50 3.68 -13.84
Dec 1988 16.81 16.14 22.87 4.42 11.95 21.67 22.76
Dec 1989 31.49 32.19 10.18 4.65 36.40 26.13 8.06
Dec 1990 -3.17 -0.56 -21.56 6.11 0.20 -6.85 -29.55
Dec 1991 30.55 24.19 44.63 3.06 38.37 22.56 57.44
Dec 1992 7.67 7.41 23.35 2.90 5.07 10.53 36.62
Dec 1993 9.99 16.94 20.98 2.75 1.68 18.60 31.32
Dec 1994 1.31 5.06 3.11 2.67 3.13 -0.64 1.81
Dec 1995 37.43 36.84 34.46 2.54 38.13 36.99 30.70
Dec 1996 23.07 28.84 17.62 3.32 23.96 21.99 13.88
Dec 1997 33.36 24.88 22.78 1.70 36.52 29.98 24.61
Dec 1998 28.58 18.14 -7.31 1.61 42.16 14.67 -6.15
Dec 1999 21.04 27.22 29.79 2.81 28.25 12.72 40.04
</TABLE>
67
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
LONG- INTERMEDIATE- MSCI LONG- LEHMAN
TERM TERM U.S. EAFE 6- TERM U.S. BROS. U.S.
U.S. GOV'T GOVERNMENT (NET OF MONTH CORPORATE GOV'T/CORP T-BILL
BONDS BONDS TAXES) CDS BONDS INTERMEDIATE (30-DAY)
- ------------------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 7.77 5.38 N/A N/A 7.37 N/A 3.27
Dec 1927 8.93 4.52 N/A N/A 7.44 N/A 3.12
Dec 1928 0.10 0.92 N/A N/A 2.84 N/A 3.56
Dec 1929 3.42 6.01 N/A N/A 3.27 N/A 4.75
Dec 1930 4.66 6.72 N/A N/A 7.98 N/A 2.41
Dec 1931 -5.31 -2.32 N/A N/A -1.85 N/A 1.07
Dec 1932 16.84 8.81 N/A N/A 10.82 N/A 0.96
Dec 1933 -0.07 1.83 N/A N/A 10.38 N/A 0.30
Dec 1934 10.03 9.00 N/A N/A 13.84 N/A 0.16
Dec 1935 4.98 7.01 N/A N/A 9.61 N/A 0.17
Dec 1936 7.52 3.06 N/A N/A 6.74 N/A 0.18
Dec 1937 0.23 1.56 N/A N/A 2.75 N/A 0.31
Dec 1938 5.53 6.23 N/A N/A 6.13 N/A -0.02
Dec 1939 5.94 4.52 N/A N/A 3.97 N/A 0.02
Dec 1940 6.09 2.96 N/A N/A 3.39 N/A 0.00
Dec 1941 0.93 0.50 N/A N/A 2.73 N/A 0.06
Dec 1942 3.22 1.94 N/A N/A 2.60 N/A 0.27
Dec 1943 2.08 2.81 N/A N/A 2.83 N/A 0.35
Dec 1944 2.81 1.80 N/A N/A 4.73 N/A 0.33
Dec 1945 10.73 2.22 N/A N/A 4.08 N/A 0.33
Dec 1946 -0.10 1.00 N/A N/A 1.72 N/A 0.35
Dec 1947 -2.62 0.91 N/A N/A -2.34 N/A 0.50
Dec 1948 3.40 1.85 N/A N/A 4.14 N/A 0.81
Dec 1949 6.45 2.32 N/A N/A 3.31 N/A 1.10
Dec 1950 0.06 0.70 N/A N/A 2.12 N/A 1.20
Dec 1951 -3.93 0.36 N/A N/A -2.69 N/A 1.49
Dec 1952 1.16 1.63 N/A N/A 3.52 N/A 1.66
Dec 1953 3.64 3.23 N/A N/A 3.41 N/A 1.82
Dec 1954 7.19 2.68 N/A N/A 5.39 N/A 0.86
Dec 1955 -1.29 -0.65 N/A N/A 0.48 N/A 1.57
Dec 1956 -5.59 -0.42 N/A N/A -6.81 N/A 2.46
Dec 1957 7.46 7.84 N/A N/A 8.71 N/A 3.14
Dec 1958 -6.09 -1.29 N/A N/A -2.22 N/A 1.54
Dec 1959 -2.26 -0.39 N/A N/A -0.97 N/A 2.95
Dec 1960 13.78 11.76 N/A N/A 9.07 N/A 2.66
</TABLE>
68
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
LONG- INTERMEDIATE- MSCI LONG- LEHMAN
TERM TERM U.S. EAFE 6- TERM U.S. BROS. U.S.
U.S. GOV'T GOVERNMENT (NET OF MONTH CORPORATE GOV'T/CORP T-BILL
BONDS BONDS TAXES) CDS BONDS INTERMEDIATE (30-DAY)
- ------------------------------------------------------------------------------------------------------------------
Dec 1961 0.97 1.85 N/A N/A 4.82 N/A 2.13
Dec 1962 6.89 5.56 N/A N/A 7.95 N/A 2.73
Dec 1963 1.21 1.64 N/A N/A 2.19 N/A 3.12
Dec 1964 3.51 4.04 N/A 4.17 4.77 N/A 3.54
Dec 1965 0.71 1.02 N/A 4.68 -0.46 N/A 3.93
Dec 1966 3.65 4.69 N/A 5.76 0.20 N/A 4.76
Dec 1967 -9.18 1.01 N/A 5.47 -4.95 N/A 4.21
Dec 1968 -0.26 4.54 N/A 6.45 2.57 N/A 5.21
Dec 1969 -5.07 -0.74 N/A 8.70 -8.09 N/A 6.58
Dec 1970 12.11 16.86 -11.66 7.06 18.37 N/A 6.52
Dec 1971 13.23 8.72 29.59 5.36 11.01 N/A 4.39
Dec 1972 5.69 5.16 36.35 5.39 7.26 N/A 3.84
Dec 1973 -1.11 4.61 -14.92 8.60 1.14 3.34 6.93
Dec 1974 4.35 5.69 -23.16 10.20 -3.06 5.88 8.00
Dec 1975 9.20 7.83 35.39 6.51 14.64 9.50 5.80
Dec 1976 16.75 12.87 2.54 5.22 18.65 12.34 5.08
Dec 1977 -0.69 1.41 18.06 6.11 1.71 3.31 5.12
Dec 1978 -1.18 3.49 32.62 10.21 -0.07 2.13 7.18
Dec 1979 -1.23 4.09 4.75 11.90 -4.18 6.00 10.38
Dec 1980 -3.95 3.91 22.58 12.33 -2.76 6.41 11.24
Dec 1981 1.86 9.45 -2.28 15.50 -1.24 10.50 14.71
Dec 1982 40.36 29.10 -1.86 12.18 42.56 26.10 10.54
Dec 1983 0.65 7.41 23.69 9.65 6.26 8.61 8.80
Dec 1984 15.48 14.02 7.38 10.65 16.86 14.38 9.85
Dec 1985 30.97 20.33 56.16 7.82 30.09 18.05 7.72
Dec 1986 24.53 15.14 69.44 6.30 19.85 13.12 6.16
Dec 1987 -2.71 2.90 24.63 6.59 -0.27 3.67 5.47
Dec 1988 9.67 6.10 28.27 8.15 10.70 6.78 6.35
Dec 1989 18.11 13.29 10.54 8.27 16.23 12.76 8.37
Dec 1990 6.18 9.73 -23.45 7.85 6.78 9.17 7.81
Dec 1991 19.30 15.46 12.13 4.95 19.89 14.63 5.60
Dec 1992 8.05 7.19 -12.17 3.27 9.39 7.17 3.51
Dec 1993 18.24 11.24 32.56 2.88 13.19 8.73 2.90
Dec 1994 -7.77 -5.14 7.78 5.40 -5.76 -1.95 3.90
Dec 1995 31.67 16.80 11.21 5.21 27.20 15.31 5.60
Dec 1996 -0.93 2.10 6.05 5.21 1.40 4.06 5.21
Dec 1997 15.85 8.38 1.78 5.71 12.95 7.87 5.26
Dec 1998 13.06 10.21 20.00 5.34 10.76 8.42 4.86
Dec 1999 -8.96 -1.77 26.96 5.43 -7.45 0.39 4.68
</TABLE>
69
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
NAREIT WILSHIRE LIPPER MSCI
EQUITY RUSSELL REAL ESTATE BALANCED EMERGING BANK
REIT 2000(R) SECURITIES S&P FUND MARKETS SAVINGS
INDEX INDEX INDEX 400 INDEX FREE INDEX ACCOUNT
- -------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 N/A N/A N/A N/A N/A N/A N/A
Dec 1927 N/A N/A N/A N/A N/A N/A N/A
Dec 1928 N/A N/A N/A N/A N/A N/A N/A
Dec 1929 N/A N/A N/A N/A N/A N/A N/A
Dec 1930 N/A N/A N/A N/A N/A N/A 5.30
Dec 1931 N/A N/A N/A N/A N/A N/A 5.10
Dec 1932 N/A N/A N/A N/A N/A N/A 4.10
Dec 1933 N/A N/A N/A N/A N/A N/A 3.40
Dec 1934 N/A N/A N/A N/A N/A N/A 3.50
Dec 1935 N/A N/A N/A N/A N/A N/A 3.10
Dec 1936 N/A N/A N/A N/A N/A N/A 3.20
Dec 1937 N/A N/A N/A N/A N/A N/A 3.50
Dec 1938 N/A N/A N/A N/A N/A N/A 3.50
Dec 1939 N/A N/A N/A N/A N/A N/A 3.40
Dec 1940 N/A N/A N/A N/A N/A N/A 3.30
Dec 1941 N/A N/A N/A N/A N/A N/A 3.10
Dec 1942 N/A N/A N/A N/A N/A N/A 3.00
