File No. 2-79140
File No. 811-3564
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Check the appropriate box:
[X] Preliminary proxy statements [ ] Confidential, for Use
of the Commission
Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Pioneer Three
(Name of Registrant as Specified in Its Charter
Pioneer Three
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2).
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PRELIMINARY PROXY MATERIALS
PIONEER THREE
60 State Street
Boston, Massachusetts 02109
1-800-225-6292
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, JANUARY 23, 1996
A Special Meeting of Shareholders of Pioneer Three, a Massachusetts
business trust (the "Fund") will be held at the offices of Hale and Dorr, 60
State Street, 26th Floor, Boston, Massachusetts 02109, at 2:00 p.m., Boston
time, on Tuesday, January 23, 1996 to consider and act upon the following
Proposals:
(1) To approve amendments to the Fund's investment objectives;
(2) To approve a new Management Contract between the Fund and
Pioneering Management Corporation, the Fund's investment adviser ("PMC"),
including a performance based management fee;
(3) To approve an Agreement and Plan of Reorganization pursuant to
which the Fund will be reorganized as a Delaware business trust;
(4) To elect the eight (8) Trustees named in the attached Proxy
Statement to serve on the Board of Trustees until their successors have been
duly elected and qualified;
(5) To approve an amendment to the Fund's fundamental investment
restriction regarding repurchase agreements;
(6) To approve the elimination of the Fund's fundamental investment
restriction regarding short sales;
(7) To approve an amendment to the Fund's fundamental investment
restriction regarding underwriting;
(8) To approve the elimination of the Fund's fundamental investment
policy regarding investment in investment companies;
(9) To approve the elimination of the Fund's fundamental investment
restriction regarding percentage investment in the securities of a single
issuer;
(10) To approve the elimination of the Fund's fundamental investment
restriction regarding investment in the voting securities of a single issuer;
(11) To approve an amendment to the Fund's fundamental investment
restriction regarding commodities;
(12) To approve the elimination of the Fund's fundamental investment
restriction regarding restricted securities;
(13) To approve the elimination of the Fund's fundamental investment
restriction regarding "unseasoned" issuers;
(14) To approve the elimination of the Fund's fundamental investment
restriction regarding affiliates of affiliates of the Fund;
(15) To approve an amendment to the Fund's fundamental investment
restriction regarding loans;
(16) To approve an amendment to the Fund's fundamental investment
restriction regarding borrowing;
(17) To approve the addition of a new fundamental investment
restriction regarding "senior securities";
(18) To approve the elimination of the Fund's investment restriction
regarding industry concentration;
(19) To ratify the selection of Arthur Andersen LLP as the Fund's
independent public accountants for the fiscal year ending September 30, 1996;
and
(20) To transact such other business as may properly come before the
meeting or any adjournments thereof.
Shareholders of record as of the close of business on November 27, 1995
are entitled to vote at the meeting or any adjournments thereof. The Proxy
Statement and proxy card are being mailed to shareholders on or about December
1, 1995.
By Order Of The Board of Trustees
Joseph P. Barri, Secretary
Boston, Massachusetts
December 1, 1995
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WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE AND
RETURN THE ENCLOSED PROXY CARD. YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE
MEETING.
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PRELIMINARY PROXY MATERIALS
PIONEER THREE
60 State Street
Boston, Massachusetts 02109
1-800-225-6292
SPECIAL MEETING OF SHAREHOLDERS
JANUARY 23, 1996
PROXY STATEMENT
This Proxy Statement is furnished to shareholders of Pioneer Three, a
Massachusetts business trust (the "Fund"), in connection with the solicitation
of proxies by the Board of Trustees for use at the Special Meeting of
Shareholders of the Fund, to be held at the offices of Hale and Dorr, 60 State
Street, 26th Floor, Boston, Massachusetts 02109, at 2:00 p.m., Boston time, on
Tuesday, January 23, 1996, and at any adjournments thereof (the "Meeting"). This
Proxy Statement and enclosed proxy are being mailed to shareholders on or about
December 1, 1995. The Fund's annual report for its fiscal period ended September
30, 1995 may be obtained free of charge by writing to the Fund at its executive
offices, 60 State Street, Boston, Massachusetts 02109 or by calling
1-800-225-6292.
Shareholders of record as of the close of business on November 27, 1995
(the "Record Date") are entitled to vote on all business of the Meeting or any
adjournments thereof. As of the Record Date, there were outstanding ____________
shares of beneficial interest of the Fund. To the knowledge of the management of
the Fund, no person beneficially owns more than 5% of the outstanding shares of
the Fund as of the Record Date.
PROPOSAL 1. APPROVAL OF AMENDMENT TO THE FUND'S INVESTMENT OBJECTIVES.
At a Meeting held on November 7, 1995, the Trustees of the Fund
unanimously approved and voted to recommend that the shareholders of the Fund
approve a change in the Fund's investment objective from reasonable income and
growth of capital to capital growth exclusively.
Current Objectives and Related Policies
In pursuing its objective of growth of capital, the Fund invests only
in companies with market capitalizations not exceeding $750 million. In order to
pursue the other objective of reasonable income, the largest portion of the
Fund's portfolio, at any time, has been invested in securities which have
produced income in the form of dividends or interest over the past year.
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Reasons for Change
Pioneering Management Corporation, the Fund's investment adviser
(PMC"), 60 State Street, Boston, Massachusetts 02109, has viewed the Fund's $750
million capitalization limitation policy as the primary means to achieving good
long-term results because of the high earnings potential presented by such
issues. It has recommended the change to the sole investment objective of
capital growth because investing in such stocks that are also income paying
presents unnecessary limitations on available investments. This is the case
because many attractive emerging companies reinvest profits in business
expansion rather than making significant current income distributions.
In addition, the Fund is limited by its investment restrictions to
investment in no more than 10% of a company's outstanding voting securities. As
the Fund's net assets have grown, this restriction has made it increasingly
difficult to find sufficient suitable investments for the Fund. Even if the Fund
continues to be able to remain in technical compliance with its investment
policies, PMC believes that the Fund's dual objectives are difficult to achieve.
Changes in Related Investment Policies
PMC believes that in pursuing the investment objective of capital
growth, attractive investment opportunities for the Fund will be provided by
mid-capitalization companies. For this purpose, mid-capitalization companies are
companies with a market capitalization of less than $5 billion. PMC believes
that Mid-capitalization companies provide similar capital appreciation
opportunities to small capitalization companies because of high potential
earnings growth but present fewer difficulties in identifying potential
investments.
Consequently, whether or not the Proposal to change the Fund's
investment objective is approved by shareholders, the Trustees intend to
eliminate the Fund's current $750 million capitalization investment limitation
discussed above, to adopt a policy of investing at least 65% of the Fund's total
assets in the securities of mid-capitalization companies in its place, and to
change the name of the Fund to "Pioneer Mid-Cap Fund". As a "non-fundamental"
policy, this mid-capitalization investment policy could be changed in the future
by the Trustees without shareholder approval, although the SEC currently takes
the position that the Fund could not continue to use "Mid-Cap" in its name if
the policy were changed to reduce the percentage of such investment below 65%.
The Trustees have no current intention of making such a change.
In addition, if the proposed change in objectives is approved, the
Trustees intend to eliminate the Fund's current policy discussed above of
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investing the largest portion of the Fund's portfolio in securities which have
paid income over the past year. Although the Fund will still be able to invest
in income producing securities, it will not be required to do so and payment of
income will be an entirely incidental consideration in the elections of
portfolio investments for the Fund.
In proposing the change in objective, the Trustees also note that there
are three other funds in the Pioneer family that combine growth and income
objectives, but which do not have any limitations in terms of the market
capitalization of portfolio holdings. These Funds are Pioneer Equity-Income
Fund, Pioneer II and Pioneer Fund.
Except to the extent described in Proposals 5-18, the other investment
policies described in the Fund's prospectus will remain unchanged.
Risks and Other Special Considerations
Because the Fund will no longer pursue an objective of reasonable
income or be required to invest at all in income producing securities, it is
expected that the Fund's dividend rate may be reduced over time. Accordingly,
shareholders seeking current income are advised to reevaluate whether the Fund
continues to be a suitable investment vehicle for their particular investment
needs.
The transition to the Fund's new investment objective and related
policies may involve higher than normal portfolio turnover for a period
following the change. High portfolio turnover involves correspondingly higher
brokerage commissions and other transaction costs, which will be borne directly
by the Fund, and could involve realization of taxable gains that would be
taxable when distributed to shareholders.
Like the small-capitalization companies in which the Fund currently
concentrates its investments, mid-capitalization companies may also involve
greater risk than larger capitalization companies. Such companies tend to be
more limited in their operations and newer than larger-capitalization companies
and may be dependant upon a single proprietary product or market niche. They may
have limited product lines, markets or financial resources, or may depend upon a
limited management group. Typically, such companies have fewer securities
outstanding and may be less liquid than large companies. Their common stock and
other securities may trade less frequently and in limited volume. The securities
of such companies are generally more sensitive to purchase and sale transactions
and, therefore, the prices of their securities tend to be more volatile than the
securities of larger companies.
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It should be noted that the Fund is not restricted from investing in
smaller-capitalization companies and may continue to hold such companies
indefinitely. However, the proposed changes will significantly expand the number
of companies in which the Fund may invest.
Required Vote
Adoption of Proposal 1 requires the approval of a majority of the
outstanding voting securities of the Fund, which under the 1940 Act is defined
to mean the affirmative vote of the lesser of (i) 67% or more of the shares of
the Fund represented at the Meeting, if at least 50% of all outstanding shares
of the Fund are represented at the Meeting, or (ii) 50% or more of the
outstanding shares of the Fund entitled to vote at the Meeting (a "1940 Act
Majority Vote").
If this Proposal 1 is not approved by the shareholders of the Fund, the
Fund will continue to adhere to its current investment objectives.
FOR THE REASONS SET FORTH ABOVE, THE TRUSTEES UNANIMOUSLY RECOMMEND
THAT THE SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THE APPROVAL OF THE PROPOSAL
TO AMEND THE FUND'S INVESTMENT OBJECTIVES.
PROPOSAL 2. APPROVAL OF NEW MANAGEMENT CONTRACT
Summary
Pioneering Management Corporation has served as the Fund's investment
adviser since the Fund's inception on November 12, 1982. PMC serves as the
investment adviser for the Pioneer Family of Mutual Funds, Pioneer Interest
Shares, Inc. ("Interest Shares") and for certain other institutional accounts.
PMC, a registered investment adviser under the Investment Advisers Act of 1940,
as amended, is a wholly owned subsidiary of PGI, a Delaware corporation with
publicly traded shares. PGI is located at 60 State Street, Boston, Massachusetts
02109.
At the Meeting held on November 7, 1995, the Trustees, including all of
the Trustees who are not "interested persons" of the Fund or PMC, unanimously
approved and voted to recommend that the shareholders of the Fund approve a
Proposal to terminate the Fund's existing Management Contract between PMC and
the Fund (the "Existing Contract") and to adopt a new Management Contract (the
"Proposed Contract"). Under the Proposed Contract, the form of which is attached
to this Proxy Statement as EXHIBIT A, THERE WILL BE AN INCREASE IN THE BASIC
RATE OF MANAGEMENT FEES PAID BY THE FUND TO PMC. AS DESCRIBED MORE FULLY BELOW,
DEPENDING UPON THE FUND'S INVESTMENT PERFORMANCE RELATIVE TO A SELECTED
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SECURITIES INDEX, THIS BASIC FEE WILL BE INCREASED OR DECREASED AND THE FEE
ULTIMATELY PAID BY THE FUND MAY BE HIGHER OR LOWER THAN THAT PAID UNDER THE
EXISTING CONTRACT.
Existing Management Contract
Pursuant to the terms of the Existing Contract, PMC serves as
investment adviser to the Fund and is responsible for the overall management of
the Fund's business affairs subject only to the authority of the Board of
Trustees. PMC is authorized to buy and sell securities for the account of the
Fund and to designate brokers to carry out such transactions, subject to the
right of the Trustees to disapprove any such purchase or sale. PMC may not make
any purchase the cost of which exceeds funds currently available for the Fund
and may not make any purchase which would violate any fundamental policy or
restriction with respect to the Fund in the Fund's Prospectus or Statement of
Additional Information as in effect from time to time.
PMC pays all expenses, including executive salaries and the rental of
office space, related to its services for the Fund with the exception of the
following which are paid by the Fund: (i) charges and expenses for determining
from time to time the value of the net assets of the Fund and the keeping of its
books and records, (ii) the charges and expenses of auditors, (iii) the charges
and expenses of any custodian, transfer agent, plan agent, dividend disbursing
agent and registrar appointed by the Fund, (iv) brokers' commissions, and issue
and transfer taxes, chargeable to the Fund in connection with securities
transactions to which the Fund is a party, (v) 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, (vi) fees and expenses involved in registering and maintaining
registrations of the Fund and of its shares with the Securities and Exchange
Commission (the "SEC"), state securities agencies and foreign jurisdictions,
including the preparation of prospectuses and statements of additional
information for filing with such agencies, (vii) 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, (viii) charges and expenses of legal counsel to the Fund; (ix) if
applicable, distribution expenses of the Fund pursuant to a Plan of Distribution
in accordance with Rule 12b-1 promulgated by the SEC pursuant to the 1940 Act,
and (x) compensation of those Trustees of the Fund who are not affiliated with
or interested persons of PMC, the Fund (other than as Trustees), PGI, or PFD.
The Existing Contract was initially approved by the Board of Trustees on
__________, 199[4] and its renewal was most recently approved by the Board at a
meeting held in April, 1995. On October 12, 1990, the Existing Contract was
submitted to and approved by the shareholders of the Fund. The Existing Contract
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is renewable annually by the vote of PMC's Board and by vote of a majority of
the Funds Board, including a majority of the Trustees who are not "interested
persons" of the Fund, PMC or PFD, cast in person at a meeting called for the
purpose of voting on such renewal. The Existing Contract terminates if assigned
(as defined in the 1940 Act) and may be terminated without penalty by either
party by vote of its Board or a majority of its outstanding voting securities
and upon 60 days' written notice.
As compensation for its management services and certain expenses which
PMC incurs on behalf of the Fund, the Fund pays PMC an annual management fee
under the Existing Contract equal to 0.50% of the Fund's average daily net
assets up to $250 million, 0.48% of the next $50 million, and 0.45% of the
excess over $300 million. This fee is computed daily and paid monthly.
Proposed Management Contract
The terms of the Proposed Contract differ materially from those of the
Existing Contract in respect of the management fees payable to PMC and in
certain other respects described below.
Basic Fee
As compensation for its management services and certain expenses which
PMC incurs on behalf of the Fund, the Fund would pay PMC a basic annual
management fee under the Proposed Contract of 0.625% of the Fund's average daily
net assets (the "Basic Fee"). One twelfth (1/12) of this annual Basic Fee would
be applied to the Fund's average daily net assets for the current month, giving
a dollar amount which is the monthly fee.
The Basic Fee represents an increase in the management fee rate payable
to PMC over the rates under the Existing Contract. The Board determined that the
Basic Fee is fair and reasonable apart from the application of the performance
fee adjustment described below under which the Basic Fee would be increased or
decreased based upon the Fund's performance.
Performance Fee Adjustment
The Board of Trustees is proposing the implementation of a performance
adjustment which will either increase or decrease the monthly Basic Fee paid by
the Fund to PMC based on the performance of the Fund as compared to the
investment record (the "record") of the Standard & Poors Mid-Cap 400 Index of
mid-capitalization stocks (the "Index"). This Index is composed of 400 domestic
stocks chosen for market size, liquidity, and industry group representation. It
is a market-value weighted index and was the first benchmark of midcap stock
price movements. It is not possible to predict the effect of the performance
adjustment on the overall compensation to PMC in the future since it will depend
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on the performance of the Fund relative to the record of the Index.
The Board determined that it would be appropriate to increase PMC's
compensation when the Fund's performance exceeds that of an objective index and,
conversely, to reduce PMC's compensation when the Fund's performance is poorer
than the record of that index. The Index was deemed appropriate for this
comparison because it is broad-based and its characteristics are expected to
correlate well with the Fund's stock selections. The Board feels that a
performance adjustment is appropriate for funds of this type and that providing
incentives to PMC based on its performance benefits shareholders.
The Board is proposing that there be a performance adjustment which
would increase or decrease the Basic fee based on the performance of the Fund
over a 36-month performance period. The Basic Fee would be subject to upward or
downward adjustment depending on whether, and to what extent, the investment
performance of the Fund for the performance period exceeds, or is exceeded by,
the record of the Index over the same period. This performance comparison would
be made at the end of each month. Each percentage point of difference (up to
maximum difference of +/-10 percentage points) would be multiplied by a
performance adjustment rate of .02%. The maximum adjustment rate is therefore
+/-.20%. One-twelfth of this rate would then be applied to the average daily net
assets of the Fund over the entire performance period which covers the current
month and the prior 35 months ("performance period"), giving the dollar amount
which will be added to (or subtracted from) the Basic fee.
Application of Performance Adjustment. The application of the
performance adjustment is illustrated by the following hypothetical example,
assuming that the net asset value of the Fund and the level of the Index were
$10 and 100, respectively, on the first day of the performance period.
Investment Performance* Cumulative Change
First Day End of Period Absolute Percentage
Points
Fund $ 10 $ 13 +$ 3 +30%
Index 100 123 + 23 +23%
*Reflects performance at net asset value. Any dividends or capital
gains distributions paid by the Fund are treated as if reinvested in shares of
the Fund at net asset value as of the payment date and any dividends paid on the
securities which comprise the Index are treated as if reinvested on the
ex-dividend date.
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The difference in relative performance for the performance period is +7
percentage points. Accordingly, the annualized management fee rate for the last
month of the performance period would be calculated as follows: One-twelfth of
the Basic Fee of 0.625% would be applied to the Fund's average daily net assets
for the month resulting in a dollar amount. The +7 percentage point difference
is multiplied by the performance adjustment rate of 0.02% producing a rate of
0.14%. One-twelfth of this rate is then applied to the average daily net assets
of the Fund over the performance period resulting in a dollar amount which is
added to the dollar amount of the Basic Fee. The management fee paid is the
dollar amount calculated for the performance period. If the investment
performance of the Index during the performance period exceeded the performance
record of the Fund, the dollar amount of the performance adjustment would be
deducted from the Basic Fee.
Because the adjustment to the Basic Fee is based on the comparative
performance of the Fund and the record of the Index, the controlling factor is
not whether Fund performance is up or down, but whether it is up or down more or
less than the record of the Index. Moreover, the comparative investment
performance of the Fund is based solely on the relevant performance period
without regard to the cumulative performance over a longer or shorter period of
time.
Phase-In of Performance Adjustment. For the period starting with the
effective date of the Proposed Contract (expected to be February 1, 1996) and
ending June 30, 1995, the Board believes it is appropriate for the Fund to
continue to pay the same management fee rate as under the Existing Contract
which is lower than the Basic Fee that would otherwise be in effect. In the
event that shareholder approval of the Proposed Contract is delayed until an
adjourned session of the meeting, this period would be shortened accordingly
beginning with the date of approval.
Because the performance adjustment will operate on a prospective basis
only, neither investment results nor average assets from periods prior to
February, 1996 will be considered in the initial implementation of the
performance based fee. In addition, the Board determined that performance
adjustments that would have the effect of increasing PMC's compensation should
be made only on the basis of comparisons of at least 12 months. As a
consequence, no performance adjustment increasing the Basic Fee will be made
until a 12 month performance record, starting in February, 1996, has accrued.
