Pioneer
Independence
Plans
PROSPECTUS
MARCH 16, 1998
(AS REVISED MAY 20, 1998)
PIONEER INDEPENDENCE PLANS (the "Plans") for the accumulation of shares
of Pioneer Independence Fund (the "Fund") are offered by Pioneer Funds
Distributor, Inc., the sponsor and principal underwriter ("Sponsor"). Under a
Plan, an investor (the "Planholder") makes fixed monthly investments for 15
years (a total of 180 investments), with the option to make additional monthly
investments for up to a total of 25 years (a total of 300 investments). The
Plans are designed to help investors create an investment fund for future
capital or income needs and build equity over a period of years by
systematically investing a modest sum each month in shares of a mutual fund.
Investments under a Plan are applied, after authorized deductions, to
the purchase of Fund shares at net asset value. A Plan should be considered a
long-term investment and is not suitable for investors seeking quick profits or
who might be unable to complete a Plan. A front-end sales load, the "Creation
and Sales Charge," is deducted from the first 12 investments. Because of the
Creation and Sales Charge, withdrawal of an investment or termination of a Plan
during the period in which the first 12 investments in a Plan are made will
probably result in a loss to the investor.
The value of a Plan is subject to fluctuations in the value of the
shares of the Fund, which in turn is based upon the value of the securities in
its portfolio. The Fund's investment results will vary depending on the
composition of its portfolio, market conditions and the Fund's operating
expenses. See "Investment Objective and Policies" in the Fund's Prospectus. A
Plan calls for monthly investments at regular intervals regardless of the
price level of the Fund shares. Planholders should therefore consider their
financial ability to continue investments in a Plan. Terminating a Plan at a
time when the value of the Fund shares then held is less than the Planholder's
cost associated with a Plan will result in a loss to the Planholder.
FUND RETURNS AND SHARE PRICES FLUCTUATE AND THE VALUE OF YOUR FUND SHARES
UPON REDEMPTION MAY BE MORE OR LESS THAN YOUR PURCHASE PRICE. SHARES IN THE FUND
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR
OTHER DEPOSITORY INSTITUTION, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
SHARES OF THE FUND ARE OFFERED TO THE GENERAL PUBLIC ONLY THROUGH THE
PLANS.
A PLANHOLDER HAS THE RIGHT TO A 45-DAY REFUND OF THE VALUE OF HIS OR HER
INVESTMENT, AS WELL AS CERTAIN OTHER LIMITED REFUND RIGHTS FOR CERTAIN PERIODS
OF TIME AND UNDER THE CONDITIONS DESCRIBED IN MORE DETAIL UNDER "CANCELLATION
AND REFUND RIGHTS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED BY THE CURRENT PROSPECTUS
OF THE FUND, WHICH CONTAINS A DESCRIPTION OF THE FUND. BOTH PROSPECTUSES SHOULD
BE READ AND RETAINED FOR FUTURE REFERENCE.
