PIONEER II
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
1-800-324-7974
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, APRIL 30, 1996
A Special Meeting of Shareholders of Pioneer II, 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 1:00 p.m., Boston time, on
Tuesday, April 30, 1996 to consider and act upon the following Proposals:
1. 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;
2. To approve a new Management Contract between the Fund and Pioneering
Management Corporation, the Fund's investment adviser ("PMC"),
increasing the rate at which management fees are payable to PMC;
3. To approve an Agreement and Plan of Reorganization pursuant to which the
Fund will be reorganized as a Delaware business trust;
4. To ratify the selection of Arthur Andersen LLP as the Fund's independent
public accountants for the fiscal year ending September 30, 1996;
5. To approve changes in the Fund's fundamental investment policies, as
described in the proxy statement; and
6. 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 March 4, 1996 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 March 22, 1996.
By Order of the Board of Trustees,
Joseph P. Barri, Secretary
March 22, 1996
Boston, Massachusetts
-------------------
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.
0396-2988-1
PIONEER II
<PAGE>
PIONEER II
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
1-800-324-7974
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
APRIL 30, 1996
This Proxy Statement is furnished to shareholders of Pioneer II, 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 1:00 p.m., Boston time, on
Tuesday, April 30, 1996, and at any adjournments thereof (the "Meeting"). This
Proxy Statement and enclosed proxy are being mailed to shareholders on or about
March 22, 1996. 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
1-800-324-7974, WHICH NUMBER IS AVAILABLE FROM MARCH 11, 1996 THROUGH APRIL 30,
1996.
Shareholders of record as of the close of business on March 4, 1996 (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
265,287,035.033 shares of beneficial interest of the Fund. To the knowledge of
the management of the Fund, no person beneficially owned more than 5% of the
outstanding shares of the Fund as of the Record Date.
1
<PAGE>
PROPOSAL 1
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,
Pioneering Management Corporation ("PMC") or Pioneer Funds Distributor, Inc.
("PFD") within the meaning of the Investment Company Act of 1940, as amended
(the "1940 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 Fund
(as defined in Proposal 3). 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,
directorships and trusteeships, and indicates the date on which he or she first
became a Trustee 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 January 31, 1996.
<TABLE>
<CAPTION>
SHARES OF BENEFICIAL
INTEREST OF THE FUND
BENEFICIALLY OWNED
NAME, AGE, PRINCIPAL OCCUPATION AND PERCENTAGE OF
POSITIONS(S) WITH OF EMPLOYMENT FIRST TOTAL
THE FUND AND DIRECTORSHIPS/ BECAME A SHARES OUTSTANDING
AND ADDRESS TRUSTEESHIPS(1) TRUSTEE ON JANUARY 31, 1996(2)
- ------------------------ ---------------------------------- -------- ----------------------
<S> <C> <C> <C>
JOHN F. COGAN, JR.* President, Chief Executive Officer 1982 57,190.441
(69) and a Director of The Pioneer 0.02%
Chairman of the Board, Group, Inc. ("PGI"); Chairman and
President and Trustee a Director of PMC, PFD, Pioneer
60 State Street Goldfields Limited ("PGL") and
Boston, MA 02109 Teberebie Goldfields Limited;
Director of Pioneer 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 of the
Supervisory Board of Pioneer Funds
Marketing GmbH ("Pioneer GmbH");
Member of the Supervisory Board of
Pioneer First Polish Trust Fund
Joint Stock Company ("PFPT"); and
Partner, Hale and Dorr (Counsel to
the Fund)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SHARES OF BENEFICIAL
INTEREST OF THE FUND
BENEFICIALLY OWNED
NAME, AGE, PRINCIPAL OCCUPATION AND PERCENTAGE OF
POSITIONS(S) WITH OF EMPLOYMENT FIRST TOTAL
THE FUND AND DIRECTORSHIPS/ BECAME A SHARES OUTSTANDING
AND ADDRESS TRUSTEESHIPS(1) TRUSTEE ON JANUARY 31, 1996(2)
- ------------------------ ---------------------------------- -------- ----------------------
<S> <C> <C> <C>
RICHARD H. EGDAHL, M.D. Professor of Management, Boston 1992 0
(68) University School of Management;
Trustee Professor of Public Health, Boston
Boston University University School of Public
Health Policy Health; Professor of Surgery,
Institute Boston University School of
53 Bay State Road Medicine: Director, Boston
Boston, MA 02115 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
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 Founding Director, Winthrop Group, 1990 0
(48) Inc., a consulting firm, since 1982;
Trustee Manager of Research Operations
The Keep Xerox Palo Alto Research Center,
P.O. Box 110, between 1991 and 1994; and
Little Deer Isle, Professor of Operations Management
ME 04650 and Management of Technology,
Boston University School of
Management, between 1989 and 1993
JOHN W. KENDRICK, Professor Emeritus of Economics, 1982 326.162
(78) George Washington University; and 0.00%
Trustee Economic Consultant and Director,
6363 Waterway Dr., American Productivity and Quality
Falls Church, Center
VA 22044
MARGUERITE A. PIRET President, Newbury, Piret & 1982 0
(47) Company, Inc., a merchant banking
Trustee firm
One Boston Place
Suite 2635
Boston, MA 02108
DAVID D. TRIPPLE,* Director and Executive Vice 1986 8,313.006
(52) President of PGI; President, Chief 0.00%
Executive Vice President Investment Officer and a Director
and Trustee of PMC; Director of PFD, PCC,
60 State Street Pioneer SBIC Corp., P. Intl. and
Boston, MA 02109 PIC; and Member of the Supervisory
Board of PFPT
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SHARES OF BENEFICIAL
INTEREST OF THE FUND
BENEFICIALLY OWNED
NAME, AGE, PRINCIPAL OCCUPATION AND PERCENTAGE OF
POSITIONS(S) WITH OF EMPLOYMENT FIRST TOTAL
THE FUND AND DIRECTORSHIPS/ BECAME A SHARES OUTSTANDING
AND ADDRESS TRUSTEESHIPS(1) TRUSTEE ON JANUARY 31, 1996(2)
- ------------------------ ---------------------------------- -------- ----------------------
<S> <C> <C> <C>
STEPHEN K. WEST Partner, Sullivan & Cromwell, a 1993 0
(67) law firm
Trustee
125 Broad Street
New York, NY 10004
JOHN WINTHROP President, John Winthrop & Co., a 1985 1,353.589
(59) private investment firm; Director 0.00%
Trustee of NUI Corp.; and Trustee of
One North Adgers Wharf Alliance Capital Reserve, Alliance
Charleston, SC 29401 Government Reserve and Alliance
Tax Exempt Reserve
</TABLE>
- ---------------
* Messrs. Cogan and Tripple are "interested persons" of the Fund, PMC and PFD
within the meaning of the 1940 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 (except for Messrs.
