PIONEER MICRO-CAP FUND
60 State Street
Boston, Massachusetts 02109
STATEMENT OF ADDITIONAL INFORMATION
Class A and Class B Shares
August 29, 1997
As Supplemented January 29, 1998
This Statement of Additional Information is not a Prospectus ("Prospectus"), but
should be read in conjunction with the Prospectus, dated August 29, 1997. A copy
of the Prospectus can be obtained free of charge by calling Shareholder Services
at 1-800-225-6292 or by written request to Pioneer Micro-Cap Fund (the "Fund")
at 60 State Street, Boston, Massachusetts 02109. The most recent Semi-Annual
Report to Shareholders is attached to and is hereby incorporated into this
Statement of Additional Information by reference.
TABLE OF CONTENTS
Page
1. Investment Policies and Restrictions........................... 2
2. Management of the Fund......................................... 9
3. Investment Adviser............................................. 13
4. Underwriting Agreement and Distribution Plans.................. 13
5. Shareholder Servicing/Transfer Agent........................... 15
6. Custodian...................................................... 15
7. Principal Underwriter.......................................... 15
8. Independent Public Accountants................................. 16
9. Portfolio Transactions......................................... 16
10. Tax Status and Dividends....................................... 17
11. Description of Shares.......................................... 19
12. Certain Liabilities............................................ 20
13. Letter of Intention............................................ 21
14. Systematic Withdrawal Plan..................................... 22
15. Determination of Net Asset Value............................... 22
16. Investment Results............................................. 23
17. Financial Statements........................................... 25
Appendix A..................................................... 26
Appendix B..................................................... 37
THIS STATEMENT OF ADDITIONAL INFORMATION IS
NOT A PROSPECTUS AND IS AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
<PAGE>
1. INVESTMENT POLICIES AND RESTRICTIONS
The Fund's current Prospectus presents the investment objectives and the
principal investment policies of the Fund. Additional investment policies and a
further description of some of the policies described in the Prospectus appear
below. This Statement of Additional Information should be read be read in
conjunction with the Prospectus. Capitalized terms not otherwise defined herein
have the meaning given to them in the Prospectus.
The following policies and restrictions supplement those discussed in the
Prospectus. Whenever an investment policy or restriction states a maximum
percentage of the Fund's assets that may be invested in any security or presents
a policy regarding quality standards, this standard or other restrictions shall
be determined immediately after and as a result of the Fund's investment.
Accordingly, any later increase or decrease resulting from a change in values,
net assets or other circumstances will not be considered in determining whether
the investment complies with the Fund's investment objectives and policies.
Lending of Portfolio Securities
The Fund may lend portfolio securities to member firms of the New York Stock
Exchange, under agreements which would require that the loans be secured
continuously by collateral in cash, cash equivalents or United States ("U.S.")
Treasury Bills maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned as well as the benefit of an increase in the market value of the
securities loaned and would also receive compensation based on investment of the
collateral. The Fund would not, however, have the right to vote any securities
having voting rights during the existence of the loan, but would call the loan
in anticipation of an important vote to be taken among holders of the securities
or of the giving or withholding of consent on a material matter affecting the
investment.
As with other extensions of credit there are risks of delay in recovery or even
loss of rights in the collateral should the borrower of the securities fail
financially. The Fund will lend portfolio securities only to firms which have
been approved in advance by the Board of Trustees, which will monitor the
creditworthiness of any such firms. At no time would the value of the securities
loaned exceed 30% of the value of the Fund's total assets.
Risk Factors Associated with the Real Estate Industry
Although the Fund does not invest directly in real estate, it may invest in real
estate equity securities. To the extent that the Fund invests in real estate
equity securities, an investment in the Fund may be subject to certain risks
generally associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible declines
in the value of real estate; risks related to general and local economic
conditions; possible lack of availability of mortgage funds; overbuilding;
extended vacancies of properties; increases in competition, property taxes and
operating expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties for damages resulting from, environmental
problems; casualty or condemnation losses; uninsured damages from floods,
earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates. Investments by the Fund in securities of
companies providing mortgage servicing may be subject to the risks associated
with refinancings and their impact on servicing rights.
<PAGE>
Real Estate Investment Trusts and Associated Risk Factors
The Fund may invest in shares of Real Estate Investment Trusts ("REITs") as
described in the Prospectus. REITs are pooled investment vehicles which invest
primarily in income producing real estate or real estate related loans or
interests. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the collection of
interest payments. Like investment companies such as the Fund, REITs are not
taxed on income distributed to shareholders provided they comply with several
requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The
Fund will indirectly bear its proportionate share of any expenses paid by REITs
in which it invests in addition to the expenses paid by the Fund.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to the risks of financing projects. REITs are subject to heavy cash
flow dependency, default by borrowers, self-liquidation, and the possibilities
of failing to qualify for the exemption from tax for distributed income under
the Code and failing to maintain their exemptions from the Investment Company
Act of 1940, as amended (the "1940 Act"). REITs whose underlying assets include
long-term health care properties, such as nursing, retirement and assisted
living homes, may be impacted by federal regulations concerning the health care
industry.
REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the Standard & Poor's Index of 500
Common Stocks.
Investment in Foreign Securities
The Fund may invest up to 5% of its net assets in securities of foreign
issuers. Such investments involve certain risks which are not typically
associated with investing in securities of U.S. companies. Foreign companies are
not subject to uniform accounting, auditing and financial standards and
requirements comparable to those applicable to U.S. companies. There may also be
less government supervision and regulation of foreign securities exchanges,
brokers and listed companies than exists in the United States. Interest and
dividends paid by foreign issuers may be subject to withholding and other
foreign taxes which will decrease the net return on such investments as compared
to interest and dividends paid to the Fund by the U.S. government or by domestic
companies
In addition, the value of securities denominated or quoted in
international currenies may also be adversely affected by fluctuations in the
relative rates of exchange between the currencies of different nations and
exchange control regulations. To the extent that the Fund has invested in
foreign securities, the Fund's investment performance may be affected, either
positively or negatively, by currency exchange rates because the U.S. dollar
value of securities denominated or quoted in another currency will increase or
decrease in response to changes in the value of such currency in relation to the
U.S. dollar.There may be less publicly available information about foreign
companies compared to reports and ratings published about U.S. companies.
Foreign securities markets have substantially less trading volume than domestic
markets and securities of some foreign companies are less liquid and more
volatile than securities of comparable U.S. companies. Transaction costs on
foreign securities exchanges are generally higher than in the United States.
. In addition, there may be the possibility of expropriation, confiscatory
taxation, political, economic or social instability, or diplomatic developments
which could affect assets of the Fund invested in foreign securities. PMC will
take these and other factors into consideration in managing the Fund's
investments.
Options on Securities and Securities Indices
The Fund may purchase call and put options on securities and securities indices
for the purpose of hedging against the risk of unfavorable price movements
adversely affecting the value of the Fund's securities or securities which the
Fund intends to buy.
Securities index options will not be used for speculative purposes.
The Fund may only purchase and sell options that are traded only in a regulated
market which is open to the public. Currently, options on stock indices are
traded only on national securities exchanges or over-the-counter, both in the
U.S. and in foreign countries. A securities index fluctuates with changes in the
market values of the securities included in the index. For example, some stock
index options are based on a broad market index such as the S&P 500 or the Value
Line Composite Index in the U.S., the Nikkei in Japan or the FTSE 100 in the
United Kingdom. Index options may also be based on a narrower market index such
as the S&P 100 or on an industry or market segment such as the AMEX Oil and Gas
Index or the Computer and Business Equipment Index.
The Fund may purchase put options in order to hedge against an anticipated
decline in securities prices that might adversely affect the value of the Fund's
portfolio securities. If the Fund purchases a put option on a security or
securities index, the amount of the payment it would receive upon exercising the
option would depend on the extent of any decline in the value of the security or
securities index below the exercise price. Such payments would tend to offset a
decline in the value of the Fund's portfolio securities. However, if the value
of the security or securities index increases and remains above the exercise
price while the put option is outstanding, the Fund will not be able to
profitably exercise the option and will lose the amount of the premium and any
transaction costs. Such loss may be partially offset by an increase in the value
of the Fund's portfolio securities.
The Fund may purchase call options on securities and securities indices in order
to remain fully invested in the stock market or to lock in a favorable price on
securities that it intends to buy in the future. If the Fund purchases a call
option on a security or securities index, the amount of the payment it receives
upon exercising the option depends on the extent of an increase in the value of
other securities and securities indices above the exercise price. Such payments
would in effect allow the Fund to benefit from securities market appreciation
even though it may not have had sufficient cash to purchase the underlying
securities. Such payments may also offset increases in the price of securities
that the Fund intends to purchase. If, however, the value of the security or
securities index declines and remains below the exercise price while the call
option is outstanding, the Fund will not be able to exercise the option
profitably and will lose the amount of the premium and transaction costs. Such
loss may be partially offset by a reduction in the price the Fund pays to buy
additional securities for its portfolio.
The Fund may sell the security or securities index option it has purchased or
write a similar offsetting option in order to close out a position in an option
which it has purchased. These closing sale transactions enable the Fund to
immediately realize gains or minimize losses on their respective options
positions. However, there is no assurance that a liquid secondary market on an
options exchange will exist for any particular option, or at any particular
time, and for some options no secondary market may exist. In addition, security
or securities index prices may be distorted by interruptions in the trading of
securities of certain companies or of issuers in certain industries, or by
restrictions that may be imposed by an exchange on opening or closing
transactions, or both, which would disrupt trading in options on such security
or securities indices and preclude the Fund from closing out its options
positions. If the Fund is unable to effect a closing sale transaction with
respect to options that it has purchased, it would have to exercise the options
in order to realize any profit.
The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price movements
can take place in the underlying markets that can not be reflected in the
options markets. The purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions.
In addition to the risks of imperfect correlation between the Fund's respective
portfolio and the security or securities index underlying the option, the
purchase of options involves the risk that the premium and transaction costs
paid by the Fund in purchasing an option will be lost. This could occur as a
result of unanticipated movements in the price of the security or the prices of
the securities comprising the securities index on which the option is based.
Futures Contracts and Options on Futures Contracts
To hedge against changes in securities prices, the Fund may purchase and sell
various kinds of futures contracts, and purchase and write (sell) call and put
options on any of such futures contracts. The Fund may also enter into closing
purchase and sale transactions with respect to any of such contracts and
options. The futures contracts may be based on various securities in which the
Fund may invest, securities indices that composed of securities in which the
Fund may invest, and other financial instruments and indices. The Fund will
engage in futures and related options transactions for bona fide hedging and
non-hedging purposes as described below. All futures contracts entered into by
the Fund are traded on U.S. exchanges or boards of trade that are licensed and
regulated by the Commodity Futures Trading Commission (the "CFTC").
Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments for an
agreed price during a designated month (or to deliver the final cash settlement
price, in the case of a contract relating to an index or otherwise not calling
for physical delivery at the end of trading in the contract).
When securities prices are falling, the Fund can seek to offset a decline in the
value of its current portfolio securities through the sale of futures contracts.
When securities prices are rising, the Fund, through the purchase of futures
contracts, can attempt to secure better prices than might later be available in
the market when it effects anticipated purchases.
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities will usually be liquidated in
this manner, the Fund may instead make, or take, delivery of the underlying
securities whenever it appears economically advantageous to do so. A clearing
corporation associated with the exchange on which futures on securities are
traded guarantees that, if still open, the sale or purchase will be performed on
the settlement date.
Hedging Strategies. Hedging, by use of futures contracts, seeks to establish
with more certainty the effective price of portfolio securities and securities
that the Fund owns or proposes to acquire. The Fund may, for example, take a
"short" position in the futures market by selling futures contracts in order to
hedge against an anticipated decline in market prices that would adversely
affect the value of the Fund's portfolio securities. Such futures contracts may
include contracts for the future delivery of securities held by the Fund or
securities with characteristics similar to those of the Fund's portfolio
securities. If, in the opinion of Pioneering Management Corporation ("PMC"),
there is a sufficient degree of correlation between price trends for the Fund's
portfolio securities and futures contracts based on securities and securities
indices or other indices, the Fund may also enter into such futures contracts as
part of their hedging strategies. Although under some circumstances prices of
securities in the Fund's portfolio may be more or less volatile than prices of
such futures contracts, PMC will attempt to estimate the extent of this
volatility difference based on historical patterns and compensate for any such
differential by having the Fund enter into a greater or lesser number of futures
contracts or by attempting to achieve only a partial hedge against price changes
affecting the Fund's portfolio securities. When hedging of this character is
successful, any depreciation in the value of portfolio securities will be
substantially offset by appreciation in the value of the futures position. On
the other hand, any unanticipated appreciation in the value of the Fund's
portfolio securities would be substantially offset by a decline in the value of
the futures position.