Dec 1943 N/A N/A N/A N/A N/A N/A 2.90
Dec 1944 N/A N/A N/A N/A N/A N/A 2.80
Dec 1945 N/A N/A N/A N/A N/A N/A 2.50
Dec 1946 N/A N/A N/A N/A N/A N/A 2.20
Dec 1947 N/A N/A N/A N/A N/A N/A 2.30
Dec 1948 N/A N/A N/A N/A N/A N/A 2.30
Dec 1949 N/A N/A N/A N/A N/A N/A 2.40
Dec 1950 N/A N/A N/A N/A N/A N/A 2.50
Dec 1951 N/A N/A N/A N/A N/A N/A 2.60
Dec 1952 N/A N/A N/A N/A N/A N/A 2.70
Dec 1953 N/A N/A N/A N/A N/A N/A 2.80
Dec 1954 N/A N/A N/A N/A N/A N/A 2.90
Dec 1955 N/A N/A N/A N/A N/A N/A 2.90
Dec 1956 N/A N/A N/A N/A N/A N/A 3.00
Dec 1957 N/A N/A N/A N/A N/A N/A 3.30
Dec 1958 N/A N/A N/A N/A N/A N/A 3.38
Dec 1959 N/A N/A N/A N/A N/A N/A 3.53
Dec 1960 N/A N/A N/A N/A 5.77 N/A 3.86
Dec 1961 N/A N/A N/A N/A 20.59 N/A 3.90
</TABLE>
70
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
NAREIT WILSHIRE LIPPER MSCI
EQUITY RUSSELL REAL ESTATE BALANCED EMERGING BANK
REIT 2000(R) SECURITIES S&P FUND MARKETS SAVINGS
INDEX INDEX INDEX 400 INDEX FREE INDEX ACCOUNT
- -------------------------------------------------------------------------------------------------------
Dec 1962 N/A N/A N/A N/A -6.80 N/A 4.08
Dec 1963 N/A N/A N/A N/A 13.10 N/A 4.17
Dec 1964 N/A N/A N/A N/A 12.36 N/A 4.19
Dec 1965 N/A N/A N/A N/A 9.80 N/A 4.23
Dec 1966 N/A N/A N/A N/A -5.86 N/A 4.45
Dec 1967 N/A N/A N/A N/A 15.09 N/A 4.67
Dec 1968 N/A N/A N/A N/A 13.97 N/A 4.68
Dec 1969 N/A N/A N/A N/A -9.01 N/A 4.80
Dec 1970 N/A N/A N/A N/A 5.62 N/A 5.14
Dec 1971 N/A N/A N/A N/A 13.90 N/A 5.30
Dec 1972 8.01 N/A N/A N/A 11.13 N/A 5.37
Dec 1973 -15.52 N/A N/A N/A -12.24 N/A 5.51
Dec 1974 -21.40 N/A N/A N/A -18.71 N/A 5.96
Dec 1975 19.30 N/A N/A N/A 27.10 N/A 6.21
Dec 1976 47.59 N/A N/A N/A 26.03 N/A 6.23
Dec 1977 22.42 N/A N/A N/A -0.72 N/A 6.39
Dec 1978 10.34 N/A 13.04 N/A 4.80 N/A 6.56
Dec 1979 35.86 43.09 70.81 N/A 14.67 N/A 7.29
Dec 1980 24.37 38.58 22.08 N/A 19.70 N/A 8.78
Dec 1981 6.00 2.03 7.18 N/A 1.86 N/A 10.71
Dec 1982 21.60 24.95 24.47 22.68 30.63 N/A 11.19
Dec 1983 30.64 29.13 27.61 26.10 17.44 N/A 9.71
Dec 1984 20.93 -7.30 20.64 1.18 7.46 N/A 9.92
Dec 1985 19.10 31.05 20.14 35.58 29.83 N/A 9.02
Dec 1986 19.16 5.68 20.30 16.21 18.43 N/A 7.84
Dec 1987 -3.64 -8.77 -7.86 -2.03 4.13 N/A 6.92
Dec 1988 13.49 24.89 24.18 20.87 11.18 40.43 7.20
Dec 1989 8.84 16.24 2.37 35.54 19.70 64.96 7.91
Dec 1990 -15.35 -19.51 -33.46 -5.12 0.66 -10.55 7.80
Dec 1991 35.70 46.05 20.03 50.10 25.83 59.91 4.61
Dec 1992 14.59 18.41 7.36 11.91 7.46 11.40 2.89
Dec 1993 19.65 18.91 15.24 13.96 11.95 74.83 2.73
Dec 1994 3.17 -1.82 1.64 -3.57 -2.05 -7.32 4.96
Dec 1995 15.27 28.44 13.65 30.94 24.89 -5.21 5.24
Dec 1996 35.26 16.49 36.87 19.20 13.05 6.03 4.95
Dec 1997 20.29 22.36 19.80 32.26 20.30 -11.59 5.17
Dec 1998 -17.51 -2.55 -17.43 19.12 15.09 -25.34 4.63
Dec 1999 -4.62 21.26 14.72 14.72 8.98 66.41 5.29
</TABLE>
71
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MERRILL LYNCH
MSCI MSCI ALL INDEX OF
ALL COUNTRY (AC) MERRILL CONVERTIBLE LIPPER
COUNTRY ASIA LEHMAN LYNCH BONDS LIPPER GROWTH &
(AC) ASIA PACIFIC BROTHERS HIGH YIELD (SPECULATIVE RUSSELL GROWTH INCOME
FREE FREE AGGREGATE MASTER II QUALITY) 1000(R) FUND FUND
EX JAPAN EX JAPAN BOND INDEX INDEX INDEX INDEX INDEX
- ---------------------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1926 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1927 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1928 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1929 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1930 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1931 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1932 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1933 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1934 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1935 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1936 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1937 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1938 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1939 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1940 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1941 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1942 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1943 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1944 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1945 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1946 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1947 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1948 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1949 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1950 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1951 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1952 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1953 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1954 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1955 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1956 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1957 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1958 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1959 N/A N/A N/A N/A N/A N/A N/A N/A
Dec 1960 N/A N/A N/A N/A N/A N/A 6.36 3.04
Dec 1961 N/A N/A N/A N/A N/A N/A 30.16 26.00
</TABLE>
72
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MSCI MSCI ALL MERRILL LYNCH
ALL COUNTRY (AC) MERRILL INDEX OF LIPPER
COUNTRY ASIA LEHMAN LYNCH CONVERTIBLE LIPPER GROWTH &
(AC) ASIA PACIFIC BROTHERS HIGH YIELD BONDS RUSSELL GROWTH INCOME