However, the Board believes it would be appropriate to apply a performance
adjustment that would have the effect of lowering the Basic Fee after a 6 month
performance record, starting in February, 1996, has accrued.
Accordingly, starting with July, 1996, the Basic Fee will take effect
and will be adjusted for the relative performance of the Fund and the record of
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the Index from February 1, 1996 onward if such adjustment would have the effect
of lowering the Basic Fee. The application of negative adjustments only will
continue through December 31, 1996. Starting with January, 1997, the Basic Fee
will be adjusted to reflect both increases and decreases based upon the Fund's
performance relative to the Index from February 1, 1996 onward.
The performance adjustment will be applied against assets over the same
period of performance and thereafter a new month will be added to the period for
purposes of measuring performance and average assets until the period equals 36
months. After 36 months have elapsed from February, 1996, the performance period
will consist of the most recent month plus the previous 35 months.
The following chart summarizes the transition to the proposed new fee
structure:
*2/96 - 6/96 - 0.50% per annum on average net assets up
to $250 million 0.48% per annum on the
next $50 million in net assets 0.45% per
annum on net assets exceeding $300
million
7/96 - 12/96 - 0.625% per annum minus up to 0.20% per
annum based on performance of Fund
relative to Index from 2/96
1/97 and thereafter - 0.625% per annum plus or minus up to
0.20% per annum based on performance of
Fund relative to Index from 2/96. Each
additional month is added to the
performance period up to 36 months after
which the period will consist of the
most recent month plus the previous 35
months.
*Or such later date as the Proposed Contract may be approved at an
adjourned session of the meeting.
Effect of the New Management Fee Structure
Under the Existing Contract, the Fund pays management fees at an
effective annual rate of 0.46% based on net assets of $1,011,224,843 at October
31, 1995. Under the Proposed Contract the Fund would pay a maximum annual fee of
0.825% and a minimum annual fee of 0.425% based upon the Fund's performance
relative to the Index as described above.
Set forth below is a chart showing the dollar amount of management fees
paid during the Fund's past fiscal year under the Existing Contract and the
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amount of fees that would have been paid under the Proposed Contract at the
maximum, base and minimum fee rates. The chart also shows the percentage
differences these amounts that would have been paid under the Proposed Contract
represent from the amount paid under the Existing Contract. Also set forth below
is a comparative fee table showing the amount of fees and expenses paid by the
Fund under the Existing Contract as a percentage of average net assets and the
amount of fees and expenses shareholders would have paid if the maximum, base
and minimum fees under the Proposed Contract had been in effect.
DOLLAR AMOUNT OF MANAGEMENT FEES PAID
(fiscal year ended September 30, 1995)
Existing Proposed Contract
Contract Maximum Base Minimum
Amount of Fees Paid $ $ $ $
or that Would Have Been Paid
Percentage Difference N/A + % + % - %
from Amount Paid
under Existing
Contract
COMPARATIVE FEE TABLE
Annual Fund Operating Expenses
(as a percentage of average net assets)
Existing Proposed Fee
Fee Maximum Base Minimum
Management Fee ...... [.46] .825 .625 .425
12b-1 Fees .......... .25 .25 .25 .25
Other Expenses ...... [.22] [.22] [.22] [.22]
Total Fund Operating Expenses [.86] [1.23] [1.03] [.825]
Example
The following illustrates the expenses on a $1,000 investment under the
existing and proposed maximum, base and minimum fees and the expense stated
above, assuming (1) a 5% annual return and (2) redemption at the end of each
time period:
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1 year 3 years 5 years 10 years
--------------------------------------
Existing Fee $[66] $[83] $[102] $[157]
Proposed Fee
Maximum $ $ $ $
Base $ $ $ $
Minimum $ $ $ $
The purpose of this example and the table is to assist investors in
understanding the various costs and expenses of investing in shares of the Fund.
The example above should not be considered a representation of past or future
expenses of the Fund. Actual expenses may be higher or lower than those shown
above.
Differences in Certain Other Provisions Under Proposed Contract
Standard of Care. The Existing Contract provides no express contractual
"standard of care" applicable to the actions of PMC. Under the Proposed
Contract, PMC "will not be liable for any error of judgment or mistake of law or
for any loss sustained by reason of the adoption of any investment policy or the
purchase, sale or retention of any security on the recommendation of [PMC] . .
." PMC, however, shall not be protected against liability by reason of its ". .
. 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 this Agreement." The proposed "standard of care" is consistent with the
1940 Act, PMC's most recent management contracts and common practice in the
mutual fund industry.
PMC's Authority. The Existing Contract authorizes PMC to buy and sell
securities on behalf of the Fund. PMC must, however, promptly notify the
Trustees of each purchase and sale transaction and, if any three (3) Trustees
disapprove such transaction within forty-eight (48) hours, PMC shall cancel the
transaction at the Fund's risk. The Proposed Contract provides that PMC shall
have full discretion to act for the Fund in connection with purchase and sale
transactions subject only to the Declaration of Trust, Bylaws, currently
effective registrations under the 1940 Act and the Securities Act of 1933, as
amended (the "1933 Act"), investment objectives, policies and restrictions of
the Fund in effect from time to time, and specific policies and instructions
established from time to time by the Trustees. Since the Fund's inception in
1982, the Trustees have never requested that PMC cancel a purchase or sale
transaction on behalf of the Fund.
Portfolio Trading. Under the Existing Contract, PMC must conduct
purchase and sale transactions on behalf of the Fund at the "best price and
execution available." This provision of the Existing Contract has been
interpreted to permit PMC to place purchase and sale orders with brokers from
whom PMC has obtained supplemental investment and market research and economic
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analysis in accordance with the provisions of Section 28(e) of the Exchange Act,
even if it results in the Fund paying a commission to a broker greater than the
amount another broker may charge. Consistent with common practice in the mutual
fund industry and with PMC's most recent management contracts, the Proposed
Contract expressly permits PMC to engage in such activity. For a more detailed
description of the Fund's current portfolio brokerage practices, see the
Appendix.
Expense Limitation. The Proposed Contract provides that if the
operating expenses of the Fund exceed the limits established by state "blue sky"
administrators, PMC's fee will be reduced (but not below $0) to the extent
required by such limits. The Proposed Contract also provides that PMC may from
time to time agree not to impose all or a portion of its fee or otherwise take
action to reduce expenses of the Fund. Any such fee limitation or expense
reduction is voluntary and may be discontinued or modified by PMC at any time.
The Existing Contract does not include comparable provisions.
Expenses. The Existing Contract provides that the Fund shall pay, among
other things, charges and expenses associated with determining its net asset
value and keeping its books and records. These expenses have historically
consisted of the costs incurred by PMC in providing accounting, pricing and
appraisal services, including costs associated with PMC personnel and equipment
employed in connection with providing such services. PMC has requested a
clarification that the expenses for which the Fund would be required to
reimburse PMC be expanded to include overhead related to the provision of such
services, as would be the case if the Fund contracted with an independent
provider of such services. As a result, the Proposed Contract provides that the
Fund shall pay ". . . charges and expenses for fund accounting, pricing and
appraisal services and related overhead, including, to the extent such services
are performed by personnel of [PMC] or its affiliates, office space and
facilities and personnel compensation, training and benefits . . .." PMC has
estimated that, at current direct labor costs, aggregate annualized fund
accounting overhead charges allocated to the Fund will be approximately $10,000.
In the absence of any voluntary limit on expenses by PMC, the assumption by the
Fund of such expenses would have the effect of slightly increasing the gross
expenses and expense ratio of the Fund. PMC has informed the Board of Trustees
of the Fund that this change in the Proposed Contract will not have a material
effect on PMC's profitability. See "Factors Considered by the Trustees" below.
Other Differences. The Proposed Contract also reflects certain other
substantive and stylistic differences from the Existing Contract resulting from
an effort to modernize the provisions of the Proposed Contract. These
differences include provisions that provide that: (i) the law of The
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Commonwealth of Massachusetts shall be the governing law of the contract; (ii)
PMC is an independent contractor and not an employee of the Fund; (iii) the
contract is the entire agreement between the parties with respect to the matters
described therein; (iv) the contract may be executed using counterpart signature
pages; (v) invalid or unenforceable provisions of the contract are severable and
do not render the entire agreement invalid or unenforceable; (vi) the Fund may
pay for charges and expenses of counsel to the "non-interested" Trustees as well
as counsel to the Fund; and (vii) subject to obtaining best execution, PMC may
consider sales of other funds in the Pioneer Family of Mutual Funds when
selecting brokers and dealers to execute the Fund's securities transactions.
Miscellaneous
If approved, the Proposed Contract will become effective on February 1,
1996 (or on the date of approval if approved after that date) and will continue
in effect until May 31, 1997, and thereafter will continue from year to year
subject to annual approval by the Board of Trustees in the same manner as the
Existing Contract. The Proposed Contract terminates if assigned (as defined in
the 1940 Act) and may terminate without penalty, upon sixty (60) days' written
notice, by either party by vote of its Board or by a vote of a majority of the
outstanding voting securities of the Fund. The description of the differences
between the Existing Contract and the Proposed Contract set forth above and the
other information with respect to the Proposed Contract are qualified in their
entirety by reference to the form of Proposed Contract, attached hereto as
Exhibit A.
Additional Information Pertaining to PMC
For additional information concerning the management, ownership
structure, affiliations, brokerage policies and certain other matters pertaining
to PMC, see the Appendix.
Factors Considered by the Trustees
The Trustees determined that the terms of the Proposed Contract are
fair and reasonable and that approval of the Proposed Contract on behalf of the
Fund is in the best interests of the Fund. In approving the Proposed Contract
and recommending its approval by the shareholders of the Fund, the Trustees,
including a majority of the Trustees who are not "interested persons" of the
Fund or PMC, considered that the form of the Existing Contract, which is also
used by other mutual funds in the Pioneer Family of Mutual Funds, had not been
materially revised in several years, that similar Proposals would be made to
shareholders of all mutual funds in the Pioneer Family of Mutual Funds at their
next shareholder meeting, that the material changes in the Proposed Contract
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were in accordance with common industry practice, and that overhead on
accounting, pricing and appraisal services would not be material to the Fund or
its shareholders or PMC's profitability.
The Trustees considered a number of factors in deciding to recommend an
increase in the Basic Fee and a performance fee adjustment. At all times during
the Trustees' deliberations, they were advised by the Fund counsel and their own
independent counsel. When the Trustees were presented with the proposed fee
arrangements, they requested and were furnished with substantial information to
assist in their evaluation. In considering whether to adopt the proposed
arrangement, the Trustees considered, among other things, information relating
to the overall reasonableness of both the Basic Fee and the fee adjustment as
well the appropriateness of the performance measurement index.
The Trustees' determination of the appropriateness of the Index was
based on a number of factors, including the volatility and diversification of
the Fund's holdings, the types of securities expected to be owned in relation to
the securities represented by the Index and the Fund's expected objective. The
Trustees determined that the Index represented a well-recognized, broad-based,
market value-weighted index that would likely correlate closely with the Fund's
holdings. Furthermore, this correlation was anticipated to be of a degree that
any divergence between the Fund's performance and that of the Index could be
attributed to PMC's skill in stock selection within the parameters established
by the Fund's objectives and policies. The time periods to be used in
determining any performance adjustment were also judged to be of appropriate
length to ensure proper correlation and to prevent fee adjustments from being
based on random or insignificant differences between the Fund and the Index.
Finally, the Trustees determined that both the Basic Fee and the amount of any
adjustments would be equitable and fair to the shareholders of the Fund.
Trustees' Recommendation
Based on its evaluation of the extensive materials presented and
assisted by the advice of independent counsel, the Board of Trustees, including
all of the Trustees who are not "interested persons" of the Fund or PMC,
concluded that the proposed Management Contract was fair and reasonable and in
the best interests of the Fund's shareholders and by a vote cast at a meeting
held on November 7, 1995, unanimously approved and voted to recommend to the
shareholders of the Fund that they approve the Proposal to terminate the
Existing Contract and to adopt the Proposed Contract.
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Required Vote
Adoption of Proposal 2 requires the affirmative 1940 Act Majority
Vote of the Fund. If the Proposed Contract is not approved by the shareholders
of the Fund, the Existing Contract will continue in effect.
FOR THE REASONS SET FORTH ABOVE, THE TRUSTEES UNANIMOUSLY RECOMMEND
THAT THE SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THE APPROVAL OF THE PROPOSED
MANAGEMENT CONTRACT.
PROPOSAL 3. APPROVAL OF AN AGREEMENT AND PLAN PROVIDING FOR THE
REORGANIZATION OF THE FUND FROM A MASSACHUSETTS
BUSINESS TRUST TO A DELAWARE BUSINESS TRUST.
General
The Board of Trustees has unanimously approved, subject to the approval
of shareholders of the Fund, an Agreement and Plan of Reorganization (the "Plan
of Reorganization") in the form attached to this Proxy Statement as Exhibit B.
The Plan of Reorganization provides for the reorganization (the
"Reorganization") of the Fund, a Massachusetts business trust ("Current Fund"),
to a newly established Delaware business trust which, prior to the
reorganization, will have no assets or operations. The form of Agreement and
Declaration of Trust for the Delaware business trust (the "Delaware Declaration
of Trust") is attached to this Proxy Statement as Exhibit C.
The Reorganization will entail creating a Delaware business trust (the
"Successor Fund"). Following the Reorganization, the Successor Fund will carry
on the business of the Current Fund. If shareholders approve any or all of the
proposed changes in the Fund's investment objectives, policies and restrictions
described in Proposal 1 and Proposals 5 through 18, the Fund's operations will
change accordingly, to the extent approved. If none of these changes are
approved, the Successor Fund will have an investment objective, policies and
restrictions that are identical to the investment objective, policies and
restrictions applicable to the Current Fund. The Successor Fund will also enter
into a management contract and other service agreements which provide the same
services on the same terms as the Proposed Contract (subject to approval of
Proposal 2 by the Fund) and other service agreements currently applicable to the
Current Fund. Shareholders should be aware that there may be deemed to occur a
momentary inconsistency with certain of the Current Fund's policies and
restrictions (such as restrictions on investments in any one issuer and
investments in other investment companies) during the Reorganization. The
principal differences between a Delaware business trust and a Massachusetts
business trust as forms of organization are discussed below under the caption
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"Comparison of Business Trusts under Delaware Law and Massachusetts Law."
Approval of the Reorganization also constitutes approval of the termination of
the Current Fund in accordance with Massachusetts law. Following the
Reorganization, PMC will serve as investment adviser for the Successor Fund
under a management contract identical to the Current Fund's Proposed Contract.
Reasons for the Proposed Reorganization
The Current Fund is organized as a Massachusetts business trust. The
proposed form of organization as a Delaware business trust offers certain
advantages over the current form of organization as a Massachusetts business
trust. The advantages include the ability to offer multiple classes of shares
and granting the Trustees greater power to amend the Delaware Declaration of
Trust without shareholder approval, although such advantages could also be
achieved under Massachusetts law by amending the Current Fund's Declaration of
Trust. The advantages of the Delaware Declaration of Trust compared to the
Current Fund's Declaration of Trust, discussed in more detail below, include
clearer limitations upon liability of shareholders and trustees and greater
flexibility in methods of voting.
The Fund's structure as an investment company with only one portfolio
of investments and a single class of securities is illustrative of one
difference between the Current Fund and the possible structures permitted by a
Delaware business trust. The Fund's Declaration of Trust currently permits the
Trust to issue multiple series, each consisting of a single class of shares of
beneficial interest. The Delaware Declaration of Trust would also permit the
Trustees to designate separate series of beneficial interest. In addition, the
Delaware Declaration of Trust would specifically authorize the Trustees to
designate and issue an unlimited number of classes of shares of each series of
the trust ("Multiple Class System"). Under the Multiple Class System, the
Successor Fund could tailor its marketing and distribution activities to a
broader segment of the investing public which may ultimately result in a
reduction of the operating expenses incurred by certain classes of shareholders.
Proposed Multiple Class System
If Proposal 3 is approved by the shareholders of the Fund, PMC intends
to recommend to the Board of Trustees of the Successor Fund that the Successor
Fund adopt the Multiple Class System. Currently, PFD does not permit holders of
shares of other funds in the Pioneer Family of Mutual Funds sold subject to
various contingent deferred sales charge arrangements ("CDSC") ("Class B shares"
and "Class C shares") to exchange their Class B shares or Class C shares for
shares of the Fund because the Fund is not able to impose a CDSC upon redemption
of its shares. Without the ability to make an exchange privilege available for
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Class B shareholders of the other Pioneer Funds offering such shares, the
Current Fund is at a competitive disadvantage relative to other mutual funds
which offer this exchange privilege. Rather than offering only one class of
shares and organizing separate funds to employ alternative distribution methods,
the Trustees believe that shareholders and investors will benefit from the
Successor Fund's ability to make additional distribution channels and exchange
privileges available. The Trustees believe that establishing separate classes of
shares of the Successor Fund will allow the Successor Fund to appeal to
investors and shareholders who prefer to invest in funds offering payment of a
CDSC rather than a front-end sales load. As of the date of this Proxy Statement,
the Trustees intend to authorize the Successor Fund to issue two additional
classes of shares. The Trustees reserve the right to issue one or more
additional classes of shares of the Fund at any time without further notice to
the shareholders.
Under the Multiple Class System, the shares of the Successor Fund and
any subsequently created class of shares of the Successor Fund would each
represent interests in the same series of shares and portfolio of investments.
They would be identical in all respects, except that the Trustees would be
authorized to differentiate among the classes in the following respects: any
class (i) could be subject to a distribution plan under Rule 12b-1 (each a
"Class Distribution Plan") and could make different payments pursuant to that
Class Distribution Plan (including payments for any other costs relating to
obtaining shareholder approval of a Class Distribution Plan for that class or an
amendment to that Class Distribution Plan); (ii) would have exclusive voting
rights with respect to any Class Distribution Plan adopted exclusively with
respect to that class; (iii) could bear certain expenses attributable to the
shares of that class, including without limitation (a) transfer agency fees
(including the incremental costs of monitoring a CDSC and/or conversion feature
applicable to a special class of shares), (b) printing and postage expenses
relating to preparing and distributing materials such as shareholder reports,
newsletters, prospectuses and proxy statements to current shareholders of a
specific class of shares, (c) SEC, state and foreign registration fees incurred
by a specific class of shares, (d) the expenses of administrative personnel and
services required to support the shareholders of a specific class of shares
(including, but not limited to, maintaining telephone lines and personnel to
answer shareholder's inquiries about their accounts, the Successor Fund or a
particular series), (e) litigation or other legal expenses relating to a
specific class of shares, (f) Trustees' fees or expenses incurred as a result of
issues relating to a specific class of shares, and (g) accounting expenses
relating to a specific class of shares; (iv) may be subject to different sales
charges (including CDSCs), conversion and/or exchange arrangements; and (v) may
bear its own name or designation.