On other occasions, the Fund may take a "long" position by purchasing futures
contracts. This may be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices then available in the applicable market to be less favorable
than prices that are currently available.
Options on Futures Contracts. The acquisition of put and call options on futures
contracts will give the Fund the right (but not the obligation) for a specified
price to sell or to purchase, respectively, the underlying futures contract at
any time during the option period. As the purchaser of an option on a futures
contract, the Fund obtains the benefit of the futures position if prices move in
a favorable direction but limits its risk of loss in the event of an unfavorable
price movement to the loss of the premium and transaction costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of the Fund's assets. By writing a call
option, the Fund becomes obligated, in exchange for the premium, to sell a
futures contract (if the option is exercised), which may have a value higher
than the exercise price. Conversely, the writing of a put option on a futures
contract generates a premium which may partially offset an increase in the price
of securities that the Fund intends to purchase. However, the Fund becomes
obligated to purchase a futures contract (if the option is exercised) which may
have a value lower than the exercise price. Thus, the loss incurred by the Fund
in writing options on futures is potentially unlimited and may exceed the amount
of the premium received. The Fund will incur transaction costs in connection
with the writing of options on futures.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same series. There
is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
The Fund may use options on futures contracts for bona fide hedging or
non-hedging purposes as discussed below.
Other Considerations. The Fund will engage in futures and related options
transactions only for bona fide hedging or non-hedging purposes in accordance
with CFTC regulations which permit principals of an investment company
registered under the 1940 Act to engage in such transactions without registering
as commodity pool operators. The Fund is not permitted to engage in speculative
futures trading. The Fund will determine that the price fluctuations in the
futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities held by the Fund or
which the Fund expects to purchase. Except as stated below, the Fund's futures
transactions will be entered into for traditional hedging purposes -- i.e.,
futures contracts will be sold to protect against a decline in the price of
securities that the Fund owns, or futures contracts will be purchased to protect
the Fund against an increase in the price of securities it intends to purchase.
As evidence of this hedging intent, the Fund expects that on 75% or more of the
occasions on which it takes a long futures or option position (involving the
purchase of futures contracts), the Fund will have purchased, or will be in the
process of purchasing, equivalent amounts of related securities at the time when
the futures or option position is closed out. However, in particular cases, when
it is economically advantageous for the Fund to do so, a long futures position
may be terminated or an option may expire without the corresponding purchase of
securities or other assets.
As an alternative to literal compliance with the bona fide hedging definition, a
CFTC regulation permits the Fund to elect to comply with a different test, under
which the sum of the amounts of initial margin deposits on the Fund's existing
non-hedging futures contracts and premiums paid for options on futures entered
into for non-hedging purposes (net of the amount the positions are "in the
money") would not exceed 5% of the market value of the Fund's total assets. The
Fund will engage in transactions in futures contracts and related options only
to the extent such transactions are consistent with the requirements of the
Code, for maintaining its qualifications as a regulated investment company for
federal income tax purposes.
Transaction costs associated with futures contracts and related options involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating the Fund to purchase securities or currencies, require the
Fund to segregate assets to cover such contracts and options.
While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
while the Fund may benefit from the use of futures and options on futures,
unanticipated changes in securities prices may result in a poorer overall
performance for the Fund than if it had not entered into any futures contracts
or options transactions. In the event of an imperfect correlation between a
futures position and a portfolio position which is intended to be protected, the
desired protection may not be obtained and the Fund may be exposed to risk of
loss.
Restricted and Illiquid Securities
With respect to liquidity determinations generally, the Board of Trustees has
the ultimate responsibility for determining whether specific securities,
including Rule 144A securities, are liquid or illiquid. The Board has delegated
the function of making day to day determinations of liquidity to PMC, pursuant
to guidelines reviewed by the Trustees. PMC takes into account a number of
factors in reaching liquidity decisions. These factors may include but are not
limited to: (i) the frequency of trading in the security; (ii) the number of
dealers who make quotes in the securities; (iii) the number of dealers who have
undertaken to make a market in the security; (iv) the number of potential
purchasers; and (v) the nature of the security and how trading is effected
(e.g., the time needed to sell the security, how offers are solicited and the
mechanics of transfer). PMC will monitor the liquidity of securities in the
Fund's portfolio and report periodically on such decisions to the Trustees.
Since it is not possible to predict with assurance exactly how the market for
restricted securities sold and offered under Rule 144A will develop, the Board
will carefully monitor the Fund's investments in these securities, focusing on
such important factors, among others, as valuation, liquidity and availability
of information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that qualified institutional
buyers become for a time uninterested in purchasing these restricted securities.
Although there is not requirement to do so, the Fund currently intends to limit
its investments in illiquid securities, including certain restricted securities,
to 5% of total assets and to limit its investments in restricted securities
determined not to be illiquid to 5% of total assets.
Investment Restrictions
Fundamental Investment Restrictions. The Fund has adopted certain additional
investment restrictions which may not be changed without the affirmative vote of
the holders of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding voting securities. The Fund may not:
(1)......Issue senior securities, except as permitted by the Fund's
borrowing, lending and commodity restrictions and, for purposes of this
restriction, the issuance of shares of beneficial interest in multiple classes
or series, the purchase or sale of options, futures contracts and options on
futures contracts, forward commitments, forward foreign exchange contracts,
repurchase agreements, fully covered reverse repurchase agreements, dollar
rolls, swaps and any other financial transaction entered into pursuant to the
Fund's investment policies as described in the Prospectus and this Statement of
Additional Information and in accordance with applicable Securities and Exchange
Commission (the "Commission") pronouncements, as well as the pledge, mortgage or
hypothecation of the Fund's assets within the meaning of the fundamental
investment restriction regarding pledging, are not deemed to be senior
securities.
(2)......Borrow money, except from banks as a temporary measure to
facilitate the meeting of redemption requests or for extraordinary emergency
purposes and except pursuant to reverse repurchase agreements and dollar rolls
and then only in amounts not to exceed 33 1/3% of the Fund's total assets
(including the amount borrowed) taken at market value. The Fund will not use
leverage to attempt to increase income.
(3)......Guarantee the securities of any other company, or mortgage,
pledge, hypothecate or assign or otherwise encumber as security for indebtedness
its securities or receivables in an amount exceeding the amount of the borrowing
thereby secured.
(4)......Act as an underwriter, except as it may be deemed to be on
underwriter in a sale of restricted securities held in its portfolio.
(5)......Invest in real estate, commodities or commodity contracts,
except that the Fund may invest in financial futures contracts and related
options and in any other financial instruments which may be deemed to be
commodities or commodity contracts in which the Fund is not prohibited from
investing by the Commodity Exchange Act and the rules and regulations
thereunder.
(6)......Make loans, except by the purchase of debt obligations in
which the Fund may invest consistent with its investment policies, by entering
into repurchase agreements or through the lending of portfolio securities, in
each case only to the extent permitted by the Prospectus and this Statement of
Additional Information.
(7)......With respect to 75% of its total assets, purchase securities
of an issuer (other than the U.S. Government, its agencies or
instrumentalities), if
(a) such purchase would cause more than 5% of the Fund's total
assets, taken at market value, to be invested in the securities of such
issuer, or
(b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held by the
Fund.
It is the fundamental policy of the Fund not to concentrate its investments in
securities of companies in any particular industry. Following the current
opinion of the staff of the Commission, the Fund's investments are concentrated
in a particular industry if such investments aggregate 25% or more of the Fund's
total assets. The Fund's policy does not apply to investments in U.S. government
Securities.
The Fund does not intend to enter into any reverse repurchase agreements or
dollar rolls, lend portfolio securities or invest in forward currency contracts,
options or futures on foreign currencies or securities index put and call
warrants, as described in fundamental investment restrictions (1), (2) and (6)
above, during the coming year. In addition, in compliance with an informal
position taken by the staff of the Commission regarding leverage, the Fund will
not purchase securities during the coming year at any time that outstanding
borrowings exceed 5% of the Fund's total assets.
2. MANAGEMENT OF THE FUND
The Fund's Board of Trustees provides broad supervision over the affairs of the
Fund. The officers of the Fund are responsible for the Fund's operations. The
Trustees and executive officers of the Fund are listed below, together with
their principal occupations during the past five years. An asterisk indicates
those Trustees who are interested persons of the Fund within the meaning of the
1940 Act.
JOHN F. COGAN, JR.*, Chairman of the Board, President and Trustee,
DOB: June 1926
President, Chief Executive Officer and a Director of The Pioneer Group,
Inc. ("PGI"); Chairman and a Director of Pioneering Management Corporation
("PMC") and Pioneer Funds Distributor, Inc. ("PFD"); Director of Pioneering
Services Corporation ("PSC"), Pioneer Capital Corporation ("PCC") and
Forest-Starma (a Russian timber joint venture); President and Director of
Pioneer Plans Corporation ("PPC"), Pioneer Investment Corp. ("PIC"), Pioneer
Metals and Technology, Inc. ("PMT"), Pioneer International Corp. ("PIntl"),
Luscina, Inc., Pioneer First Russia, Inc. ("First Russia") and Pioneer Omega,
Inc. ("Omega") and Theta Enterprises, Inc.; Chairman of the Board and Director
of Pioneer Goldfields Limited ("PGL") and Teberebie Goldfields Limited; Chairman
of the Supervisory Board of Pioneer Fonds Marketing, GmbH ("Pioneer GmbH");
Member of the Supervisory Board of Pioneer First Polish Trust Fund Joint Stock
Company ("PFPT"); Chairman, President and Trustee of all of the Pioneer mutual
funds; and Partner, Hale and Dorr LLP (counsel to the Fund).
MARY K. BUSH, Trustee, DOB: April 1948
4201 Cathedral Ave. NW, Washington, DC 20016
President, Bush & Co., an International Financial Advisory firm, since
1991; Director/Trustee of Mortgage Guaranty Insurance Corporation, Novecon
Management Company, Hoover Institution, Folger Shakespeare Library, March of
Dimes, Project 2000, Inc., Small Enterprise Assistance Fund and Wilberforce
University; Advisory Board member, Washington Mutual Investors Fund, a
registered investment company; U.S. Alternate Executive Director, International
Monetary Fund (1984-1988); and Managing Director, Federal Housing Finance Board
(1989-1991).
RICHARD H. EGDAHL, M.D., Trustee, DOB: December 1926
Boston University Health Policy Institute, 53 Bay State Rd., Boston, MA 02115
Professor of Management, Boston University School of Management;
Professor of Public Health, Boston University School of Public Health; Professor
of Surgery, Boston University School of Medicine; Director, Boston University
Health Policy Institute and Boston 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. (investment adviser), Health Payment Review, Inc.
(health care containment software firm), Mediplex Group, Inc. (nursing care
facilities firm), Peer Review Analysis, Inc. (health care facilities firm) and
Springer-Verlag New York, Inc. (publisher); Honorary Trustee, Franciscan
Children's Hospital; and Trustee of all of the Pioneer mutual funds.
<PAGE>
MARGARET B.W. GRAHAM, Trustee, DOB: May 1947
The Keep, P.O. Box 110. Little Deer Isle, ME 04650
Founding Director, Winthrop Group, Inc. (consulting firm); Manager of
Research Operations, Xerox Palo Alto Research Center, from 1991 to 1994;
Professor of Operations Management and Management of Technology, Boston
University School of Management ("BUSM"), from 1989 to 1993; and Trustee of all
of the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
JOHN W. KENDRICK, Trustee, DOB: July 1917
6363 Waterway Drive, Falls Church, VA 22044
Professor Emeritus and Adjunct Scholar, George Washington University;
Economic Consultant and Director, American Productivity and Quality Center;
American Enterprise Institute; and Trustee of all of the Pioneer mutual funds,
except Pioneer Variable Contracts Trust.