FREE FREE AGGREGATE MASTER II (SPECULATIVE 1000(R) FUND FUND
EX JAPAN EX JAPAN BOND INDEX INDEX QUALITY) INDEX INDEX INDEX
- ---------------------------------------------------------------------------------------------------------------------
Dec 1962 N/A N/A N/A N/A N/A N/A -16.84 -11.87
Dec 1963 N/A N/A N/A N/A N/A N/A 22.43 19.10
Dec 1964 N/A N/A N/A N/A N/A N/A 14.99 15.23
Dec 1965 N/A N/A N/A N/A N/A N/A 26.61 19.00
Dec 1966 N/A N/A N/A N/A N/A N/A -1.80 -6.04
Dec 1967 N/A N/A N/A N/A N/A N/A 45.31 27.59
Dec 1968 N/A N/A N/A N/A N/A N/A 15.34 15.29
Dec 1969 N/A N/A N/A N/A N/A N/A -10.62 -11.80
Dec 1970 N/A N/A N/A N/A N/A N/A -8.57 1.10
Dec 1971 N/A N/A N/A N/A N/A N/A 26.17 13.77
Dec 1972 N/A N/A N/A N/A N/A N/A 18.08 12.87
Dec 1973 N/A N/A N/A N/A N/A N/A -24.75 -14.27
Dec 1974 N/A N/A N/A N/A N/A N/A -30.73 -20.85
Dec 1975 N/A N/A N/A N/A N/A N/A 32.83 4.62
Dec 1976 N/A N/A 15.60 N/A N/A N/A 20.07 25.66
Dec 1977 N/A N/A 3.04 N/A N/A N/A -2.62 -3.64
Dec 1978 N/A N/A 1.39 N/A N/A N/A 12.53 7.99
Dec 1979 N/A N/A 1.93 N/A N/A 22.31 29.29 23.87
Dec 1980 N/A N/A 2.71 N/A N/A 31.88 38.67 28.27
Dec 1981 N/A N/A 6.25 N/A N/A -5.10 -6.82 -1.39
Dec 1982 N/A N/A 32.62 N/A N/A 20.30 24.04 24.17
Dec 1983 N/A N/A 8.36 N/A N/A 22.13 21.35 22.76
Dec 1984 N/A N/A 15.15 N/A N/A 4.75 -3.60 4.29
Dec 1985 N/A N/A 22.10 N/A N/A 32.27 30.14 28.55
Dec 1986 N/A N/A 15.26 N/A N/A 17.87 15.59 17.63
Dec 1987 N/A N/A 2.76 4.47 N/A 2.94 3.25 2.64
Dec 1988 30.00 30.45 7.89 13.36 16.19 17.23 14.13 18.35
Dec 1989 32.13 21.43 14.53 2.31 9.82 30.42 27.47 23.73
Dec 1990 -6.54 -11.86 8.96 -4.36 -8.61 -4.16 -5.41 -5.99
Dec 1991 30.98 32.40 16.00 39.17 37.53 33.03 36.33 27.75
Dec 1992 21.81 9.88 7.40 17.44 24.06 9.04 7.63 9.63
Dec 1993 103.39 84.94 9.75 16.69 19.37 10.15 11.98 14.62
Dec 1994 -16.94 -12.59 -2.92 -1.03 -6.91 0.38 -1.57 -0.41
Dec 1995 4.00 10.00 18.47 20.46 25.14 37.77 32.65 31.14
Dec 1996 10.05 8.08 3.63 11.27 15.29 22.45 17.53 20.67
Dec 1997 -40.31 -34.20 9.65 13.27 16.76 32.85 28.03 26.88
Dec 1998 -7.79 -4.42 8.69 2.95 12.62 27.02 25.69 13.58
Dec 1999 64.67 49.83 -0.82 2.51 38.91 20.91 27.96 11.86
</TABLE>
73
<PAGE>
21. APPENDIX D - OTHER PIONEER INFORMATION
The Pioneer group of mutual funds was established in 1928 with the creation of
Pioneer Fund. Pioneer is one of the oldest and most experienced money managers
in the U.S.
As of December 31, 1999, Pioneer employed a professional investment staff of 82.
Total assets of all Pioneer mutual funds at December 31, 1999, were
approximately $23 billion representing 1,392,828 shareholder accounts, 881,091
non-retirement accounts and 511,737 retirement accounts.
74
<PAGE>
THIRD AVENUE HIGH YIELD FUND
ANNUAL REPORT
OCTOBER 31, 1999
<PAGE>
THIRD AVENUE HIGH YIELD FUND
Dear Fellow Shareholders:
At October 31, 1999, the audited net asset value attributable to the 786,343
common shares outstanding of the Third Avenue High Yield Fund (the "Fund") was
$9.65 per share. On September 30, 1999, the most recent dividend date, the Fund
paid $0.175 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 $0.692 per share has been paid in dividends. On July 30, 1999, the last
day of the Fund's third quarter, the unaudited net asset value per share was
$9.89. At December 13, 1999, the unaudited net asset value per share was $10.51.
QUARTERLY ACTIVITY
During the fourth quarter of fiscal 1999, the Fund eliminated 13 positions,
reduced three positions, established 10 new positions and increased three
positions, as shown below:
PAR VALUE
OR NUMBER OF SHARES REDUCTIONS IN EXISTING POSITIONS
$500,000 American Tower Corp. 144A 6.25% due 10/15/09
$400,000 Cirrus Logic, Inc. 6.00% due 12/15/03
$400,000 Fisher Scientific International Inc. 9.00% due 2/1/08
$400,000 MascoTech, Inc. 4.50% due 12/15/03
$300,000 Parker Drilling Co. 5.50% due 8/1/04
$400,000 R&B Falcon Corp. 9.50% due 12/15/08
$435,000 SBA Communications Corp. 12.00% due 3/1/08
$250,000 Scotts Co. 144A 8.63% due 1/15/09
$250,000 Toll Corp. 8.13% due 2/1/09
$400,000 WESCO Distribution, Inc. 9.13% due 6/1/08
INCREASES IN EXISTING POSITIONS
1,500 shares Conseco Finance Trust IV 7.00% due 2/16/01
$150,000 NCI Building Systems, Inc. 144A 9.25% due 5/1/09
$100,000 Pogo Producing Co. 5.50% due 6/15/06
NEW POSITIONS ACQUIRED
$200,000 Credence Systems Corp. 5.25% due 9/15/02
$300,000 Safeguard Scientifics, Inc. 144A 5.00% due 6/15/06
744 shares Winstar Communications, Inc. Common
POSITIONS ELIMINATED
$425,000 Adaptec, Inc. 4.75% due 2/1/04
$100,000 Adaptive Broadband Corp. 5.25% due 12/15/03
$275,000 Alpharma, Inc. 5.75% due 4/1/05
$325,000 Atmel SA 3.25% due 6/1/02
7,000 shares Breed Technologies, Inc. 6.50% due 11/15/27
1
<PAGE>
$325,000 Cypress Semiconductors Corp. 6.00% due 10/1/02
$450,000 Cymer, Inc. 3.50% due 8/6/04
$450,000 Lam Research Corp. 5.00% due 9/1/02
$500,000 Level 3 Communications, Inc. 9.13% due 5/1/08
$250,000 MidAmerican Energy Holdings Co. 8.48% due 9/15/28
5,000 shares NEXTLINK Communications, Inc. 6.50% due 3/31/10
9,000 shares Sun Financing I 7.00% due 5/1/28
5,000 shares Winstar Communications, Inc. 7.00% due 3/15/10
During the quarter, the Fund had a considerable amount of portfolio
repositioning. Most issues which were sold or reduced in size had reached price
levels which we felt had reached their full investment value, and offered little
price appreciation potential from then current levels. These securities included
some of our technology and telecommunications holdings. In the technology area,
sales included Adaptec, Atmel, Cypress Semiconductor, Cymer, and Lam Research.