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Implementation. When the Successor Fund adopts the Multiple Class
System, existing shares of the Fund will be designated as Class A shares and
will continue to be sold at net asset value plus the applicable sales charge and
subject to the Rule 12b-1 distribution fee pursuant to the Rule 12b-1 plan of
distribution (the "Class A Plan") approved by the Current Fund's shareholders on
November 1, 1991. The Successor Fund, will issue two additional classes of
shares of the Fund, Class B shares and Class C shares. It is expected that Class
B shares and Class C shares will be offered subject to different CDSC
arrangements and a Rule 12b-1 distribution fee based on a percentage of the
Fund's average net assets attributable to each class of shares pursuant to a
separate Rule 12b-1 plan of distribution for each class.
Comparison of Business Trusts Under
Delaware Law and Massachusetts Law
Delaware law provides that the shareholders of a Delaware business
trust shall not be subject to liability for the debts or obligations of the
trust. Under Massachusetts law, shareholders of a Massachusetts business trust
(such as Current Trust shareholders) may, under certain circumstances, be liable
for the debts and obligations of that trust. Although the risk of liability of
shareholders of a Massachusetts business trust who do not participate in the
management of the trust may be remote, the Board of Trustees has determined that
Delaware law affords greater protection against potential shareholder liability.
Similarly, Delaware law provides that, to the extent that a Delaware business
trust issues multiple series of shares, each series shall not be liable for the
debts or obligations of any other series, another potential, although remote,
risk in the case of a Massachusetts business trust. While the Trustees believe
that a series of a Massachusetts business trust will only be liable for its own
obligations, there is no direct statutory or judicial support for that position.
Delaware law provides that, except to the extent otherwise provided in
a trust's declaration of trust or bylaws, trustees will not be personally liable
to any person (other than the business trust or a shareholder thereof) for any
act, omission or obligation of the business trust or any trustee thereof.
Delaware law also provides that a trustee's actions under a Delaware business
trust's declaration of trust or bylaws will not subject the trustee to liability
to the business trust or its shareholders if the trustee takes such action in
good faith reliance on the provisions of the business trust's declaration of
trust or bylaws. The declaration of trust of a Massachusetts business trust may
limit the liability of a trustee, who is not also an officer of the corporation,
for breach of fiduciary duty except for, among other things, any act or omission
not in good faith which involves intentional misconduct or a knowing violation
of law or any transaction from which such trustee derives an improper direct or
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indirect financial benefit. The Trustees believe that such limitations on
liability under Delaware law are consistent with those applicable to directors
of a corporation under Delaware law and will be beneficial in attracting and
retaining in the future qualified persons to act as trustees.
Delaware law provides that a Delaware business trust's declaration of
trust or bylaws may set forth provisions related to voting in any manner. This
provision appears to permit trustee and shareholder voting through computer or
electronic media. For an investment company with a significant number of
institutional shareholders, all with access to computer or electronic networks,
the use of such voting methods could significantly reduce the costs of
shareholder voting. However, the advantage of such methods may not be realizable
unless the SEC modifies its proxy rules. Also, as required by the 1940 Act,
votes on certain matters by trustees would still need to be taken at actual
in-person meetings.
Delaware law explicitly provides that separate boards of trustees may
be authorized for each series of a Delaware business trust. Whether separate
boards of trustees can be authorized for series of a Massachusetts business
trust is unclear under Massachusetts law. As always, the establishment of any
board of trustees of a registered investment company must comply with applicable
securities laws, including the provision of the 1940 Act regarding the election
of trustees by shareholders. Establishing separate boards of trustees would,
among other things, enable the series of a Delaware business trust to be
governed by individuals who are more familiar with such series' particular
operations.
Comparison of the Current Fund's Declaration of Trust
under Massachusetts law and the Delaware Declaration
of Trust under Delaware law
It is anticipated that a Delaware business trust will be required to
hold fewer shareholder meetings than a Massachusetts business trust, potentially
further reducing costs. Although neither a Delaware business trust nor a
Massachusetts business trust is required to hold annual shareholder meetings,
Delaware law affords to the Trustees the ability to adapt the Delaware business
trust to future contingencies without the necessity of holding a special
shareholder meeting. The Trustees may have the power to amend the business
trust's governing instrument to create a class or series of beneficial interest
that was not previously outstanding; to dissolve the business trust; to
incorporate the Delaware business trust; to merge or consolidate with another
entity; to sell, lease, exchange, transfer, pledge or otherwise dispose of all
or any part of the business trust's assets; to cause any series to become a
separate trust; and to change the Delaware business trust's domicile --all
without shareholder vote. Any exercise of authority by the Trustee will be
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subject to applicable state and Federal law. The flexibility of a Delaware
business trust should help to assure that the Delaware business trust always
operates under the most advantageous form of organization and is intended to
reduce the expense and frequency of future shareholder meetings for
non-investment-related operational issues.
Trustees' Recommendation
After considering the matters discussed above and other matters deemed
to be relevant, the Trustees determined that the Reorganization (i) is in the
best interest of the Current Fund and (ii) will not result in dilution of the
interest of the shareholders of the Current Fund. The Trustees unanimously voted
to recommend to the shareholders of the Current Fund that they approve the
Reorganization.
Required Vote
Approval of the Agreement and Plan of Reorganization requires the
affirmative 1940 Act Majority Vote of the Current Fund. The Trustees have
determined that the Reorganization will not proceed as described above unless
the shareholders of the Current Fund approve the Reorganization. In the event
that the shareholders of the Current Fund do not vote in favor of the
Reorganization, the Trustees will determine what further action, if any, to
take, including the possibility of resubmitting the Proposal at a later time.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE FUND
APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION PROVIDING FOR THE
REORGANIZATIONS OF EACH CURRENT FUND FROM A SERIES OF A MASSACHUSETTS BUSINESS
TRUST TO A SERIES OF A DELAWARE BUSINESS TRUST.
Summary of the Plan of Reorganization
The following discussion summarizes certain terms of the Plan of
Reorganization. The summary of the Plan of Reorganization is qualified in its
entirety by the provisions of the form of Plan of Reorganization, which is
attached to this Proxy Statement as Exhibit B. Assuming the Plan of
Reorganization is approved, it is currently contemplated that the
Reorganizations will become effective at the close of business on or about
January 26, 1996.
In order to accomplish the Reorganization, a Delaware business trust
will be formed corresponding to the Current Fund pursuant to the Delaware
Declaration of Trust and the Successor Fund. On the closing date of the
Reorganization (the "Closing Date"), the Current Fund will transfer all of its
assets to the Successor Fund in exchange for the assumption by the Successor
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Fund of all the liabilities of that Current Fund and the issuance to the Current
Fund of shares of beneficial interest of the Successor Fund ("Successor Fund
shares") equal to the value (as determined by using the procedures set forth in
the Current Fund's current prospectus) on the date of the exchange of the
Current Fund's net assets. The Current Fund as sole shareholder of the Successor
Fund, will then vote on certain matters that require shareholder approval, as
described below. Immediately thereafter, the Current Fund will liquidate and
distribute Successor Fund shares to each Current Fund shareholder pro rata in
proportion to the Current Fund shareholder's beneficial interest in the Current
Fund ("Current Fund shares") in exchange for his or her Current Fund shares.
After this distribution of Successor Fund shares, each Current Fund will, as
soon as practicable thereafter, be wound up and terminated. Certificates
evidencing full or fractional Successor Fund shares will not be mailed to
shareholders. Upon completion of the Reorganization, each Current Fund
shareholder will be the owner of full and fractional Successor Fund shares equal
in number and aggregate net asset value to his or her Current Fund shares as of
the date of the exchange.
As described above, the Plan of Reorganization authorizes the Current
Fund as the then sole shareholder of the Successor Fund (i) to elect as Trustees
of the Delaware business trust the persons who currently serve as Trustees of
the Massachusetts business trust; (ii) to ratify the selection of the
independent accountants; (iii) to approve an investment advisory agreement for
the Successor Fund; and (iv) to approve the Rule 12b-1 plan of distribution for
the Successor Fund.
The newly elected Trustees will hold office without limit in time
except that (i) any Trustee may resign; (ii) any Trustee may be removed by
written instrument signed by at least a majority of the Trustees prior to
removal; and (iii) a Trustee may be removed at any special meeting of the
shareholders by a vote of two-thirds of the outstanding shares of the Successor
Fund. In case a vacancy shall for any reason exist, the remaining Trustees will
fill such vacancy by appointing another Trustee so long as, immediately after
such appointment, at least two-thirds of the Trustees have been elected by
shareholders.
If, at any time prior to the Closing of the Reorganization, the
Trustees determine that it would not be in the best interest of the Current Fund
or the shareholders to proceed with the execution of the Plan of Reorganization,
the Reorganization will not go forward, notwithstanding the approval of the
Reorganization by the shareholders at the Meeting. The obligations of the
Current Fund under the Plan of Reorganization are subject to various conditions
as stated therein. In order to provide against unforeseen events, the Plan of
Reorganization may be terminated or amended at any time prior to the
Reorganizations by mutual agreement of the Trustees of the Current Fund and the
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Successor Fund. The Current Fund and the Successor Fund may at any time waive
compliance with any of the covenants and conditions contained in, or may amend,
the Plan of Reorganization; provided that such waiver or amendment does not
materially adversely affect the interests of shareholders of the Current Fund.
Continuation of Shareholder Accounts and Services
The Successor Fund's transfer agent, PSC, will establish accounts for
all shareholders of the Successor Fund containing the appropriate number of
Successor Fund shares to be received by that shareholder under the Plan of
Reorganization. Such accounts will be identical in all material respects to the
accounts currently maintained by the Current Fund for each shareholder.
Shareholders who have elected to receive a particular service, such as telephone
redemptions or exchanges or Pioneer Investomatic Plans, will continue to receive
such services as a shareholder of the Successor Fund without any further action.
Expenses of the Reorganization
The Current Fund will bear its expenses associated with the
transactions contemplated by the Plan of Reorganization. In the event that the
Reorganizations is successfully completed, such expenses will be assumed by the
Successor Fund. It is presently estimated that the expenses of the
Reorganization will be approximately $10,000.00.
Tax Consequences of the Reorganization
It is a condition to the consummation of the Reorganization that the
Fund receives on or before the Closing Date an opinion from counsel, Hale and
Dorr, substantially to the effect that, among other things, for federal income
tax purposes the transactions contemplated by the Plan of Reorganization will
constitute a reorganization under Section 368(a)(1) of the Internal Revenue Code
of 1986, as amended, and that, consequently, no gain or loss will be recognized
for federal income tax purposes by the Current Fund or its shareholders upon (1)
the transfer of all of the Current Fund's assets to the Successor Fund in
exchange solely for Successor Fund shares and the assumption by the Successor
Fund of the Current Fund's liabilities or (2) the distribution by the Current
Fund of the Successor Fund shares, in liquidation of the Current Fund, to the
shareholders in exchange for their shares of the Current Fund. The opinion will
further state, among other things, that (i) the federal tax basis of Successor
Fund shares to be received by shareholders of the Current Fund will be the same
as the federal tax basis of the shares of the Current Fund surrendered in
exchange therefor and (ii) each shareholder's federal tax holding period for his
or her Successor Fund shares will include such shareholder's holding period for
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the shares of the Current Fund surrendered in exchange therefor, provided that
such shares of the Current Fund were held as capital assets on the date of the
exchange.
Description of Certain Provisions
of the Delaware Declaration of Trust
The following is a summary of certain provisions of the Successor
Trust's Delaware Declaration of Trust. This summary is qualified in its entirety
by reference to the form of Delaware Declaration of Trust attached hereto as
Exhibit C.
Series and Classes. As discussed above, the Delaware Declaration of
Trust would permit the Successor Trust to issue series of its shares which would
represent interests in separate portfolios of investments. No series would be
entitled to share in the assets of any other series or be liable for the
expenses or liabilities of any other series. Each series would also be
authorized to implement a Multiple Class System.
Limitations on Derivative Actions. In addition to the requirements
under Delaware law, the Delaware Declaration of Trust provides that a
shareholder of the Successor Fund may bring a derivative action on behalf of the
Successor 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 Successor Trust, or 10% of the outstanding
shares of the series or class of 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 to
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
Successor Fund for the expense of any such advisers in the event that the
Trustees determine not to bring such action.
Shareholder Meetings and Voting Rights. The Successor Fund is not
required to hold annual meetings of shareholders and does not intend to hold
such meetings. In the event that a meeting of shareholders is held, each share
of the Successor Fund shall be entitled to one vote on all matters presented to
shareholders including the election of Trustees. Shareholders of the Successor
Fund do not have cumulative voting rights in connection with the election of
Trustees. Meetings of shareholders of the Successor Fund, or any series or class
thereof, may be called by the Trustees, certain officers or upon the written
request of holders of 10% or more of the shares entitled to vote at such
meeting. The shareholders of the Successor Fund shall only have the right to
vote with respect to the limited number of matters specified in the Delaware
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Declaration of Trust and such other matters as the Trustees shall determine or
shall be required by law.
Indemnification. The Delaware Declaration of Trust provides for
indemnification of Trustees, officers and agents of the Successor Fund provided
that no such indemnification shall be provided to any person who is adjudicated
(i) to be liable by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such person's
office or (ii) not to have acted in good faith in the reasonable belief that
such person's actions were in the best interest of the Delaware business trust.
The Delaware Declaration of Trust provides that if any shareholder or
former shareholder of any series shall be held personally liable solely by
reason of his being or having been a shareholder and not because of his acts or
omissions or for some other reason, the shareholder or former shareholder (or
his heirs, executors, administrators or other legal representatives or in the
case of any entity, its general successor) shall be entitled, out of the assets
belonging to the applicable series, to be held harmless from and indemnified
against all loss and expense arising from such liability. The Successor Fund, on
behalf of any affected series, shall, upon request by such shareholder, assume
the defense of any claim made against such shareholder for any act or obligation
of the series and satisfy any judgment thereon from the assets of the series.
Termination. The Delaware Declaration of Trust would permit termination
of the Successor Fund or of any series or class of the Successor Fund (i) by a
majority of the shareholders at a meeting of shareholders of the Successor Fund,
series or class; or (ii) by a majority of the Trustees without shareholder
approval if the Trustees determine that such action is in the best interest of
the Trust or its shareholders. The factors and events that the Trustees may take
into account in making such determination include (i) the inability of the
Successor Fund, or any successor series or class to maintain their assets at an
appropriate size; (ii) changes in laws or regulations governing them or
affecting assets of the type in which they invest; or (iii) economic
developments or trends having a significant adverse impact on their business or
operations. Termination of the Current Fund requires the approval of a majority
of the outstanding shares of the Fund.
Merger, Consolidation, Sale of Assets, Etc. The Delaware Declaration of
Trust would authorize the Trustees without shareholder approval to specifically
permit the Successor Fund, or any series thereof, to merge or consolidate with
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any corporation, association, trust or other organization or sell or exchange
all or substantially all of the property belonging to the Successor Fund, or any
series thereof. A merger, consolidation or sale of assets of the Current Fund
requires an affirmative 1940 Act Majority Vote of the Fund.
Amendments. The Delaware Declaration of Trust would permit the Trustees
to amend the Delaware Declaration of Trust without a shareholder vote; provided
that shareholders of the Successor Fund shall have the right to vote on any
amendment (i) that would affect the voting rights of shareholders, (ii) with
respect to which shareholder approval is required by law; (iii) that would amend
this provision of the Declaration of Trust and (iv) with respect to any other
matter that the Trustees determine to submit to shareholders. Any amendment to
the Current Declaration of Trust, except an amendment changing the name of the
Fund or supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision of the Declaration of
Trust, requires the approval of the Current Fund's shareholders.
PROPOSAL 4. ELECTION OF TRUSTEES
The persons named on the accompanying proxy card intend to vote at the
Meeting (unless otherwise directed) FOR the election of the eight (8) nominees
named below as Trustees of the Fund. All of the nominees currently serve as
Trustees and have been recommended by the Nominating Committee of the Trustees
which consists solely of Trustees who are not "interested persons", of the Fund,
PMC or the Fund's principal underwriter, Pioneer Funds Distributor, Inc. ("PFD")
within the meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act").
Each Trustee will be elected to hold office until the next meeting of
shareholders or until his or her successor is elected and qualified. In
addition, if Proposal 3 regarding the reorganization of the Fund as a Delaware
business trust is approved by shareholders, the election of Trustees of the Fund
shall also be deemed to constitute election as Trustees of the Successor Trust.
Each nominee has consented to being named herein and indicated his or her
willingness to serve if elected. If any such nominee should be unable to serve,
an event not now anticipated, the persons named as proxies may vote for such
other person as shall be designated by the Board of Trustees.
The following table sets forth each nominee's position(s) with the
Fund, age, address, principal occupation or employment during the past five
years and directorships, and indicates the date on which he or she first became
a Director of the Fund. The table also shows the number of shares of beneficial
interest of the Fund beneficially owned by each nominee, directly or indirectly,
on October 31, 1995.
-25-
<PAGE>
<TABLE>
<CAPTION>
Stock of the Fund
Name, Age, Beneficially Owned
Position(s) with Principal Occupation First and Percentage of Total
the Fund or Employment Became a Shares Outstanding
and Address and Trusteeships(1) Trustee on October 31, 1995(2)
- - ---------------- ------------------- --------- -----------------------
<S> <C> <C> <C>
John F. Cogan, Jr., 69* President, Chief 1982 [14,591.687]
Executive Officer and a
Chairman of the Board, Director of The Pioneer
President and Group, Inc., a public company
Director ("PGI"); Chairman and a Director
60 State Street of PMC, PFD, Pioneer Goldfields
Boston, MA 02109 Limited ("PGL") and Teberebie
Goldfields Limited; Director of
Pioneering Services Corporation
("PSC") and Pioneer Capital
Corporation ("PCC"); President
and Director of Pioneer Plans
Corporation ("PPC"), Pioneer
Investment Corporation ("PIC"),
Pioneer Metals and Technology,
Inc. ("PMT") and Pioneer
International Corporation
("P.Intl."); Chairman,
President and Director of
Pioneer Goldfields Limited
("PGL"); Chairman of the
Supervisory Board of Pioneer
Fonds Marketing GmbH ("Pioneer
GmbH"); Member of the
Supervisory Board of Pioneer
First Polish Trust Fund Joint
Stock Company ("PFPT"); and
Chairman and Partner, Hale and
Dorr (Counsel to the Fund)
Richard H. Egdahl, M.D., 68 Professor of Management, 1992 -0-
Trustee Boston University School of
Boston University Management; Professor of Public
Health Policy Health, Boston University School
Institute of Public Health; Professor of
53 Bay State Road Surgery, Boston University School
Boston, MA 02115 of Medicine: Director, Boston
University Health Policy
Institute and University
Medical Center; Executive Vice
President and Vice Chairman of
the Board, University Hospital;
Academic Vice President for
Health Affairs, Boston
University; Director, Essex
-26-
<PAGE>
Investment Management Company,
Inc., an investment adviser;
Health Payment Review, Inc., a
health care containment
software firm, Mediplex Group,
Inc., a nursing care facilities
firm, Peer Review Analysis,
Inc., a health care utilization
management firm, and
Springer-Verlag New York, Inc.,
a publisher; and Honorary
Director, Franciscan Children's
Hospital
Margaret B.W. Graham, 48 Founding Director, Winthrop, 1990 -0-
Trustee Group, Inc., a consulting firm, since
The Keep 1982; Manager of Research Operations,
P.O. Box 110 Xerox Palo Alto Research Center, between
Little Deer Isle, 1991 and 1994; Professor of Operations
ME 04650 Management and Management of Technology,
Boston University School of Management,
between 1989 and 1993
John W. Kendrick, 78 Professor Emeritus of 1982 -0-
Trustee Economics, George Washington
6363 Waterway Dr. University; and Economic
Falls Church, Consultant and Director,
Virginia 22044 American Productivity and
Quality Center
Marguerite A. Piret, 47 President, Newbury, Piret & 1982 -0-
Trustee Company, Inc., a merchant
One Boston Place banking firm
Suite 2635
Boston, MA 02108
David D. Tripple, 51* Director and Executive Vice 1986 [1,731,637]
Executive Vice President President of PGI; President,
60 State Street Chief Investment
Boston, MA 02109 Officer and a Director of PMC;
Director of PFD, PCC, Pioneer
SBIC Corp., P. Intl. and PIC;
and Member of the Supervisory
Board of PFPT
Stephen K. West, 67 Partner, Sullivan & Cromwell, a 1993 -0-
Trustee law firm
125 Broad Street
New York, NY 10004
John Winthrop, 59 President, John Winthrop & Co., 1985 [1,217.614]
Trustee a private investment firm;
One North Adgers Wharf Director of NUI Corp.;
Charleston, SC 29401 and Trustee of Alliance Capital
Reserve, Alliance Government
-27-
<PAGE>
Reserve and Alliance Tax
Exempt Reserve
</TABLE>
<PAGE>
- - ---------------
* Messrs. Cogan and Tripple are "interested persons" of the Fund, PMC and PFD
within the meaning of the Investment Company Act.