MARGUERITE A. PIRET, Trustee, DOB: May 1948
One Boston Place, Suite 2635, Boston, MA 02108
President, Newbury, Piret & Company, Inc. (merchant banking firm) and
Trustee of all of the Pioneer mutual funds.
DAVID D. TRIPPLE*, Trustee and Executive Vice President, DOB: February 1944
Executive Vice President and a Director of PGI; President, Chief
Investment Officer and a Director of PMC; Director of PFD, PCC, PIC, PIntl,
First Russia, Omega and Pioneer SBIC Corporation; and Executive Vice President
and Trustee of all of the Pioneer mutual funds.
STEPHEN K. WEST, Trustee, DOB: September 1928
125 Broad Street, New York, NY 10004
Partner, Sullivan & Cromwell (law firm); Trustee, The Winthrop Focus
Funds (mutual funds) and Trustee of all of the Pioneer mutual funds.
JOHN WINTHROP, Trustee, DOB: June 1936
One North Adgers Wharf, Charleston, SC 29401
President, John Winthrop & Co., Inc. (private investment firm); Director
of NUI Corp.; Trustee of Alliance Capital Reserves, Alliance Government Reserves
and Alliance Tax Exempt Reserves; and Trustee of all of the Pioneer mutual
funds, except Pioneer Variable Contracts Trust.
WILLIAM H. KEOUGH, Treasurer, DOB: April 1937
Senior Vice President, Chief Financial Officer and Treasurer of PGI;
Treasurer of PFD, PMC, PSC, PCC, PIC, PIntl, PMT, PGL, First Russia, Omega and
Pioneer SBIC Corporation; Treasurer and Director of PPC; and Treasurer of all of
the Pioneer mutual funds.
JOSEPH P. BARRI, Secretary, DOB: August 1946
Secretary of PGI, PMC, PPC, PIC, PIntl, PMT, First Russia, Omega and PCC;
Clerk of PFD and PSC; Partner, Hale and Dorr LLP (counsel to the Fund); and
Secretary of all of the Pioneer mutual funds.
ERIC W. RECKARD, Assistant Treasurer, DOB: June 1956
Manager of Fund Accounting of PMC since May 1994; Manager of Auditing,
Compliance and Business Analysis for PGI prior to May 1994; and Assistant
Treasurer of all of the Pioneer mutual funds.
ROBERT P. NAULT, Assistant Secretary, DOB: March 1964
General Counsel and Assistant Secretary of PGI since 1995; Assistant
Secretary of PMC, PIntl, PGL, First Russia, Omega and all of the Pioneer mutual
funds; Assistant Clerk of PFD and PSC; and formerly of Hale and Dorr LLP
(counsel to the Fund) where he most recently served as junior partner.
WILLIAM M. TAUSSIG, Vice President, DOB: August 1952
Vice President of PMC.
The Fund's Declaration of Trust (the "Declaration of Trust") provides that the
holders of two-thirds of its outstanding shares may vote to remove a Trustee of
the Fund at any meeting of shareholders. See "Description of Shares" below. The
business address of all officers is 60 State Street, Boston, Massachusetts
02109.
The expense of organizing the Fund and initially registering its shares under
federal and state securities laws are being charged to the Fund's operations, as
an expense, over a period not to exceed 60 months from the Fund's inception
date. If any of the original shares are redeemed by any holder thereof prior to
the end of the amortization period, the redemption proceeds will be decreased by
the pro rata share of the unamortized expenses as of the date of redemption. The
pro rata shares is derived by dividing the number of original shares redeemed by
the total number of original shares outstanding at the time of redemption.
All of the outstanding capital stock of PFD, PMC and PSC is owned, directly or
indirectly, by PGI, a publicly-owned Delaware corporation. PMC, the Fund's
investment adviser, serves as the investment adviser for the Pioneer mutual
funds listed below and manages the investments of certain institutional
accounts.
The table below lists all the Pioneer mutual funds currently offered to
the public and the investment adviser and principal underwriter for each fund.
Investment Principal
Fund Name Adviser Underwriter
Pioneer International Growth Fund PMC PFD
Pioneer Europe Fund PMC PFD
Pioneer World Equity Fund PMC PFD
Pioneer Emerging Markets Fund PMC PFD
Pioneer India Fund PMC PFD
Pioneer Capital Growth Fund PMC PFD
Pioneer Mid-Cap Fund PMC PFD
Pioneer Growth Shares PMC PFD
Pioneer Small Company Fund PMC PFD
Pioneer Micro-Cap Fund PMC PFD
Pioneer Gold Shares PMC PFD
Pioneer Equity-Income Fund PMC PFD
Pioneer Fund PMC PFD
Pioneer II PMC PFD
Pioneer Real Estate Shares PMC PFD
Pioneer Balanced Fund PMC PFD
Pioneer Short-Term Income Trust PMC PFD
Pioneer America Income Trust PMC PFD
Pioneer Bond Fund PMC PFD
Pioneer Intermediate Tax-Free Fund PMC PFD
Pioneer Tax-Free Income Fund PMC PFD
Pioneer Cash Reserves Fund PMC PFD
Pioneer Interest Shares PMC Note 1
Pioneer Variable Contracts Trust PMC Note 2
- ------------------------------------
Note 1 This fund is a closed-end fund.
Note 2 This is a series of eight separate portfolios designed to provide
investment vehicles for the variable annuity and variable life
insurance contracts of various insurance companies or for certain
qualified pension plans.
- ------------------------------------
To the knowledge of the Fund, no officer or trustee of the Fund owned 5% or more
of the issued and outstanding shares of PGI on the date of this Statement of
Additional Information, except Mr. Cogan who then owned approximately 14% of
such shares. At June 30, 1997, the Trustees and officers of the Fund owned in
the aggregate, less than 1% of the outstanding securities of the Fund. As of
such date, Merrill Lynch Pierce Fenner & Smith for the sole benefit of its
customers, 4800 Deer Lake Drive East, Jacksonville, FL 32246 owned approximately
10.68% (193,001 shares) of the outstanding Class A shares of the Fund and
approximately 16.71% (374,873 shares) of the outstanding Class B shares of the
Fund.
Compensation of Officers and Trustees
The Fund pays no salaries or compensation to any of its officers. The Fund pays
an annual trustees' fee of $500 plus $120 per meeting attended to each Trustee
who is not affiliated with PMC, PFD or PGI and pays an annual trustees' fee of
$500 plus expenses to each Trustee affiliated with PMC, PFD or PGI. Any such
fees and expenses paid to affiliates or interested persons of PMC, PFD or PGI
are reimbursed to the Fund under its Management Contract.
The following table sets forth certain information with respect to the estimated
compensation of each Trustee of the Fund for the fiscal year ending November 30,
1997:
Pension or Retirement Total
Compensation Benefits Accrued as Compensation
from Fund and
Aggregate Part of ioneer Family
Name of Trustee from the Fund* Fund's Expenses of Funds**
Mary K. Bush+ $ 0 $ 0 $ 0
John F. Cogan, Jr. 500 0 $11,083
Richard H. Egdahl, M.D. 1,940 0 $59,858
Margaret B.W. Graham 1,940 0 $59,858
John W. Kendrick 1,940 0 $59,858
Marguerite A. Piret 2,040 0 $79,842
David D. Tripple 500 0 $11,083
Stephen K. West 2,040 0 $67,850
John Winthrop 2,040 0 $66,442
-
Total $12,940 0 $415,874
- -------------------------------------------------------------------------
* As of Fund's fiscal year ending November 30, 1997 (estimated).
** As of December 31, 1996 (calendar year end for all Pioneer mutual
funds).
+ Mary K. Bush became a Trustee on June 23, 1997.
3. INVESTMENT ADVISER
The Fund has contracted with PMC, 60 State Street, Boston, Massachusetts, to act
as its investment adviser. A description of the services provided to the Fund
under its management contract and the expenses paid by the Fund under the
contract is set forth in the Prospectus under the caption "Management of the
Fund."
The term of the management contract is one year and is renewable annually by the
vote of a majority of the Board of Trustees of the Fund (including a majority of
the Board of Trustees who are not parties to the contract or interested persons
of any such parties). The vote must be cast in person at a meeting called for
the purpose of voting on such renewal. This contract terminates if assigned and
may be terminated without penalty by either party upon sixty days' written
notice by vote of the Board of Directors or Trustees or a majority of the
outstanding voting securities. Pursuant to the management contract, PMC will not
be liable for any error of judgment or mistake of law or for any loss sustained
by reason of the adoption of any investment policy or the purchase, sale or
retention of any securities on the recommendation of PMC. PMC, however, is not
protected against liability by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under the respective management
contract.
As compensation for its management services and expenses incurred, PMC is
entitled to a management fee from the Fund at the rate of 1.10% per annum of he
Fund's average daily net assets. The fee is normally computed and accrued daily
and paid monthly.
PMC has agreed not to impose all or a portion of its management fees and make
other arrangements, if necessary, to limit expenses for the Fund's Class A
shares to not more than 1.75% of such Class's average net assets. The management
fee attributable to the Fund's Class B shares will not be imposed to the same
extent that it is not imposed for Class A shares. This agreement is temporary
and voluntary and may be terminated at any time by PMC. See "Expense
Information" in the Prospectus.
The Fund paid no management fees for the period February 28, 1997
(commencement of operations) through May 31, 1997. If PMC's fee reduction and
expense limitation had not been in effect, the Fund would have paid management
fees of $102,038 for the period.
4. UNDERWRITING AGREEMENT AND DISTRIBUTION PLANS
The Fund entered into an Underwriting Agreement with PFD. The Underwriting
Agreement will continue from year to year if annually approved by the Trustees.
The Underwriting Agreement provides that PFD will bear expenses for the
distribution of the Fund's shares, except for expenses incurred by PFD for which
it is reimbursed by the Fund under the Plan. PFD bears all expenses it incurs in
providing services under the Underwriting Agreement. Such expenses include
compensation to its employees and representatives and to securities dealers for
distribution related services performed for the Fund. PFD also pays certain
expenses in connection with the distribution of the Fund's shares, including the
cost of preparing, printing and distributing advertising or promotional
materials, and the cost of printing and distributing prospectuses and
supplements to prospective shareholders. The Fund bears the cost of registering
its shares under federal and state securities law and the laws of certain
foreign countries. The Fund and PFD have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended. Under the Underwriting Agreement, PFD will use its best efforts in
rendering services to the Fund.
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 under the
1940 Act with respect to both its Class A shares (the "Class A Plan") and its
Class B shares (the "Class B Plan") (together, the "Plans").
Class A Plan
Pursuant to the Class A Plan the Fund may reimburse PFD for its expenditures in
financing any activity primarily intended to result in the sale of Fund shares.
Certain categories of such expenditures have been approved by the Board of
Trustees and are set forth in the Prospectus. See "Distribution Plans" in each
Prospectus. The expenses of the Fund pursuant to the Class A Plan are accrued on
a fiscal year basis and may not exceed, with respect to Class A shares, the
annual rate of 0.25% of the Fund's average annual net assets attributable to
Class A shares.
Class B Plan
The Class B Plan provides that the Fund shall pay PFD, as the Fund's distributor
for its Class B shares, a daily distribution fee equal on an annual basis to
0.75% of the Fund's average daily net assets attributable to Class B shares and
will pay PFD a service fee equal to 0.25% of the Fund's average daily net assets
attributable to Class B shares (which PFD will in turn pay to securities dealers
which enter into a sales agreement with PFD at a rate of up to 0.25% of the
Fund's average daily net assets attributable to Class B shares owned by
investors for whom that securities dealer is the holder or dealer of record).
This service fee is intended to be in consideration of personal services and/or
account maintenance services rendered by the dealer with respect to Class B
shares. PFD will advance to dealers the first-year service fee at a rate equal
to 0.25% of the amount invested. As compensation therefor, PFD may retain the
service fee paid by the Fund with respect to such shares for the first year
after purchase. Dealers will become eligible for additional service fees with
respect to such shares commencing in the thirteenth month following purchase.