Telecommunications issues sold were Adaptive Broadband, Level3 Communications,
and WinStar Communications. We also eliminated MidAmerican Energy bonds after
the bond price moved up in response to the company receiving a buyout bid from
the principals of Berkshire Hathaway, Inc. to take the company private.
We reduced somewhat our holding of Credence Systems bonds after the underlying
stock advanced considerably in response to the company's substantially improved
results. The company makes equipment to test semiconductors. Despite the
reduction, we still have a major position in the bonds, and expect the company
to prosper as demand for their test equipment continues to grow. Our position in
the bonds of Safeguard Scientifics, a company which makes venture capital
investments in internet companies, was lowered because its advancing price had
raised our holdings to an outsized position for the Fund. Winstar Communications
common stock was sold, having been received as an in kind dividend from our
preferred holdings.
Among our new positions acquired were several straight high yield bonds which we
felt had improving operating results, and would provide a relatively high yield.
These issues include Fisher Scientific, which makes and distributes instruments
and supplies to corporate customers worldwide. We also purchased bonds issued by
Scotts, the world's largest supplier of lawn and garden care products. Toll
Corp. bonds were added--Toll is a very well managed home builder located in the
mid-Atlantic area, and has recently expanded into California and the upper
Midwest. Another issue purchased was WESCO International bonds. This company is
one of the nation's largest distributors of electrical products and supplies for
the maintenance and repair activities of industrial and commercial customers.
We added two holdings in the tower industry: one was a convertible bond of
American Tower, and another was an original discount bond of SBA Communications.
We feel the wireless telecommunications market will grow very strongly for the
forseeable future to serve the markets for cellular phones, as well as for
transmittal of voice and data from fixed locations. These companies control
valuable and increasingly scarce locations for towers, and will benefit from
industry consolidation which is eliminating small entities that control
relatively few towers in their portfolios.
Convertible bonds of Parker Drilling, a company which specializes in onshore and
offshore drilling rigs, and straight bonds of R&B Falcon, which operates the
world's largest marine-based drilling units, were also purchased in the quarter.
These purchases, as well as an addition to our holding in convertible bonds of
Pogo Producing, a smaller exploration and production company, reflect our
optimism for stable energy prices and increases in drilling activity over the
next few years.
2
<PAGE>
Cirrus Logic, a semiconductor manufacturer of analog and mixed signal chips, has
convertible bonds trading at deeply discounted levels, which we felt had an
attractive combination of yield and total return potential. Thus we have made
initial purchases of these bonds in the quarter. Also purchased in the quarter
were deeply discounted bonds of MascoTech. This company has world-leading metal
forming process capabilities and proprietary product positions. It serves
companies in the transportation, industrial and consumer markets with products
such as transmission and drive applications, towing systems, ferrous and
nonferrous industrial fasteners, and packaging and sealing products for
industrial fluids.
We made small additions to our position in Conseco preferred shares. This
holding has been a disappointment in terms of price performance since it was
purchased last year, as financial stocks have fallen out of favor in the general
market. Recently Conseco received a $500 million investment in the form of
preferred stock from Thomas H. Lee, the well regarded buyout investor. In
recognition of this infusion as well as some additional restructuring moves made
by the company, the investment rating firm of Moody's Investors Service has put
Conseco's bonds under review for upgrading from below investment grade to
investment grade.
Sincerely,
/s/ Margaret D. Patel
Margaret D. Patel
Portfolio Manager
3
<PAGE>
<TABLE>
<CAPTION>
THIRD AVENUE TRUST
THIRD AVENUE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
AT OCTOBER 31, 1999
PRINCIPAL VALUE % OF NET
AMOUNT ($) ISSUES (NOTE 1) ASSETS
- ------------------------------ --------------- ---------------------------------- -------------- -----------
<S> <C> <C> <C> <C>
CONVERTIBLE BONDS - 52.14%
Computers - Memory 300,000 HMT Technology Corp. 5.75%,
Devices due 1/15/04 $ 111,000 1.46%
--------------
Computer Software & 200,000 Safeguard Scientifics, Inc. 144A
Services 5.00%, due 6/15/06 256,250 3.38%
--------------
Electric Utility Services 400,000 Itron, Inc. 6.75%, due 3/31/04 219,000 2.88%
--------------
Industrial 400,000 MascoTech, Inc. 4.50%, due
12/15/03 314,000 4.14%
--------------
Instrumentation - 300,000 Credence Systems Corp. 5.25%,
Electronic Testing due 9/15/02 292,125 3.85%
--------------
Medical - Hospitals 625,000 Columbia\HCA Medical Care,
Int'l. 6.75%, due 10/1/06 528,125 6.96%
--------------
Oil/Gas Exploration 300,000 Range Resources Corp. 6.00%,
due 2/1/07 185,625
400,000 Pogo Producing Co. 5.50%, due
6/15/06 309,500
--------------
495,125 6.52%
--------------
Oil Field Services 300,000 Key Energy Group, Inc. 5.00%,
due 9/15/04 (b) 205,875
300,000 Parker Drilling Co. 5.50%, due
8/1/04 213,000
--------------
418,875 5.52%
--------------
Pharmaceutical Services 505,000 Innovative Clinical Solutions,
Ltd. 6.75%, due 6/15/03 252,500 3.33%
--------------
Semiconductors 400,000 Cirrus Logic, Inc. 6.00%, due
12/15/03 298,500 3.93%
--------------
Telecommunications - 500,000 P-Com, Inc. 4.25%, due
Wireless 11/1/02 269,375
500,000 American Tower Corp. 144A
6.25%, due 10/15/09 502,500
--------------
771,875 10.17%
--------------
TOTAL CONVERTIBLE BONDS
(Cost $4,891,047) 3,957,375
--------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
THIRD AVENUE TRUST
THIRD AVENUE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
AT OCTOBER 31, 1999
VALUE % OF NET
SHARES ISSUES (NOTE 1) ASSETS
- ------------------------------ --------------- ---------------------------------- -------------- -----------
<S> <C> <C> <C> <C>
CONVERTIBLE PREFERRED STOCK - 7.31%
Electric Utility Services 4,000 KN Energy, Inc. 8.25%, due
11/30/01 137,000
4,000 Texas Utilities 9.25%, due
8/16/01 (b) 203,250
--------------
340,250 4.48%
--------------
Insurance 6,500 Conseco Finance Trust IV
7.00%, due 2/16/01 214,906 2.83%
--------------
TOTAL CONVERTIBLE PREFERRED
STOCK (Cost $650,438) 555,156
--------------
<CAPTION>
PRINCIPAL
AMOUNT ($)
- ------------------------------ --------------- ---------------------------------- -------------- -----------
<S> <C> <C> <C> <C>
CORPORATE BONDS - 35.24%
Building and Construction 400,000 NCI Building Systems, Inc.
Products 9.25%, due 5/1/09 379,000 4.99%
--------------
Industrial 400,000 Fisher Scientific International
Inc. 9.00%, due 2/1/08 378,000
250,000 Scotts Co. 144A 8.63%, due
1/15/09 238,125
--------------
616,125 8.12%
--------------
Instrumentation - 400,000 WESCO Distribution, Inc.