<PAGE>
TABLE OF CONTENTS PAGE
- --------------------------------------------------------------------------------
I. PIONEER INDEPENDENCE PLANS -- HELPING PLANHOLDERS MEET THEIR
INVESTMENT OBJECTIVES...................................................3
II. PLAN INVESTMENTS AND DEDUCTIONS.........................................3
III. 15-YEAR PLAN INVESTMENTS AND DEDUCTIONS.................................4
IV. TOTAL 25-YEAR PLAN INVESTMENTS AND DEDUCTIONS WHEN EXTENDED
INVESTMENT OPTION IS USED...............................................4
V. A TYPICAL $100 MONTHLY INVESTMENT SCHEDULE..............................5
VI. INVESTMENT OBJECTIVE OF THE FUND........................................5
VII. STARTING A PIONEER INDEPENDENCE PLAN....................................5
VIII. CREATION AND SALES CHARGES..............................................5
IX. RIGHTS AND PRIVILEGES OF PLANHOLDERS....................................6
Automatic Investment Option........................................6
Planholders May Qualify for Reduced Sales Charges..................6
Making Investments Ahead of Schedule to Complete a Plan Early......6
Changing the Face Amount of Your Plan..............................6
Partial withdrawal or Redemption Without Termination of the Plan...7
Replacements of Partial Withdrawals................................8
Extended Investment Option.........................................8
Systematic Withdrawal Program......................................8
Cancellation and Refund Rights.....................................8
Termination of a Plan by the Planholder and Withdrawal of Shares...9
Replacement Privilege on Termination...............................9
Dividends and Distributions........................................9
Voting Rights in Fund Shares......................................10
Transfer or Assignment of Rights in a Plan........................10
Statements, Reports and Notices...................................10
X. TERMINATION OF A PLAN BY THE SPONSOR OR CUSTODIAN......................10
XI. SERVICE CHARGES AND OTHER FEES.........................................10
XII. TAXES..................................................................11
XIII. THE FUND...............................................................11
XIV. SUBSTITUTION OF THE UNDERLYING INVESTMENT..............................11
XV. RETIREMENT PLANS.......................................................12
XVI. THE SPONSOR............................................................12
XVII. THE CUSTODIAN..........................................................13
XVIII. PIONEER INDEPENDENCE PLANS.............................................13
XIX. FINANCIAL STATEMENTS...................................................14
Pioneer Independence Plans........................................14
Pioneer Funds Distributor, Inc....................................16
2
<PAGE>
I. PIONEER INDEPENDENCE PLANS -- HELPING PLANHOLDERS MEET THEIR INVESTMENT
OBJECTIVES
Many people who desire to accumulate an investment portfolio for their
future through a planned long-range investment program find it difficult to
accumulate enough money to efficiently purchase stocks directly. The Plans are
designed to help investors create an investment fund for future capital or
income needs and build equity over a period of years by systematically investing
a modest sum each month in shares of a mutual fund.
The value of a Plan is subject to fluctuations in the value of the
securities in the underlying Fund's portfolio. The Planholder makes monthly Plan
investments at regular intervals regardless of the price level of the shares of
the Fund. Planholders should consider, therefore, their financial ability to
initiate and continue a Plan. Ownership of a Plan does not eliminate the risk
inherent in the ownership of any security. Terminating a Plan at a time when the
value of acquired Fund shares held in the Plan is less than the Planholder's
original cost for Fund shares held under the Plan will result in a loss to the
Planholder.
An investor should consider the following aspects of the Plan before
making an investment:
1. A Plan represents an agreement between the Planholder, the Sponsor,
and State Street Bank and Trust Company (the "Custodian") under which
amounts invested (after deduction of Creation and Sales Charges and
other fees) are used to purchase shares of the Fund at net asset
value.
2. Each Plan includes a Creation and Sales Charge, which is sometimes
called a "front-end load" sales charge, equal to a maximum of 50% of
the first 12 investments. The effect of a front-end load is that if
you terminate your Plan between the second and eighteenth month, total
deductions may amount to as much as 15% of your total Plan investments
made up to that date and as much as 31.6% after 18 months. However,
the maximum Creation and Sales Charge for a 15-year Plan is only 3.33%
when expressed as a percentage of the total Plan investments.
Accordingly, a Plan is not suited for short-term investments. See
"Creation and Sales Charges."
3. Investments under a Plan will not constitute direct ownership of Fund
shares, but rather an interest in a trust which will have direct
ownership of the Fund's shares on behalf of each Planholder.
Planholders have only a beneficial interest in the underlying shares
of the Fund. A Planholder will, however, retain full voting rights
with respect to such underlying shares of the Fund. The Custodian will
vote the shares held for Planholders' accounts in accordance with
their instructions.
4. A Plan may be terminated by the Custodian or Sponsor if a
Planholder fails to make investments under his or her Plan for a
period of 12 consecutive months or if Fund shares are not available
and a substitution is not made. See "Termination of a Plan by the
Sponsor or Custodian." Planholders must be notified of any
substitution of the Plan's underlying investment. See "Substitution of
the Underlying Investment."
5. The dealer firm of record has proprietary rights to all commissions,
including any service fees, earned from the Sponsor during the
duration of your Plan. The dealer firm of record is under no
obligation to transfer your Plan to another dealer firm as long
as its dealer agreement with the Sponsor is still in effect;
thus, a new dealer engaged by a Planholder may have no direct
incentive to provide services with respect to the Plan. If the
dealer firm of record chooses to release a Plan to a new dealer
firm, the new dealer firm must first complete, sign and signature
guarantee a release form that can be obtained from the Sponsor.