(1) Each nominee also serves as a trustee for each of the 25 open-end
investment companies (mutual funds) in the Pioneer Family of Mutual Funds
and for each of the 8 portfolios of Pioneer Variable Annuity Trust and as
Directors of Pioneer Interest Shares, Inc., a closed-end investment company
("Interest Shares"). Except for Dr. Egdahl and Mr. West, each Trustee was
elected by the shareholders of the Fund in 1990. Dr. Egdahl and Mr. West
were elected by the Trustees in August, 1992 and October, 1993,
respectively.
(2) As of October 31, 1995, the Trustees and officers of the Fund beneficially
owned, directly or indirectly, in the aggregate less than 1% of the Fund's
outstanding shares.
Ms. Piret, Mr. West and Mr. Winthrop serve on the Audit Committee of
the Board of Trustees. The functions of the Audit Committee include recommending
independent auditors to the Trustees, monitoring the independent auditors'
performance, reviewing the results of audits and responding to certain other
matters deemed appropriate by the Trustees. Ms. Graham, Ms. Piret and Mr.
Winthrop serve on the Nominating Committee of the Board of Trustees. The primary
responsibility of the Nominating Committee is the selection and nomination of
candidates to serve as independent directors. The Nominating Committee will also
consider nominees recommended by shareholders to serve as Trustees provided that
shareholders submitting such recommendations comply with all relevant provisions
of Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
During the fiscal year ended September 30, 1995, the Board of Trustees
held eleven meetings, the Audit Committee held five meetings and the Nominating
Committee did not meet. All of the current Trustees and Committee Members then
serving attended at least 75% of the meetings of the Board of Trustees or
applicable committee, if any, held during the fiscal year ended September 30,
1995.
Other Executive Officers
In addition to Messrs. Cogan and Tripple, who serve as executive
officers of the Fund, the following table provides information with respect to
the other executive officers of the Fund. Each executive officer is elected by
the Board of Trustees and serves until his successor is chosen and qualified or
until his resignation or removal by the Board. The business address of all
officers of the Fund is 60 State Street, Boston, Massachusetts 02109.
-28-
<PAGE>
Name, Age and Position with The Fund Principal Occupation(s)
William H. Keough, 58, Treasurer Senior Vice President, Chief
Financial Officer and Treasurer of
PGI and Treasurer of PFD, PMC, PSC,
PPC, Pioneer SBIC Corp., PIC, PMT,
P. Intl. and of each fund in the
Pioneer Family of Mutual Funds.
Joseph P. Barri, 49, Secretary Secretary of PGI, PMC and PCC, and
each fund in the Pioneer Family of
Mutual Funds; Clerk of PFD and PSC
and Partner, Hale and Dorr (counsel
to the Fund).
Remuneration of Trustees and Officers
The following table provides information regarding the compensation
paid by the Fund and the other investment companies in the Pioneer Family of
Mutual Funds to the Trustees for their services for the Fund's most recently
completed fiscal year. Compensation paid by the Fund to Messrs. Cogan and
Tripple, interested persons of PMC, is reimbursed to the Fund by PMC. The Fund
pays no salary or other compensation to its officers.
-29-
<PAGE>
<TABLE>
<CAPTION>
Total Compensa-
tion from the
Pension or Fund and other
Aggregate Retirement funds in the
Compensation Benefits Pioneer Family
Director From the Fund* Accrued of Mutual Funds**
<S> <C> <C> <C>
John F. Cogan, Jr. $0+ $0 $0+
Richard H. Egdahl, M.D. [4,500] 0 55,650
Margaret B.W. Graham [4,500] 0 55,650
John W. Kendrick [4,500] 0 55,650
Marguerite A. Piret [6,063] 0 66,650
David D. Tripple 0+ 0 0+
Stephen K. West [6,167] 0 63,650
John Winthrop [5,750] 0 63,650
-------------------------------------------------------------
Totals [$31,480] $0 $360,900
====== =======
</TABLE>
- - --------
+ PMC fully reimbursed the Fund and the other funds in the Pioneer Family of
Mutual Funds for compensation paid to Messrs. Cogan and Tripple.
* For the fiscal year ended September 30, 1995.
** For the calendar year ended December 31, 1994.
Required Vote
In accordance with the Fund's Declaration of Trust, the vote of a
plurality of all of the shares of the Fund voted at the Meeting is sufficient to
elect the nominees.
PROPOSALS 5 THROUGH 18. ELIMINATION, AMENDMENT OR ADDITION OF VARIOUS INVESTMENT
RESTRICTIONS
General
The Trustees of the Fund unanimously recommend that shareholders
approve the elimination, amendment or addition of several of the Fund's
investment restrictions, as described in detail below. All of the current
restrictions proposed to be eliminated or amended are set forth in the Fund's
Statement of Additional Information except for the repurchase agreement policy
discussed under Proposal 5 which is contained in the Prospectus.
Each Proposal requires the separate approval of the shareholders of the
Fund. Each of these restrictions, except the industry concentration restriction
covered by Proposal 18, is a fundamental investment policy that may only be
changed by an affirmative 1940 Act Majority Vote. In the case of Proposal 18,
-30-
<PAGE>
the proposed change requires an absolute majority vote. See "Required Vote"
below.
PROPOSAL 5. AMENDMENT OF FUNDAMENTAL INVESTMENT RESTRICTION REGARDING REPURCHASE
AGREEMENTS. The Fund's current fundamental policy regarding repurchase
agreements states:
The Fund may enter into repurchase
agreements with banks, generally not
exceeding seven days.
If amended as proposed, the new policy will state:
The Fund may enter into repurchase
agreements with banks and broker-dealers,
generally not exceeding seven days.
The amendment is being proposed to permit the Fund to enter into
repurchase agreements with brokers as well as banks. This ability is consistent
with that of the other Pioneer funds that invest in repurchase agreements.
Repurchase agreements afford an opportunity for the Fund to earn a return on
temporarily available cash at no market risk. However, such transactions do
involve credit risk. If the seller defaults on its obligation under a repurchase
agreement, the Fund could realize a loss on the sale of the underlying security
or be subject to delays and associated expenses. In order to protect against
these risks, the Fund will enter into repurchase agreements only with banks and
brokers that have been reviewed and approved by the Trustees. PMC has advised
the Trustees that it believes the brokers with whom the Fund will enter into
repurchase agreements if the change is approved do not generally present any
greater credit risk than the current bank counterparties.
PROPOSAL 6. AMENDMENT OF FUNDAMENTAL INVESTMENT RESTRICTION REGARDING SHORT
SALES. The Fund's existing fundamental investment restriction regarding short
sales states that the Fund may not:
purchase securities "on margin" or
effect "short sales" of securities.
If amended as proposed, the restriction would provide that the Fund may
not:
purchase securities on "margin" or
effect "short sales" of securities unless at
all times when a short position is open it
owns an equal amount of such securities or
owns securities which, without payment of any
-31-
<PAGE>
further consideration, are convertible into
or exchangeable for securities of the same
issue as, and at least equal in amount to,
the securities sold short.
A "short sale" is the sale of a security not owned by the seller,
usually to take advantage of an anticipated decline in the price or to protect
the profit in a long position. This practice is prohibited by the blue sky laws
of certain states in which the Fund offers its shares because it involves
elements of investment leverage. This amendment is being proposed to clarify
that the Fund may engage in short sales "against the box" (i.e., where the Fund
effectively covers the short position by portfolio holdings and, in essence, is
not really selling short) which are permitted by the applicable blue sky laws.
Historically, short sales against the box were used primarily for tax planning
purposes which are no longer relevant. The Fund therefore does not expect to
engage significantly in this practice.
PROPOSAL 7. AMENDMENT TO FUNDAMENTAL INVESTMENT POLICY REGARDING UNDERWRITING.
The Fund's current investment policy regarding underwriting states that the Fund
may not:
underwrite any issue of securities.
If amended as proposed, the new policy will state that the Fund may
not:
act as an underwriter, except as it may
be deemed to be an underwriter in a sale of
restricted securities held in its portfolio.
The Investment Company Act Requires that a fund state a formal
fundamental policy regarding underwriting. The amendment is being proposed to
clarify that the sale by the Fund of portfolio securities restricted as to
transfer by the federal securities laws will not be subject to this restriction
to the extent such a sale may be deemed to be underwriting activity. As
discussed in detail in Proposal 10, PMC believes it is advantageous for a fund
with investment policies such as the Fund's to have the flexibility to invest in
restricted securities. The proposed amendment would eliminate any doubt created
by the current underwriting restriction as to the Fund's ability to dispose of
any restricted securities it may acquire.
PROPOSAL 8. ELIMINATION OF FUNDAMENTAL INVESTMENT RESTRICTION REGARDING
INVESTMENT COMPANIES. The Fund's existing fundamental investment restriction
regarding investment companies and investment funds states that the Fund may
not:
-32-
<PAGE>
acquire the securities of any other
domestic or foreign investment company or
investment fund (except in connection with a
plan of merger or consolidation with or
acquisition of substantially all the assets
of such other investment company); provided,
however, that nothing herein contained shall
prevent the Fund from investing in the
securities issued by a real estate investment
trust, provided that such trust shall not be
permitted to invest in real estate or
interests in real estate other than mortgages
or other security interests.
If eliminated as proposed, the Trustees would adopt a new
non-fundamental restriction that would provide that the Fund may not:
invest in securities of other registered
investment companies, except by purchases in
the open market including only customary
brokers' commissions, and except as they may
be acquired as part of a merger, a
consolidation or an acquisition of assets.
This change is being proposed to provide the Fund with additional
investment flexibility. The change would permit investment in investment
vehicles (except other mutual funds) that would be attractive investments for
the Fund but may technically be (or be deemed to be ) investment companies (as
defined in the Investment company Act) or investment funds (which has no precise
meaning but arguably encompasses any pooled investment vehicle) and therefore
prohibited by the Fund's investment restriction. Even though securities of such
issuers may involve the duplication of some fees and expenses, PMC believes that
they can provide attractive investment opportunities that, except for the
restriction stated above, would be consistent with the Fund's investment
objectives and policies. PMC does not currently expect to significantly invest
the Fund's assets in such vehicles but would like the flexibility to do so to
the extent permitted by the Investment Company Act should appropriate
opportunities arise.
PROPOSAL 9. ELIMINATION OF FUNDAMENTAL INVESTMENT RESTRICTION REGARDING
SECURITIES OF A SINGLE ISSUER. The Fund's existing fundamental investment
restriction regarding investment in the securities of a single issuer states
that the Fund may not:
purchase securities of a company if
-33-
<PAGE>
the purchase would result in the Fund's
having more than 5% of the value of its total
asset invested in securities of such company.
The Investment Company Act limits any fund, such as the Fund,
subclassified as a "diversified" company, with respect to 75% of its total
assets, to investment of no more than 5% of the value of its total assets in the
securities of any one issuer. Although the Fund must declare its status as a
diversified company in its Prospectus and comply with this and other related
diversification limitations, there is no requirement that such limitations be
formally stated as a matter of fundamental (or non-fundamental) policy.
The change is being proposed to provide the Fund with the flexibility
to invest without limitation up to 25% of its total assets in the securities of
a single issuer (or issuers). However, given the large net assets of the Fund
and the relatively small capitalizations of most of the companies in which the
Fund invests, PMC does not expect that the change will have a significant impact
on the management of the Fund's portfolio. In the event that the Fund does take
advantage of the flexibility to concentrate a higher percentage of its assets in
the securities of a small number of issuers, it will be affected commensurately
by any fluctuations in value of such securities.
Certain state blue sky laws may limit the Fund's ability to invest in
the securities of a single issuer up to the amount permitted by the Investment
Company Act. To the extent required by a state securities administrator, the
Fund may undertake to limit its investment to a lower percentage.
PROPOSAL 10. ELIMINATION OF FUNDAMENTAL INVESTMENT RESTRICTION REGARDING VOTING
SECURITIES OF A SINGLE ISSUER. The Fund's existing fundamental investment
restriction regarding investment in the voting securities of a single issuer
states that the Fund may not:
purchase securities of a company if the
purchase would result in the Fund's owning
more than 10% of the outstanding voting
securities of such company.
As a diversified investment company, in addition to the limitations on
the percentage of its assets that may be invested in the securities of a single
issuer, with respect to 75% of its total assets, the Fund may not acquire more
than 10% of the outstanding voting securities of any one issuer. As in the case
of the percentage of assets investment restriction, although the Fund must
-34-
<PAGE>
comply with this limitation, there is no requirement that it be formally adopted
as a matter of fundamental (or non-fundamental) policy. The change is being
proposed to provide the Fund with the flexibility to invest, with respect to 25%
of its total assets, in more than 10% of the outstanding voting securities of a
single issuer (or issuers). Contrary to the case of the limitation on the
percentage of the Fund's asset which may be invested in a single issuer, the
large capitalization of the Fund relative to many of the companies in which it
invests make it more likely that the Fund will take advantage of the additional
flexibility afforded by the elimination of the current investment restriction.
Certain state blue sky laws may limit the Fund's ability to invest in
the voting securities of a single issuer to a lesser amount than permitted by
the Investment Company Act. To the extent required by a state securities
administrator, the Fund may undertake to limit its investment to a lower
percentage.
PROPOSAL 11. AMENDMENT OF FUNDAMENTAL INVESTMENT RESTRICTION REGARDING
COMMODITIES. The Fund's existing fundamental investment restriction regarding
commodities states that the Fund may not:
invest in commodities, commodity
contracts, or real estate.
If amended as proposed, the restriction would provide that the Fund may
not:
invest in real estate, commodities or
commodity contracts, except that the Fund may
invest in financial futures contracts and
related options and in any other financial
instruments which may be deemed to be
commodities or commodity contracts in which
the Fund is not prohibited from investing by
the Commodity Exchange Act and the rules and
regulations thereunder.
The Investment Company Act requires that a fund state a formal
fundamental investment policy regarding investment in commodities. Any financial
futures contract or related option is considered to be a commodity. Other types
of financial instruments such as forward commitments and swaps might also be
deemed to be commodities. The amendment is being proposed to enable the Fund to
invest in financial futures contracts and related options for hedging and other
permissible purposes and to clarify that certain practices in which the Fund
engages (such as forward foreign currency contracts) or might in the future
engage (such as swaps) are not subject to this restriction. The Fund does not
currently intend to engage in financial futures and related options transactions
or any other investment practice not currently described in its Prospectus. In
-35-
<PAGE>
the event that the Trustees decide in the future it is desirable for the Fund to
engage in any such practices, the Fund's Prospectus will be revised accordingly,
including the addition of appropriate risk disclosure.
PROPOSAL 12. ELIMINATION OF FUNDAMENTAL INVESTMENT RESTRICTION REGARDING
RESTRICTED SECURITIES. The Fund's existing fundamental investment restriction
regarding restricted securities states that the Fund may not:
purchase "investment letter" securities
(i.e., securities that must be registered
under the Securities Act of 1933 before they
may be offered or sold to the public).
If eliminated as proposed, the Trustees would adopt a new
non-fundamental restriction that would provide that the Fund may not:
purchase (a) securities which at the
time of investment are not readily
marketable, (b) securities the disposition of
which is restricted under federal securities
laws (excluding restricted securities that
have been determined by the Trustees of the
Fund (or the person designated by them to
make such determinations) to be readily
marketable) and (c) repurchase agreements
maturing in more than seven days, if, as a
result, more than 15% of the Fund's net
assets would be invested in securities
described in (a), (b) and (c) above.
The SEC has long taken the position that an open-end investment company
should limit its investments in illiquid securities because such securities may
present problems of accurate valuation and because the investment company would
have difficulty satisfying redemptions within the permitted seven day time
period. In general, illiquid securities have included restricted securities and
those securities for which there is no readily available market. Since the
adoption of the Fund's investment restriction, the SEC has revised its position
to permit a fund to invest up to 15% of its net assets in illiquid securities.
In recognition of the increased size and liquidity of the institutional
markets for unregistered securities and the importance of institutional
investors in providing capital to developing companies, the SEC has also, since
the adoption of the Fund's investment restriction, adopted Rule 144A, which is
-36-
<PAGE>
designed to facilitate efficient trading of restricted securities among
institutional investors. The SEC has specifically stated that restricted
securities traded under Rule 144A may be treated as liquid for purposes of
investment limitations if the trustees of a fund determine that the securities
are liquid. It is expected that the Trustees of the Fund will delegate to PMC
the daily function of determining and monitoring the liquidity of restricted
securities.
The change is being proposed to provide the Fund with the flexibility
to take advantage of these regulatory developments. As securities markets have
evolved, PMC believes that the Fund's current restriction has become
unnecessarily restrictive. The fact that a security may be restricted will not
necessarily adversely affect either the liquidity or the accurate valuation of
such investment. The Fund might thereby be constrained from making attractive
investments even though they could satisfy both valuation and redemption
concerns.
Certain state blue sky laws may limit the ability of the Fund to invest
in restricted securities, including restricted securities that are readily
marketable. To the extent required by a state securities administrator, the Fund
may undertake to limit its investment to a lower percentage.
PROPOSAL 13. ELIMINATION OF FUNDAMENTAL INVESTMENT RESTRICTION REGARDING
"UNSEASONED" ISSUERS. The Fund's existing fundamental investment restriction
regarding securities of "unseasoned" issuers states that the Fund may not:
purchase the securities of any
enterprise which has a business history of
less than three years, including the
operation of any predecessor business to
which it succeeded.
The Investment Company Act does not impose any limitation upon
investment in securities of issuers with a limited operating history. The change
is being proposed to permit the Fund to invest in such securities to the extent
that PMC believes that such investment would be beneficial to the Fund and would
not involve undue risk. In general, PMC believes that it would be advantageous
for any fund that concentrates on mid-capitalization stocks to have the
flexibility to invest in recently formed companies. The risks of investing in
such companies are similar to the general risks of investing in
mid-capitalization companies discussed above in Proposal 4. Although the Fund
will not formally adopt a percentage limitation on such investments, it is not
expected that PMC will invest more than 5% of the Fund's assets in such
securities.