Dealers may from time to time be required to meet certain other criteria in
order to receive service fees. PFD or its affiliates are entitled to retain all
service fees payable under the Class B Plan for which there is no dealer of
record or for which qualification standards have not been met as partial
consideration for personal services and/or account maintenance services
performed by PFD or its affiliates for shareholder accounts. When a
broker-dealer sells Class B shares and elects, with PFD's approval, to waive its
right to receive the commission normally paid at the time of the sale, PFD may
cause all of a portion of the distribution fees described above to be paid to
the broker-dealer.
The purpose of distribution payments to PFD under the Class B Plan is to
compensate PFD for its distribution services to the Fund. PFD pays commissions
to dealers as well as expenses of printing prospectuses and reports used for
sales purposes, expenses with respect to the preparation and printing of sales
literature and other distribution-related expenses, including, without
limitation, the cost necessary to provide distribution-related services, or
personnel, travel office expenses and equipment. The Class B Plan also provides
that PFD will receive all contingent deferred sales charges ("CDSCs")
attributable to Class B shares.
(See "Distributions Plans" in the Prospectus.)
General
In accordance with the terms of the Plans, PFD provides to the Fund for review
by the Trustees a quarterly written report of the amounts expended under the
respective Plan and the purpose for which such expenditures were made. In the
Trustees' quarterly review of the Plans, they will consider the continued
appropriateness and the level of reimbursement or compensation the Plans
provide.
No interested person of the Fund, nor any Trustee of the Fund who is not an
interested person of the Fund, has any direct or indirect financial interest in
the operation of the Plans except to the extent that PFD and certain of its
employees may be deemed to have such an interest as a result of receiving a
portion of the amounts expended under the Plans by the Fund and except to the
extent certain officers may have an interest in PFD's ultimate parent, PGI.
The Plans were adopted by a majority vote of the Board of Trustees, including
all of the Trustees who are not, and were not at the time they voted, interested
persons of the Fund, as defined in the 1940 Act (none of whom had or have any
direct or indirect financial interest in the operation of the Plans), cast in
person at a meeting called for the purpose of voting on the Plans. In approving
the Plans, the Trustees identified and considered a number of potential benefits
which the Plans may provide. The Board of Trustees believes that there is a
reasonable likelihood that the Plans will benefit each Fund and their current
and future shareholders. Under their terms, the Plans remain in effect from year
to year provided such continuance is approved annually by vote of the Trustees
in the manner described above. The Plans may not be amended to increase
materially the annual percentage limitation of average net assets which may be
spent for the services described therein without approval of the shareholders of
the Fund affected thereby, and material amendments of the Plans must also be
approved by the Trustees in the manner described above. A Plan may be terminated
at any time, without payment of any penalty, by vote of the majority of the
Trustees who are not interested persons of the Fund and have no direct or
indirect financial interest in the operations of the Plan, or by a vote of a
majority of the outstanding voting securities of the respective Class of the
Fund (as defined in the 1940 Act). A Plan will automatically terminate in the
event of its assignment (as defined in the 1940 Act).
During the period February 28, 1997 (commencement of operations) through May 31,
1997, the Fund incurred total distribution fees of $10,404 and $51,146 pursuant
to the Fund's Class A Plan and Class B Plan, respectively.
Redemptions of each Class of shares may be subject to a CDSC. A CDSC of 1.00%
may be imposed on certain net asset purchases of Class A shares that are
redeemed within one year of purchase. Class B shares that are redeemed within
six years of purchase are subject to a CDSC at declining rates beginning at 4.0%
based on the lower of cost or market value of shares being redeemed. See " How
to Buy Fund Shares" in the Prospectus. During the period February 28, 1997
(commencement of operations) through May 31, 1997, CDSCs in the amount of
approximately $2,269 were paid to PFD. Such CDSCs are paid to PFD in
reimbursement of expenses related to servicing of shareholders accounts and
compensation paid to dealers and sales personnel.
5. SHAREHOLDER SERVICING/TRANSFER AGENT
The Fund has contracted with PSC, 60 State Street, Boston, Massachusetts, to act
as shareholder servicing and transfer agent for the Fund. This contract
terminates if assigned and may be terminated without penalty by either party
upon ninety days' written notice by vote of its Board of Directors or Trustees
or a majority of its outstanding voting securities.
Under the terms of its contract with the Fund, PSC services shareholder
accounts, and its duties include: (i) processing sales, redemptions and
exchanges of shares of the Fund; (ii) distributing dividends and capital gains
associated with Fund portfolio accounts; and (iii) maintaining account records
and responding to shareholder inquiries.
PSC receives an annual fee of $22.75 for each Class A and Class B shareholder
account from the Fund as compensation for the services described above. PSC is
also reimbursed by the Fund for its cash out-of-pocket expenditures. The annual
fee is set at an amount determined by vote of a majority of the Trustees
(including a majority of the Trustees who are not parties to the contract with
PSC or interested persons of any such parties) to be comparable to fees for such
services being paid by other investment companies. The Fund may compensate
entities which have agreed to provide certain sub-accounting services, such as
specific transaction processing or recordkeeping services. Any such payments by
the Fund would be in lieu of the per account fee which would otherwise be paid
by the Fund to PSC.
6. CUSTODIAN
Brown Brothers Harriman & Co. (the "Custodian") 40 Water Street, Boston,
Massachusetts 02109, is the custodian of the Fund's assets. The Custodian's
responsibilities include safekeeping and controlling the Fund's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Fund's investments. The Custodian does not
determine the investment policies of the Fund or decide which securities the
Fund will buy or sell. The Fund may, however, invest in securities, including
repurchase agreements, issued by the Custodian and may deal with the Custodian
as a principal in securities transactions. Portfolio securities may be deposited
into the Federal Reserve-Treasury Department Book Entry System or the Depository
Trust Company.
7. PRINCIPAL UNDERWRITER
PFD serves as the principal underwriter for the Fund in connection with the
continuous offering of the Class A and Class B shares of the Fund. During the
period February 28, 1997 (commencement of operations) through May 31, 1997, net
underwriting commissions retained by PFD in connection with its offering of the
Class A shares of the Fund were approximately $23,000. Commissions reallowed to
dealers by PFD in such period were approximately $1,019,000. See "Underwriting
Agreement and Distribution Plans" above for a description of the terms of the
Underwriting Agreement with PFD.
The Fund will not generally issue Fund shares for consideration other than cash.
At the Fund's sole discretion, however, it may issue Fund shares for
consideration other than cash in connection with an acquisition of portfolio
securities or a merger or other reorganization.
<PAGE>
8. INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, 225 Franklin Street, Boston, Massachusetts 02110, is the
Fund's independent public accountants, providing audit services, tax return
review, and assistance and consultation with respect to the preparation of
filings with the Commission.
9. PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on behalf
of the Fund by PMC pursuant to authority contained in the Fund's management
contract. In selecting brokers or dealers, PMC will consider various relevant
factors, including, but not limited to, the size and type of the transaction;
the nature and character of the markets for the security to be purchased or
sold; the execution efficiency, settlement capability, and financial condition
of the 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 managed by PMC. In addition, if
PMC determines in good faith that the amount of commissions charged by a
broker-dealer is reasonable in relation to the value of the brokerage and
research services provided by such broker, the Fund may pay commissions to such
broker-dealer in an amount greater than the amount another firm may charge. Such
services may include advice concerning the value of securities; the advisability
of investing in, purchasing or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement). PMC maintains a listing of broker-dealers who provide such services
on a regular basis. However, because it is anticipated that many transactions on
behalf of the Fund and other investment companies managed by PMC are placed with
broker-dealers (including broker-dealers on the listing) without regard to the
furnishing of such services, it is not possible to estimate the proportion of
such transactions directed to such dealers solely because such services were
provided.
The research received from broker-dealers may be useful to PMC in rendering
investment management services to the Fund as well as other investment companies
managed by PMC, although not all such research may be useful to the Fund.
Conversely, such information provided by brokers or dealers who have executed
transaction orders on behalf of such other PMC clients may be useful to PMC in
carrying out its obligations to the Fund. The receipt of such research has not
reduced PMC's normal independent research activities; however, it enables PMC to
avoid the additional expenses which might otherwise be incurred if it were to
attempt to develop comparable information through its own staff.
In circumstances where two or more broker-dealers offer comparable prices and
executions, preference may be given to a broker-dealer which has sold shares of
the Fund as well as shares of other investment companies or accounts managed by
PMC. This policy does not imply a commitment to execute all portfolio
transactions through all broker-dealers that sell shares of the Fund.
The Trustees periodically review PMC's performance of its responsibilities in
connection with the placement of portfolio transactions on behalf of the Fund.
In addition to the Fund, PMC acts as investment adviser to other Pioneer mutual
funds and certain private accounts with investment objectives similar to those
of the Fund. Securities frequently meet the investment objectives of the Fund,
such other funds and such private accounts. In such cases, the decision to
recommend a purchase to one fund or account rather than another is based on a
number of factors. The determining factors in most cases are the amount of
securities of the issuer then outstanding, the value of those securities and the
market for them. Other factors considered in the investment recommendations
include other investments which each fund or account presently has in a
particular industry and the availability of investment funds in each fund or
account.
It is possible that at times identical securities will be held by more than one
fund and/or account. However, positions in the same issue may vary and the
length of time that any fund or account may choose to hold its investment in the
same issue may likewise vary. To the extent that the Fund, another mutual fund
in the Pioneer group or a private account managed by PMC may not be able to
acquire as large a position in such security as it desires, it may have to pay a
higher price for the security. Similarly, the Fund may not be able to obtain as
large an execution of an order to sell or as high a price for any particular
portfolio security if PMC decides to sell on behalf of another account the same
portfolio security at the same time. On the other hand, if the same securities
are bought or sold at the same time by more than one fund or account, the
resulting participation in volume transactions could produce better executions
for the Fund or the account. In the event more than one account purchases or
sells the same security on a given date, the purchases and sales will normally
be made as nearly as practicable on a pro rata basis in proportion to the
amounts desired to be purchased or sold by each.
During the period from February 28, 1997 through May 31, 1997, the Fund
paid or accrued aggregate brokerage and underwriting commissions of
approximately $58,648.
10. TAX STATUS AND DIVIDENDS
It is the Fund's policy to meet the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated
investment company. These requirements relate to the sources of the Fund's
income, the diversification of its assets, and the timing of its distributions.
If the Fund meets all such requirements and distributes to its shareholders at
least annually all investment company taxable income and net capital gain, if
any, which it receives, the Fund will be relieved of the necessity of paying
federal income tax.
In order to qualify under Subchapter M, the Fund must, among other things,
derive at least 90% of its gross income for each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities, or other income (including gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies (the "90% income test"), limit
its gains from the sale of stock, securities and certain other investments held
for less than three months to less than 30% of its annual gross income (the "30%
test") and satisfy certain diversification and income distribution requirements.
Dividends from investment company taxable income, which includes net investment
income, net short-term capital gain in excess of net long-term capital loss are
taxable as ordinary income, whether received in cash or in additional shares.
Dividends from net long-term capital gain in excess of net short-term capital
loss, if any, whether received in cash or additional shares, are taxable to the
Fund's shareholders as long-term capital gains for federal income tax purposes
without regard to the length of time shares of the Fund have been held. The
federal income tax status of all distributions will be reported to shareholders
annually.
Any dividend declared by the Fund in October, November or December as of a
record date in such a month and paid during the following January will be
treated for federal income tax purposes as received by shareholders on December
31 of the calendar year in which it is declared.
If the Fund invests in certain pay-in-kind securities ("PIKs"), zero coupon
securities, deferred interest securities or, in general, any other securities
with original issue discount (or with market discount if the Fund elects to
include market discount in income currently), the Fund must accrue income on
such investments for each taxable year, which generally will be prior to the
receipt of the corresponding cash payments. However, the Fund must distribute,
at least annually, all or substantially all of its net income, including such
accrued income, to shareholders to qualify as a regulated investment company
under the Code and avoid Federal income and excise taxes. Therefore, the Fund
may have to dispose of its portfolio securities under disadvantageous
circumstances to generate cash, or may have to leverage itself by borrowing the
cash, to satisfy distribution requirements.