The form must be returned to and accepted by the Custodian.
6. The Sponsor is not required to notify Planholders or seek their
approval prior to replacing the Custodian. The terms of the
Custodian Agreement, however, cannot be amended to adversely
affect the rights and privileges of a Planholder without
obtaining his or her written consent.
II. PLAN INVESTMENTS AND DEDUCTIONS
The following tables show the range of available monthly Plan
investments to be made, total Plan investments (known as the "face amount" of
the Plan) to be made and the Creation and Sales Charges that will be charged on
each monthly Plan investment. The total charges as a percentage of the total
amount invested under a Plan and as a percentage of the net amount invested are
also shown. This information is based solely on investments made under a Plan
and does not reflect any investment experience, dividend or income from the Fund
over the period of a Plan, or expenses of the Fund or any other charges.
The Creation and Sales Charges reflected below are specified under the
Plans and may not be increased. The Fund also incurs expenses as described under
"The Fund." Fund expenses are not specified under the terms of the Plans and may
vary from year to year.
3
<PAGE>
<TABLE>
<CAPTION>
III. 15-YEAR PLAN INVESTMENTS AND DEDUCTIONS
CREATION AND SALES CHARGE
----------------------------------------------------------
PER TO NET
MONTHLY PER INVEST- TOTAL TO INVEST- MONTHLY
PLAN TOTAL INVEST- MENT SALES TOTAL MENT PLAN
INVEST- INVEST- MENT 13 THRU CHARGE INVEST- IN INVEST-
MENT MENT 1 THRU 12 180 (A) MENT SHARES MENT
- ---------- ------------- --------- -------- ------------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 50.00 $ 9,000.00 $ 25.00 $0 $ 300.00 3.33% 3.45% $ 50.00
75.00 13,500.00 37.50 0 450.00 3.33% 3.45% 75.00
100.00 18,000.00 50.00 0 600.00 3.33% 3.45% 100.00
125.00 22,500.00 62.50 0 750.00 3.33% 3.45% 125.00
150.00 27,000.00 75.00 0 900.00 3.33% 3.45% 150.00
166.66 29,998.80 83.33 0 999.96 3.33% 3.45% 166.66
200.00 36,000.00 100.00 0 1,200.00 3.33% 3.45% 200.00
250.00 45,000.00 125.00 0 1,500.00 3.33% 3.45% 250.00
300.00 54,000.00 150.00 0 1,800.00 3.33% 3.45% 300.00
350.00 63,000.00 175.00 0 2,100.00 3.33% 3.45% 350.00
400.00 72,000.00 200.00 0 2,400.00 3.33% 3.45% 400.00
450.00 81,000.00 225.00 0 2,700.00 3.33% 3.45% 450.00
500.00 90,000.00 250.00 0 3,000.00 3.33% 3.45% 500.00
600.00 108,000.00 300.00 0 3,600.00 3.33% 3.45% 600.00
700.00 126,000.00 350.00 0 4,200.00 3.33% 3.45% 700.00
800.00 144,000.00 400.00 0 4,800.00 3.33% 3.45% 800.00
900.00 162,000.00 450.00 0 5,400.00 3.33% 3.45% 900.00
1,000.00 180,000.00 500.00 0 6,000.00 3.33% 3.45% 1,000.00
1,250.00 225,000.00 625.00 0 7,500.00 3.33% 3.45% 1,250.00
1,500.00 270,000.00 675.00 0 8,100.00 3.00% 3.09% 1,500.00
1,750.00 315,000.00 700.00 0 8,400.00 2.67% 2.74% 1,750.00
2,000.00 360,000.00 750.00 0 9,000.00 2.50% 2.56% 2,000.00
2,500.00 450,000.00 812.50 0 9,750.00 2.17% 2.21% 2,500.00
5,000.00 900,000.00 1,250.00 0 15,000.00 1.67% 1.69% 5,000.00
10,000.00 1,800,000.00 1,500.00 0 18,000.00 1.00% 1.01% 10,000.00
</TABLE>
(A) Does not include an annual distribution and service fee paid by the Fund of
up to 0.25% based on the Fund's average daily net assets. See "Distribution
Plan" in the Fund's Prospectus.