Kendrick and Winthrop and Ms. Graham who do not serve as trustees for
Pioneer Variable Contracts Trust) and as a Director 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 January 31, 1996, 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 trustees. The Nominating Committee will also
consider nominees recommended by shareholders to serve as Trustees provided that
shareholders submitting such recommendations comply with all relevant provisions
of Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
During the fiscal year ended September 30, 1995, the Board of Trustees held
twelve meetings, the Audit Committee held six 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.
4
<PAGE>
The business address of all officers of the Fund is 60 State Street, Boston,
Massachusetts 02109.
<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH THE FUND PRINCIPAL OCCUPATION(S)
- ------------------------------------- ------------------------------------------
<S> <C>
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 of each
fund in the Pioneer family of mutual
funds; Clerk of PFD and PSC and Partner,
Hale and Dorr (counsel to the Fund).
</TABLE>
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 as indicated below. 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.
<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. $ 500 $0 $ 11,000
Richard H. Egdahl, M.D. 7,197 0 63,315
Margaret B.W. Graham 7,197 0 62,398
John W. Kendrick 7,197 0 62,398
Marguerite A. Piret 8,942 0 76,704
David D. Tripple 500 0 11,000
Stephen K. West 11,080 0 68,180
John Winthrop 11,697 0 71,199
Totals $ 68,097 $0 $ 426,194
======= == ========
</TABLE>
- ---------------
* For the fiscal year ended September 30, 1995.
** For the calendar year ended December 31, 1995.
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.
5
<PAGE>
PROPOSAL 2
APPROVAL OF NEW MANAGEMENT CONTRACT
SUMMARY
PMC serves as the investment adviser for the Pioneer family of mutual funds
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 a meeting held on February 15, 1996, the Trustees who were present,
including a majority 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 SECURITIES INDEX, THIS BASIC FEE WILL BE INCREASED OR
DECREASED. IN ALL CASES, THE FEE ULTIMATELY PAID BY THE FUND WILL BE HIGHER 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
6
<PAGE>
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 July 10, 1990 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 is renewable annually by the vote of PMC's Board and by
vote of a majority of the Fund's 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 0.60% of the Fund's average daily net assets
(the "Basic Fee"). An appropriate percentage of the Basic Fee rate (based upon
the number of days in the current month) would be multiplied by the Fund's
average daily net assets for the current month, giving a dollar amount which is
the monthly Basic 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, both apart from and together with the
application of the performance fee adjustment described below. That adjustment
provides for increases or decreases in the Basic Fee, 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
7
<PAGE>
PMC based on the performance of the Fund as compared to the investment record
(the "record") of a securities index determined by the Fund to be appropriate
over the same period. The Trustees have initially designated the Lipper Growth &
Income Funds Index (the "Index") for this purpose. This Index represents the
arithmetic mean performance (i.e., equally weighted) of the thirty largest funds
with investment objectives oriented towards growth and income.
From time to time, the Trustees may determine that another securities index
is a more appropriate benchmark than the Index for purposes of evaluating the
performance of the Fund. In such event, a successor index may be substituted for
the Index in prospectively calculating the performance based adjustment to the
Basic Fee. However, the calculation of the performance adjustment for any
portion of the performance period prior to the adoption of the successor index
would still be based upon the Fund's performance compared to the Index.
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 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 because the Index is composed of funds
with similar investment objectives and policies to those of the Fund. The Board
feels that a performance adjustment is appropriate for the Fund 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 a
maximum difference of 10 percentage points) would be multiplied by a performance
adjustment rate of .01%. The maximum adjustment rate is therefore .10%. An
appropriate percentage of this rate (based upon the number of days in the
current month) would then be multiplied by 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. The monthly performance adjustment
will be further adjusted to the extent necessary in order to insure that the
total annual adjustment to the Basic Fee does not exceed 0.10% of average daily
net assets for that year.
8
<PAGE>
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.
<TABLE>
<CAPTION>
INVESTMENT PERFORMANCE* CUMULATIVE CHANGE
----------------------- -----------------
<S> <C> <C>
Fund Index
First Day................................ $10 100
End of Period............................ $13 123
Absolute Change.......................... +$3 +23
Percentage Change........................ +30% +23%
</TABLE>
- ---------------
* 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.
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: an appropriate
percentage of the Basic Fee rate (based upon the number of days in the month) of
0.60% would be multiplied by 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 0.01% producing a rate of .07%. An
appropriate percentage of this rate (based upon the number of days in the month)
is then multiplied by 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 Basic Fee adjusted by
the dollar amount of the performance adjustment 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.
The effective date of the Proposed Contract is expected to be May 1, 1996.