-37-
<PAGE>
Certain state blue sky laws may limit the ability of the Fund to invest
in securities of unseasoned issuers either alone or in combination with certain
other types of securities such as restricted securities. To the extent required
by a state securities administrator, the Fund may undertake to limit its
investment to a specified percentage.
PROPOSAL 14. ELIMINATION OF FUNDAMENTAL INVESTMENT RESTRICTION REGARDING
AFFILIATES OF AFFILIATES. The Fund's existing fundamental investment restriction
regarding securities of affiliates of affiliates of the Fund states that the
Fund may not:
purchase or retain the securities of any
company if those officers and Trustees of the
Fund, or officers and directors of its
adviser or principal underwriter, owning
individually more than one-half of 1% of the
securities of such company, together own more
than 5% of the securities of such company
which has a business history of less than
three years, including the operation of any
predecessor business to which it succeeded.
If the elimination of this restriction is approved by shareholders, the
Trustees will adopt the identical restriction as a non-fundamental policy. The
restriction is required by the blue sky laws of states in which the Fund offers
its shares but is not required to be stated as a matter of fundamental policy.
The change is being proposed to give the Trustees the flexibility to
amend the restriction if desired without the need for shareholder approval in
the event of a change in the applicable blue sky laws or if the Fund ceases to
offer shares in such states. There is no current expectation that either of
these developments is likely to occur. In the event of such an occurrence, PMC
will advise the Trustees whether it might be desirable to consider changing the
restriction.
PROPOSAL 15. AMENDMENT OF FUNDAMENTAL INVESTMENT RESTRICTION REGARDING LOANS.
The Fund's existing fundamental investment restriction regarding making loans
states that the Fund may not:
make loans, provided that (i) the
purchase of publicly distributed debt
securities pursuant to the Fund's investment
objectives shall not be deemed loans for the
purposes of this restrictions; (ii) loans of
portfolio securities, as described from time
to time, under the heading "Lending of
-38-
<PAGE>
Portfolio Securities" shall be made only in
accordance with the terms and conditions
therein set forth and (iii) in seeking a
return on temporarily available cash the Fund
may engage in repurchase transactions with
banks maturing in seven days or less and
involving obligations of the U.S. Government,
its agencies or instrumentalities.
If amended as proposed, the restriction would provide that the Fund may
not:
make loans, except by purchase of debt
obligations in which the Fund may invest
consistent with its investment policies, by
entering into repurchase agreements or
through the lending of portfolio securities,
in each case only to the extent permitted by
the Prospectus and this Statement of
Additional Information.
The Investment Company Act requires that a Fund state a fundamental
investment policy regarding making loans. This amendment is being proposed to
clarify that the Fund may enter into repurchase agreements with brokers pursuant
to the proposed new repurchase agreement policy discussed in Proposal 5 and to
provide future flexibility to adjust the Fund's repurchase agreement and
securities lending practices without the need to further revise the restriction.
PROPOSAL 16. AMENDMENT OF FUNDAMENTAL INVESTMENT RESTRICTION REGARDING
BORROWING. The Fund's existing fundamental investment restriction regarding
borrowing states that the Fund may not:
borrow money, except that, as a
temporary measure for extraordinary or
emergency purposes and not for investment
purposes, the Fund may borrow from banks up
to 5% of the value of its total assets at the
time of the borrowing.
If amended as proposed, the restriction will provide that the Fund may
not:
borrow money, except from banks as a
temporary measure to facilitate the meeting
of redemption requests or for extraordinary
or emergency purposes and except pursuant to
reverse repurchase agreements or dollar
rolls, in all cases in amount not exceeding
-39-
<PAGE>
33 1/3% of the Fund's total assets (including
the amount borrowed) taken at market value.
The Fund will not use leverage to attempt to
increase income. The Fund will not purchase
securities while outstanding borrowings
(including reverse repurchase agreements)
exceed 10% of the Fund's total assets.
The Investment Company Act requires that a fund state a fundamental
policy regarding borrowing. The amendment is being proposed (1) to raise the
percentage limit to the maximum permitted by the Investment Company Act, (2) to
clarify that the Fund may borrow from banks both for extraordinary or emergency
purposes and to meet redemptions and (3) to give the Fund the future ability to
engage in reverse repurchase agreements and dollar rolls without the need for
shareholder approval. The Proposal would also eliminate the requirement to value
the Fund's assets at the lower of cost or market.
Reverse repurchase agreements involve sales by a fund of portfolio
assets concurrently with an agreement by the fund to repurchase the same assets
at a later date at a fixed price. During the reverse repurchase agreement
period, the fund continues to receive principal and interest on these securities
and also has the opportunity to earn a return on the collateral furnished by the
counterparty to secure its obligation to redeliver the securities. Dollar rolls
are transactions in which a fund sells securities for delivery in the current
month and simultaneously contracts to repurchase similar securities on a
specified future date. During the roll period, the fund forgoes principal and
interest paid on the securities. The fund is compensated by the difference
between the current sales price and the forward price for the future purchase
(often referred to as the "drop") as well as by the interest earned on the cash
proceeds of the initial sale.
Although the change in percentage limitation is significant, there is
no current expectation that the Fund will engage in borrowing beyond its current
practices. In regard to the permitted uses of bank borrowings, clarification is
necessary because the current restriction is not explicit with respect to the
Fund's ability to borrow to meet redemptions. In regard to reverse repurchase
agreements and dollar rolls, the Fund does not currently engage or desire to
engage in either of these investment practices. However, because these common
practices may be deemed to constitute borrowings, the Trustees believe it is
best to create the flexibility to introduce such practices at some future time
without the need for shareholder approval if this becomes desirable. In such
-40-
<PAGE>
event, the Prospectus and Statement of Additional Information would be amended
accordingly, including the addition of appropriate risk disclosure.
PROPOSAL 17. ADDITION OF FUNDAMENTAL INVESTMENT RESTRICTION REGARDING "SENIOR
SECURITIES." The Trustees propose adopting a fundamental investment restriction
regarding the issuance of "senior securities" such that the Fund may not:
issue senior securities, except as
permitted by the Fund's borrowing, lending
and commodity restrictions, and for purposes
of this restriction, the issuance of shares
of beneficial interest in multiple classes or
series, the purchase or sale of options,
futures contracts, options on futures
contracts, forward commitments, forward
foreign exchange contracts, repurchase
agreements, reverse repurchase agreements,
dollar rolls, swaps and any other financial
transaction entered into pursuant to the
Fund's investment policies as described in
the Prospectus and this Statement of
Additional Information and in accordance with
applicable SEC pronouncements, as well as the
pledge, mortgage or hypothecation of the
Fund's assets within the meaning of the
Fund's fundamental investment restriction
regarding pledging, are not deemed to be
senior securities.
The Investment Company Act requires that a fund state a fundamental
policy regarding the issuance of "senior securities" which are any securities
that have preferential rights compared to the Fund's shares of beneficial
interest. The Fund does not currently have such a policy. The above restriction
is being proposed for the purpose of complying with this technical requirement.
The restriction is designed to clarify that the issuance of multiple classes or
series of shares by the Fund would be permitted and that certain investment
practices in which the Fund engages or might in the future desire to engage
which could be deemed to be senior securities are not.
Except for forward foreign currency contracts, forward commitments and
repurchase agreements in which the Fund already engages, the Fund has no current
intention of engaging in the other listed investment practices. However, the
Trustees believe it is appropriate to provide clarification at this time that
such practices (and other unspecified investment practices) are not covered by
the restriction in case it becomes desirable to engage in one or more of these
practices at some future time. In the event that a new practice is implemented,
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the Prospectus and Statement of Additional Information will be revised
accordingly, including the addition of appropriate risk disclosure.
PROPOSAL 18. ELIMINATION OF INVESTMENT RESTRICTION REGARDING INDUSTRY
CONCENTRATION. The Fund's existing investment restriction regarding
concentration of investments in particular industries states:
It is the policy of the Fund not to
concentrate its investments in securities of
companies in any particular industry. In the
opinion of the staff of the SEC, investments
are concentrated in a particular industry if
such investments aggregate 25% or more of the
Fund's total assets.
This policy is designated as non-fundamental but may only be changed by
the affirmative vote of a majority of the Fund's outstanding shares of
beneficial interest (i.e., an absolute majority). If this restriction is
eliminated as proposed, the Fund will not adopt any new formal policy regarding
investment in a particular industry. However, as discussed below, it would be
required to adopt such a new policy in the event that the Fund desires in the
future to concentrate investment in any particular industry or industries.
The Investment Company Act requires that any Fund desiring to
concentrate investment in a particular industry must adopt a formal fundamental
policy. As indicated by the Fund's current policy, the SEC staff generally
defines concentration to mean investing more than 25% of a fund's assets in an
industry and takes the position that a fund cannot reserve freedom of action
whether or not to concentrate except under defined circumstances. A fund, such
as the Fund, which does not desire to reserve the ability to concentrate is not
required to state this as a formal policy but would need to adopt such a policy
in order to do so.
The change is being proposed to eliminate the absolute majority voting
requirement imposed by the current restriction. If approved, the Fund would be
able to adopt an industry concentration policy at some future time by satisfying
the lesser requirement of an affirmative 1940 Act Majority vote. There is no
current intention of proposing such a policy.
Trustees' Recommendations
At a meeting of the Trustees held on August 10, 1995, the Trustees
unanimously approved, and voted to recommend to the shareholders of the Fund
that they approve the proposed modifications to certain of the Fund's investment
restrictions. In taking such action and making such recommendations, the
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Trustees considered the fact that the proposed modifications will provide
clarification relating to certain investment restrictions and flexibility to
adjust to changing regulations and markets and new investment techniques without
continually incurring the significant expense involved in soliciting proxies and
holding shareholder meetings. The Trustees believe that this increased clarity
and flexibility will be beneficial to present shareholders as well as potential
investors.
Except as described in this Proxy Statement, approval of the proposed
changes to the investment restrictions will not result in changes in the
Trustees, officers, investment programs and services or any operations that are
described in the Fund's current Prospectus and Statement of Additional
information.
Required Vote
Adoption of each of Proposals 5 through 17 requires the affirmative
1940 Act Majority Vote of the Fund. Adoption of Proposal 18 requires the
affirmative vote of a majority of the Fund's outstanding shares of beneficial
interest.
If all or some of the Proposals are not approved by the shareholders of
the Fund, the Fund will continue to adhere to the current investment
restriction(s) as to which no change has been approved.
FOR THE REASONS SET FORTH ABOVE, THE TRUSTEES UNANIMOUSLY RECOMMEND
THAT THE SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THE APPROVAL OF THE PROPOSALS
TO ELIMINATE, AMEND OR ADD CERTAIN INVESTMENT RESTRICTIONS.
PROPOSAL 19. RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP has served as the Fund's independent
public accountant since the Fund's inception. Audit services during the fiscal
year ended September 30, 1995 consisted of examinations of the Fund's financial
statements for this period and reviews of the Fund's filings with the SEC.
The Trustees, including all of the Trustees who are not "interested
persons" of the Fund or PMC, have selected Arthur Andersen LLP as the Fund's
independent public accountants for the fiscal year ended September 30, 1996,
subject to shareholder ratification at the Meeting. A representative of Arthur
Andersen LLP is expected to be available at the Meeting to make a statement if
he or she desires to do so and to respond to appropriate questions.
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Required Vote
The ratification of the selection of Arthur Andersen LLP as the Fund's
independent public accountants for the fiscal year ended September 30, 1996
requires the affirmative vote of a majority of the shares present and entitled
to vote at the meeting.
THE TRUSTEES UNANIMOUSLY RECOMMENDED THAT THE SHAREHOLDERS OF THE FUND
VOTE IN FAVOR OF THE RATIFICATION OF ARTHUR ANDERSEN LLP AS THE FUND'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996.
OTHER MATTERS
Shareholder Proposals
The Fund is not required to hold annual meetings of shareholders and
does not currently intend to hold such a meeting of shareholders in 1997.
Shares Held in Retirement Plans
The Fund is permitted to vote any shares held in Retirement Plans and
will do so if necessary to obtain a quorum.
Proxies, Quorum and Voting at the Meeting
Any person giving a proxy has the power to revoke it at any time prior
to its exercise by executing a superseding proxy or by submitting a notice of
revocation to the Secretary of the Fund. In addition, although mere attendance
at the Meeting will not revoke a proxy, a shareholder present at the Meeting may
withdraw his or her proxy and vote in person. All properly executed and
unrevoked proxies received in time for the Meeting will be voted in accordance
with the instructions contained in the proxies. If no instruction is given, the
persons named as proxies will vote the shares represented thereby in favor of
the Proposals described above and will use their best judgment in connection
with the transaction of such other business as may properly come before the
Meeting or any adjournment thereof.
A majority of the shares entitled to vote -- present in person or
represented by proxy -- constitutes a quorum for the transaction of business
with respect to any proposal (unless otherwise noted in the Proxy Statement). In
the event that at the time any session of the Meeting is called to order a
quorum is not present in person or by proxy, the persons named as proxies may
vote those proxies which have been received to adjourn the Meeting to a later
date. In the event that a quorum is present but sufficient votes in favor of any
of the Proposals, including the election of the nominees to the Board of
Trustees, have not been received, the persons named as proxies may propose one
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or more adjournments of the Meeting to permit further solicitation of proxies
with respect to such Proposal. Any such adjournment will require the affirmative
vote of more than one half of the shares of the Fund present in person or by
proxy at the session of the Meeting to be adjourned. The persons named as
proxies will vote those proxies which they are entitled to vote in favor of any
such Proposal in favor of such an adjournment and will vote those proxies
required to be voted against any such Proposal against any such adjournment. A
shareholder vote may be taken on one or more of the Proposals in the proxy
statement prior to such adjournment if sufficient votes for its approval have
been received and it is otherwise appropriate. Such vote will be considered
final regardless of whether the meeting is adjourned to permit additional
solicitation with respect to any other Proposal.
Shares of the Fund represented at the meeting (including, shares which
abstain or do not vote with respect to one or more of the Proposals) will be
counted for purposes of determining whether a quorum is present at the Meeting.
Abstentions will be treated as shares that are present and entitled to vote for
purposes of determining the number of shares that are present and entitled to
vote with respect to any particular Proposal, but will not be counted as a vote
in favor of such Proposal. Accordingly, an abstention from voting on a Proposal
has the same legal effect as a vote against the Proposal.
Adoption by the shareholders of any of Proposals 1, 2, 3 and 5 through
17 requires the affirmative vote of the lesser of (i) 67% or more of the voting
securities of the Fund present at the Meeting, if the holders of more than 50%
of the shares of the Fund are present or represented by proxy at the Meeting, or
(ii) 50% or more of the outstanding shares of the Fund. Adoption of Proposal 18
requires the affirmative vote of an absolute majority of the Fund's outstanding
voting securities. If a broker or nominee holding shares in "street name"
indicates on the proxy that it does not have discretionary authority to vote as
to any Proposal, those shares will not be considered as present and entitled to
vote as to that Proposal. Accordingly, a "broker non-vote" has no effect on the
voting in determining whether a Proposal has been adopted pursuant to item (i)
above, provided that the holders of more than 50% of the outstanding shares
(excluding the "broker non-votes") of the Fund are present or represented by
proxy. However, with respect to determining whether a Proposal has been adopted
pursuant to item (ii) above, because shares represented by a "broker non-vote"
are considered outstanding shares, a "broker non-vote" has the same legal effect
as a vote against such Proposal.
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Other Business
While the Meeting has been called to transact any business that may
properly come before it, the only matters that the Trustees intend to present
are those matters stated in the attached Notice of Special Meeting of
Shareholders. However, if any additional matters properly come before the
Meeting, and on all matters incidental to the conduct of the Meeting, it is the
intention of the persons named in the enclosed proxy to vote the proxy in
accordance with their judgment on such matters unless instructed to the
contrary.
Methods of Solicitation and Expenses
The cost of preparing, assembling and mailing this proxy statement and
the attached Notice of Special Meeting of Shareholders and the accompanying
proxy card will be borne by the Fund. In addition to soliciting proxies by mail,
the Fund may, at its expense, have one or more of its officers, representatives
or compensated third-party agents, including PMC, PSC and PFD, aid in the
solicitation of proxies by personal interview or telephone and telegraph and may
request brokerage houses and other custodians, nominees and fiduciaries to
forward proxy soliciting material to the beneficial owners of the shares held of
record by such persons.
The Fund may also arrange to have votes recorded by telephone. The
telephone voting procedure is designed to authenticate shareholders' identities,
to allow shareholders to authorize the voting of their shares in accordance with
their instructions and to confirm that their instructions have been properly
recorded. The Fund has been advised by counsel that these procedures are
consistent with the requirements of applicable law. If these procedures were
subject to a successful legal challenge, such votes would not be counted at the
meeting. The Fund is unaware of any such challenge at this time. Shareholders
would be called at the phone number PSC has in its records for their accounts,
and would be asked for their Social Security number or other identifying
information. The shareholders would then be given an opportunity to authorize
proxies to vote their shares at the meeting in accordance with their
instructions. To ensure that the shareholders' instructions have been recorded
correctly, they will also receive a confirmation of their instructions in the
mail. A special toll-fee number will be available in case the information
contained in the confirmation is incorrect.
Persons holding shares as nominees will be reimbursed by the Fund, upon
request, for the reasonable expenses of mailing soliciting materials to the
principals of the accounts.
December 1, 1995
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APPENDIX
Additional Information Pertaining to PMC
Directors. Information regarding the affiliations of Mr. Cogan,
Chairman of PMC, and Mr. Tripple, a Director of PMC, is contained in Proposal 4
of this Proxy Statement. The following table provides information with respect
to the other Director of PMC:
Name, Age and Address Principal Occupation(s)
Robert L. Butler, 54 Executive Vice President and a
60 State Street Director of PGI; President and
Boston, MA 02109 a Director of PFD; Director of
PSC, PIC, and P. Intl.; Vice
Chairman of Pioneer GmbH; and a
Member of the Supervisory Board
of PFPT.
Ownership of PMC. PMC is a wholly-owned subsidiary of PGI. As of October
31, 1995, Mr. Cogan beneficially owned [3,656,841] shares 14.74%) of the
outstanding Common Stock of PGI. Mr. Cogan's beneficial holdings included
[1,637,726] shares held in trusts with respect to which Mr. Cogan may be deemed
to be a beneficial owner by reason of his interest as a beneficiary and/or
position as a trustee and shares which Mr. Cogan has the right to acquire under
outstanding options within sixty days of October 31, 1995. At such date, Messrs.
Butler and Tripple, PMC's other directors, each owned beneficially less than 2%
of the outstanding Common Stock of PGI. As of October 31, 1995, officers and
directors of PMC and Trustees and officers of the Fund beneficially owned an
aggregate of [4,596,866] shares of Common Stock of PGI, approximately [20%] of
the outstanding Common Stock of PGI. During PGI's fiscal year ended December 31,
1994, there were no transactions in PGI Common Stock by any officer, Trustee of
the Fund or Director of PMC in an amount equal to or exceeding 1% of the
outstanding Common Stock of PGI.
Services Provided to the Fund By Affiliates of PMC. PSC serves as the
Fund's transfer agent and shareholder servicing agent. Under the terms of its
contract with the Fund, PSC's duties include: (i) processing sales, redemptions
and exchanges of shares of the Fund; (ii) distributing dividends and capital
gains associated with Fund portfolio accounts; and (iii) maintaining certain
account records and responding to routine shareholder inquires. For the fiscal
year ended September 30, 1995 the Fund paid PSC approximately $1,635,000 in fees
for these services.