For federal income tax purposes, the Fund is permitted to carry forward a net
capital loss in any year to offset net capital gains, if any, during the eight
years following the year of the loss. To the extent subsequent net capital gains
are offset by such losses, they would not result in federal income tax liability
to such Fund and are not expected to be distributed as such to shareholders.
At the time of an investor's purchase of Fund shares, a portion of the purchase
price is often attributable to realized or unrealized appreciation in the Fund's
portfolio or undistributed taxable income of the Fund. Consequently, subsequent
distributions from such appreciation or income may be taxable to such investor
even if the net asset value of the investor's shares is, as a result of the
distributions, reduced below the investor's cost for such shares and the
distributions in reality represent a return of a portion of the investment.
Any loss realized upon the redemption of shares with a tax holding period of six
months or less will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain with respect to such
shares.
In addition, if Class A shares redeemed or exchanged have been held for less
than 91 days, (1) in the case of a reinvestment at net asset value, the sales
charge paid on such shares is not included in their tax basis under the Code and
(2) in the case of an exchange, all or a portion of the sales charge paid on
such shares is not included in their tax basis under the Code, to the extent a
sales charge that would otherwise apply to the shares received is reduced
pursuant to the exchange privilege. In either case, the portion of the sales
charge not included in the tax basis of the shares redeemed or surrendered in an
exchange is included in the tax basis of the shares acquired in the reinvestment
or exchange. Losses on certain redemptions may be disallowed under "wash sale"
rules in the event of other investments in the same Fund within a period of 61
days beginning 30 days before and ending 30 days after a redemption or other
sale of shares. In such a case, the disallowed portion of any loss would be
included in the federal tax basis of the shares acquired in the other
investments.
Options written or purchased and futures contracts entered into by the Fund on
certain securities and securities and securities indices may cause the Fund to
recognize gains or losses from marking-to-market at the end of its taxable year
even though such options may not have lapsed, been closed out, or exercised or
such futures or forward contracts may not have been performed or closed out. The
tax rules applicable to these contracts may affect the characterization as
long-term or short-term of some capital gains and losses realized by the Fund.
Losses on certain options, futures and/or offsetting positions (portfolio
securities or other positions with respect to which the Fund's risk of loss is
substantially diminished by one or more options, futures or forward contracts)
may also be deferred under the tax straddle rules of the Code, which may also
affect the characterization of capital gains or losses from straddle positions
and certain successor positions as long-term or short-term. Certain tax
elections may be available that would enable the Fund to ameliorate some adverse
effects of the tax rules described in this paragraph. The tax rules applicable
to options, futures, and straddles may affect the amount, timing and character
of the Fund's income and loss and hence of its distributions to shareholders.
For purposes of the 70% dividends-received deduction available to corporations
under the Code, dividends received by the Fund from U.S. domestic corporations
in respect of any share of stock with a tax holding period of at least 46 days
(91 days in the case of certain preferred stock) held in an unleveraged position
and distributed and designated by the Fund may be treated as qualifying
dividends. Any corporate shareholder should consult its tax adviser regarding
the possibility that its tax basis in its shares may be reduced, for federal
income tax purposes, by reason of "extraordinary dividends" received with
respect to the shares. In order to qualify for the deduction, corporate
shareholders must meet the minimum holding period requirement stated above with
respect to their Fund shares, taking into account any holding period reductions
from certain hedging or other transactions that diminish risk of loss, with
respect to their Fund shares and, if they borrow to acquire Fund shares, may be
denied a portion of the dividends-received deduction. The entire qualifying
dividend, including the otherwise deductible amount, will be included in
determining the excess (if any) of a corporation's adjusted current earnings
over its alternative minimum taxable income, which may increase a corporation's
alternative minimum tax liability.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions, and certain
prohibited transactions is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
Federal law requires that the Fund withhold (as "backup withholding") 31% of
reportable payments, including dividends, capital gain dividends, and the
proceeds of redemptions (including exchanges) and repurchases, to shareholders
who have not complied with Internal Revenue Service ("IRS") regulations. In
order to avoid this withholding requirement, shareholders must certify on their
Account Applications, or on separate W-9 Forms, that their Social Security or
other Taxpayer Identification Number is correct and that they are not currently
subject to backup withholding, or that they are exempt from backup withholding.
The Fund may nevertheless be required to withhold if it receives notice from the
IRS or a broker that the number provided is incorrect or backup withholding is
applicable as a result of previous underreporting of interest or dividend
income.
If, as anticipated, the Fund qualifies as a regulated investment company under
the Code, it will not be required to pay any Massachusetts income, corporate
excise or franchise taxes or any Delaware corporation income tax.
The description of certain federal tax provisions above relates only to U.S.
federal income tax consequences for shareholders who are U.S. persons, i.e.,
U.S. citizens or residents and U.S. domestic corporations, partnerships, trusts
or estates, and who are subject to U.S. federal income tax. The description does
not address the special tax rules applicable to particular types of investors,
such as financial institutions, insurance companies, securities dealers, or
tax-exempt or tax-deferred plans, accounts or entities. Investors other than
U.S. persons may be subject to different U.S. tax treatment, including a
possible 30% U.S. withholding tax (or withholding tax at a lower treaty rate) on
amounts treated as ordinary dividends from the Fund and, unless an effective IRS
Form W-8 or authorized substitute is on file, to 31% backup withholding on
certain other payments from the Fund. Shareholders should consult their own tax
advisers on these matters and on state, local and other applicable tax laws.
<PAGE>
11. DESCRIPTION OF SHARES
The Fund's Declaration of Trust permits the Board of Trustees to authorize the
issuance of an unlimited number of full and fractional shares of beneficial
interest which may be divided into such separate series as the Trustees may
establish. Currently, the Fund consists of only one series. The Trustees may,
however, establish additional series of shares in the future, and may divide or
combine the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interests in the Fund. The Declaration of
Trust further authorizes the Trustees to classify or reclassify any series of
the shares into one or more classes. Pursuant thereto, the Trustees have
authorized the issuance of two classes of shares of the Fund, designated as
Class A shares and Class B shares. Each share of a class of the Fund represents
an equal proportionate interest in the assets of the Fund allocable to that
class. Upon liquidation of the Fund, shareholders of each class of the Fund are
entitled to share pro rata in the Fund's net assets allocable to such class
available for distribution to shareholders. The Fund reserves the right to
create and issue additional series or classes of shares, in which case the
shares of each class of a series would participate equally in the earnings,
dividends and assets allocable to that class of the particular series.
Shareholders are entitled to one vote for each share held and may vote in the
election of Trustees and on other matters submitted to a meeting of
shareholders. Although Trustees are not elected annually by the shareholders,
shareholders have, under certain circumstances, the right to remove one or more
Trustees.
The shares of the Fund are entitled to vote separately to approve investment
advisory agreements or changes in investment restrictions, but shareholders of
all series vote together in the election and selection of Trustees and
accountants. Shares of all series of the Fund vote together as a class on
matters that affect all series of the Fund in substantially the same manner. As
to matters affecting a single series or class, shares of such series or class
will vote separately. No amendment adversely affecting the rights of
shareholders may be made to the Fund's Declaration of Trust without the
affirmative vote of a majority of its shares. Shares have no preemptive or
conversion rights. Shares are fully paid and non-assessable by the Fund, except
as stated below.
12. CERTAIN LIABILITIES
As a Delaware business trust, the Fund's operations are governed by its
Declaration of Trust dated December 3, 1996. A copy of the Fund's Certificate of
Trust, also dated December 3, 1996, is on file with the office of the Secretary
of State of Delaware. Generally, Delaware business trust shareholders are not
personally liable for obligations of the Delaware business trust under Delaware
law. The Delaware Business Trust Act (the "Delaware Act") provides that a
shareholder of a Delaware business trust shall be entitled to the same
limitation of liability extended to shareholders of private for-profit
corporations. The Fund's Declaration of Trust expressly provides that the Fund
is organized under the Delaware Act and that the Declaration of Trust is to be
governed by Delaware law. It is nevertheless possible that a Delaware business
trust, such as the Fund, might become a party to an action in another state
whose courts refused to apply Delaware law, in which case the trust's
shareholders could become subject to personal liability.
To guard against this risk, the Declaration of Trust (i) contains an express
disclaimer of shareholder liability for acts or obligations of the Fund and
provides that notice of such disclaimer may be given in each agreement,
obligation or instrument entered into or executed by the Fund or its Trustees,
(ii) provides for the indemnification out of Fund property of any shareholders
held personally liable for any obligations of the Fund or any series of the Fund
and (iii) provides that the Fund shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the Fund and
satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss beyond his or her investment because of shareholder liability is
limited to circumstances in which all of the following factors are present: (1)
a court refused to apply Delaware law; (2) the liability arose under tort law
or, if not, no contractual limitation of liability was in effect; and (3) the
Fund itself would be unable to meet its obligations. In light of Delaware law,
the nature of the Fund's business and the nature of its assets, the risk of
personal liability to a Fund shareholder is remote.
The Declaration of Trust further provides that the Fund shall indemnify each of
its Trustees and officers against liabilities and expenses reasonably incurred
by them, in connection with, or arising out of, any action, suit or proceeding,
threatened against or otherwise involving such Trustee or officer, directly or
indirectly, by reason of being or having been a Trustee or officer of the Fund.
The Declaration of Trust does not authorize the Fund to indemnify any Trustee or
officer against any liability to which he or she would otherwise be subject by
reason of or for willful misfeasance, bad faith, gross negligence or reckless
disregard of such person's duties.
13. LETTER OF INTENT (Class A Shares Only)
The use of the Letter of Intent ("LOI") procedure may be limited for this Fund.
A Letter of Intent may, however, be used in connection with the purchases of
shares of other Pioneer mutual funds. See "How to Purchase Fund Shares - Letter
of Intent" in the Prospectus for more information.
Purchases in the Class A shares of the Fund of $50,000 or more (excluding any
reinvestments of dividends and capital gains distributions) made within a
13-month period pursuant to a LOI provided by PFD will qualify for a reduced
sales charge. Such reduced sales charge will be the charge that would be
applicable to the purchase of all Class A shares purchased during such 13-month
period pursuant to a LOI had such shares been purchased all at once. See "How to
Buy Fund Shares" in each Prospectus.
For example, a person who signs a LOI providing for a total investment in Class
A shares of $50,000 over a 13-month period would be charged at the 4.50% sales
charge rate with respect to all purchases during that period. Should the amount
actually purchased during the 13-month period be more or less than that
indicated in the LOI, an adjustment in the sales charge will be made. A purchase
not made pursuant to a LOI may be included thereafter if the LOI is filed within
90 days of such purchase. Any shareholder may also obtain the reduced sales
charge by including the value (at current offering price) of all the shares of
record he holds in the Fund and in all other Pioneer mutual funds as of the date
of the LOI as a credit toward determining the applicable scale of sales charge
for the Class A shares to be purchased under the LOI.
A LOI may be established by completing the Letter of Intent section of the
Account Application. When you sign the Account Application, you agree to
irrevocably appoint PSC your attorney-in-fact to surrender for redemption any or
all shares held in escrow with full power of substitution. A Letter of Intent is
not a binding obligation upon the investor to purchase, or the Fund to sell, the
full amount indicated.
If the 13-month total purchases less redemptions, exceed the amount specified
under the LOI and are in an amount which would qualify for a further quantity
discount, all transactions will be recomputed on the expiration date of the LOI
to effect the lower sales charge. Any difference in the sales charge resulting
from such recomputation will be either delivered to you in cash or invested in
additional shares at the lower sales charge. The dealer, by signing the Account
Application, agrees to return to PFD, as part of such retroactive adjustment,
the excess of the commission previously reallowed or paid to the dealer over
that which is applicable to the actual amount of the total purchases under the
LOI.
If the 13-month total purchases less redemptions, are less than the amount
specified under the LOI, you must remit to PFD any difference between the sales
charge on the amount actually purchased and the amount originally specified in
the LOI section of the Account Application. When the difference is paid, the
shares held in escrow will be deposited to your account. If you do not pay the
difference in sales charge within 20 days after written request from PFD or your
dealer, PSC, after receiving instructions from PFD, will redeem the appropriate
number of shares held in escrow to realize the difference and release any
excess.
14. SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan ("SWP") is designed to provide a convenient
method of receiving fixed payments at regular intervals from shares of the Fund
deposited by the applicant under this SWP. The applicant must deposit or
purchase for deposit with PSC shares of the Fund having a total value of not
less than $10,000. Periodic payments of $50 or more will be deposited monthly or
quarterly directly into a bank account designated by the applicant or will be
sent by check to the applicant, or any person designated by the applicant. A
designation of a third party to receive checks subsequent to opening an account
requires an acceptable signature guarantee. Withdrawals under a SWP from Class B
share accounts are limited to 10% of the value of the account at the time the
SWP is implemented.
Any income dividends or capital gains distributions on shares under the SWP will
be credited to the SWP account on the payment date in full and fractional shares
at the net asset value per share in effect on the record date.
SWP payments are made from the proceeds of the redemption of shares deposited
under the SWP in a SWP account. To the extent that such redemptions for periodic
withdrawals exceed dividend income reinvested in the SWP account, such
redemptions will reduce and may ultimately exhaust the number of shares
deposited in the SWP account. Redemptions are taxable transactions to
shareholders. In addition, the amounts received by a shareholder cannot be
considered as yield or income on his or her investment because part of such
payments may be a return of his or her investment.
The SWP may be terminated at any time (1) by written notice to PSC or from PSC
to the shareholder; (2) upon receipt by PSC of appropriate evidence of the
shareholder's death; or (3) when all shares under the SWP have been redeemed.
15. DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of the Fund is determined as of the
close of regular trading on the New York Stock Exchange (the "Exchange")
(normally 4:00 p.m., Eastern Time) on each day on which the Exchange is open for
trading. As of the date of this Statement of Additional Information, the
Exchange is open for trading every weekday except for the following holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share of
each class of the Fund is also determined on any other day in which the level of
trading in its portfolio securities is sufficiently high that the current net
asset value per share might be materially affected by changes in the value of
its portfolio securities. The Fund is not required to determine its net asset
value per share on any day in which no purchase orders for the shares of the
Fund become effective and no shares are tendered for redemption.
The net asset value per share of each class of the Fund is computed by taking
the value of all of the Fund's assets attributable to a class, less the Fund's
liabilities attributable to a class, and dividing it by the number of
outstanding shares of the class. For purposes of determining net asset value,
expenses of the classes of the Fund are accrued daily.
Securities that have not traded on the date of valuation or securities for which
sales prices are not generally reported are valued at the mean between the last
bid and asked prices. Securities for which no market quotations are readily
available (excluding those whose trading has been suspended) will be valued at
fair value as determined in good faith by the Board of Trustees, although the
actual computations may be made by persons acting pursuant to the direction of
the Board of Trustees.
The Fund's maximum offering price per Class A share is determined by adding the
maximum sales charge to the net asset value per Class A share. Class B shares
are offered at net asset value without the imposition of an initial sales
charge.
16. INVESTMENT RESULTS
Quotations, Comparisons, and General Information
From time to time, in advertisements, in sales literature, or in reports to
shareholders, the past performance of the Fund may be illustrated and/or
compared with that of other mutual funds with similar investment objectives, and
to stock or other relevant indices. For example, total return of the Fund's
classes may be compared to rankings prepared by Lipper Analytical Services,
Inc., a widely recognized independent service which monitors mutual fund
performance; the Standard & Poor's 500 Stock Index ("S&P 500"), an index of
unmanaged groups of common stock; the Dow Jones Industrial Average, a recognized
unmanaged index of common stocks of 30 industrial companies listed on the New
York Stock Exchange; or The Frank Russell Indexes ("Russell 1000," "2000,"
"2500," "3000,") or the Wilshire Total Market Value Index ("Wilshire 5000"), two
recognized unmanaged indexes of broad based common stocks.
In addition, the performance of the classes of the Fund may be compared to
alternative investment or savings vehicles and/or to indices or indicators of
economic activity, e.g., inflation or interest rates. Performance rankings and
listings reported in newspapers or national business and financial publications,
such as Barron's, Business Week, Consumers Digest, Consumer Reports, Financial
World, Forbes, Fortune, Investors Business Daily, Kiplinger's Personal Finance
Magazine, Money Magazine, New York Times, Smart Money, USA Today, U.S. News and
World Report, The Wall Street Journal, and Worth may also be cited (if the Fund
is listed in any such publication) or used for comparison, as well as
performance listings and rankings from various other sources including Bloomberg
Financial Markets, CDA/Wiesenberger, Donoghue's Mutual Fund Almanac, Investment
Company Data, Inc., Johnson's Charts, Kanon Bloch Carre and Co., Lipper
Analytical Services, Inc., Micropal, Inc., Morningstar, Inc., Schabacker
Investment Management and Towers Data Systems, Inc.
In addition, from time to time, quotations from articles from financial
publications such as those listed above may be used in advertisements in sales
literature, or in reports to shareholders of the Fund.
The Fund may also present, from time to time, historical information depicting
the value of a hypothetical account in one or more classes of the Fund since
such Fund's inception.
In presenting investment results, the Fund may also include references to
certain financial planning concepts, including (a) an investor's need to
evaluate his financial assets and obligations to determine how much to invest;
(b) his need to analyze the objectives of various investments to determine where
to invest; and (c) his need to analyze his time frame for future capital needs
to determine how long to invest. The investor controls these three factors, all
of which affect the use of investments in building assets.
One of the primary methods used to measure the performance of a class of the
Fund is "total return." "Total return" will normally represent the percentage
change in value of an account, or of a hypothetical investment in a class of the
Fund, over any period up to the lifetime of that class of the Fund. Total return
calculations will usually assume the reinvestment of all dividends and capital
gains distributions and will be expressed as a percentage increase or decrease
from an initial value, for the entire period or for one or more specified
periods within the entire period. Total return percentages for periods of less
than one year will usually be annualized; total return percentages for periods
longer than one year will usually be accompanied by total return percentages for
each year within the period and/or by the average annual compounded total return
for the period. The income and capital components of a given return may be
separated and portrayed in a variety of ways in order to illustrate their
relative significance. Performance may also be portrayed in terms of cash or
investment values, without percentages. Past performance cannot guarantee any
particular future result.
The Fund's average annual total return quotations for each of its classes as
that information may appear in the Fund's Prospectus, this Statement of
Additional Information or in advertising are calculated by standard methods
prescribed by the Commission.
Standardized Average Annual Total Return Quotations
Average annual total return quotations for Class A and Class B shares are
computed by finding the average annual compounded rates of return that would
cause a hypothetical investment in the class made on the first day of a
designated period (assuming all dividends and distributions are reinvested) to
equal the ending redeemable value of such hypothetical investment on the last
day of the designated period in accordance with the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000,
less the maximum sales load of $57.50 for
Class A shares or the deduction of the CDSC
for Class B shares at the end of the
period.
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical
$1000 initial payment made at the
beginning of the designated period (or
fractional portion thereof)
For purposes of the above computation, it is assumed that all dividends and
distributions made by the Fund are reinvested at net asset value during the
designated period. The average annual total return quotation is determined to
the nearest 1/100 of 1%.
In determining the average annual total return (calculated as provided above),
recurring fees, if any, that are charged to all shareholder accounts of a
particular class are taken into consideration. For any account fees that vary
with the size of the account, the account fee used for purposes of the above
computation is assumed to be the fee that would be charged to a class's mean
account size.
The total returns for each Class of Fund shares as of May 31, 1997, are as
follows:
Average Total Return (%)*
Life of Fund
Class A Shares -1.26%
Class B Shares 0.73%
*Inception was February 28, 1997.
Automated Information Line
FactFoneSM, Pioneer's 24-hour automated information line, allows shareholders to
dial toll-free 1-800-225-4321 and hear recorded fund information, including:
o net asset value prices for all Pioneer mutual funds;
o annualized 30-day yields on Pioneer's fixed income funds;
o annualized 7-day yields and 7-day effective (compound) yields
for Pioneer Cash Reserves Fund; and
o dividends and capital gains distributions on all Pioneer mutual
funds.
Yields are calculated in accordance with Commission mandated standard formulas.
In addition, by using a personal identification number ("PIN"), shareholders may
enter purchases, exchanges and redemptions, access their account balance and
last three transactions and may order a duplicate statement. See "FactFoneSM" in
the Prospectus for more information.
All performance numbers communicated through FactFoneSM represent past
performance, and figures for all quoted bond funds include the maximum
applicable sales charge. A shareholder's actual yield and total return will vary
with changing market conditions. The value of Class A and Class B shares (except
for Pioneer Cash Reserves Fund, which seeks a stable $1.00 share price) will
also vary, and such shares may be worth more or less at redemption than their
original cost.
17. FINANCIAL STATEMENTS
The Fund's Semi-Annual Report dated May 31, 1997, is attached to and
incorporated by reference into this Statement of Additional Information in
reliance upon the report of Arthur Andersen LLP, independent public accountants,
as experts. Additional copies of the Fund's Semi-Annual Report may be obtained
without charge by calling Shareholder Services at 1-800-225-6292 or by written
request to the Fund at 60 State Street, Boston, Massachusetts 02109.
<PAGE>
APPENDIX A
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
The following securities indices are well-known, unmanaged measures of market
performance. Advertisements and sales literature for the Fund may refer to these
indices or may present comparisons between the performance of the Fund and one
or more of the indices. Other indices may be used, if appropriate. The indices
are not available for direct investment. The data presented is not meant to be
indicative of the performance of the Fund, reflects past performance and does
not guarantee future results.
S&P 500
This index is a readily available, carefully constructed, market value weighted
benchmark of common stock performance. Currently, the S&P Composite Index
includes 500 of the largest stocks (in terms of stock market value) in the U.S.;
prior to March 1957 it consisted of 90 of the largest stocks.
DOW JONES INDUSTRIAL AVERAGE
This is a total return index based on the performance of 30 blue chip stocks.
U.S. SMALL STOCK INDEX
This index is a market value weighted index of the ninth and tenth deciles of
the New York Stock Exchange (NYSE), plus stocks listed on the American Stock
Exchange (AMEX) and over-the-counter (OTC) with the same or less capitalization
as the upper bound of the NYSE ninth decile.
U.S. INFLATION
The Consumer Price Index for All Urban Consumers (CPI-U), not seasonally
adjusted, is used to measure inflation, which is the rate of change of consumer
goods prices. Unfortunately, the inflation rate as derived by the CPI is not
measured over the same period as the other asset returns. All of the security
returns are measured from one month-end to the next month-end. CPI commodity
prices are collected during the month. Thus, measured inflation rates lag the
other series by about one-half month. Prior to January 1978, the CPI (as
compared with CPI-U) was used. Both inflation measures are constructed by the
U.S.
Department of Labor, Bureau of Labor Statistics, Washington, DC.
S&P/BARRA INDEXES
The S&P/BARRA Growth and Value Indexes are constructed by dividing the stocks in
the S&P 500 Index according to price-to-book ratios. The Growth Index contains
stocks with higher price-to-book ratios, and the Value Index contains stocks
with lower price-to-book ratios. Both indexes are market capitalization
weighted.
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
LONG-TERM U.S. GOVERNMENT BONDS
The total returns on long-term government bonds from 1977 to 1991 are
constructed with data from The Wall Street Journal. Over 1926-1976, data are
obtained from the Government bond file at the Center for Research in Security
Prices (CRSP), Graduate School of Business, University of Chicago. Each year, a
one-bond portfolio with a term of approximately 20 years and a reasonably
current coupon was used, and whose returns did not reflect potential tax
benefits, impaired negotiability, or special redemption or call privileges.
Where callable bonds had to be used, the term of the bond was assumed to be a
simple average of the maturity and first call dates minus the current date. The
bond was "held" for the calendar year and returns were computed. Total returns
for 1977-1991 are calculated as the change in the flat price or and-interest
price.
INTERMEDIATE-TERM U.S. GOVERNMENT BONDS
Total returns of the intermediate-term government bonds for 1977-1991 are
calculated from The Wall Street Journal prices, using the change in flat price.
Returns from 1934-1986 are obtained from the CRSP Government Bond File.