Electronic Testing 9.13%, due 6/1/08 360,000 4.74%
--------------
Oil Field Services 400,000 R&B Falcon Corp. 9.50%, due
12/15/08 (b) 384,000 5.06%
--------------
Real Estate - Commercial 500,000 BF Saul REIT 144A 9.75%, due
4/1/08 472,500
250,000 Toll Corp. 8.13%, due 2/1/09 228,750
--------------
701,250 9.24%
--------------
Telecommunications - 435,000 SBA Communications Corp.
Wireless 12.00%, due 3/1/08 234,900 3.09%
--------------
TOTAL CORPORATE BONDS
(Cost $2,732,950) 2,675,275
--------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
THIRD AVENUE TRUST
THIRD AVENUE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
AT OCTOBER 31, 1999
VALUE % OF NET
SHARES ISSUES (NOTE 1) ASSETS
- ------------------------------ --------------- ---------------------------------- -------------- -----------
<S> <C> <C> <C> <C>
COMMON STOCKS - 0.03%
Telecommunications - Wireless 65 Winstar Communications, Inc (a)
$ 2,523 0.03%
--------------
TOTAL COMMON STOCK
(Cost $3,500) 2,523
--------------
<CAPTION>
PRINCIPAL
AMOUNT ($)
- ------------------------------ --------------- ---------------------------------- -------------- -----------
<S> <C> <C> <C> <C>
SHORT TERM INVESTMENTS - 1.71%
Repurchase Agreements 129,536 Bear Stearns 5.23%, due date
November 1, 1999 (c) 129,536 1.71%
--------------
TOTAL SHORT TERM INVESTMENTS
(Cost $129,536) 129,536
--------------
TOTAL INVESTMENT PORTFOLIO -
96.43% (Cost $8,407,471) 7,319,865
--------------
CASH AND OTHER ASSETS LESS
LIABILITIES - 3.57% 270,808
--------------
NET ASSETS - 100.00%
(Applicable to 786,343 shares
outstanding) $7,590,673
==============
Notes:
(a) Non-income producing security.
(b) Securities in whole or in part on loan.
(c) Repurchase agreement collateralized by: U.S. Treasury Strips, par
value $715,000, 6.29%, matures 11/25/26: market value $132,275.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
THIRD AVENUE TRUST
THIRD AVENUE HIGH YIELD FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS:
<S> <C>
Investments at value (Notes 1 and 4):
Unaffiliated issuers (identified cost of $8,407,471) $7,319,865
Receivable for securities sold 111,246
Receivable for fund shares sold 39,300
Receivable from investment adviser 2,491
Dividends and interest receivable 157,614
Collateral on loaned securities (Note 1) 57,081
Deferred organizational costs (Note 1) 9,869
Other assets 270
----------
Total assets 7,697,736
----------
LIABILITIES:
Payable for fund shares redeemed 1,060
Accounts payable and accrued expenses 48,922
Collateral on loaned securities (Note 1) 57,081
----------
Total liabilities 107,063
----------
Net assets $7,590,673
==========
SUMMARY OF NET ASSETS:
Common stock, unlimited shares authorized, no
par value, 786,343 shares outstanding $8,486,591
Accumulated undistributed net investment income 59,002
Accumulated undistributed net realized gains
from investment transactions 132,686
Net unrealized depreciation of investments (1,087,606)
----------
Net assets applicable to capital shares outstanding $7,590,673
==========
Net asset value, offering and redemption price per share $9.65
=====
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
THIRD AVENUE TRUST
THIRD AVENUE HIGH YIELD FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1999
<S> <C>
INVESTMENT INCOME:
Interest $ 634,714
Dividends 116,954
----------
Total investment income 751,668
----------
EXPENSES:
Investment advisory fees (Note 3) 74,907
Directors' fees and expenses 61,420
Administration fees (Note 3) 56,596
Transfer agent fees 26,948
Accounting services 25,592
Auditing and tax consulting fees 22,987
Registration fees 16,498
Custodian fees 7,606
Reports to shareholders 4,409
Legal fees 3,724
Amortization of organizational expenses (Note 1) 2,997
Miscellaneous expenses 1,568
Insurance expenses 370
----------
Total operating expenses 305,622
----------
Expenses waived and reimbursed (Note 3) (147,482)
----------
Net expenses 158,140
----------
Net investment income 593,528
----------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investments 183,311
Net change in unrealized appreciation on investments 834,889
----------
Net realized and unrealized gains on investments 1,018,200
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,611,728
==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
THIRD AVENUE TRUST
THIRD AVENUE HIGH YIELD FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE FOR THE YEAR
YEAR ENDED ENDED
10/31/99 10/31/98*
---------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 593,528 $ 348,681
Net realized gains (losses) on investments 183,311 (50,625)
Net change in unrealized appreciation
(depreciation) on investments 834,889 (1,922,495)
---------- ----------
Net increase (decrease) in net assets
resulting from operations 1,611,728 (1,624,439)
---------- ----------
DISTRIBUTIONS:
Dividends to shareholders from net
investment income (592,389) (295,950)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 3,087,088 12,705,359
Net asset value of shares issued in reinvestment
of dividends and distributions 529,189 266,886
Cost of shares redeemed (4,736,179) (3,360,620)
---------- ----------
Net increase (decrease) in net assets resulting
from capital share transactions (1,119,902) 9,611,625
---------- ----------
Net increase (decrease) in net assets (100,563) 7,691,236
Net assets at beginning of period 7,691,236 0
---------- ----------
Net assets at end of period (including
undistributed net investment income of
$59,002 and $54,866, respectively) $7,590,673 $7,691,236
========== ==========
* The Fund commenced investment operations on February 12, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
THIRD AVENUE TRUST
THIRD AVENUE HIGH YIELD FUND
FINANCIAL HIGHLIGHTS
OCTOBER 31, 1999
Selected data (for a share outstanding throughout each period) and ratios are as
follows:
FOR THE
FOR THE PERIOD
YEAR ENDED ENDED
10/31/99 10/31/98*
<S> <C> <C>
Net Asset Value, Beginning of Period $ 8.50 $10.00
------ ------
Income (loss) from Investment Operations:
Net investment income .70 .34
Net income (loss) on securities (both
realized and unrealized) 1.14 (1.56)
------ ------
Total from Investment Operations 1.84 (1.22)
------ ------
Less Distributions:
Dividends from net investment income (.69) (.28)
------ ------
Net Asset Value, End of Period $ 9.65 $ 8.50
====== ======
Total Return 22.20% (12.39%)1
Ratios/Supplemental Data:
Net Assets, End of period (in thousands) $7,591 $7,691
Ratio of Expenses to Average Net Assets
Before expense reimbursement 3.67% 3.99%2
After expense reimbursement 1.90% 1.90%2
Ratio of Net Income to Average Net Assets
Before expense reimbursement 5.36% 4.13%2
After expense reimbursement 7.13% 6.22%2
Portfolio Turnover Rate 64% 38%1
1 Not Annualized
2 Annualized
* The Fund commenced investment operations February 12, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
10
<PAGE>
THIRD AVENUE TRUST
THIRD AVENUE HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999
1. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION:
Third Avenue Trust (the "Trust") is an open-end, non-diversified management
investment company organized as a Delaware business trust pursuant to a Trust
Instrument dated October 31, 1996. The Trust currently consists of four separate
investment series: Third Avenue Value Fund, Third Avenue Small-Cap Value Fund,
Third Avenue High Yield Fund and Third Avenue Real Estate Value Fund. The
information presented in these financial statements pertains to the Third Avenue
High Yield Fund (the "Fund"). Third Avenue Value Fund, Third Avenue Small-Cap
Value Fund and Third Avenue Real Estate Value Fund are presented under separate
cover. Third Avenue High Yield Fund commenced investment operations on February
12, 1998. The Fund seeks to achieve its objective of maximizing total return
through a combination of income and capital appreciation by adhering to a strict
value discipline in selecting securities.
The Fund seeks to achieve its objective by investing at least 65% of its assets
in a portfolio of non-investment grade fixed income or other debt securities of
companies whose capital structures are believed to have a market value priced
below their private market values.