PFD, an indirect wholly owned subsidiary of PGI, serves as the Fund's
principal underwriter. For the fiscal year ended September 30, 1995, the Fund
paid PFD approximately $1,799,000 in distribution fees pursuant to the Fund's
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Distribution Plan. Such fees are paid to PFD in reimbursement of expenses
related to servicing of shareholder accounts and compensating broker/dealers and
sales personnel. For the same period, PFD earned net underwriting commissions in
connection with its offering of shares of the Fund in the amount of
approximately $1,409,000 of which approximately $1,224,000 was reallowed to
dealers.
Similar Funds Managed By PMC. PMC serves as the investment manager to
the following funds with investment objectives similar to the Fund's current and
proposed revised objectives:
Name of Fund
Annual (Net Assets as of
Management Fee Rate as of 10/31/95)
0.50% on average Pioneer II
net assets up to $250 million ($ )
0.48% on the next
$50 million in net assets
0.45% on net assets
exceeding $300 million
0.65% on average Pioneer Capital
net assets up to $300 million Growth Fund
0.60% on the next ($ )
$200 million in net assets
0.50% on the next Pioneer Equity-Income Fund
$500 million in net assets ($ )
0.45% on net assets
exceeding $1 billion
Portfolio Transactions. All orders for the purchase or sale of portfolio
securities are placed on behalf of the Fund by PMC pursuant to authority
contained in the Current and Proposed Management Contracts. In selecting brokers
or dealers, PMC considers factors relating to execution on the best overall
terms available, including, but not limited to, the size and type of the
transaction; the nature and character of the markets of the security to be
purchased or sold; the execution efficiency, settlement capability and financial
condition of the dealer; the dealer's execution services rendered on a
continuing basis; and the reasonableness of any dealer spreads.
PMC may select broker-dealers which provide brokerage and/or research
services to the Fund and/or other investment companies or accounts managed by
PMC. Such research services must be lawful and appropriate assistance to PMC in
the performance of its investment decision making responsibilities and could
include advice concerning the value of securities; the advisability of investing
in, purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analysis and reports concerning
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issuers, industries, securities, economic factors and trends, portfolio strategy
and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement). In
addition, if PMC determines in good faith that the amount of commissions charged
by a broker 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 in
an amount greater than the amount another firm may charge. This information
might be useful to PMC in providing services to the Fund as well as to other
investment companies or accounts managed by PMC, although not all of such
research may be useful to the Fund. Conversely, such information provided to PMC
by brokers and dealers through whom other clients of PMC effect securities
transactions might be useful to PMC in providing services to the Fund. The
receipt of such research is not expected to reduce PMC's normal independent
research activities; however, it enables PMC to avoid the additional expense
which might otherwise be incurred if it were to attempt to develop comparable
information through its own staff.
-------------------------------------
EXHIBIT A
MANAGEMENT CONTRACT
THIS AGREEMENT dated this 1st day of February, 1996 between Pioneer Mid-Cap
Growth Fund (formerly Pioneer Three), a Delaware business trust (the "Trust"),
and Pioneering Management Corporation, a Delaware corporation (the "Manager").
W I T N E S S E T H
WHEREAS, the Trust is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (the "Registration Statement") for the
purpose of registering its shares for public offering under the Securities Act
of 1933, as amended (the "1933 Act"),
WHEREAS, the parties hereto deem it mutually advantageous that the Manager
should be engaged, subject to the supervision of the Trust's Board of Trustees
and officers, to manage the Trust.
NOW, THEREFORE, in consideration of the mutual covenants and benefits set forth
herein, the Trust and the Manager do hereby agree as follows:
1. (a) The Manager will regularly provide the Trust with investment
research, advice and supervision and will furnish continuously an investment
program for the Trust, consistent with the investment objectives and policies of
the Trust. The Manager will determine from time to time what securities shall be
purchased for the Trust, what securities shall be held or sold by the Trust and
what portion of the Trust's assets shall be held uninvested as cash, subject
always to the provisions of the Trust's Certificate of Trust, Agreement and
Declaration of Trust, By-Laws and its registration statements under the 1940 Act
and under the 1933 Act covering the Trust's shares, as filed with the Securities
and Exchange Commission, and to the investment objectives, policies and
restrictions of the Trust, as each of the same shall be from time to time in
effect, and subject, further, to such policies and instructions as the Board of
Trustees of the Trust may from time to time establish. To carry out such
determinations, the Manager will exercise full discretion and act for the Trust
in the same manner and with the same force and effect as the Trust itself might
or could do with respect to purchases, sales or other transactions, as well as
with respect to all other things necessary or incidental to the furtherance or
conduct of such purchases, sales or other transactions.
<PAGE>
(b) The Manager will, to the extent reasonably required in the
conduct of the business of the Trust and upon the Trust's request, furnish to
the Trust research, statistical and advisory reports upon the industries,
businesses, corporations or securities as to which such requests shall be made,
whether or not the Trust shall at the time have any investment in such
industries, businesses, corporations or securities. The Manager will use its
best efforts in the preparation of such reports and will endeavor to consult the
persons and sources believed by it to have information available with respect to
such industries, businesses, corporations or entities.
(c) The Manager will maintain all books and records with respect to
the Trust's securities transactions required by sub-paragraphs (b)(5), (6), (9)
and (10) and paragraph (f) of Rule 31a-1 under the 1940 Act (other than those
records being maintained by the custodian or transfer agent appointed by the
Trust) and preserve such records for the periods prescribed therefor by Rule
31a-2 under the 1940 Act. The Manager will also provide to the Board of Trustees
such periodic and special reports as the Board may reasonably request.
2. (a) Except as otherwise provided herein, the Manager, at its own
expense, shall furnish to the Trust office space in the offices of the Manager
or in such other place as may be agreed upon from time to time, and all
necessary office facilities, equipment and personnel for managing the Trust's
affairs and investments, and shall arrange, if desired by the Trust, for members
of the Manager's organization to serve as officers or agents of the Trust.
(b) The Manager shall pay directly or reimburse the Trust for: (i)
the compensation (if any) of the Trustees who are affiliated with, or
"interested persons" (as defined in the 1940 Act) of, the Manager and all
officers of the Trust as such; and (ii) all expenses not hereinafter
specifically assumed by the Trust where such expenses are incurred by the
Manager or by the Trust in connection with the management of the affairs of, and
the investment and reinvestment of the assets of, the Trust.
(c) The Trust shall assume and shall pay: (i) charges and expenses
for fund accounting, pricing and appraisal services and related overhead,
including, to the extent such services are performed by personnel of the
Manager, or its affiliates, office space and facilities and personnel
compensation, training and benefits; (ii) the charges and expenses of auditors;
(iii) the charges and expenses of any custodian, transfer agent, plan agent,
dividend disbursing agent and registrar appointed by the Trust with respect to
the Trust; (iv) issue and transfer taxes chargeable to the Trust in connection
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with securities transactions to which the Trust is a party; (v) insurance
premiums, interest charges, dues and fees for membership in trade associations
and all taxes and corporate fees payable by the Trust to federal, state or other
governmental agencies; (vi) fees and expenses involved in registering and
maintaining registrations of the Trust and/or its shares with the Commission,
state or blue sky securities agencies and foreign countries, including the
preparation of Prospectuses and Statements of Additional Information for filing
with the Commission; (vii) 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; (viii)
charges and expenses of legal counsel to the Trust and the Trustees; (ix) any
distribution fees paid by the Trust in accordance with Rule 12b-1 promulgated by
the Commission pursuant to the 1940 Act; (x) compensation of those Trustees of
the Trust who are not affiliated with or interested persons of the Manager, the
Trust (other than as Trustees), The Pioneer Group, Inc. or Pioneer Trusts
Distributor, Inc.; (xi) the cost of preparing and printing share certificates;
and (xii) interest on borrowed money, if any.
(d) In addition to the expenses described in Section 2(c) above, the
Trust shall pay all brokers' and underwriting commissions chargeable to the
Trust in connection with securities transactions to which the Trust is a party.
3. (a) The Trust shall pay to the Manager, as compensation for the
Manager's services and expenses assumed hereunder, a fee as set forth below.
Management fees payable hereunder shall be computed daily and paid monthly in
arrears.
(i) For the period beginning on the date this Contract becomes
effective and ending on June 30, 1996, the fee shall be paid at the annual rate
of 0.50% of the Trust's average daily net assets up to $250 million, 0.48% of
the next $50 million, and 0.45% of the excess over $300 million (the "Carryover
Fee").
(ii) For periods after June 30, 1996, the fee payable hereunder
shall be composed of the Basic Fee (defined below) and a Performance Adjustment
(defined below) to the Basic Fee based upon the investment performance of the
Trust in relation to the Standard & Poors Mid-Cap 400 Index (the "Index").
(iii) The Basic Fee is payable at an annual rate of 0.625% of
the Trust's average daily net assets.
(iv) The Performance Adjustment consists of an adjustment to the
monthly Basic Fee to be made by applying a performance adjustment rate to the
average net assets of the Trust over the performance period. The resulting
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dollar figure will be added to or subtracted from the Basic Fee depending on
whether the Trust experienced better or worse performance than the Index.
The Performance Adjustment rate is 0.02% per annum for each percentage
point rounded to the nearer point (the higher point if exactly one-half point)
that the Trust's investment performance for the period was better or worse than
the record of the index as then constituted. The maximum performance adjustment
is 0.20% per annum.
The performance period will commence on February 1, 1996. During the
first five months thereafter there will be no Performance Adjustment and the
Carryover Fee will be in effect. Starting with July, 1996 and ending with
December, 1997 (the "Transition Period"), the Performance Adjustment will take
effect only if this would have the effect of lowering the Basic Fee. Starting
with January, 1997, the Performance Fee will take effect for purposes of both
raising and lowering the Basic Fee.
Starting with July, 1996, a new month will be added to the performance
period each month until the performance period equals 36 months. Thereafter, the
performance period will consist of the current month plus the preceding 35
months.
The Trust's investment performance will be measured by comparing the
(i) opening net asset value of one share of the Trust on the first business day
of the performance period with (ii) the closing net asset value of the one share
of the Trust as of the last business day of such period. In computing the
investment performance of the Trust and the investment record of the Index,
distributions of realized capital gains, the value of capital gains taxes per
share paid or payable on undistributed realized long-term capital gains
accumulated to the end of such period and dividends paid out of investment
income on the part of the Trust, and all cash distributions of the companies
whose stock comprise the Index, will be treated as reinvested in accordance with
Rule 205-1 or any other applicable rule under the Investment Advisers Act of
1940, as the same from time to time may be amended.
The computation of the performance adjustment will not be cumulative.
Except during the Transition Period, a positive fee adjustment will apply even
though the performance of the Trust over some period of time shorter than the
performance period has been behind that of the Index, and, conversely, a
negative fee adjustment will apply for the month even though the performance of
the Trust over some period of time shorter than the performance period has been
ahead of that of the Index.
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(v) One-twelth of the annual Performance Adjustment rate shall
be applied to the average of the net assets of the Trust (computed in the manner
set forth in the Declaration of Trust of the Trust adjusted as provided above,
if applicable) determined as of the close of business on each business day
through out the performance period. The resulting dollar amount is added to or
deducted from the Basic Fee.
(vi) In the event of termination of this Agreement, the
Carryover Fee or Basic Fee then in effect shall be computed on the basis of the
period ending on the last business day on which this Agreement is in effect
subject to a pro rata adjustment based on the number of days elapsed in the
current month as a percentage of the total number of days in such month. The
amount of any Performance Adjustment to the Basic Fee will be computed on the
basis of and applied to net assets averaged over the 36 month period ending on
the last business day on which this Agreement is in effect, provided that if
this Agreement has been in effect less than 36 months, the computation will be
made on the basis of the period of time during which it has been in effect.
(b) If the operating expenses of the Trust in any year exceed the
limits set by state securities laws or regulations in states in which shares of
the Trust are sold, the amount payable to the Manager under subsection (a) above
will be reduced (but not below $0), and the Manager shall make other
arrangements concerning expenses but, in each instance, only as and to the
extent required by such laws or regulations. If amounts have already been
advanced to the Manager under this Agreement, the Manager will return such
amounts to the Trust to the extent required by the preceding sentence.
(c) In addition to the foregoing, the Manager may from time to time
agree not to impose all or a portion of its fee otherwise payable hereunder (in
advance of the time such fee or a portion thereof would otherwise accrue) and/or
undertake to pay or reimburse the Trust for all or a portion of its expenses not
otherwise required to be borne or reimbursed by the Manager. Any such fee
reduction or undertaking may be discontinued or modified by the Manager at any
time.
4. It is understood that the Manager may employ one or more
sub-investment advisers (each a "Subadviser") to provide investment advisory
services to the Trust by entering into a written agreement with each such
Subadviser; provided, that any such agreement first shall be approved by the
vote of a majority of the Trustees, including a majority of the Trustees who are
not "interested persons" (as defined in the 1940 Act) of the Trust, the Manager
or any such Subadviser, at a meeting of Trustees called for the purpose of
voting on such approval and by the affirmative vote of a "majority of the
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outstanding voting securities" (as defined in the 1940 Act) of the Trust. The
authority given to the Manager in Sections 1 through 6 hereof may be delegated
by it under any such agreement; provided, that any Subadviser shall be subject
to the same restrictions and limitations on investments and brokerage discretion
as the Manager. The Trust agrees that the Manager shall not be accountable to
the Trust or the Trust's shareholders for any loss or other liability relating
to specific investments directed by any Subadviser, even though the Manager
retains the right to reverse any such investment, because, in the event a
Subadviser is retained, the Trust and the Manager will rely almost exclusively
on the expertise of such Subadviser for the selection and monitoring of specific
investments.
5. The Manager 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 security on the recommendation
of the Manager, whether or not such recommendation shall have been based upon
its own investigation and research or upon investigation and research made by
any other individual, firm or corporation, but nothing contained herein will be
construed to protect the Manager against any liability to the Trust or its
shareholders 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 this Agreement.
6. (a) Nothing in this Agreement will in any way limit or restrict the
Manager or any of its officers, Trustees, or employees from buying, selling or
trading in any securities for its or their own accounts or other accounts. The
Manager may act as an investment advisor to any other person, firm or
corporation, and may perform management and any other services for any other
person, association, corporation, firm or other entity pursuant to any contract
or otherwise, and take any action or do any thing in connection therewith or
related thereto; and no such performance of management or other services or
taking of any such action or doing of any such thing shall be in any manner
restricted or otherwise affected by any aspect of any relationship of the
Manager to or with the Trust or deemed to violate or give rise to any duty or
obligation of the Manager to the Trust except as otherwise imposed by law. The
Trust recognizes that the Manager, in effecting transactions for its various
accounts, may not always be able to take or liquidate investment positions in
the same security at the same time and at the same price.
(b) In connection with purchases or sales of securities for the
account of the Trust, neither the Manager nor any of its Trustees, officers or
employees will act as a principal or agent or receive any commission except as
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permitted by the 1940 Act. The Manager shall arrange for the placing of all
orders for the purchase and sale of securities for the Trust's account with
brokers or dealers selected by the Manager. In the selection of such brokers or
dealers and the placing of such orders, the Manager is directed at all times to
seek for the Trust the most favorable execution and net price available except
as described herein. It is also understood that it is desirable for the Trust
that the Manager have access to supplemental investment and market research and
security and economic analyses provided by brokers who may execute brokerage
transactions at a higher cost to the Trust than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price and
efficient execution. Therefore, the Manager is authorized to place orders for
the purchase and sale of securities for the Trust with such brokers, subject to
review by the Trust's Trustees from time to time with respect to the extent and
continuation of this practice. It is understood that the services provided by
such brokers may be useful to the Manager in connection with its or its
affiliates' services to other clients.
(c) On occasions when the Manager deems the purchase or sale of a
security to be in the best interest of the Trust as well as other clients, the
Manager, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased in order to obtain the best
execution and lower brokerage commissions, if any. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Manager in the manner it considers to be the
most equitable and consistent with its fiduciary obligations to the Trust and to
such clients.
7. This Agreement shall become effective on the date hereof and shall
remain in force until , 1997 and from year to year thereafter, but only so long
as its continuance is approved annually by a vote of the Trustees of the Trust
voting in person, including a majority of its Trustees who are not parties to
this Agreement or "interested persons" (as defined in the 1940 Act) of any such
parties, at a meeting of Trustees called for the purpose of voting on such
approval or by a vote of a "majority of the outstanding voting securities" (as
defined in the 1940 Act) of the Trust, subject to the right of the Trust and the
Manager to terminate this contract as provided in Section 8 hereof.
8. Either party hereto may, without penalty, terminate this Agreement
by vote of its Board of Trustees or Directors, as the case may be, or by vote of
a "majority of its outstanding voting securities" (as defined in the 1940 Act)
and the giving of 60 days' written notice to the other party.
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9. This Agreement shall automatically terminate in the event of its
assignment. For purposes of this Agreement, the term "assignment" shall have the
meaning given it by Section 2(a)(4) of the 1940 Act.
10. The Trust agrees that in the event that neither the Manager nor any
of its affiliates acts as an investment adviser to the Trust, the name of the
Trust will be changed to one that does not contain the name "Pioneer" or
otherwise suggest an affiliation with the Manager.
11. The Manager is an independent contractor and not an employee of the
Trust for any purpose. If any occasion should arise in which the Manager gives
any advice to its clients concerning the shares of the Trust, the Manager will
act solely as investment counsel for such clients and not in any way on behalf
of the Trust or any series thereof.
12. This Agreement states the entire agreement of the parties hereto,
and is intended to be the complete and exclusive statement of the terms hereof.
It may not be added to or changed orally, and may not be modified or rescinded
except by a writing signed by the parties hereto and in accordance with the 1940
Act, when applicable.
13. This Agreement and all performance hereunder shall be governed by
and construed in accordance with the laws of The Commonwealth of Massachusetts.
14.Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms or provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.
15.This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officers and their seal to be hereto affixed as of the
day and year first above written.
<PAGE>
ATTEST: PIONEER MID-CAP
GROWTH FUND
By:
Joseph P. Barri John F. Cogan, Jr.
Secretary Chairman and President
ATTEST: PIONEERING MANAGEMENT CORPORATION
By:
Joseph P. Barri David D. Tripple
Secretary President
EXHIBIT B
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made as of the day of
January, 1996, by and between Pioneer Three, a Massachusetts business trust (the
"Current Fund"), and Pioneer Mid-Cap Growth Fund, a business trust duly formed
under the laws of the State of Delaware (the "Successor Trust").
This Agreement is intended to be and is adopted as a plan of
reorganization within the meaning of Section 368 (a)(1) of the U.S. Internal
Revenue Code of 1986, as amended (the "Code"), and is intended to effect the
reorganization (a "reorganization") of the Current Fund, as a new separate
series of the Successor Trust. The reorganization will involve the transfer of
all of the assets of the Current Fund to the sole series of the Successor Trust
(the "Successor Fund") solely in exchange for (1) assumption by the Successor
Fund of all liabilities of the Current Fund and (2) the issuance of shares of
beneficial interest (the "Successor Shares") by the Successor Trust on behalf of
the Successor Fund to the Current Fund, followed by the pro rata distribution on
the Closing Date (as defined below) of the Successor Shares to the holders of
shares of beneficial interest of the Current Fund (the "Current Fund
Shareholders") in exchange for their shares of the Current Fund in liquidation
and termination of the Current Fund, all upon the terms and conditions
hereinafter set forth in this Agreement.