Each year, one-bond portfolios are formed, the bond chosen is the shortest
noncallable bond with a maturity not less than 5 years, and this bond is "held"
for the calendar year. Monthly returns are computed. (Bonds with impaired
negotiability or special redemption privileges are omitted, as are partially or
fully tax-exempt bonds starting with 1943.) From 1934-1942, almost all bonds
with maturities near 5 years were partially or full tax-exempt and were selected
using the rules described above. Personal tax rates were generally low in that
period, so that yields on tax-exempt bonds were similar to yields on taxable
bonds. From 1926-1933, there are few bonds suitable for construction of a series
with a 5-year maturity. For this period, five year bond yield estimates are
used.
MSCI
Morgan Stanley Capital International Indices, developed by the Capital
International S.A., are based on share prices of some 1470 companies listed on
the stock exchanges around the world.
Countries in the MSCI EAFE Portfolio are:
Australia; Austria; Belgium; Denmark; Finland; France; Germany; Hong Kong;
Italy; Japan; Netherlands; N. Zealand; Norway;
Singapore/Malaysia; Spain; Sweden; Switzerland; United Kingdom.
Countries in the MSCI Emerging Market Free Index are: Argentina, Brazil, Chile,
China, Czech Republic, Colombia, Greece, Hungary, India, Indonesia, Israel,
Jordan, Korea Free (at 50%), Malaysia, Mexico Free, Pakistan, Peru, Philippines
Free, Poland, Portugal, South Africa, Sri Lanka, Taiwan, Thailand, Turkey,
Venezuela Free
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
6 MONTH CDs
Data sources include the Federal Reserve Bulletin and The Wall Street Journal.
LONG-TERM U.S. CORPORATE BONDS
For 1969-1991, corporate bond total returns are represented by the Salomon
Brothers Long-Term High-Grade Corporate Bond Index. Since most large corporate
bond transactions take place over the counter, a major dealer is the natural
source of these data. The index includes nearly all Aaa- and Aa-rated bonds. If
a bond is downgraded during a particular month, its return for the month is
included in the index before removing the bond from future portfolios.
Over 1926-1968 the total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946-1968, Ibbotson
and Sinquefield backdated the Salomon Brothers' index, using Salomon Brothers'
monthly yield data with a methodology similar to that used by Salomon for
1969-1991. Capital appreciation returns were calculated from yields assuming (at
the beginning of each monthly holding period) a 20-year maturity, a bond price
equal to par, and a coupon equal to the beginning-of-period yield. For the
period 1926-1945, the Standard and Poor's monthly High-Grade Corporate Composite
yield data were used, assuming a 4 percent coupon and a 20-year maturity. The
conventional present-value formula for bond price for the beginning and
end-of-month prices was used. (This formula is presented in Ross, Stephen A.,
and Randolph W. Westerfield, Corporate Finance, Times Mirror/Mosby, St. Louis,
1990, p. 97 ["Level-Coupon Bonds"].) The monthly income return was assumed to be
one-twelfth the coupon.
U.S. (30 DAY) TREASURY BILLS
For the U.S. Treasury bill index, data from The Wall Street Journal are used for
1977-1991; the CRSP U.S. Government Bond File is the source until 1976. Each
month a one-bill portfolio containing the shortest-term bill having not less
than one month to maturity is constructed. (The bill's original term to maturity
is not relevant.) To measure holding period returns for the one-bill portfolio,
the bill is priced as of the last trading day of the previous month-end and as
of the last trading day of the current month.
NAREIT-EQUITY INDEX
All of the data is based upon the last closing price of the month for all
tax-qualified REITs listed on the NYSE, AMSE and the NASDAQ. The data is
market-value-weighted. Prior to 1987 REITs were added to the index the January
following their listing. Since 1987 Newly formed or listed REITs are added to
the total shares outstanding figure in the month that the shares are issued.
Only common shares issued by the REIT are included in the index. The total
return calculation is based upon the weighing at the beginning of the period.
Only those REITs listed for the entire period are
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
used in the total return calculation. Dividends are included in the month based
upon their payment date. There is no smoothing of income. Liquidating dividends,
whether full or partial, are treated as income.
RUSSELL 2000 SMALL STOCK INDEX
Index of the 2,000 smallest stocks in the Russell 3000 Index (TM); the smallest
company has a market capitalization of approximately $13 million. The Russell
3000 is comprised of the 3,000 largest US companies as determined by market
capitalization representing approximately 98% of the US equity market. The
largest company in the index has a market capitalization of $67 billion. The
Russell Indexes (TM) are reconstituted annually as of June 1st, based on May 31
market capitalization rankings.
WILSHIRE REAL ESTATE SECURITIES INDEX
The Wilshire Real Estate Securities Index is a market capitalization-weighted
index which measures the performance of more than 85 securities.
The index contains performance data on five major categories of property;
office, retail, industrial, apartment and miscellaneous. Additionally, the Index
has real estate portfolio encumbered by 16% third party mortgages. The companies
in the WRESEC are 79% equity and hybrid REIT's and 21% real estate operating
companies. The capitalization is 47% NYSE, 33% AMEX and 20% OTC."
STANDARD & POOR'S MIDCAP 400 INDEX
The Standard and Poor's MidCap 400 Index is a market-value-weighted index. The
performance data for the MidCap 400 Index were calculated by taking the stocks
presently in the MidCap 400 Index and tracking them backwards in time as long as
there were prices reported. No attempt was made to determine what stocks "might
have been" in the MidCap 400 Index five or ten years ago had it existed.
Dividends are reinvested on a monthly basis prior to June 30, 1991, and are
reinvested daily thereafter.
The S&P MidCap 400 Index and the S&P 500 together represent approximately 85% of
the total market capitalization of stocks traded in the United States.
LIPPER BALANCED FUNDS INDEX
Equally-weighted performance indices, adjusted for capital gains distributions
and income dividends of approximately 30 of the largest funds with a primary
objective of conserving principal by maintaining at all times a balanced
portfolio of stocks and bonds. Typically, the stock/bond ratio ranges around
60%/40%.
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
BANK SAVINGS ACCOUNT
Data sources include the U.S. League of Savings Institutions Sourcebook; average
annual yield on savings deposits in FSLIC [FDIC] insured savings institutions
for the years 1963-1987 and The Wall Street Journal for the years 1988-1994.
Source: Ibbotson Associates
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Dow S&P/ BARRA S&P/
S&P Jones Industrial U.S. Small 500 Growth BARRA
500 Average Stock Index U. S. 500
Index Inflation Value
- ---------------------------------------------------------------------------------------------------
Dec 1928 43.61 55.38 39.69 -0.97 N/A N/A
Dec 1929 -8.42 -13.64 -51.36 0.20 N/A N/A
Dec 1930 -24.90 -30.22 -38.15 -6.03 N/A N/A
Dec 1931 -43.34 -49.02 -49.75 -9.52 N/A N/A
Dec 1932 -8.19 -16.88 -5.39 -10.30 N/A N/A
Dec 1933 53.99 73.72 142.87 0.51 N/A N/A
Dec 1934 -1.44 8.08 24.22 2.03 N/A N/A
Dec 1935 47.67 43.77 40.19 2.99 N/A N/A
Dec 1936 33.92 30.23 64.80 1.21 N/A N/A
Dec 1937 -35.03 -28.88 -58.01 3.10 N/A N/A
Dec 1938 31.12 33.16 32.80 -2.78 N/A N/A
Dec 1939 -0.41 1.31 0.35 -0.48 N/A N/A
Dec 1940 -9.78 -7.96 -5.16 0.96 N/A N/A
Dec 1941 -11.59 -9.88 -9.00 9.72 N/A N/A
Dec 1942 20.34 14.13 44.51 9.29 N/A N/A
Dec 1943 25.90 19.06 88.37 3.16 N/A N/A
Dec 1944 19.75 17.19 53.72 2.11 N/A N/A
Dec 1945 36.44 31.60 73.61 2.25 N/A N/A
Dec 1946 -8.07 -4.40 -11.63 18.16 N/A N/A
Dec 1947 5.71 7.61 0.92 9.01 N/A N/A
Dec 1948 5.50 4.27 -2.11 2.71 N/A N/A
Dec 1949 18.79 20.92 19.75 -1.80 N/A N/A
Dec 1950 31.71 26.40 38.75 5.79 N/A N/A
Dec 1951 24.02 21.77 7.80 5.87 N/A N/A
Dec 1952 18.37 14.58 3.03 0.88 N/A N/A
Dec 1953 -0.99 2.02 -6.49 0.62 N/A N/A
Dec 1954 52.62 51.25 60.58 -0.50 N/A N/A
Dec 1955 31.56 26.58 20.44 0.37 N/A N/A
Dec 1956 6.56 7.10 4.28 2.86 N/A N/A
Dec 1957 -10.78 -8.63 -14.57 3.02 N/A N/A
Dec 1958 43.36 39.31 64.89 1.76 N/A N/A
Dec 1959 11.96 20.21 16.40 1.50 N/A N/A
Dec 1960 0.47 -6.14 -3.29 1.48 N/A N/A
Dec 1961 26.89 22.60 32.09 0.67 N/A N/A
Dec 1962 -8.73 -7.43 -11.90 1.22 N/A N/A
Dec 1963 22.80 20.83 23.57 1.65 N/A N/A
Dec 1964 16.48 18.85 23.52 1.19 N/A N/A
Dec 1965 12.45 14.39 41.75 1.92 N/A N/A
Dec 1966 -10.06 -15.78 -7.01 3.35 N/A N/A
Dec 1967 23.98 19.16 83.57 3.04 N/A N/A
Dec 1968 11.06 7.93 35.97 4.72 N/A N/A
Dec 1969 -8.50 -11.78 -25.05 6.11 N/A N/A
Dec 1970 4.01 9.21 -17.43 5.49 N/A N/A
Dec 1971 14.31 9.83 16.50 3.36 N/A N/A
Dec 1972 18.98 18.48 4.43 3.41 N/A N/A
Dec 1973 -14.66 -13.28 -30.90 8.80 N/A N/A
Dec 1974 -26.47 -23.58 -19.95 12.20 N/A N/A
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Dow S&P/ BARRA S&P/
S&P Jones Industrial U.S. Small 500 Growth BARRA
500 Average Stock Index U. S. 500
Index Inflation Value
- ---------------------------------------------------------------------------------------------------
Dec 1975 37.20 44.75 52.82 7.01 31.72 43.38
Dec 1976 23.84 22.82 57.38 4.81 13.84 34.93
Dec 1977 -7.18 -12.84 25.38 6.77 -11.82 -2.57
Dec 1978 6.56 2.79 23.46 9.03 6.78 6.16
Dec 1979 18.44 10.55 43.46 13.31 15.72 21.16
Dec 1980 32.42 22.17 39.88 12.40 39.40 23.59
Dec 1981 -4.91 -3.57 13.88 8.94 -9.81 0.02
Dec 1982 21.41 27.11 28.01 3.87 22.03 21.04
Dec 1983 22.51 25.97 39.67 3.80 16.24 28.89
Dec 1984 6.27 1.31 -6.67 3.95 2.33 10.52
Dec 1985 32.16 33.55 24.66 3.77 33.31 29.68
Dec 1986 18.47 27.10 6.85 1.13 14.50 21.67
Dec 1987 5.23 5.48 -9.30 4.41 6.50 3.68
Dec 1988 16.81 16.14 22.87 4.42 11.95 21.67
Dec 1989 31.49 32.19 10.18 4.65 36.40 26.13
Dec 1990 -3.17 -0.56 -21.56 6.11 0.20 -6.85
Dec 1991 30.55 24.19 44.63 3.06 38.37 22.56
Dec 1992 7.67 7.41 23.35 2.90 5.07 10.53
Dec 1993 9.99 16.94 20.98 2.75 1.68 18.60
Dec 1994 1.31 5.06 3.11 2.67 3.13 -0.64
Dec 1995 37.43 36.84 34.46 2.54 38.13 36.99
Dec 1996 23.07 28.84 17.62 3.58 23.96 21.99
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Long- Intermediate- MSCI Long-
Term U.S. Term U.S. EAFE 6 Term U.S. U.S.