The Fund has entered into an Agreement and Plan of Reorganization with Pioneer
High Yield Fund. Under this agreement, the Fund will transfer all of its assets
to Pioneer High Yield Fund in exchange for Class A shares of Pioneer High Yield
Fund and Pioneer High Yield Fund will assume the liabilities of the Fund. Class
A shares of Pioneer High Yield Fund having a value on the reorganization date
equal to the value of Fund shares will be distributed to Fund shareholders in
exchange for their Fund shares. The consummation of this transaction is subject
to, among other things, approval by the Fund's shareholders of the Agreement and
Plan of Reorganization. It is anticipated that a meeting of shareholders to
approve the Agreement and Plan of Reorganization will be held in February, 2000.
ACCOUNTING POLICIES:
The policies described below are followed consistently by the Fund in the
preparation of its financial statements in conformity with accounting principles
generally accepted in the United States of America.
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
SECURITY VALUATION:
Securities traded on a principal stock exchange or the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") are valued at the last
quoted sales price or, in the absence of closing sales prices on that day,
securities are valued at the mean between the closing bid and asked price.
Temporary cash investments are valued at cost, plus accrued interest, which
approximates market. Short-term securities with original or remaining maturities
in excess of 60 days are valued at the mean of their quoted bid and asked
prices. Short-term securities with 60 days or less to maturity are amortized to
maturity based on their cost if acquired within 60 days of maturity, or if
already held by a Fund on that day, based on the value determined on that day.
The Fund may invest up to 15% of its total assets in securities which are not
readily marketable, including those which are restricted as to disposition under
applicable securities laws ("restricted securities"). Restricted securities and
other securities and assets for which market quotations are not readily
available are valued at "fair value", as determined in good faith by the Board
of Trustees of the Fund although actual
11
<PAGE>
THIRD AVENUE TRUST
THIRD AVENUE HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
evaluations may be made by personnel acting under procedures established by the
Board of Trustees. At October 31, 1999, the Fund did not hold any restricted
securities. Among the factors considered by the Board of Trustees in determining
fair value are the type of security, trading in unrestricted securities of the
same issuer, the financial condition of the issuer, the Fund's cost at the date
of purchase, a percentage of the Fund's beneficial ownership of the issuer's
common stock and debt securities, the operating results of the issuer, the
discount from market value of any similar unrestricted securities of the issuer
at the time of purchase and liquidation values of the issuer. The fair values
determined in accordance with these procedures may differ significantly from the
amounts which would be realized upon disposition of the securities. Restricted
securities often have costs associated with subsequent registration.
SECURITY TRANSACTIONS AND INVESTMENT INCOME:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date and interest income, including, where
applicable, amortization of premium and accretion of discount on investments, is
accrued daily, except when collection is not expected. Realized gains and losses
from securities transactions are reported on an identified cost basis.
LOANS OF PORTFOLIO SECURITIES:
The Fund loaned securities during the year to certain brokers, with the Fund's
custodian acting as lending agent. Upon such loans, the Fund receives collateral
which is maintained by the custodian and earns income in the form of negotiated
lenders' fees, which are included in interest income in the Statement of
Operations. On a daily basis, the Fund monitors the market value of securities
loaned and maintain collateral against the securities loaned in an amount not
less than the value of the securities loaned. The Fund may receive collateral in
the form of cash or other eligible securities. Risks may arise upon entering
into securities lending to the extent that the value of the collateral is less
than the value of the securities loaned due to changes in the value of
collateral or the loaned securities.
During the year ended October 31, 1999, the Fund had securities lending income
included in interest income totaling $490. The value of loaned securities and
related collateral outstanding at October 31, 1999 was $54,550 and $57,081,
respectively. The collateral consisted of cash, which was invested in repurchase
agreements with Bear Stearns due November 1, 1999, collateralized by U.S.
Treasury securities.
REPURCHASE AGREEMENTS:
Securities pledged as collateral for repurchase agreements are held by the
Fund's custodian bank until maturity of the repurchase agreement. Provisions in
the agreements ensure that the market value of the collateral is at least equal
to the repurchase value in the event of default. In the event of default, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
ORGANIZATIONAL COSTS:
Organizational costs of $15,000 are being amortized on a straight line basis
over five years from commencement of operations.
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income paid to shareholders and distributions from
realized gains on sales of securities paid to shareholders are recorded on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized capital gains are determined in accordance with Federal
income tax regulations which may differ from accounting principles generally
accepted in the United States of America. These "book/tax" differences are
either temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the capital accounts
based on their tax-basis treatment. Temporary differences do not require
reclassification.
12
<PAGE>
THIRD AVENUE TRUST
THIRD AVENUE HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
For the year ended October 31, 1999, permanent differences were reclassified as
shown below:
INCREASE TO ACCUMULATED DECREASE TO
UNDISTRIBUTED NET ADDITIONAL
INVESTMENT INCOME PAID-IN-CAPITAL
----------------- ---------------
2,997 (2,997)
FEDERAL INCOME TAXES:
The Fund has complied and intends to continue to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies.
Therefore, no Federal income tax provision is required.
CASH AND CASH EQUIVALENTS:
The Fund has defined cash and cash equivalents as cash in interest bearing and
non-interest bearing accounts.
EXPENSE ALLOCATION:
Expenses attributable to the Fund are charged to the Fund. Expenses attributable
to the Trust are allocated using the ratio of each Fund's net assets relative to
the total net assets of the Trust, unless otherwise specified.
TRUSTEES FEES:
The Trust does not pay any fees to its officers for their services as such, but
does pay Trustees who are not affiliated with the Investment Adviser a fee of
$1,500 for each meeting of the Board of Trustees that they attend, in addition
to reimbursing all Trustees for travel and incidental expenses incurred by them
in connection with their attendance at Board meetings. The Trust also pays
non-interested Trustees an annual stipend of $2,000 in January of each year for
the previous year's service.
2. SECURITIES TRANSACTIONS
PURCHASES AND SALES/CONVERSIONS:
The aggregate cost of purchases, and aggregate proceeds from sales and
conversions of investments, excluding short-term investments, from unaffiliated
and affiliated issuers (as defined in the Investment Company Act of 1940, as
amended, ownership of 5% or more of the outstanding common stock of the issuer)
for the year ended October 31, 1999 were as follows:
PURCHASES SALES
Unaffiliated $5,078,813 $6,271,463
At October 31, 1999, cost and gross unrealized appreciation and gross unrealized
depreciation, for Federal income tax purposes were as follows:
GROSS GROSS NET
COST APPRECIATION DEPRECIATION DEPRECIATION
---- ------------ ------------ ------------
$8,407,471 $100,584 $(1,188,190) $(1,087,606)
3. INVESTMENT ADVISORY SERVICES AND SERVICE FEE AGREEMENT
The Fund has an Investment Advisory Agreement with EQSF Advisers, Inc. (the
"Adviser") for investment advice and certain management functions. The terms of
the Investment Advisory Agreement provide for a monthly fee of 1/12 of 0.90% (an
annual fee of 0.90%) of the total average daily net assets of the Fund, payable
each month. Additionally, under the terms of the Investment Advisory Agreement,
the Adviser pays certain expenses on behalf of the Fund, which is reimbursable
by the Fund, including salaries of non-
13
<PAGE>
THIRD AVENUE TRUST
THIRD AVENUE HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
officer employees and other miscellaneous expenses. Amounts reimbursed with
respect to non-officer salaries are included under the caption Administration
fees. At October 31, 1999, the Fund had a payable to affiliates of $4,360, for
reimbursement of expenses paid by such affiliates. Under current arrangements,
whenever, in any fiscal year, the Fund's normal operating expenses, including
the investment advisory fee, but excluding brokerage commissions and interest
and taxes, exceeds 1.90% of the first $100 million of the Fund's average daily
net assets, and 1.50% of average daily net assets in excess of $100 million, the
Adviser is obligated to reimburse the Fund in an amount equal to that excess.