The Basic Fee, therefore, will take effect on May 1, 1996. Accordingly,
beginning in May, 1996, the Fund will pay management fees at a rate equal to the
Basic Fee plus or minus the amount of the performance adjustment based upon the
current month and the preceding thirty-five months. In this regard, the
performance adjustment for the thirty-five month period prior to the
effectiveness of the Proposed Contract would likely -- on the basis of
performance since April 1993 -- result in a negative adjustment to the Basic
Fee. In the unlikely event that the inclusion in the initial rolling performance
period of aggregate results from prior to effectiveness would have the effect of
increasing the Basic
9
<PAGE>
Fee for any month, such aggregate prior results will be treated as Index neutral
for purposes of calculating the performance adjustment for such month.
EFFECT OF THE NEW MANAGEMENT FEE STRUCTURE
Under the Existing Contract, the Fund pays management fees at an effective
annual rate of 0.45% based on net assets of approximately $5,114,963,000 at
September 30, 1995. Under the Proposed Contract the Fund would pay a maximum
annual fee of 0.70% and a minimum annual fee of 0.50% 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
amount of fees that would have been paid under the Proposed Contract at the
maximum, Basic 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, Basic
and minimum fees under the Proposed Contract had been in effect. The figures
shown for the Basic Fee represent the amounts that actually would have been paid
had the Proposed Contract been in effect.
DOLLAR AMOUNT OF MANAGEMENT FEES PAID
(FISCAL YEAR ENDED SEPTEMBER 30, 1995)
<TABLE>
<CAPTION>
EXISTING PROPOSED CONTRACT
CONTRACT MAXIMUM BASIC MINIMUM
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Amount of Fees Paid or that
Would Have Been Paid........ $23,017,333 $32,539,743 $27,891,209 $23,242,674
Percentage Difference from
Amount Paid under Existing
Contract.................... N/A +55% +32% +10%
</TABLE>
COMPARATIVE FEE TABLE
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
PROPOSED
EXISTING CONTRACT
FEE MAXIMUM BASIC MINIMUM
-------- ------- ----- -------
<S> <C> <C> <C> <C>
Management Fee.............................. 0.45% 0.70% 0.60 % 0.50%
12b-1 Fees.................................. 0.19 0.19 0.19 0.19
Other Expenses.............................. 0.29 0.29 0.29 0.29
Total Fund Operating Expenses............... 0.93 1.18 1.08 0.98
</TABLE>
10
<PAGE>
EXAMPLE
The following illustrates the expenses on a $1,000 investment under the
existing and proposed maximum, Basic and minimum fees stated above, assuming a
5% annual return and constant expenses, with or without redemption at the end of
each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Existing Fee.................................... $ 9 $28 $49 $108
Proposed Fee
Maximum....................................... $ 11 $35 $61 $135
Basic......................................... $ 10 $32 $56 $125
Minimum....................................... $ 9 $29 $51 $113
</TABLE>
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 effectiveness of the
Existing Contract, 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 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
11
<PAGE>
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 $55,000.
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
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.
12
<PAGE>
MISCELLANEOUS
If approved, the Proposed Contract will become effective on May 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 apart from the
management fee provisions, which is also used by certain other mutual funds in
the Pioneer family of mutual funds, had not been materially revised in several
years, that similar proposals had been or would be made to shareholders of all
such other mutual funds in the Pioneer family of mutual funds at their next
shareholder meeting, that the material changes in the Proposed Contract not
relating to the proposed fee increase 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 management fee and a performance fee adjustment. At all times
during the Trustees' deliberations, they were advised by 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 fee
arrangements, the Trustees considered, among other things, PMC's intended use of
a significant portion of the fee increase to benefit the Fund, as well as
information relating to the overall reasonableness of both the Basic Fee and the
fee adjustment and the appropriateness of the Index as a measure of the Fund's
performance.
The Trustees considered and placed heavy emphasis on PMC's indications that
it would use a significant portion of the increased fee to enhance its
management and accounting systems and research capabilities with respect to the
Fund's portfolio, including significant additional investment in human resources
and technology, with the
13
<PAGE>
purpose of helping to make the Fund more competitive. The Trustees also
considered that the management fees paid by the Fund to PMC under the Existing
Contract are below those paid by most other funds with investment objectives of
growth and income and that the proposed fee is consistent with management fees
paid by many other such similar funds.
The Trustees who were present at the meeting on February 15, 1996,
including a majority of the Trustees who are not "interested persons" of the
Fund or PMC, unanimously determined that the Index is appropriate based upon a
number of factors, including the fact that the Index is broad-based and is
composed of funds with similar investment objectives and policies to those of
the Fund. It was anticipated that any divergence between the Fund's performance
and that of the Index could be attributed to PMC's skill in selecting securities
within the parameters established by the Fund's objectives and policies. Because
of the possible future development of an even more appropriate index for
measuring the Fund's performance, the Trustees believed it advisable to reserve
the ability to substitute a successor index for the Index; provided, in such
event, the calculation of the performance adjustment for any portion of the
performance period prior to the adoption of the successor index would still be
based upon the Fund's performance compared to the Index.
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 upon random or insignificant
differences between the Fund and the Index. In this regard, the Trustees
concluded that it would be appropriate to begin making performance adjustments,
based upon a full 36-month performance period, immediately after effectiveness
of the Proposed Contract, so long as the inclusion in the rolling performance
period of aggregate results from prior to effectiveness would not have the
effect of increasing the Basic Fee. In the event that the inclusion of such
aggregate results would have the effect of increasing the Basic Fee for any
month, then such results will be treated as Index neutral for purposes of
calculating the performance adjustment for such month.
Based upon all of the above considerations, 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 materials presented and assisted by the
advice of independent counsel, the Trustees who were present at the meeting on
February 15, 1996, including a majority of the Trustees who are not "interested
persons" of the Fund or PMC, unanimously concluded that the Proposed Contract
was fair and reasonable and in the best interests of the Fund's shareholders and
by a vote cast at the meeting, 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.