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 CURRENT FUND IN EXCHANGE FOR ASSUMPTION OF
LIABILITIES AND ISSUANCE OF SUCCESSOR SHARES OF THE SUCCESSOR TRUST;
TERMINATION OF THE CURRENT FUND
1.1 Subject to the terms and conditions set forth herein and on the
basis of the representations and warranties contained herein, the Current Fund
agrees to transfer all of the assets of the Current Fund as set forth in
paragraph 1.2 and assign and transfer all of its liabilities to the Successor
Fund of the Successor Trust which has been established solely for the purpose of
acquiring all of the assets and assuming all of the liabilities of the Current
Fund. The Successor Trust has not issued any Shares or commenced operations. The
Successor Trust on behalf of the Successor Fund agrees that in exchange for all
of the assets of the Current Fund (1) the Successor Fund shall assume all of the
liabilities of the Current Fund, whether contingent or otherwise, then existing,
and further (2) the Successor Trust shall deliver to the Current Fund the number
of full and fractional Successor Shares equal to the value of the assets of the
Current Fund transferred to the Successor Fund, minus the liabilities of the
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Current Fund assumed by the Successor Fund (the "Net Assets"), as described in
paragraph 3.1 on the Closing Date provided for in paragraph 3.1. Such
transactions shall take place at the Closing provided for in paragraph 3.1.
1.2 The assets of the Current Fund to be acquired by the Successor Fund
shall include, without limitation, all cash, cash equivalents, securities,
receivables (including interest and dividends receivable), any claims or rights
of action or rights to register shares under applicable securities laws, any
books or records of the Current Fund and other property owned by the Current
Fund and any deferred or prepaid expenses shown as assets on the books of the
Current Fund on the Closing Date provided for in paragraph 3.1.
1.3 Immediately upon delivery to the Current Fund of Successor Shares,
any duly authorized officer of the Current Fund shall cause the Current Fund, as
the then sole shareholder of the Successor Fund, to (i) elect as Trustees of the
Successor Trust the persons who currently serve as Trustees of the Current Fund;
(ii) ratify the selection of the independent accountants; (iii) approve an
investment advisory agreement for the Successor Fund in the form currently
approved by the shareholders of the Current Fund; (iv) approve a Rule 12b-1 plan
in the form currently in place with respect to the Current Fund; and (v) adopt,
on behalf of the Successor Fund, the investment objectives, investment policies
and investment restrictions of the Current Fund.
1.4 As provided in paragraph 3.4, on the Closing Date the Current Fund
will distribute in liquidation the Successor Shares pro rata in proportion to
the Current Fund's respective shares of beneficial interest in the Current Fund
("Current Fund Shares") to Current Fund Shareholders of record determined as of
the close of business on the Closing Date, in exchange for the Current Fund
Shares. Such distribution will be accomplished by the transfer of the Successor
Shares then credited to the account of the Current Fund on the share records of
the Successor Trust to open accounts on those records in the names of the
Current Fund Shareholders and representing the respective pro rata number of the
Successor Shares received from the Successor Trust on behalf of the Successor
Fund due the Current Fund Shareholders. The Successor Trust shall not issue
certificates representing Successor Shares in connection with such distribution.
Fractional Successor Shares shall be rounded to the third place after the
decimal point.
1.5 As soon as practicable after the distribution of the Successor
Shares as set forth in Section 1.4, the Current Fund shall be terminated and any
such further actions shall be taken in connection therewith as are required by
applicable law.
1.6 Ownership of the Successor Shares of each Successor Fund
Shareholder shall be maintained separately on the books of Pioneering Services
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Corporation as the Successor Trust's shareholder services and transfer agent.
1.7 Any transfer taxes payable upon issuance of Successor Shares in a
name other than the registered holder of the Current Fund Shares on the books of
the Current Fund as of that time shall be paid by the person to whom such
Successor Shares are to be distributed as a condition of such transfer.
2. VALUATION
2.1 The value of the Current Fund's Net Assets to be acquired by the
Successor Trust on behalf of the Successor Fund hereunder shall be the net asset
value computed as of the valuation time provided in the Current Fund's
prospectus on the Closing Date using the valuation procedures set forth in the
Current Fund's current prospectus or statement of additional information.
2.2 The value of full and fractional Successor Shares to be issued in
exchange for the Current Fund's Net Assets shall be equal to the value of the
Net Assets of the Current Fund on the Closing Date, and the number of such
Successor Shares shall equal the number of full and fractional Current Fund
Shares of the Current Fund on the Closing Date.
2.3 All computations of value shall be made by Brown Brothers Harriman
& Co. as custodian for the Current Fund and the Successor Trust.
3. CLOSING AND CLOSING DATE
3.1 The transfer of the Current Fund's assets in exchange for the
assumption by the Successor Fund of the Current Fund's liabilities and the
issuance of Successor Shares to the Current Fund, as described above, together
with related acts necessary to consummate such acts (the "Closing"), shall occur
at the offices of Hale and Dorr at 60 State Street, Boston, Massachusetts 02109
on January __, 1996 ("Closing Date"), or at such other place or date on or prior
to March 31, 1996 as the parties may agree in writing. All acts taking place at
the Closing shall be deemed to take place simultaneously as of the last daily
determination of the net asset value of any Current Fund or at such other time
and/or place as the parties may agree.
3.2 In the event that on the Closing Date (a) the New York Stock
Exchange is closed to trading or trading thereon is restricted or (b) trading or
reporting of trading on said Exchange or in any market in which portfolio
securities of any Current Fund are traded is disrupted so that accurate
appraisal of the value of the total net assets of the Current Fund is
impracticable, the Closing shall be postponed until the first business day upon
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which trading shall have been fully resumed and reporting shall have been
restored.
3.3 The Current Fund shall deliver at the Closing a certificate or
separate certificates of an authorized officer stating that it has notified the
Custodian, as custodian for the Current Fund, of the Current Fund's
reorganization as the Successor Fund.
3.4 Pioneering Services Corporation, as shareholder services and
transfer agent for the Current Fund, shall deliver at the Closing a certificate
as to the conversion on its books and records of the Current Fund Shareholder
account to an account as a holder of Successor Shares. The Successor Trust shall
issue and deliver to the Current Fund a confirmation evidencing the Successor
Shares to be credited on the Closing Date or provide evidence satisfactory to
the Current Fund that such Successor Shares have been credited to the Current
Fund's account on the books of the Successor Trust. At the Closing each party
shall deliver to the other such bills of sale, checks, assignments, stock
certificates, receipts or other documents as such other party or its counsel may
reasonably request.
3.5 Portfolio securities that are not held in book-entry form in the
name of the Custodian as record holder for the Current Fund shall be presented
by the Current Fund to the Custodian for examination no later than five business
days preceding the Closing Date. Portfolio securities which are not held in
book-entry form shall be delivered by the Current Fund to the Custodian for the
account of the Successor Fund on the Closing Date, duly endorsed in proper form
for transfer, in such condition as to constitute good delivery thereof in
accordance with the custom of brokers, and shall be accompanied by all necessary
federal and state stock transfer stamps or a check for the appropriate purchase
price thereof. Portfolio securities held of record by the Custodian in
book-entry form on behalf of the Current Fund shall be delivered to the
Successor Fund by the Custodian by recording the transfer of beneficial
ownership thereof on its records. The cash delivered shall be in the form of
currency or by the Custodian crediting the Successor Fund' account maintained
with the Custodian with immediately available funds.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Current Fund represents and warrants as follows:
4.1.A. The Current Fund is a business trust duly organized, validly
existing and in good standing under the laws of The Commonwealth of
Massachusetts and has the power to own all of its properties and assets and,
subject to approval by the shareholders of the Current Fund, to perform its
obligations under this Agreement. The Current Fund is not required to qualify to
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do business in any jurisdiction in which it is not so qualified or where failure
to qualify would not subject it to any material liability or disability. The
Current 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;
4.1.B. The Current Fund 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") as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
is in full force and effect;
4.1.C. The Current Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of any provision of
its Declaration of Trust or By-laws, or any agreement, indenture, instrument,
contract, lease or other undertaking to which the Current Fund is a party or by
which the Current Fund is bound;
4.1.D. The Current Fund has no material contracts or other
commitments (other than this Agreement or agreements on behalf of a Current Fund
for the purchase of securities entered into in the ordinary course of business
and consistent with its obligations under this Agreement) that will not be
terminated without liability to the Current Fund on or prior to the Closing
Date;
4.1.E. No material litigation or administrative proceeding or
investigation of or before any court or governmental body presently is pending
or threatened against the Current Fund or any of its properties or assets. The
Current Fund knows of no facts that might form the basis for the institution of
such proceedings and the Current Fund is not a party to, or subject to, the
provisions of any order, decree or judgment of any court or governmental body
that materially and adversely affects its business or its ability to consummate
the transactions herein contemplated;
4.1.F. At the date hereof and at the Closing Date, all federal,
state and other tax returns and reports, including information returns and payee
statements, of the Current Fund required by law to have been filed or furnished
by such dates shall have been filed or furnished and all federal, state and
other taxes, interest and penalties shall have been paid so far as due or
provision shall have been made for the payment thereof and no such return is
currently under audit and no assessment has been asserted with respect to any of
such returns or reports;
4.1.G. The Current Fund has elected to be treated as a regulated
investment company under Subchapter M of the Code, has qualified as such for
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each taxable year since its inception, and will qualify as such as of the
Closing Date;
4.1.H. The authorized capital of the Current Fund consists of an
unlimited number of shares of beneficial interest. All issued and outstanding
shares of beneficial interest of the Current Fund are, and at the Closing Date
will be, duly and validly issued and outstanding, fully paid and nonassessable.
The Current Fund does not have outstanding any options, warrants or other rights
to subscribe for or purchase any of its shares of beneficial interest, nor is
there outstanding any security convertible into any of its shares of beneficial
interest;
4.1.I. The information to be furnished by the Current Fund for use
in applications for orders, registration statements, proxy materials and other
documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete and shall comply in all
material respects with federal securities and other laws and regulations
thereunder applicable thereto;
4.1.J. All of the issued and outstanding Current Fund Shares will
at the time of the Closing be held by the persons and in the amounts as
certified in accordance with the provisions of paragraph 3.4;
4.1.K. At the Closing Date, the Current Fund will have good and
marketable title to the assets to be transferred to the Successor 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 in payment for such
assets, the Successor Fund will acquire good and marketable title thereto
subject to no restrictions on the full transfer thereof, including such
restrictions as might arise under the Securities Act of 1933, as amended;
4.1.L. The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Date by all necessary action
on the part of the Current Fund and this Agreement constitutes a valid and
binding obligation of the Current Fund enforceable in accordance with its terms,
subject to the approval of the Current Fund's Shareholders; and
4.1.M. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Current Fund of
the transactions contemplated herein, except such as shall have been obtained
prior to the Closing Date.
4.2 The Successor Trust represents and warrants as follows:
4.2.A. The Successor Trust is a business trust duly organized,
validly existing and in good standing under the laws of the State of Delaware
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and has the power to own all of its properties and assets and to perform its
obligations under this Agreement; the Successor Trust is not required to qualify
to do business in any jurisdiction in which it is not so qualified or where
failure to qualify would not subject it to any material liability or disability;
the Successor Trust 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; that as of the date hereof and as of the Closing Date, the Successor
Fund is the only series of the Successor Trust; and the Successor Fund is a duly
established and designated series of the Successor Trust;
4.2.B. The Successor Trust is not, and the execution, delivery and
performance of this Agreement will not result, in violation of any provision of
the Declaration of Trust or By-laws of the Successor Trust or any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Successor Trust is a party or by which the Successor Trust is bound;
4.2.C. No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or threatened against the Successor Trust or any of its properties or assets.
The Successor Trust knows of no facts that might form the basis for the
institution of such proceedings, and the Successor Trust is not a party to, or
subject to, the provisions of any order, decree or judgment of any court or
governmental body that materially and adversely affects its business or its
ability to consummate the transactions herein contemplated;
4.2.D. The Successor Trust will cause the Successor Fund to qualify
as a regulated investment company under subchapter M of the Code for the taxable
year in which the Closing occurs and to continue to qualify as such for each
taxable year;
4.2.E. Prior to the Closing Date, there shall be no issued and
outstanding Successor Shares or any other securities of the Successor Trust;
Successor Shares issued in connection with the transactions contemplated herein
will be duly and validly issued and outstanding and fully paid and non-
assessable;
4.2.F. The execution, delivery and performance of this Agreement
has been duly authorized by all necessary action on the part of the Successor
Trust, and this Agreement constitutes a valid and binding obligation of the
Successor Trust enforceable against the Successor Trust in accordance with its
terms;
4.2.G. The information to be furnished by the Successor Trust for
use in applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete and shall comply in all
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material respects with Federal securities and other laws and regulations
applicable thereto; and
4.2.H. No consent, approval, authorization or order of any
court or governmental authority is required for the consummation by the
Successor Trust of the transactions contemplated herein, except such as shall
have been obtained prior to the Closing Date.
5. COVENANTS OF THE CURRENT FUND AND THE SUCCESSOR TRUST
5.1 The Current Fund covenants that the Successor Shares are not being
acquired for the purpose of making any distribution thereof, other than in
accordance with the terms of this Agreement.
5.2 The Current Fund covenants that it will assist the Successor Trust
in obtaining such information as the Successor Trust reasonably requests
concerning the beneficial ownership of Current Fund Shares.
5.3 The Current Fund will, from time to time, as and when requested by
the Successor Trust execute and deliver, or cause to be executed and delivered,
all such assignments and other instruments, and will take or cause to be taken
such further action, as the Successor Trust may deem necessary or desirable in
order to vest in, and confirm to, the Successor Fund, title to, and possession
of, all the assets of the Current Fund to be sold, assigned, transferred and
delivered hereunder and otherwise to carry out the intent and purpose of this
Agreement.
5.4 The Successor Trust will, from time to time, as and when requested
by the Current Fund, execute and deliver or cause to be executed and delivered
all such assignments and other instruments, and will take or cause to be taken
such further action, as the Current Fund may deem necessary or desirable in
order to vest in, and confirm to, the Current Fund, on behalf of the Current
Funds, title to, and possession of, the Successor Shares issued, sold, assigned,
transferred and delivered hereunder and otherwise to carry out the intent and
purpose of this Agreement.
5.5 The Successor Trust shall use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such
state securities laws as it may deem appropriate in order to operate after the
Closing Date.
5.6 Subject to the provisions of this Agreement, the Successor Trust
and the Current Fund each will take, or cause to be taken, all action and will
do or cause to be done all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
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5.7 As promptly as practicable, but in any event within 60 days after
the Closing Date, the Current Fund shall furnish to the Successor Trust, in such
form as is reasonably satisfactory to the Successor Trust, a statement of the
earnings and profits of the Current Fund for federal income tax purposes, and of
any capital loss carryovers and other items that will be carried over to the
Successor Fund as a result of Section 381 of the Code, and which statement will
be certified by the President or Treasurer of the Current Fund.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE CURRENT FUND
The obligations of the Current Fund to consummate the transactions
provided for herein shall be subject to the performance by the Successor Trust
of all the obligations to be performed by the Successor Trust hereunder on or
before the Closing Date and, in addition thereto, to the following further
conditions:
6.1 All representations and warranties of the Successor Trust contained
in this Agreement shall be true and correct in all material respects as of the
date hereof 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
6.2 The Successor Trust shall have delivered on the Closing Date to the
Current Fund a certificate executed in the Successor Trust's name by its
President or Vice President, in form and substance satisfactory to the Current
Fund, dated as of the Closing Date, to the effect that the representations and
warranties of the Successor Trust made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as the Current Fund
shall reasonably request.
Each of the foregoing conditions precedent may be waived by the Current Fund.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SUCCESSOR TRUST
The obligations of the Successor Trust to consummate the transactions
provided for herein shall be subject to the performance by the Current Fund of
all the obligations to be performed by the Current Fund hereunder on or before
the Closing Date and, in addition thereto, to the following further conditions:
7.1 All representations and warranties of the Current Fund contained in
this Agreement 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
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made on and as of the Closing Date;
7.2 The Current Fund shall have delivered to the Successor Trust on the
Closing Date a statement of the Current Fund's assets and liabilities, prepared
in accordance with generally accepted accounting principles consistently
applied, together with a certificate of the Treasurer or Assistant Treasurer of
the Current Fund as to its portfolio securities and the Current Fund's federal
income tax basis and holding period for each such portfolio security as of the
Closing Date; and
7.3 The Current Fund shall have delivered to the Successor Trust on the
Closing Date a certificate executed in the Current Fund's name by its President
or Vice President, in form and substance satisfactory to the Successor Trust,
dated as of the Closing Date, to the effect that the representations and
warranties of the Current Fund made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as the Successor
Trust shall reasonably request.
Each of the foregoing conditions precedent may be waived by the
Successor Trust.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE CURRENT FUND AND THE
SUCCESSOR TRUST
The obligations of the Current Fund and the Successor Trust are each
subject to the further conditions that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the Current Fund's Shareholders in
accordance with applicable law;
8.2 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 to obtain damages or other relief in connection with,
the transactions contemplated hereby;
8.3 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 securities authorities) deemed necessary by the
Successor Trust or the Current Fund 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 the
Successor Trust or the Current Fund, provided that either party hereto may for
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itself waive any of such conditions;
8.4 The President of the Successor Trust shall have delivered a
certificate to the Current Fund on the Closing Date certifying that the
Successor Trust has taken all necessary action so that it shall be a registered
open-end investment company under the 1940 Act; and
8.5 The Current Fund and the Successor Trust shall have received on or
before the Closing Date an opinion of Hale and Dorr satisfactory to the Current
Fund and the Successor Trust, substantially to the effect that, with respect to
the Current Fund, for federal income tax purposes:
8.5.A. The acquisition of all of the assets of a Current Fund
by the Successor Fund solely in exchange for the issuance of Successor
Shares to the Current Fund and the assumption by the Successor Fund of
all of the liabilities of the Current Fund, followed by the
distribution in liquidation by the Current Fund of such Successor
Shares to the Current Fund Shareholders in exchange for their Current
Fund Shares and the termination of the Current Fund, will constitute a
reorganization within the meaning of Section 368(a)(1) of the Code, and
the Current Fund and the Successor Fund will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code;
8.5.B. No gain or loss will be recognized by the Current Fund
upon (i) the transfer of all of its assets to the Successor Fund solely
in exchange for the issuance of Successor Shares to the Current Fund
and the assumption by the Successor Fund of the Current Fund's
liabilities and (ii) the distribution by the Current Fund of the
Successor Shares to the Current Fund Shareholders;
8.5.C. No gain or loss will be recognized by any Successor
Fund upon its receipt of all of the Current Fund's assets solely in
exchange for the issuance of the Successor Shares to the Current Fund
and the assumption by the Successor Fund of all of the liabilities of
the Current Fund;
8.5.D. The tax basis of the assets acquired by a Successor
Fund from the Current Fund will be the same as the tax basis of those
assets in the Current Fund's hands immediately before the transfer;
8.5.E. The tax holding period of the assets of the Current
Fund in the hands of the Successor Fund will include the Current Fund's
tax holding period for those assets;
B-11
<PAGE>
8.5.F. The Current Fund's Shareholders will not recognize gain
or loss upon the exchange of all of their Current Fund Shares solely
for Successor Shares as part of the transaction;
8.5.G. The tax basis of the Successor Shares received by
Current Fund Shareholders in the transaction will be, for each
shareholder, the same as the tax basis of the Current Fund Shares
surrendered in exchange therefor; and
8.5.H. The tax holding period of the Successor Shares received
by Current Fund Shareholders will include, for each such Shareholder,
the tax holding period for the Current Fund Shares surrendered in
exchange therefor, provided that the Current Fund Shares were held as
capital assets on the date of the exchange.