<TABLE>
<CAPTION>
IV. TOTAL 25-YEAR PLAN INVESTMENTS AND DEDUCTIONS WHEN
EXTENDED INVESTMENT OPTION IS USED
CREATION AND SALES CHARGE
-------------------------------------------------------
PER TO NET
MONTHLY PER INVEST- TOTAL TO INVEST- MONTHLY
PLAN TOTAL INVEST- MENT SALES TOTAL MENT PLAN
INVEST- INVEST- MENT 13 THRU CHARGE INVEST- IN INVEST-
MENT MENT 1 THRU 12 300 (A) MENT SHARES MENT
- ---------- ------------- --------- -------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 50.00 $ 15,000.00 $ 25.00 $0 $ 300.00 2.00% 2.04% $ 50.00
75.00 22,500.00 37.50 0 450.00 2.00% 2.04% 75.00
100.00 30,000.00 50.00 0 600.00 2.00% 2.04% 100.00
125.00 37,500.00 62.50 0 750.00 2.00% 2.04% 125.00
150.00 45,000.00 75.00 0 900.00 2.00% 2.04% 150.00
166.66 49,998.00 83.33 0 999.96 2.00% 2.04% 166.66
200.00 60,000.00 100.00 0 1,200.00 2.00% 2.04% 200.00
250.00 75,000.00 125.00 0 1,500.00 2.00% 2.04% 250.00
300.00 90,000.00 150.00 0 1,800.00 2.00% 2.04% 300.00
350.00 105,000.00 175.00 0 2,100.00 2.00% 2.04% 350.00
400.00 120,000.00 200.00 0 2,400.00 2.00% 2.04% 400.00
450.00 135,000.00 225.00 0 2,700.00 2.00% 2.04% 450.00
500.00 150,000.00 250.00 0 3,000.00 2.00% 2.04% 500.00
600.00 180,000.00 300.00 0 3,600.00 2.00% 2.04% 600.00
700.00 210,000.00 350.00 0 4,200.00 2.00% 2.04% 700.00
800.00 240,000.00 400.00 0 4,800.00 2.00% 2.04% 800.00
900.00 270,000.00 450.00 0 5,400.00 2.00% 2.04% 900.00
1,000.00 300,000.00 500.00 0 6,000.00 2.00% 2.04% 1,000.00
1,250.00 375,000.00 625.00 0 7,500.00 2.00% 2.04% 1,250.00
1,500.00 450,000.00 675.00 0 8,100.00 1.80% 1.83% 1,500.00
1,750.00 525,000.00 700.00 0 8,400.00 1.60% 1.63% 1,750.00
2,000.00 600,000.00 750.00 0 9,000.00 1.50% 1.52% 2,000.00
2,500.00 750,000.00 812.50 0 9,750.00 1.30% 1.32% 2,500.00
5,000.00 1,500,000.00 1,250.00 0 15,000.00 1.00% 1.01% 5,000.00
10,000.00 3,000,000.00 1,500,00 0 18,000.00 0.60% 0.60% 10,000.00
</TABLE>
(A) Does not include an annual distribution and service fee paid by the Fund of
up to 0.25% based on the Fund's average daily net assets. See "Distribution
Plan" in the Fund's Prospectus.