14
<PAGE>
REQUIRED VOTE
Adoption of Proposal 2 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, or (ii) 50% or more of the outstanding
shares of the Fund entitled to vote at the Meeting (a "1940 Act Majority Vote").
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 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
At a meeting held on February 2, 1996, the Trustees who were present
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 (the "Current Fund"), to a newly established
Delaware business trust which, prior to the Reorganization, will have no assets
or operations.
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 policies and restrictions described in
Proposals 5(a) through 5(i) the Fund's operations will change accordingly, to
the extent approved. If none of these changes are approved, the Successor Fund
will have investment policies and restrictions that are identical to the
investment 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 "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
15
<PAGE>
for the Successor Fund under a management contract which will have been approved
by the Board of Trustees of the Successor Fund and by the Current Fund as sole
shareholder of the Successor Fund, as further discussed below under the caption
"Summary of the Plan of Reorganization." The Successor Fund's management
contract will be identical to the Proposed Contract or the Existing Contract, in
the event the Proposed Contract is not approved by the Fund's shareholders.
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 granting the Trustees greater power to amend the
Delaware Declaration of Trust without shareholder approval, although this
advantage 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.
COMPARISON OF BUSINESS TRUSTS UNDER DELAWARE LAW AND MASSACHUSETTS LAW
Limitation of Shareholders' and Series' Liability. 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 Fund
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.
Limitation of Trustee Liability. 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 indirect
16
<PAGE>
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.
Shareholder Voting. 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.
Board Composition. 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 Trustees will be
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.
17
<PAGE>
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 present at the
meeting 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 RECOMMEND THAT SHAREHOLDERS OF THE FUND APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION PROVIDING FOR THE REORGANIZATION OF THE FUND FROM A
MASSACHUSETTS BUSINESS TRUST TO 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 Reorganization
will become effective at the close of business on or about April 30, 1996.
In order to accomplish the Reorganization, a Delaware business trust will
be formed with a single series corresponding to the Current 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 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 Board of Trustees of the
Current Fund will then cause the Current Fund as sole shareholder of the
Successor Fund to 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, the 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
18
<PAGE>
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. With respect to the foregoing matters, the Successor Fund will vote after
the Board of Trustees of the Successor Fund has approved such matters.
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
Reorganization by mutual agreement of the Trustees of the Current Fund and the
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.
19
<PAGE>
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 Reorganization
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.
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
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 Fund's
Delaware Declaration of Trust.
Series and Classes. As discussed above, the Delaware Declaration of Trust
would permit the Successor Fund to issue series of its shares which would
represent interests in separate portfolios of investments, including that of the
Current Fund. 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. The
Trustees would also be able to authorize the Successor Fund to issue additional
classes of shares without prior shareholder approval. The Trustees, however,
have no present intention of authorizing the issuance of additional classes of
shares.
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 Fund, 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
20
<PAGE>
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
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 their being or having been a shareholder and not because of their acts
or omissions or for some other reason, the shareholder or former shareholder (or
their 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 affirmative 1940 Act
Majority Vote of the Fund.
21
<PAGE>
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
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. The Current Declaration of Trust does not specifically provide
for mergers or consolidations of the Current Fund. A 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 Fund's 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 affirmative 1940 Act Majority Vote of the
Current Fund.
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP has served as the Fund's independent public
accountants 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 who were present at the February 2, 1996 meeting, including a
majority of the Trustees who are not "interested persons" of the Fund or PMC,
unanimously 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.
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 RECOMMEND 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.
22
<PAGE>
PROPOSALS 5(A) THROUGH 5(I)
ELIMINATION, AMENDMENT OR ADDITION
OF VARIOUS INVESTMENT RESTRICTIONS
GENERAL
The Trustees of the Fund 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(a) which is contained in the Prospectus.
Each Proposal requires the separate approval of the shareholders of the
Fund. Each of these restrictions is a fundamental investment policy that may
only be changed by an affirmative 1940 Act Majority Vote. See "Required Vote"
below.
5(A). ELIMINATION OF FUNDAMENTAL INVESTMENT RESTRICTION REGARDING
REPURCHASE AGREEMENTS
The Fund's existing fundamental policy regarding repurchase agreements
states:
The Fund may enter into repurchase agreements with banks,
generally not exceeding seven days.
If eliminated as proposed, the Trustees would adopt a new non-fundamental
policy that would 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.
5(B). AMENDMENT TO FUNDAMENTAL INVESTMENT RESTRICTION REGARDING
UNDERWRITING
The Fund's current fundamental investment restriction regarding
underwriting states that the Fund may not:
underwrite any issue of securities.
23
<PAGE>
If amended as proposed, the restriction would provide 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 1940 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 5(d), 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.
5(C). 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 1940 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 purposes
permitted under the rules and regulations of the Commodity Futures Trading
Commission from time to time in effect, 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.
A financial futures contract is a contract to buy or sell units of a
particular securities index or foreign currency at an agreed price on a
specified future date. Depending on the change in value of the index or currency
between the time when a fund enters into and terminates a financial futures
transaction, the fund realizes a gain or loss. Financial futures and options on
financial futures are typically used for hedging purposes and involve certain
risks, including imperfect correlations between movements in the prices of
financial futures and options and movements in the price of the underlying
securities index or currency or the portfolio securities that are the subject of
a hedge, potentially illiquid secondary markets at certain times and inability
of the adviser to correctly predict
24
<PAGE>
market or currency movements. 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 the coming year. In 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.
5(D). 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:
invest more than 15% of its net assets in the aggregate of (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.
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
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. It should be noted, however, that investing in restricted securities
traded under Rule 144A could effectively increase the level of the Fund's
illiquidity to the extent that qualified institutional buyers are uninterested
in purchasing such securities.