Such waived and reimbursed expenses may be paid to the Adviser during the
following three year period to the extent that the payment of such expenses
would not cause the Fund to exceed the preceding limitations. The adviser waived
fees of $74,907, and reimbursed $72,575, for the year ended October 31, 1999.
For the period ended October 31, 1998, the adviser waived fees of $50,472, and
reimbursed $66,638.
4. RELATED PARTY TRANSACTIONS
BROKERAGE COMMISSIONS:
Martin J. Whitman, the Chairman and a director of the Funds, is the
Chairman and Chief Executive Officer of M.J. Whitman Holding Corp., which is the
parent of both M.J. Whitman, Inc., a registered broker-dealer and M.J. Whitman
Senior Debt Corp., a dealer in the trading of bank debt and other private
claims. For the year ended October 31, 1999, the Fund incurred total brokerage
commissions of $803, which includes commissions earned by M.J. Whitman, Inc. of
$313.
5. CAPITAL SHARE TRANSACTIONS
FOR THE FOR THE
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
Increase in Fund shares:
Shares outstanding at beginning of period 904,440 --
Shares sold 326,545 1,266,191
Shares reinvested from dividends
and distributions 56,746 29,079
Shares redeemed (501,388) (390,830)
-------- ----------
Net increase (decrease) in Fund shares (118,097) 904,440
-------- ---------
Shares outstanding at end of period 786,343 904,440
======== =========
6. RISKS RELATING TO CERTAIN INVESTMENTS
HIGH YIELD DEBT:
The Fund currently invests in high yield lower grade debt. The market values of
these higher yielding debt securities tend to be more sensitive to economic
conditions and individual corporate developments than those of higher rated
securities. In addition, the secondary market for these bonds is generally less
liquid.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS:
The Fund invests in loans and other direct debt instruments issued by a
corporate borrower to another party. These loans represent amounts owed to
lenders or lending syndicates (loans and loan participations) or to other
parties. Direct debt instruments may involve a risk of loss in case of default
or insolvency of the borrower and may offer less legal protection to the Fund in
the event of fraud or misrepresentation. In addition, loan participations
involve a risk of insolvency of the lending bank or other financial
intermediary. The markets in loans are not regulated by federal securities laws
or the SEC.
14
<PAGE>
THIRD AVENUE TRUST
THIRD AVENUE HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
7. CAPITAL LOSS CARRYFORWARDS
During the year ended October 31, 1999, the Fund utilized approximately $50,625
of its net capital loss carryforward. No further capital loss carryforwards are
available.
15
<PAGE>
THIRD AVENUE TRUST
THIRD AVENUE HIGH YIELD FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To The Trustees and Shareholders of
Third Avenue Trust--Third Avenue High Yield Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations, of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Third Avenue High Yield Fund (the
"Fund", one of the four series comprising Third Avenue Trust) at October 31,
1999, the results of its operations for the year then ended, and the changes in
net assets and the financial highlights for the year then ended and for the
period February 12, 1998 (commencement of operations) to October 31, 1998, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
As more fully described in Note 1 to the financial statements, the Fund has
entered into an Agreement and Plan of Reorganization between the Fund and
Pioneer High Yield Fund. The consummation of this transaction is subject to,
among other things, approval by the Fund's shareholders of the Agreement and
Plan of Reorganization.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
December 17, 1999
16
<PAGE>
THIRD AVENUE TRUST
THIRD AVENUE HIGH YIELD FUND
FEDERAL TAX STATUS OF DIVIDENDS
(UNAUDITED)
The following information represents the tax status of dividends and
distributions paid by the Fund during the fiscal year ended October 31, 1999.
This information is presented to meet regulatory requirements and no current
action on your part is required.
Of the $0.692 per share paid to you in cash or reinvested into your account for
the fiscal year ended October 31, 1999, the entire amount was derived from net
investment income. 21.63% of the ordinary income distributed qualifies for the
Corporate Dividends Received Deduction.
17
<PAGE>
PERFORMANCE INFORMATION
(Unaudited)
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
Average Annual Total Return
1 Year Since Inception
22.20% 4.06%
[The following table represents a chart in the printed piece.]
TAHYF Merrill Lynch Merrill Lynch
High Yield Index of all Convertibles,
Master II Index Speculative Quality
2/12/98* $10,000.00 $10,000.00 $10,000.00
10/31/99 10,706.00 10,159.00 $12,588.00
- --------------------------------------------------------------------------------
* Period beginning February 12, 1998 (THIRD AVENUE HIGH YIELD FUND'S
commencement of operations)
As with all mutual funds, past performance does not indicate future results.
18
<PAGE>>
PART C - OTHER INFORMATION
Item 23. Exhibits
(a)(1) Agreement and Declaration of Trust.(1)
(a)(2) Certificate of Trust.(1)
(b) By-Laws.(1)
(c) None.
(d) Form of Management Contract with Pioneer Investment
Management, Inc.(1)
(e)(1) Form of Underwriting Agreement with Pioneer Funds
Distributor, Inc.(1)
(e)(2) Form of Dealer Sales Agreement.(1)
(f) None.
(g) Form of Custodian Agreement with Brown Brothers
Harriman & Co.(1)
(h)(1) Form of Investment Company Service Agreement with
Pioneering Services Corporation.(1)
(h)(2) Administration Agreement with Pioneer Investment
Management, Inc. (formerly Pioneering Management
Corporation).(1)
(h)(3) Form of Expense Limit and Reimbursement Agreement.(2)
(h)(4) Agreement and Plan of Reorganization with Third Avenue Trust/
Third Avenue High Yield Fund.(2)
(i) Opinion of Counsel.(1)
(j) Consent of Independent Public Accountants.(2)
(k) None.
(l) None.
(m)(1) Form of Class A Distribution Plan.(1)
(m)(2) Form of Class B Distribution Plan.(1)
(m)(3) Form of Class C Distribution Plan.(1)
(n) Form of Multiple Class Plan Pursuant to Rule 18f-3.(1)
(o) Not applicable.
(p) Code of Ethics.(3)
N/A Powers of Attorney.(1)
- -------------------------
(1) Previously filed. Incorporated herein by reference from the exhibits filed
with the Fund's Registration Statement on Form N-1A (File No. 333-90215) as
filed with the Securities and Exchange Commission (the "SEC") on November 11,
1999 (Accession No. 0001016964-99-000169).
(2) Filed herewith.
(3) To be filed by amendment.
Item 24. Persons Controlled by or Under Common Control with the Fund
None.
Item 25. Indemnification
Except for the Agreement and Declaration of Trust, dated August 3, 1999
the "Declaration"), establishing the Fund as a business trust under
Delaware law, there is no contract, arrangement or statute under which any
Trustee, officer, underwriter or affiliated person of the Fund is insured or
indemnified. The Declaration provides that no Trustee or officer will be
indemnified against any liability to which the Fund would otherwise be subject
by reason of or for willful misfeasance, bad faith, gross negligence or reckless
disregard of such person's duties.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be available to Trustees, officers
and controlling persons of the Fund pursuant to the foregoing provisions, or
otherwise, the Fund has been advised that in the opinion of the SEC such
C-1
<PAGE>
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Fund of expenses incurred or
paid by a Trustee, officer or controlling person of the Fund in the successful
defense of any action, suit or proceeding) is asserted by such Trustee, officer
or controlling person in connection with the securities being registered, the
Fund will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
Item 26. Business and Other Connections of Investment Adviser
Pioneer Investment Management, Inc. ("Pioneer Investments") is a registered
investment adviser under the Investment Advisers Act of 1940, as amended, and is
a wholly owned subsidiary of The Pioneer Group, Inc. ("Pioneer"). Pioneer
Investments manages investment companies, pension and profit sharing plans,
trusts, estates or charitable organizations and other corporations or
business entities.
To the knowledge of the Fund, none of Pioneer Investments' directors
or executive officers is or has been during their employment with Pioneer
Investments engaged in any other business, profession, vocation or employment
of a substantial nature for the past two fiscal years, except as noted below.