Gov't Bonds Government (Net of Month Corporate Bonds T-Bill
Bonds Taxes) CDs (30 Day)
- ------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A
Dec 1926 7.77 5.38 N/A N/A 7.37 3.27
Dec 1927 8.93 4.52 N/A N/A 7.44 3.12
Dec 1928 0.10 0.92 N/A N/A 2.84 3.56
Dec 1929 3.42 6.01 N/A N/A 3.27 4.75
Dec 1930 4.66 6.72 N/A N/A 7.98 2.41
Dec 1931 -5.31 -2.32 N/A N/A -1.85 1.07
Dec 1932 16.84 8.81 N/A N/A 10.82 0.96
Dec 1933 -0.07 1.83 N/A N/A 10.38 0.30
Dec 1934 10.03 9.00 N/A N/A 13.84 0.16
Dec 1935 4.98 7.01 N/A N/A 9.61 0.17
Dec 1936 7.52 3.06 N/A N/A 6.74 0.18
Dec 1937 0.23 1.56 N/A N/A 2.75 0.31
Dec 1938 5.53 6.23 N/A N/A 6.13 -0.02
Dec 1939 5.94 4.52 N/A N/A 3.97 0.02
Dec 1940 6.09 2.96 N/A N/A 3.39 0.00
Dec 1941 0.93 0.50 N/A N/A 2.73 0.06
Dec 1942 3.22 1.94 N/A N/A 2.60 0.27
Dec 1943 2.08 2.81 N/A N/A 2.83 0.35
Dec 1944 2.81 1.80 N/A N/A 4.73 0.33
Dec 1945 10.73 2.22 N/A N/A 4.08 0.33
Dec 1946 -0.10 1.00 N/A N/A 1.72 0.35
Dec 1947 -2.62 0.91 N/A N/A -2.34 0.50
Dec 1948 3.40 1.85 N/A N/A 4.14 0.81
Dec 1949 6.45 2.32 N/A N/A 3.31 1.10
Dec 1950 0.06 0.70 N/A N/A 2.12 1.20
Dec 1951 -3.93 0.36 N/A N/A -2.69 1.49
Dec 1952 1.16 1.63 N/A N/A 3.52 1.66
Dec 1953 3.64 3.23 N/A N/A 3.41 1.82
Dec 1954 7.19 2.68 N/A N/A 5.39 0.86
Dec 1955 -1.29 -0.65 N/A N/A 0.48 1.57
Dec 1956 -5.59 -0.42 N/A N/A -6.81 2.46
Dec 1957 7.46 7.84 N/A N/A 8.71 3.14
Dec 1958 -6.09 -1.29 N/A N/A -2.22 1.54
Dec 1959 -2.26 -0.39 N/A N/A -0.97 2.95
Dec 1960 13.78 11.76 N/A N/A 9.07 2.66
Dec 1961 0.97 1.85 N/A N/A 4.82 2.13
Dec 1962 6.89 5.56 N/A N/A 7.95 2.73
Dec 1963 1.21 1.64 N/A N/A 2.19 3.12
Dec 1964 3.51 4.04 N/A 4.18 4.77 3.54
Dec 1965 0.71 1.02 N/A 4.68 -0.46 3.93
Dec 1966 3.65 4.69 N/A 5.76 0.20 4.76
Dec 1967 -9.18 1.01 N/A 5.48 -4.95 4.21
Dec 1968 -0.26 4.54 N/A 6.44 2.57 5.21
Dec 1969 -5.07 -0.74 N/A 8.71 -8.09 6.58
Dec 1970 12.11 16.86 -11.66 7.06 18.37 6.52
Dec 1971 13.23 8.72 29.59 5.36 11.01 4.39
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Long- Intermediate- MSCI Long-
Term U.S. Term U.S. EAFE 6 Term U.S. U.S.
Gov't Bonds Government (Net of Month Corporate Bonds T-Bill
Bonds Taxes) CDs (30 Day)
- ------------------------------------------------------------------------------------------------------
Dec 1972 5.69 5.16 36.35 5.38 7.26 3.84
Dec 1973 -1.11 4.61 -14.92 8.60 1.14 6.93
Dec 1974 4.35 5.69 -23.16 10.20 -3.06 8.00
Dec 1975 9.20 7.83 35.39 6.51 14.64 5.80
Dec 1976 16.75 12.87 2.54 5.22 18.65 5.08
Dec 1977 -0.69 1.41 18.06 6.11 1.71 5.12
Dec 1978 -1.18 3.49 32.62 10.21 -0.07 7.18
Dec 1979 -1.23 4.09 4.75 11.90 -4.18 10.38
Dec 1980 -3.95 3.91 22.58 12.33 -2.76 11.24
Dec 1981 1.86 9.45 -2.28 15.49 -1.24 14.71
Dec 1982 40.36 29.10 -1.86 12.18 42.56 10.54
Dec 1983 0.65 7.41 23.69 9.65 6.26 8.80
Dec 1984 15.48 14.02 7.38 10.65 16.86 9.85
Dec 1985 30.97 20.33 56.16 7.82 30.09 7.72
Dec 1986 24.53 15.14 69.44 6.30 19.85 6.16
Dec 1987 -2.71 2.90 24.63 6.59 -0.27 5.47
Dec 1988 9.67 6.10 28.27 8.15 10.70 6.35
Dec 1989 18.11 13.29 10.54 8.27 16.23 8.37
Dec 1990 6.18 9.73 -23.45 7.85 6.78 7.81
Dec 1991 19.30 15.46 12.13 4.95 19.89 5.60
Dec 1992 8.05 7.19 -12.17 3.27 9.39 3.51
Dec 1993 18.24 11.24 32.56 2.88 13.19 2.90
Dec 1994 -7.77 -5.14 7.78 5.40 -5.76 3.90
Dec 1995 31.67 16.80 11.21 5.21 27.20 5.60
Dec 1996 -0.93 2.10 6.05 5.21 1.40 5.21
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Lipper MSCI Emerging
Russell 2000 Wilshire Real S&P MidCap Balanced Markets Free Bank
NAREIT-Equity Index Estate 400 Fund Index Savings Account
Securities Index Index
- -----------------------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 N/A N/A N/A N/A N/A N/A N/A
Dec 1927 N/A N/A N/A N/A N/A N/A N/A
Dec 1928 N/A N/A N/A N/A N/A N/A N/A
Dec 1929 N/A N/A N/A N/A N/A N/A N/A
Dec 1930 N/A N/A N/A N/A N/A N/A 5.30
Dec 1931 N/A N/A N/A N/A N/A N/A 5.10
Dec 1932 N/A N/A N/A N/A N/A N/A 4.10
Dec 1933 N/A N/A N/A N/A N/A N/A 3.40
Dec 1934 N/A N/A N/A N/A N/A N/A 3.50
Dec 1935 N/A N/A N/A N/A N/A N/A 3.10
Dec 1936 N/A N/A N/A N/A N/A N/A 3.20
Dec 1937 N/A N/A N/A N/A N/A N/A 3.50
Dec 1938 N/A N/A N/A N/A N/A N/A 3.50
Dec 1939 N/A N/A N/A N/A N/A N/A 3.40
Dec 1940 N/A N/A N/A N/A N/A N/A 3.30
Dec 1941 N/A N/A N/A N/A N/A N/A 3.10
Dec 1942 N/A N/A N/A N/A N/A N/A 3.00
Dec 1943 N/A N/A N/A N/A N/A N/A 2.90
Dec 1944 N/A N/A N/A N/A N/A N/A 2.80
Dec 1945 N/A N/A N/A N/A N/A N/A 2.50
Dec 1946 N/A N/A N/A N/A N/A N/A 2.20
Dec 1947 N/A N/A N/A N/A N/A N/A 2.30
Dec 1948 N/A N/A N/A N/A N/A N/A 2.30
Dec 1949 N/A N/A N/A N/A N/A N/A 2.40
Dec 1950 N/A N/A N/A N/A N/A N/A 2.50
Dec 1951 N/A N/A N/A N/A N/A N/A 2.60
Dec 1952 N/A N/A N/A N/A N/A N/A 2.70
Dec 1953 N/A N/A N/A N/A N/A N/A 2.80
Dec 1954 N/A N/A N/A N/A N/A N/A 2.90
Dec 1955 N/A N/A N/A N/A N/A N/A 2.90
Dec 1956 N/A N/A N/A N/A N/A N/A 3.00
Dec 1957 N/A N/A N/A N/A N/A N/A 3.30
Dec 1958 N/A N/A N/A N/A N/A N/A 3.38
Dec 1959 N/A N/A N/A N/A N/A N/A 3.53
Dec 1960 N/A N/A N/A N/A 5.77 N/A 3.86
Dec 1961 N/A N/A N/A N/A 20.59 N/A 3.90
Dec 1962 N/A N/A N/A N/A -6.80 N/A 4.08
Dec 1963 N/A N/A N/A N/A 13.10 N/A 4.17
Dec 1964 N/A N/A N/A N/A 12.36 N/A 4.19
Dec 1965 N/A N/A N/A N/A 9.80 N/A 4.23
Dec 1966 N/A N/A N/A N/A -5.86 N/A 4.45
Dec 1967 N/A N/A N/A N/A 15.09 N/A 4.67
Dec 1968 N/A N/A N/A N/A 13.97 N/A 4.68
Dec 1969 N/A N/A N/A N/A -9.01 N/A 4.80
Dec 1970 N/A N/A N/A N/A 5.62 N/A 5.14
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Lipper MSCI Emerging
Russell 2000 Wilshire Real S&P MidCap Balanced Markets Free Bank
NAREIT-Equity Index Estate 400 Fund Index Savings Account
Securities Index Index
- -----------------------------------------------------------------------------------------------------------------------
Dec 1971 N/A N/A N/A N/A 13.90 N/A 5.30
Dec 1972 8.01 N/A N/A N/A 11.13 N/A 5.37
Dec 1973 -15.52 N/A N/A N/A -12.24 N/A 5.51
Dec 1974 -21.40 N/A N/A N/A -18.71 N/A 5.96
Dec 1975 19.30 N/A N/A N/A 27.10 N/A 6.21
Dec 1976 47.59 N/A N/A N/A 26.03 N/A 6.23
Dec 1977 22.42 N/A N/A N/A -0.72 N/A 6.39
Dec 1978 10.34 N/A 13.04 N/A 4.80 N/A 6.56
Dec 1979 35.86 43.09 70.81 N/A 14.67 N/A 7.29
Dec 1980 24.37 38.58 22.08 N/A 19.70 N/A 8.78
Dec 1981 6.00 2.03 7.18 N/A 1.86 N/A 10.71
Dec 1982 21.60 24.95 24.47 22.68 30.63 N/A 11.19
Dec 1983 30.64 29.13 27.61 26.10 17.44 N/A 9.71
Dec 1984 20.93 -7.30 20.64 1.18 7.46 N/A 9.92
Dec 1985 19.10 31.05 22.20 35.58 29.83 N/A 9.02
Dec 1986 19.16 5.68 20.30 16.21 18.43 N/A 7.84
Dec 1987 -3.64 -8.77 -7.86 -2.03 4.13 N/A 6.92
Dec 1988 13.49 24.89 24.18 20.87 11.18 40.43 7.20
Dec 1989 8.84 16.24 2.37 35.54 19.70 64.96 7.91
Dec 1990 -15.35 -19.51 -33.46 -5.12 0.66 10.55 7.80
Dec 1991 35.70 46.05 20.03 50.10 25.83 59.91 4.61
Dec 1992 14.59 18.41 7.36 11.91 7.46 11.40 2.89
Dec 1993 19.65 18.91 15.24 13.96 11.95 74.83 2.73
Dec 1994 3.17 -1.82 1.64 -3.57 -2.05 7.32 4.96
Dec 1995 15.27 28.44 13.65 30.94 24.89 5.21 5.24
Dec 1996 35.26 16.53 36.87 19.20 13.01 6.03 4.95
Source: Lipper
</TABLE>
<PAGE>
APPENDIX B
Additional Pioneer Information
The Pioneer group of mutual funds was established in 1928 with the
creation of Pioneer Fund. Pioneer is one of the oldest and most experienced
money managers in the United States.
As of December 31, 1996, PMC employed a professional investment staff
of 53, with a combined average of twelve years' experience in the financial
services industry.
Total assets of all Pioneer mutual funds at December 31, 1996, were
approximately $15.8 billion representing 1,086,554 shareholder accounts, 722,661
non-retirement accounts and 363,893 retirement accounts.