25
<PAGE>
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 in restricted securities to a lower
percentage.
5(E). 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 has succeeded.
The 1940 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 the Fund to
have the flexibility to invest in recently formed companies. 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 total assets in such
securities.
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.
5(F). 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.
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
26
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.
5(G). 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
restriction; (ii) loans of portfolio securities, as described, from
time to time, under "Lending of 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 1940 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(a) and to provide future
flexibility to adjust the Fund's repurchase agreement and securities lending
practices without the need to further revise the restriction.
5(H). 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.
27
<PAGE>
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 amounts not exceeding 10%
of the Fund's total assets (including the amount borrowed) taken at
market value.
The 1940 Act requires that a fund state a fundamental policy regarding
borrowing. The amendment is being proposed (1) to clarify that the Fund may
borrow from banks both for extraordinary or emergency purposes and to meet
redemptions and (2) to give the Fund the future ability to engage in reverse
repurchase agreements and dollar rolls without the need for shareholder
approval. The Fund will not purchase securities while outstanding borrowings
exceed 5% of the Fund's total assets.
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.
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 in the coming year. 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 event, the Prospectus and Statement of Additional
Information would be amended accordingly, including the addition of appropriate
risk disclosure.
5(I). 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, fully covered
reverse repurchase agreements, dollar rolls, swaps and
28
<PAGE>
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 1940 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 above
restriction is being proposed for the purpose of complying with this technical
requirement and to clarify that the issuance of multiple classes or series of
shares by the Fund would be permitted and that the investments specified therein
are not considered to be senior securities.
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 in the coming
year. 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, the Prospectus and Statement of Additional Information will be
revised accordingly, including the addition of appropriate risk disclosure.
TRUSTEES' RECOMMENDATIONS
At a meeting of the Trustees held on February 2, 1996, the Trustees present
unanimously approved, and voted to recommend to the shareholders of the Fund
that they approve the proposed elimination or amendment of certain of the Fund's
investment restrictions. In taking such action and making such recommendations,
the Trustees considered the fact that the proposed changes 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(a) through 5(i) requires the affirmative
1940 Act Majority Vote of the Fund.
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.
29
<PAGE>
Please note that the Fund is registered in Germany, Austria and Switzerland
and that any changes made to the Fund's investment restrictions are subject to
review by German, Austrian and Swiss securities authorities. Such authorities
may require investment restrictions more restrictive than those approved by
shareholders. Accordingly, in such event the changes to the Fund's investment
restrictions approved hereby will only take effect to the extent approved by
German, Austrian and Swiss securities authorities.
FOR THE REASONS SET FORTH ABOVE, THE TRUSTEES RECOMMEND THAT THE
SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THE APPROVAL OF THE PROPOSALS TO
ELIMINATE, AMEND OR ADD CERTAIN INVESTMENT RESTRICTIONS.
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
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
30
<PAGE>
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 2, 3 and 5(a) through 5(i)
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. 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.
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 PMC. In addition to soliciting proxies by mail, PMC may,
at PMC's expense, have one or more Fund officers, representatives or compensated
third-party agents, including PMC, PSC and PFD, aid in the solicitation of
proxies by personal
31
<PAGE>
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-free number will be available in case the information
contained in the confirmation is incorrect.
Persons holding shares as nominees will be reimbursed by PMC, upon request,
for the reasonable expenses of mailing soliciting materials to the principals of
the accounts.
March 22, 1996
32
<PAGE>
APPENDIX
ADDITIONAL INFORMATION PERTAINING TO PMC
Directors. Information regarding the affiliations of Mr. Cogan, Chairman
of PMC, and Mr. Tripple, President and a Director of PMC, is contained in
Proposal 1 of this Proxy Statement. The following table provides information
with respect to the other Director of PMC:
<TABLE>
<CAPTION>
NAME, AGE AND ADDRESS PRINCIPAL OCCUPATION(S)
- ---------------------- -------------------------------------------------------
<S> <C>
ROBERT L. BUTLER, 55 Executive Vice President and a Director of PGI;
60 State Street President and a Director of PFD; Director of PSC, PIC,
Boston, MA 02109 and P. Intl.; Vice Chairman of Pioneer GmbH; and a
Member of the Supervisory Board of PFPT.
</TABLE>
OWNERSHIP OF PMC. PMC is a wholly-owned subsidiary of PGI. As of December
31, 1995, Mr. Cogan beneficially owned 3,721,841 shares (14.99%) of the
outstanding Common Stock of PGI. Mr. Cogan's beneficial holdings included
711,190 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 December 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 December 31, 1995,
officers and directors of PMC and Trustees and officers of the Fund beneficially
owned an aggregate of 4,816,019 shares of Common Stock of PGI, approximately
19.39% of the outstanding Common Stock of PGI. During PGI's fiscal year ended
December 31, 1995 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 $882,000 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 $8,744,000 in distribution fees pursuant to the Fund's
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 $1,498,000. Commissions of approximately $10,054,000 were
reallowed to dealers.
33
<PAGE>
Similar Funds Managed By PMC. PMC serves as the investment manager to the
following funds with investment objectives similar to the Fund's objectives:
<TABLE>
<CAPTION>
NAME OF FUND
ANNUAL (NET ASSETS AS OF
MANAGEMENT FEE RATE 12/31/95)
- ------------------------------------------------- -----------------------------
<S> <C>
0.50% on average net assets up to $250 million; Pioneer Fund*
0.48% on the next $50 million in average net ($2,265,748,403)
assets; and 0.45% on average net assets
exceeding $300 million
1.00% on average net assets Pioneer Real Estate Shares
($27,000,000)
0.65% on average net assets up to $300 million Pioneer Equity-Income Fund
($358,491,000)
0.60% on the next $200 million in average net
assets
0.50% on the next $500 million in average net
assets
0.45% on average net assets exceeding $1 billion
</TABLE>
- ---------------
* A proposal has been submitted to the shareholders of Pioneer Fund to change
the annual management fee rate so that the rate will be 0.60% on average net
assets, adjusted by up to P.10% to reflect Pioneer Fund's performance.