4
<PAGE>
V. A TYPICAL $100 MONTHLY INVESTMENT PLAN
(Assuming that all investments are made in accordance
with the terms of Pioneer Independence Plans)
<TABLE>
<CAPTION>
AT THE END OF AT THE END OF AT THE END OF
AGGREGATE 6 MONTHS 1 YEAR 2 YEARS
AMOUNT (6 INVESTMENTS) (12 INVESTMENTS) (24 INVESTMENTS)
----------------------- ------------------------- ------------------------ ------------------------
% % % %
of Total of Total of Total of Total
Amount Investment Amount Investment Amount Investment Amount Investment
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
15 YEARS
(180 INVESTMENTS)
Total Investments $18,000 100.00% $600 100% $1,200 100% $2,400 100%
Deduct:
Creation and
Sales Charge $600 3.33% $300 50% $600 50% $600 25%
Net Amount Invested
in a Plan $17,400 96.67% $300 50% $600 50% $1,800 75%
25 YEARS
(300 INVESTMENTS)
Total Investments $30,000 100.00% $600 100% $1,200 100% $2,400 100%
Deduct:
Creation and
Sales Charge $600 2.00% $300 50% $600 50% $600 25%
Net Amount Invested
in a Plan $29,400 98.00% $300 50% $600 50% $1,800 75%
</TABLE>
(1) Dividends and distributions received on Fund shares, during the periods
shown, have not been included or reflected in any way in the foregoing
figures.
(2) The 25-year investment schedule reflects the charges applicable to a
15-year Plan which is continued under the extended investment option.
FUND ANNUAL EXPENSES (AFTER EXPENSE LIMITATION)
(as a percentage of the Fund's average daily net assets)
Management Fee (after fee waiver). . . . . . 0.00%
12b-1 Fee . . . . . . . . . . . . . . . . . 0.25%
Other Expenses (estimated) . . . . . . . 1.25%
----
Total Expenses (after fee waiver) . . . . . 1.50%
====
Pioneering Management Corporation, the Fund's investment adviser, has
agreed not to impose all or a portion of its management fee and to make other
arrangements, if necessary, to limit the operating expenses of the Fund to 1.50%
of the Fund's average daily net assets. Absent the fee waiver, management fee
and total expenses would be 0.75% and 2.20%, respectively. This agreement is
voluntary and temporary and may be revised or terminated at any time after the
expiration of the 1998 fiscal year. For a discussion of Fund expenses, refer to
"Expense Information" and "Management of the Fund" in the Fund's Prospectus.
VI. INVESTMENT OBJECTIVE OF THE FUND
Pioneer Independence Fund ("the Fund") is an open-end management
investment company. The Fund seeks growth of capital. The Fund will invest in
a diversified portfolio of securities consisting primarily of common stocks. For
more information about the Fund, including charges and expenses, see the
attached Fund Prospectus. Read it carefully before you invest or send money.
Fund returns and share prices fluctuate and, upon redemption, the value of the
Fund shares held in a Plan may be more or less than the purchase price. The past
performance of an investment does not guarantee future results.
VII. STARTING A PIONEER INDEPENDENCE PLAN
To start a Plan, complete the attached Plan Application indicating the
monthly Plan investment amount for your Plan. Because a Plan is specifically
designed for regular monthly investing, you are encouraged to invest through an
automatic investment option such as military government allotment or a
preauthorized check transaction (a "PACT").
To elect an automatic investment option complete the required forms and
have your investment dealer forward them to the Custodian. See "Automatic
Investment Option."
To invest by check, have your investment dealer send your check to the
Custodian with your Plan Application. Write your check for the amount of your
initial monthly Plan investment and make it payable to State Street Bank and
Trust Company. As described in "Service Charges and Other Fees," a separate
processing fee may be charged for each investment made by check.
After your Plan Application is accepted by the Custodian and your initial
investment is received, you will receive a confirmation statement showing the
number of whole and fractional shares of the Fund purchased for your Plan. After
the initial investment, Planholders should send regularly scheduled monthly Plan
investments, made payable to State Street Bank and Trust Company, directly to
the Custodian. Each monthly Plan investment, after applicable deductions, will
be applied to the purchase of Fund shares at the then current net asset value.
If the Custodian does not receive monthly Plan investments for a period of 12
consecutive months, then the Sponsor or Custodian may terminate your Plan as
described under "Termination of a Plan by the Sponsor or Custodian."
A Planholder may terminate a Plan completely or partially at any time as
described on pages 7 and 9. Any correspondence regarding your Plan should be
addressed to your investment dealer or to Boston Financial Data Services, P.O.
Box 8300, Boston, Massachusetts 02266-8300.