Certain directors and officers, however, may hold or may have held various
positions with, and engage or have engaged in business for, the investment
companies that Pioneer Investments manages, Pioneer and/or other Pioneer
subsidiaries.
OTHER BUSINESS, PROFESSION, VOCATION OR
EMPLOYMENT OF SUBSTANTIAL NATURE WITHIN LAST TWO
NAME OF DIRECTOR/OFFICER FISCAL YEARS
John F. Cogan, Jr. Senior Partner, Hale and Dorr LLP, 60 State
Street, Boston, Massachusetts 02109
Joseph P. Barri Senior Partner, Hale and Dorr LLP, 60 State
Street, Boston, Massachusetts 02109
Margaret D. Patel Portfolio Manager, EQSF Advisers, Inc.,
767 Third Avenue, New York, New York 10017-2023
Item 27. Principal Underwriters
(a) See "Management of the Fund" in the Statement of Additional
Information.
(b) Directors and officers of Pioneer Funds Distributor, Inc.:
POSITIONS AND OFFICES WITH POSITIONS AND OFFICES WITH
NAME UNDERWRITER FUND
John F. Cogan, Jr. Director and Chairman Chairman of the Board,
President and Trustee
David D. Tripple Director and President Executive Vice President and
Trustee
Steven M. Graziano Executive Vice President None
C-2
<PAGE>
William A. Misata Senior Vice President None
Constance D. Spiros Senior Vice President None
Marcy L. Supovitz Senior Vice President None
Mark R. Kiniry Vice President, Regional
Director, Sales None
Barry G. Knight Vice President None
William H. Spencer Vice President, Regional
Director, Sales None
Elizabeth A. Watson Vice President, Compliance None
Steven R. Berke Assistant Vice President,
Blue Sky None
Eric W. Reckard Treasurer Treasurer
Joseph P. Barri Clerk Secretary
Robert P. Nault Assistant Clerk Assistant Secretary
The principal business address of each of these individuals is 60 State Street,
Boston, Massachusetts 02109-1820.
(c) Not applicable.
Item 28. Location of Accounts and Records
The accounts and records are maintained at the Fund's office at
60 State Street, Boston, Massachusetts 02109; contact the Treasurer.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Fund has duly caused this registration
statement to be signed on its behalf by the undersigned, duly authorized, in the
City of Boston and The Commonwealth of Massachusetts on the 14th day of February
2000.
PIONEER HIGH YIELD FUND
By: /s/ John F. Cogan, Jr.
John F. Cogan, Jr.
Chairman and President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated:
Signature Title
/s/ John F. Cogan, Jr. Chairman of the Board )
John F. Cogan, Jr. and President )
(Principal Executive )
Officer) )
)
)
/s/ Eric W. Reckard Chief Financial Officer )
Eric W. Reckard and Treasurer (Principal )
Financial and Accounting )
Officer) )
)
)
Trustees: )
)
)
Mary K. Bush* )
Mary K. Bush )
)
)
/s/ John F. Cogan, Jr. )
John F. Cogan, Jr. )
)
)
)
Richard H. Egdahl* )
Richard H. Egdahl )
)
)
Margaret BW Graham* )
Margaret B. W. Graham )
)
)
John W. Kendrick* )
John W. Kendrick )
)
)
Marguerite A. Piret* )
Marguerite A. Piret )
)
)
David D. Tripple* )
David D. Tripple )
)
)
Stephen K. West* )
Stephen K. West )
)
)
John Winthrop* )
John Winthrop )
)
)
*By: /s/ John F. Cogan, Jr. Dated: February 14, 2000)
John F. Cogan, Jr.
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
Exhibit
Number Document Title
(h)(3) Form of Expense Limit and Reimbursement Agreement
(h)(4) Agreement and Plan of Reorganization with Third Avenue Trust/
Third Avenue High Yield Fund
(j) Consent of Independent Public Accountants
EXPENSE LIMIT AND REIMBURSEMENT AGREEMENT made as of February __, 2000, between
Pioneer Investment Management, Inc. ("PIM") and Pioneer High Yield Fund (the
"Fund").
WHEREAS PIM wishes to reduce the expenses of the Fund until the Fund achieves a
certain level of assets; and
WHEREAS the Fund wishes to have PIM enter into such an agreement and is prepared
to repay such expenses if the Fund subsequently achieves a sufficient level of
asset;
NOW THEREFOR the parties agree as follows:
1) PIM agrees to reduce its fees or to reimburse the Fund for its ordinary
operating expenses in order that the total expenses of the Fund (other than
extraordinary expenses, such as litigation) with respect to Class A shares do
not exceed 0.75% per annum of average daily net assets attributable to Class A
shares. PIM also agrees to reduce the portion the Fund's expenses attributable
to Class B, Class C and Class Y shares by the same number of basis points such
expenses are reduced for Class A shares.
2) PIM may discontinue such expense limitation at any time by supplementing the
Fund's prospectus prior to such discontinuance and by prior notice to the Board
of Directors of the Fund. Such limitation will terminate without any action by
PIM in the event that the average net assets of the Fund for a period of sixty
days are $75 million or more.
3) PIM shall keep a record of the amount of expenses for each Class of shares
that it waived or reduced pursuant to Section 1 hereof ("Prior Expenses"). If at
any future date the total expenses of the Fund attributable to Class A shares
are less than 0.75% of the Fund's average daily net assets, PIM shall be
entitled to be reimbursed for such Prior Expenses attributable to Class A,
provided that such reimbursement does not cause the Fund's total expenses to
exceed 0.75%. PIM shall also be entitled to reimbursement of the corresponding
Prior Expenses attributable to Class B, Class C and Class Y shares. If the
Fund's total expenses subsequently exceed 0.75%, the reimbursement of Prior
Expenses shall be suspended and, if subsequent reimbursement of Prior Expenses
shall be resumed to the extent that total expenses do not exceed 0.75% (unless
previously terminated by PIM), the limitations in Section 1 shall be applied.
4) It is not intended by PIM or the Fund that the reimbursement agreement in
Section 3 is considered an obligation of the Fund unless and until the total
expenses of the Fund attributable to Class A shares are less than 0.75% of
average daily net assets. PIM understands that the Fund total expenses may never
be reduced to such level and there is no assurance that the Prior Expenses shall
be reimbursed. In addition, the Fund shall have the right to terminate this
Agreement, including its obligation to reimburse Prior Expenses, at any time
upon notice to PIM. This Agreement automatically terminates without obligation
by the Fund upon termination of the Management Contract between PIM and the
Fund.
5) This Agreement shall be governed by the laws of the State of Delaware.
-1-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
as of the __th day of February, 2000.
PIONEER HIGH YIELD PIONEER INVESTMENT
FUND MANAGEMENT, INC.
BY: BY:
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
<PAGE>
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 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
2
<PAGE>
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.
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
3
<PAGE>
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;
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(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;
(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;
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(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
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
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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
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<PAGE>
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 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
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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 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
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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
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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
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.
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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.
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
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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.
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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: /s/ Ian M. Kirschner By: /s/ David Barse
Name: Ian M. Kirschner Name: David Barse
Title: Secretary Title: President
Attest: PIONEER HIGH YIELD FUND
By: /s/ Joseph P. Barri By: /s/ John F. Cogan, Jr.
Name: Joseph P. Barri Name: John F. Cogan, Jr.
Title: Secretary Title: Chairman and President
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CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 1 to the registration
statement of Pioneer High Yield Fund on Form N-1A (the "Registration Statement")
of our report dated December 17, 1999, relating to the financial statements and
financial highlights of Third Avenue High Yield Fund, which appears in such
Statement of Additional Information, and to the incorporation by reference of
our report into the Class A, Class B, Class C and Class Y Prospectuses of
Pioneer High Yield Fund, which constitute part of this Registration Statement.
We also consent to the reference to us under the heading "Financial Statements"
in such Statement of Additional Information and to the reference to us under the
heading "Financial Highlights" in the Class A, Class B and Class C Prospectus.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
February 14, 2000