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
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.
34
<PAGE>
EXHIBIT A
MANAGEMENT CONTRACT
THIS AGREEMENT dated this 1st day of May, 1996 between Pioneer II, a
Delaware business trust (the "Trust"), and Pioneering Management Corporation, a
Delaware corporation (the "Manager").
WITNESSETH
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.
(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
A-1
<PAGE>
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 subparagraphs (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 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
A-2
<PAGE>
Trustees), The Pioneer Group, Inc. or Pioneer Funds 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) 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 investment record of a securities index determined
by the Trustees of the Trust to be appropriate over the same period.
The Trustees have initially designated the Lipper Growth & Income
Funds Index (the "Index") for this purpose.
(ii) From time to time, the Trustees may 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, determine that
another securities index is a more appropriate benchmark than the
Index for purposes of evaluating the performance of the Trust. In
such event, after ten days' written notice to the Manager, a
successor index (the "Successor Index") may be substituted for the
Index in prospectively calculating the Performance Adjustment.
However, the calculation of that portion of the Performance
Adjustment attributable to any portion of the performance period
prior to the adoption of the Successor Index will still be based
upon the Trust's performance compared to the Index.
(iii) The Basic Fee is payable at an annual rate of 0.60% 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 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 0.01% 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 0.10% per annum. In addition, as the Trust's average daily net assets over
the performance period may differ substantially from the Trust's average daily
net assets during the current year, the
A-3
<PAGE>
performance adjustment may be further adjusted to the extent necessary to insure
that the total adjustment to the Basic Fee on an annualized basis does not
exceed 0.10%.
The initial performance period will consist of the 36 month period
beginning June 1, 1993 and ending May 31, 1996. Each month thereafter, the
performance period shall consist of the current month plus the preceding 35
months. In the event that the inclusion in the rolling performance period of
aggregate results from prior to May 1, 1996 would have the effect of increasing
the Basic Fee for any month, such aggregate prior results will be treated as
Index neutral for purposes of calculating the performance adjustment for such
month.
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. 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.
(v) An appropriate percentage (based on the number of days in the
current month) of the annual Performance Adjustment rate shall be
multiplied by 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 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.
A-4
<PAGE>
(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 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, directors, or employees from buying,
selling or trading in any
A-5
<PAGE>
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 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 May 31, 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
A-6
<PAGE>
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.
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.
A-7
<PAGE>
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.
<TABLE>
<S> <C>
ATTEST: PIONEER II
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
</TABLE>
A-8
<PAGE>
EXHIBIT B
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made as of the day of April,
1996, by and between Pioneer II, a Massachusetts business trust (the "Current
Fund"), and Pioneer II, 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
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
B-1
<PAGE>
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 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.
B-2
<PAGE>
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 April 30, 1996 ("Closing Date"), or at such other place or date on or prior
to May 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
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
B-3
<PAGE>
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
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 openend 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
B-4
<PAGE>
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 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 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
B-5
<PAGE>
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
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.
B-6
<PAGE>
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.
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
B-7
<PAGE>
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
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;
B-8
<PAGE>
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
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;
B-9
<PAGE>
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;
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-10
<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 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
B-11
<PAGE>
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.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its duly authorized officer.
PIONEER II
By:
---------------------------------------
Its:
---------------------------------------
Title
PIONEER II
a Delaware business trust,
on behalf of Pioneer II
By:
---------------------------------------
Its:
---------------------------------------
Title
B-12
<PAGE>
(LOGO)PRINTED ON RECYCLED PAPER
PRELIMINARY COPY
PROXY PROXY
PIONEER II
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 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 Fund (the
"Fund") to be held on Tuesday, April 30, 1996 at 1:00 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 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
(2) To approve a new Management Contract between the Fund and
Pioneering Management Corporation, the Fund's investment adviser
("PMC"), increasing the rate at which management fees are payable
to PMC:
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 / /
(4) 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 / /
(5)(a) To approve the elimination of the Fund's fundamental investment
restriction regarding repurchase agreements:
FOR / / AGAINST / / ABSTAIN / /
(5)(b) To approve an amendment to the Fund's fundamental investment
restriction regarding underwriting:
FOR / / AGAINST / / ABSTAIN / /
(5)(c) To approve an amendment to the Fund's fundamental investment
restriction regarding commodities:
FOR / / AGAINST / / ABSTAIN / /
(5)(d) To approve the elimination of the Fund's fundamental investment
restriction regarding restricted securities:
FOR / / AGAINST / / ABSTAIN / /
(5)(e) To approve the elimination of the Fund's fundamental investment
restriction regarding "unseasoned" issuers:
FOR / / AGAINST / / ABSTAIN / /
(5)(f) To approve the elimination of the Fund's fundamental investment
restriction regarding affiliates of affiliates of the Fund:
FOR / / AGAINST / / ABSTAIN / /
(5)(g) To approve an amendment to the Fund's fundamental investment
restriction regarding loans:
FOR / / AGAINST / / ABSTAIN / /
-2-
<PAGE>
(5)(h) To approve an amendment to the Fund's fundamental investment
restriction regarding borrowing:
FOR / / AGAINST / / ABSTAIN / /
(5)(i) To approve the addition of a new fundamental_investment
restriction regarding "senior securities":
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: ......................, 1996
....................................
....................................
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 FUND AND
SHOULD BE RETURNED AS SOON AS POSSIBLE IN THE ENVELOPE PROVIDED
-4-
<PAGE>
PIONEER II PROXY SOLICITATION: QUESTIONS AND ANSWERS
Q: WHAT DO THE PROPOSALS FOR PIONEER II MEAN?