The Current Fund and Successor Trust each agree to make and provide
representations with respect to the Current Fund and the Successor Fund which
are reasonably necessary to enable Hale and Dorr to deliver an opinion
substantially as set forth in this paragraph 8.5, which opinion may address such
other federal income tax consequences, if any, as Hale and Dorr believes to be
material to the transaction.
Each of the foregoing conditions precedent to the obligations of a
party, except for the receipt of the opinion of Hale and Dorr set forth in
paragraph 8.5, may be waived by that party.
9. BROKERAGE FEES AND EXPENSES
9.1 The Successor Trust and the Current Fund each represent and warrant
to the other that there are no broker's or finder's fees payable in connection
with the transactions contemplated hereby.
9.2 The Current Fund and the Successor Fund shall each be liable for
its own expenses incurred in connection with entering into and carrying out the
provisions of this Agreement whether or not the transactions contemplated hereby
are consummated; if the transactions are consummated, such expenses of the
Current Fund will be assumed by the Successor Fund as part of the transactions.
10. ENTIRE AGREEMENT
The Successor Trust and the Current Fund agree that neither party has
made any representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties. The
representations, warranties and covenants contained herein or in any document
delivered pursuant hereto or in connection herewith shall survive the
consummation of the transactions contemplated hereunder.
B-12
<PAGE>
11. TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Successor Trust and the Current Fund. In addition, either the Successor Trust or
the Current Fund may at its option terminate this Agreement at or prior to the
Closing Date because:
11.1.A. There exists a material breach by the other party of
any representations, warranties or agreements contained herein to be
performed at or prior to the Closing Date; or
11.1.B. 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.
11.2 In the event of any such termination, there shall be no liability
for damages on the part of the Successor Trust or the Current Fund, or their
respective trustees, directors or officers, to the other party or its trustees,
directors or officers.
12. AMENDMENT
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the parties; provided, however,
that following the approval of this Agreement by the Current Funds'
Shareholders, no such amendment may have the effect of changing the provisions
for determining the number of Successor Shares to be paid to the Current Fund
Shareholders under this Agreement to the detriment of the Current Fund
Shareholders without their further approval.
13. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
13.1 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.
13.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance
with the laws of The Commonwealth of Massachusetts.
13.4 This Agreement shall be binding upon 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 any party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation other than the parties hereto and their
B-13
<PAGE>
respective successors and assigns any rights or remedies under or by reason of
this Agreement.
13.5 All persons dealing with the Successor Trust must look solely to
the property of the Successor Trust for the enforcement of any claims against
the Successor Trust as neither the Trustees, officers, agents nor shareholders
of the Successor Trust assume any personal liability for obligations entered
into on behalf of the Successor Trust. No other series of the of the Successor
Trust hereafter established shall be responsible for any obligations assumed by
the Successor Trust on behalf of the Successor Fund under this Agreement.
13.6 A copy of the Agreement and Declaration of Trust of the Current
Fund is on file with the Secretary of State of The Commonwealth of
Massachusetts, and notice is hereby given that this instrument is executed on
behalf of the Trustees of the Current Fund as trustees and not individually and
that the obligations of this instrument are not binding upon any of the
trustees, officers, or shareholders of the Current Fund individually, but are
binding only upon the assets and property of the Current Fund.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Current Fund or the
Successor Trust, each at 60 State Street, Boston, Massachusetts 02109,
Attention: Secretary.
B-14
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer.
PIONEER THREE
By:_____________________________
Its:____________________________
Title
PIONEER MID-CAP GROWTH
FUND, a Delaware business
trust, on behalf of Pioneer
Mid-Cap Growth Fund
By:_____________________________
Its:____________________________
Title
B-15
PRELIMINARY COPY
PROXY PROXY
PIONEER THREE
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
To be held January 23, 1996
The undersigned, having received notice of the meeting and management's
proxy statement therefor, and revoking all prior proxies, hereby appoint(s) John
F. Cogan, Jr., David D. Tripple, Robert P. Nault and Joseph P. Barri, and each
of them, attorneys or attorney of the undersigned (with full power of
substitution in them and each of them) for and in the name(s) of the undersigned
to attend the Special Meeting of Shareholders of Pioneer Three (the "Fund") to
be held on Tuesday, January 23, 1996 at 2:00 p.m. (Boston time) at the offices
of Hale and Dorr, counsel to the Fund, 60 State Street, 26th Floor, Boston,
Massachusetts 02109 (the "Meeting"), and any adjourned session or sessions
thereof, and there to vote and act upon the following matters (as more fully
described in the accompanying Proxy Statement) in respect of all shares of the
Fund which the undersigned will be entitled to vote or act upon, with all the
powers the undersigned would possess if personally present:
(1) To approve amendments to the Fund's investment objectives:
FOR |_| AGAINST |_| ABSTAIN |_|
(2) To approve a new Management Contract between the Fund and Pioneering
Management Corporation, the Fund's investment adviser ("PMC"),
including a performance based management fee:
FOR |_| AGAINST |_| ABSTAIN |_|
(3) To approve an Agreement and Plan of Reorganization pursuant to which
the Fund will be reorganized as a Delaware business trust:
FOR |_| AGAINST |_| ABSTAIN |_|
-2-
<PAGE>
(4) To elect Trustees:
The nominees for Trustees are: J.F. Cogan, Jr., Dr. R.H. Egdahl,
M.B.W. Graham, J.W. Kendrick, M.A. Piret, D.D. Tripple, S.K. West and
J. Winthrop.
/ / FOR electing all the nominees
(except as marked to the contrary above)
To withhold authority to vote for one or more the nominees, circle
those nominees names above.
/ / WITHHOLD authority to vote for all nominees
(5) To approve an amendment to the Fund's fundamental investment
restriction regarding repurchase agreements:
FOR |_| AGAINST |_| ABSTAIN |_|
(6) To approve the elimination of the Fund's fundamental investment
restriction regarding short sales:
FOR |_| AGAINST |_| ABSTAIN |_|
(7) To approve an amendment to the Fund's fundamental investment
restriction regarding underwriting:
FOR |_| AGAINST |_| ABSTAIN |_|
(8) To approve the elimination of the Fund's fundamental investment
restriction regarding investment in investment companies.
FOR |_| AGAINST |_| ABSTAIN |_|
(9) To approve the elimination of the Fund's fundamental investment
restriction regarding percentage investment in the securities of
a single issuer:
FOR |_| AGAINST |_| ABSTAIN |_|
(10) To approve the elimination of the Fund's fundamental
investment restriction regarding investment in the voting
securities of a single issuer:
FOR |_| AGAINST |_| ABSTAIN |_|
(11)To approve an amendment to the Fund's fundamental investment
restriction regarding commodities:
FOR |_| AGAINST |_| ABSTAIN |_|
(12)To approve the elimination of the Fund's fundamental investment
restriction regarding restricted securities:
FOR |_| AGAINST |_| ABSTAIN |_|
-3-
<PAGE>
(13)To approve the elimination of the Fund's fundamental investment
restriction regarding "unseasoned" issuers:
FOR |_| AGAINST |_| ABSTAIN |_|
(14)To approve the elimination of the Fund's fundamental investment
restriction regarding affiliates of affiliates of the Fund:
FOR |_| AGAINST |_| ABSTAIN |_|
(15)To approve an amendment to the Fund's fundamental investment
restriction regarding loans:
FOR |_| AGAINST |_| ABSTAIN |_|
(16)To approve an amendment to the Fund's fundamental investment
restriction regarding borrowing:
FOR |_| AGAINST |_| ABSTAIN |_|
(17)To approve the addition of a new fundamental investment restriction
regarding "senior securities":
FOR |_| AGAINST |_| ABSTAIN |_|
(18)To approve the elimination of the Fund's investment restriction
regarding industry concentration:
FOR |_| AGAINST |_| ABSTAIN |_|
(19)To ratify the selection of Arthur Andersen LLP as the Fund's
independent public accountants for the fiscal year ending
September 30, 1996:
FOR |_| AGAINST |_| ABSTAIN |_|
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
-3-
<PAGE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE
PROPOSAL.
DATED: ......................, 1995
....................................
....................................
Signature(s)
In signing, please write name(s)
exactly as appearing hereon. When
signing as attorney, executor,
administrator or other fiduciary,
please give your full title as such.
Joint owners should each sign
personally.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE TRUST AND
SHOULD BE RETURNED AS SOON AS POSSIBLE IN THE ENVELOPE PROVIDED
-4-
Pioneer Three
60 State Street
Boston, MA 02109
November 1995
Dear Fellow Shareowners,
I am writing to let you know that a special meeting will be held January 23,
1996, for shareowners of Pioneer Three to vote on a number of important
proposals. As a shareowner in the Fund, you have the opportunity to voice your
opinion on these matters.
This package contains information about the proposals, along with the proxy card
for you to use when voting by mail. Please take a moment to read the enclosed
materials and cast your vote on the yellow proxy card.
Your prompt vote will help save the Fund money. If a majority of the Fund's
shareowners have not voted prior to the meeting, we must try to obtain their
votes with additional mailings or phone solicitation. That is a costly process.
(callout in margin) VOTING YOUR SHARES BY MAIL IS QUICK AND EASY. EVERYTHING YOU
NEED IS ENCLOSED.
Each of the proposals up for approval has been reviewed by Pioneer ThreeOs Board
of Trustees, whose primary role is to protect your interests as a shareowner. In
the Trustees' opinion, the proposals are fair and reasonable. The Trustees
recommend that you vote FOR each proposal.
(callout in margin) THE FUND'S BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR
EACH PROPOSAL.
HERE IS WHAT A FOR VOTE MEANS FOR EACH OF THE PROPOSALS BEING CONSIDERED.
PROPOSAL 1:
AUTHORIZE AMENDMENTS TO THE FUND'S INVESTMENT OBJECTIVES. As proposed, the Fund
would shift from dual objectives of reasonable income and growth of capital to a
single objective of capital growth. Although the Fund will still be able to
invest in income-producing securities, it will not be required to do so.
PROPOSAL 2:
APPROVE A NEW MANAGEMENT CONTRACT WITH PIONEERING MANAGEMENT CORPORATION (PMC),
including a performance-based management fee. Depending upon the Fund's
investment performance, relative to a selected securities index, the fee paid by
the Fund may be lower or higher than the proposed base fee of 0.625% of daily
net assets.
PROPOSAL 3:
ALLOW THE FUND TO BE REORGANIZED AS A DELAWARE BUSINESS TRUST. Currently, the
Fund is registered as a Massachusetts business trust. As a Delaware business
trust, the Fund would be able to offer multiple classes of shares.
PROPOSAL 4:
ELECT EIGHT TRUSTEES TO THE BOARD. The Trustees supervise the Fund's activities
and review contractual arrangements with companies that provide services to the
Fund. All of the nominees currently serve as Trustees.
<PAGE>
PROPOSALS 5 THROUGH 17:
MODERNIZE THE FUND'S OPERATING STRUCTURE AND INVESTMENT POLICIES to conform with
current standards in the mutual fund industry. The Fund's Trustees believe the
proposed changes are appropriate and necessary to update the Fund since its last
shareowner meeting, held in 1990. For detail on each of these Proposals, we
encourage you to read the enclosed Proxy Statement.
PROPOSAL 18:
RATIFY THE SELECTION OF ARTHUR ANDERSEN LLP AS THE FUND'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1996.
Cast your vote by completing and signing the yellow proxy card enclosed in this
package. Please mail your completed and signed proxy as quickly as possible,
using the postage-paid envelope provided.
(callout in margin) PLEASE VOTE! YOUR VOTE IS EXTREMELY IMPORTANT, NO MATTER HOW
MANY SHARES YOU OWN.
One final note. It is expected that the Fund's name will change to Pioneer
Mid-Cap Fund after the shareowner meeting date.
Please feel free to call Pioneer at 1-800-225-6292 if you have any questions
about the proposals or the process for voting your shares. Thank you for your
prompt response.
Sincerely,
John F. Cogan, Jr.
Chairman
1195-2928
<PAGE>
Pioneer Three
60 State Street
Boston, MA 02109
URGENT
PLEASE VOTE YOUR SHARES TODAY
Dear Fellow Shareowner,
Not too long ago we sent you a proxy card and materials explaining the proposals
up for a vote at Pioneer ThreeOs January 23, 1996, shareowner meeting. WE NEED
YOU TO CAST YOUR VOTE!
If you have not already completed and returned the proxy card included in our
earlier package, PLEASE TAKE A MOMENT NOW TO COMPLETE THE ENCLOSED YELLOW PROXY
CARD AND MAIL IT TO US IN THE POSTAGE-PAID ENVELOPE PROVIDED.
The proposals up for approval have been reviewed by Pioneer ThreeOs Board of
Trustees, whose primary role is to protect your interests as a shareowner. In
the Trustees' opinion, the proposals are fair and reasonable. The Trustees
recommend that you vote FOR each proposal. For your easy reference, on the back
of this page is a summary of what a FOR vote would mean for each proposal.
PLEASE VOTE! YOUR VOTE IS EXTREMELY IMPORTANT, NO MATTER HOW MANY SHARES YOU
OWN.
Please feel free to call us at 1-800-225-6292 if you have any questions about
the proposals or the process for voting your shares. Thank you for your prompt
response.
Sincerely,
John F. Cogan, Jr.
Chairman
<PAGE>
back page
Here is what a FOR vote means for each of the proposals being considered.
PROPOSAL 1:
AUTHORIZE AMENDMENTS TO THE FUND'S INVESTMENT OBJECTIVES. As proposed, the Fund
would shift from dual objectives of reasonable income and growth of capital to a
single objective of capital growth. Although the Fund will still be able to
invest in income-producing securities, it will not be required to do so.
PROPOSAL 2:
APPROVE A NEW MANAGEMENT CONTRACT WITH PIONEERING MANAGEMENT CORPORATION (PMC),
including a performance-based management fee. Depending upon the Funds
investment performance, relative to a selected securities index, the fee paid by
the Fund may be lower or higher than the proposed base fee of 0.625% of daily
net assets.
PROPOSAL 3:
ALLOW THE FUND TO BE REORGANIZED AS A DELAWARE BUSINESS TRUST. Currently, the
Fund is registered as a Massachusetts business trust. As a Delaware business
trust, the Fund would be able to offer multiple classes of shares.
PROPOSAL 4:
ELECT EIGHT TRUSTEES TO THE BOARD. The Trustees supervise the Fund's activities
and review contractual arrangements with companies that provide services to the
Fund. All of the nominees currently serve as Trustees.
PROPOSALS 5 THROUGH 17:
MODERNIZE THE FUND'S OPERATING STRUCTURE AND INVESTMENT POLICIES to conform with
current standards in the mutual fund industry. The Fund's Trustees believe the
proposed changes are appropriate and necessary to update the Fund since its last
shareowner meeting, held in 1990. For detail on each of these Proposals, we
encourage you to read the enclosed Proxy Statement.
PROPOSAL 18:
RATIFY THE SELECTION OF ARTHUR ANDERSEN LLP AS THE FUND'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1996.
PLEASE VOTE! YOUR VOTE IS EXTREMELY IMPORTANT, NO MATTER HOW MANY SHARES YOU
OWN.
1195-2929
<PAGE>
Pioneer Three
60 State Street
Boston, MA 02109
URGENT
PLEASE VOTE YOUR SHARES TODAY
Dear Fellow Shareowner,
TIME IS RUNNING OUT. You have not yet returned the proxy cards we sent for you
to use in voting on the proposals up for consideration at Pioneer ThreeOs
January 23, 1996, shareowner meeting. WE NEED YOU TO CAST YOUR VOTE TODAY!
Voting now will help save your Fund money. If a majority of the Fund's
shareowners have not voted before January 23, we must delay the meeting and
begin the proposal and voting process all over again. This would be extremely
costly to the Fund and, ultimately, to you as a shareowner.
If you have not already completed and returned the proxy cards included in our
earlier packages, PLEASE TAKE A MOMENT NOW TO COMPLETE THE ENCLOSED YELLOW PROXY
CARD AND MAIL IT TO US TODAY IN THE POSTAGE-PAID ENVELOPE PROVIDED.
The proposals up for approval have been reviewed by Pioneer ThreeOs Board of
Trustees, whose primary role is to protect your interests as a shareowner. In
the Trustees' opinion, the proposals are fair and reasonable. The Trustees
recommend that you vote FOR each proposal. For your easy reference, on the back
of this page is a summary of what a FOR vote would mean for each proposal.
VOTE TODAY! YOUR VOTE IS EXTREMELY IMPORTANT, NO MATTER HOW MANY SHARES YOU OWN.
Please feel free to call us at 1-800-225-6292 if you have any questions about
the proposals or the process for voting your shares. Thank you for your
immediate response.
Sincerely,
John F. Cogan, Jr.
Chairman
<PAGE>
back page
Here is what a FOR vote means for each of the proposals being considered.
PROPOSAL 1:
AUTHORIZE AMENDMENTS TO THE FUND'S INVESTMENT OBJECTIVES. As proposed, the Fund
would shift from dual objectives of reasonable income and growth of capital to a
single objective of capital growth. Although the Fund will still be able to
invest in income-producing securities, it will not be required to do so.
PROPOSAL 2:
APPROVE A NEW MANAGEMENT CONTRACT WITH PIONEERING MANAGEMENT CORPORATION (PMC),
including a performance-based management fee. Depending upon the Fund's
investment performance, relative to a selected securities index, the fee paid by
the Fund may be lower or higher than the proposed base fee of 0.625% of daily
net assets.
PROPOSAL 3:
ALLOW THE FUND TO BE REORGANIZED AS A DELAWARE BUSINESS TRUST. Currently, the
Fund is registered as a Massachusetts business trust. As a Delaware business
trust, the Fund would be able to offer multiple classes of shares.
PROPOSAL 4:
ELECT EIGHT TRUSTEES TO THE BOARD. The Trustees supervise the Fund's activities
and review contractual arrangements with companies that provide services to the
Fund. All of the nominees currently serve as Trustees.
PROPOSALS 5 THROUGH 17:
MODERNIZE THE FUND'S OPERATING STRUCTURE AND INVESTMENT POLICIES to conform with
current standards in the mutual fund industry. The Fund's Trustees believe the
proposed changes are appropriate and necessary to update the Fund since its last
shareowner meeting, held in 1990. For detail on each of these Proposals, we
encourage you to read the enclosed Proxy Statement.
PROPOSAL 18:
RATIFY THE SELECTION OF ARTHUR ANDERSEN LLP AS THE FUND'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1996.
PLEASE VOTE TODAY! YOUR VOTE IS EXTREMELY IMPORTANT, NO MATTER HOW MANY SHARES
YOU OWN.
1195-2930