A: Pioneer II periodically holds a shareowner meeting to vote on certain
issues. The upcoming meeting is scheduled for April 30, 1996. THE FUND'S
TRUSTEES, WHOSE PRIMARY FUNCTION IS TO PROTECT YOUR INTERESTS AS A SHAREOWNER,
RECOMMEND THAT YOU VOTE FOR EACH PROPOSAL.
Here is a what a FOR vote means for each of the proposals being considered.
PROPOSAL 1:
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.
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 basic fee of 0.60% 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, among other
benefits.
PROPOSAL 4:
RATIFY THE SELECTION OF ARTHUR ANDERSEN LLP AS THE FUND'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER, 1996.
PROPOSALS 5a - 5i:
MODERNIZE THE FUND'S OPERATING STRUCTURE AND INVESTMENT POLICIES to conform to
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. For detail on each of these Proposals, we encourage you to
read the Proxy Statement.
<PAGE>
PROPOSAL 1
Q: WHO IS BEING NOMINATED FOR TRUSTEE?
A: All of the nominees currently serve as Trustees and their biographical
information is included in the Proxy Statement. The Trustees' primary role is to
protect your interests as a shareowner.
PROPOSAL 2
Q: WHAT EFFECT WILL THE PROPOSED NEW MANAGEMENT CONTRACT HAVE?
A: The fee ultimately paid by the Fund will be higher than that paid under
the existing contract, even though it may vary as a result of Fund performance.
Under the current management fee structure, which has been in place since the
Fund's inception in 1969, the Fund pays the investment adviser, Pioneering
Management Corporation (PMC), the following fees, regardless of the Fund's
performance:
- - 0.50% of the Fund's average daily net assets up to $250 million in net
assets
- - 0.48% of the next $50 million in net assets, and
- - 0.45% of the amount over $300 million in net assets.
At current asset levels, the Fund is paying an effective management fee of
0.45%. Proposal 2 calls for the basic fee to increase to 0.60% of the Fund's
average daily net assets, regardless of the level of the Fund's average daily
net assets. However, the introduction of a performance-based fee structure would
link the management fee to the Fund's performance, relative to an objective
index. This means the fee ultimately paid by the Fund may be higher or lower
than the basic fee of 0.60%.
Q: WHY IS THE BASIC FEE BEING INCREASED?
A: The current fee paid by your Fund has not changed since the Fund's
inception. Over the past 25- plus years, it has become significantly more
complicated and expensive to manage a mutual fund. The industry has changed
dramatically, particularly in terms of research, technology and salary
requirements. The increased fee would be used primarily to enhance the Fund's
human resources, accounting and computer systems and research capabilities,
all of which we expect to help make the Fund more competitive.
<PAGE>
Q: HOW WOULD THE PROPOSED PERFORMANCE-BASED FEE BE CALCULATED?
A: Simply, the performance-based fee would combine a basic fee with a
performance adjustment. The Fund would add to or subtract from the basic fee
based on its performance relative to the Lipper Growth & Income Funds Index,
which the Fund's Trustees consider to be a fair benchmark for the performance of
funds with similar objectives.
The performance adjustment would be based on the Fund's performance over a
36-month period. The comparison between the Index's and Fund's performance will
be made at the end of each month. Each percentage point of difference, up to 10
percentage points, would be multiplied by a performance adjustment of 0.01%.
This means the maximum adjustment rate to the basic fee is 0.10% (10 x 0.01%),
up or down. THEREFORE, THE FUND'S MANAGEMENT FEE COULD RANGE FROM 0.50% TO
0.70%. THAT TRANSLATES INTO AN INCREASE OF BETWEEN $.04 AND &.24 PER $1,000.00.
For example, if the Fund's 36-month average annual total return was 15.0%, and
the Lipper Growth & Income Funds Index's 36-month average annual total return
was 25.0%, the management fee would be the basic fee minus the
performance-adjustment figure:
0.60% + [0.01% x (15.0% - 25.0%)] = 0.50%
Conversely, if the Fund's 36-month average annual total return was 25.0%, and
the Lipper Growth & Income Funds Index's 36-month average annual total return
was 15.0%, the management fee would be the basic fee plus the
performance-adjustment figure:
0.60% + [0.01% x (25.0% - 15.0%)] = 0.70%
Q: THE PROPOSED NEW MANAGEMENT FEE SEEMS HIGH TO ME. IS IT?
A: Comparatively, no. The Fund's proposed fee would still be lower than
most management fees currently being charged throughout the mutual fund
industry. Naturally, before proposing a change in management fee, Pioneer
undertook extensive research into how and how much other mutual funds were
paying in management fees. Here's what we found:
- - Your Fund's proposed basic management fee would be in the bottom third
(below 70%) of growth and income funds.*
- - The median management fee paid by these growth and income funds is
0.74%. That means that not only is your Fund's basic fee of 0.60% WELL
BELOW THE MEDIAN, its maximum performance-adjusted fee of 0.70% would
also be LESS THAN the median.
* The growth and income universe includes 256 funds with the growth and income
objective. It excludes hybrid fee funds that pay: a single, all-inclusive fee
for management, transfer agency, custody, accounting, etc.; or some combination
of these fees bundled with the management fee.
<PAGE>
Q: WHEN WOULD THE PROPOSED PERFORMANCE-BASED FEE TAKE EFFECT?
A: The effective date of the proposed contract is expected to be May 1,
1996, and the new fee structure would take effect at that time. Looking at the
Fund's performance to date relative to the Index, from June 1993 (the 35 months
of the period before May 1996), we would expect the Fund to pay less than the
basic fee when the new structure is introduced.
Q: WHAT WOULD THE FUND HAVE PAID IN MANAGEMENT FEES OVER THE PAST 10
YEARS, BASED ON THIS FEE STRUCTURE?
<TABLE>
A: The following table details what the effective management fee for
Pioneer II would have been for the past 10 years using the proposed
performance-based fee structure. Note that at no time would the management fee
have exceeded the basic 0.60% fee:
<CAPTION>
YEAR MANAGEMENT FEE
<S> <C>
1986 0.57%
1987 0.58%
1988 0.58%
1989 0.60%
1990 0.59%
1991 0.57%
1992 0.57%
1993 0.58%
1994 0.59%
1995 0.60%
</TABLE>
PROPOSAL 3
Q: WHY REORGANIZE THE FUND AS A DELAWARE BUSINESS TRUST?
A: This proposal would allow the Fund to operate within the better-defined
regulations provided in Delaware, and also would allow the Fund more flexibility
to adapt to changes in the investment industry. The reorganization will have no
tax impact on shareowners. New classes of shares, if any are offered in the
future, also would have no effect on the value or operation of Fund shares
already in existence.
Reorganizing to a Delaware business trust will help save the Fund, and
shareowners, money because it will allow the Fund to adapt to new laws without
going to the expense of a special shareowner meeting. And, as a Delaware
business trust, it is clear that Fund shareowners have no responsibilities for
the Fund's liabilities, a point that is less certain as a Massachusetts business
trust.
<PAGE>
PROPOSAL 4
Q: WHO IS ARTHUR ANDERSEN LLP?
A: Arthur Andersen LLP is one of the six largest CPA firms in the U.S. and
the firm is the current independent public accountant for the Fund and other
funds in the Pioneer family of mutual funds.
PROPOSALS 5a - 5i
Q: WHY ARE THERE SO MANY CHANGES PROPOSED TO THE FUND'S OPERATIONS
STRUCTURE AND INVESTMENT POLICIES?
A: Since the Fund's last shareowner meeting, the mutual fund industry has
evolved. The Fund's Trustees believe the proposed changes are appropriate and
necessary to update the Fund and modernize it to conform with current standards
in the mutual fund industry, along with other Pioneer funds.
GENERAL QUESTIONS
Q: WHO MAKES THE FINAL DECISIONS IN REGARDS TO THESE PROPOSALS?
A: You do. The Trustees you have elected -- whose primary role, as
mentioned, is protecting your interests as a shareowner -- have unanimously
approved the proposals and encourage you to vote FOR each. However, you must
make the final decision, either by attending the meeting in person or by giving
your proxy vote.
Q: WHEN AND WHERE WILL THE MEETING TAKE PLACE?
A: The meeting is scheduled for April 30, 1996, in Boston.
Q: WHAT IF I HAVE QUESTIONS ABOUT MY INVESTMENT?
A: The investment representative through whom you purchased Pioneer II can
provide you with additional information as needed.
<PAGE>
IMPORTANT ADVISORY CONCERNING PIONEER FUND AND PIONEER II
For nearly 70 years, Pioneer has earned a
distinguished reputation in two key
areas:
PIONEER IS COMMITTED TO BUILDING - Providing independent, fundamental
UPON THE HIGH STANDARDS WE HAVE SET research as the investment foundation
IN PROFESSIONAL MONEY MANAGEMENT AND for decisions
DEALER SERVICE - Delivering first-class service to you
and your clients.
Pioneer is committed to building upon
these high standards. To assist us in
doing so, after a thorough review of the
fee structure of the mutual fund
industry, Trustees of Pioneer Fund and
Pioneer II have decided to ask
shareowners to approve a modest increase
in the management fee. DESPITE
CONTINUALLY RISING COSTS FOR TECHNOLOGY
AND OTHER ENHANCEMENTS, PIONEER FUND HAS
NOT HAD A FEE INCREASE SINCE IT WAS FIRST
REGISTERED WITH THE SEC IN 1944; PIONEER
II HASN'T RAISED ITS FEES SINCE INCEPTION
IN 1969.
TO ASSIST US IN MAINTAINING Special shareowner meetings to consider
OUR HIGH STANDARDS, FUND TRUSTEES the matter are being scheduled for April
HAVE RECOMMENDED A MODEST for Pioneer Fund and Pioneer II and proxy
MANAGEMENT FEE INCREASE solicitations will be mailed shortly.
Pioneer Fund currently pays an effective
fee of 0.46%, based on assets of $2.466
billion under management as of Dec. 31,
1995. Pioneer II currently pays an
effective fee of 0.45%, based on assets
of $5.214 billion under management as of
Dec. 31, 1995.
For both Funds, fees are significantly
lower than most of the funds in the
Lipper Analytical Services growth and
income category. The Trustees of both
Funds are recommending that the effective
fee be raised to 0.60% of assets. As
proposed, this fee will be
performance-based: For every one
percentage point of total return above or
below the Lipper Growth and Income Funds
Index, the 0.60% fee would increase or
decrease by one basis point, up to a
maximum of 10 basis points.
<PAGE>
Assuming shareowners approve, THE NEW FEE
STRUCTURE WOULD STILL BE LOWER THAN 70%
OF THE 256 LIPPER GROWTH AND INCOME
FUNDS, AND SUBSTANTIALLY BELOW THE 0.74%
MEDIAN MANAGEMENT FEE IN THE CATEGORY
(excluding funds with hybrid fees).
We are grateful for the confidence you
and your clients have demonstrated by
investing with Pioneer. We will continue
to work to justify your support, and to
ensure that our standards of service and
investment management remain second to
none.
FOR MORE INFORMATION, CALL YOUR PIONEER
SALES SPECIALIST AT 1-800-622-9876.
Pioneer Funds Distributor, Inc. FOR BROKER/DEALER USE ONLY -- NOT
60 State Street AUTHORIZED FOR USE WITH THE PUBLIC
Boston, MA 02109 0296-3157