VIII. CREATION AND SALES CHARGES
The Sponsor receives a Creation and Sales Charge as compensation for
its services and costs in creating the Plans and arranging for their
administration, for making the Fund shares available to Planholders at
their net asset value and for certain selling expenses and commissions with
respect to the Plans. These charges are deducted from each of the first 12
monthly Plan investments. For example, on a $100 a
5
<PAGE>
month Plan, $50 is deducted from each of the first 12 monthly Plan investments.
After the 12th investment, Creation and Sales Charges no longer apply to
subsequent monthly investments. Deductions will decrease proportionately on
certain larger Plans. See "Plan Investments and Deductions."
IX. RIGHTS AND PRIVILEGES OF PLANHOLDERS
A Plan is established in the name of the Planholder at the time of
issuance and constitutes an individual agreement among the Planholder, the
Sponsor and the Custodian. No agent or other person has the authority to modify,
alter or otherwise change the terms of the Plan or to bind the Sponsor, the
Custodian or the issuer of Fund shares by any statement, written or oral, not
contained in this Prospectus. Under the terms of a Plan, Planholders enjoy
certain rights, privileges and options which are described as follows.
AUTOMATIC INVESTMENT OPTION
If a Planholder wishes to have investments in a Plan made automatically
each month without having to write a check and mail it to the Custodian, the
Planholder may elect an automatic investment option for the Plan. Each Plan for
which an automatic investment option has been elected is funded automatically
each month through the Planholder's bank account, PACT or, for U.S. military
personnel, a government allotment. To initiate an automatic investment option,
the Planholder should complete the appropriate forms and forward them to the
Custodian. A request to terminate a PACT must be received by the Custodian at
least 15 days prior to the date of the next scheduled monthly Plan investment.
PLANHOLDERS MAY QUALIFY FOR REDUCED SALES CHARGES
To qualify for reduced Creation and Sales Charges, the Planholder must
submit a written request that the face amounts of existing Plans and/or the then
current net asset value of other Pioneer mutual fund accounts be combined with
the face amounts indicated on any new Plan applications for the purpose of
determining the applicable Creation and Sales Charge for the new Plan(s).
PURCHASING TWO OR MORE PLANS. The face amounts of two or more Plans
purchased at one time by "any person" (see below) may be combined to take
advantage of the lower Creation and Sales Charges available on larger sized
Plans. Creation and Sales Charges will be determined by the face amounts of the
Plans selected.
The term "any person" includes:
[bullet] an individual, his or her spouse and their children under the
age of 21 and their grandchildren under age 21 who are
beneficiaries of a Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act account in which the Planholder serves as
custodian, or
[bullet] a trustee or other fiduciary of a single trust estate or single
fiduciary account (including a pension, profit-sharing or other
employee benefit trust created pursuant to a plan qualified
under Section 401 of the Internal Revenue Code of 1986, as
amended (the "Code")).
RIGHTS OF ACCUMULATION. When purchasing any new Plan(s) or increasing the
face amount of any existing Plan(s), a right of accumulation may exist. If such
Plans are registered in the name of "any person" (see above), the Plans may
qualify for a reduced Creation and Sales Charge on the new Plan by combining the
face amount of the new Plan with the face amount(s) of any existing Plan(s) on
which investments due are current (see below) and/or with the current value of
shares owned in certain other Pioneer mutual funds for which Pioneering
Management Corporation or an affiliate is the investment manager.
The new Plan includes the total face amounts of any new Plans plus the face
amounts of Plans on which an increase in monthly investments is requested. For
rights of accumulation, a Plan is considered to be current if: (1) it has been
completed and not redeemed; (2) it has not been completed but has at least as
many investments recorded as there are months elapsed since the establishment
date or since a Plan face amount increase date; or (3) the Planholder is a tax-
qualified plan or an individual retirement account ("IRA").
MAKING INVESTMENTS AHEAD OF SCHEDULE TO COMPLETE A PLAN EARLY
A Planholder normally makes 12 scheduled investments each calendar year.
A Planholder who wishes to complete his or her Plan ahead of schedule may make
up to 36 monthly Plan investments in advance of their normal due date during the
life of his or her Plan. Normally, no more than 24 investments may be made in
any one calendar year ( including the current investment ). Monthly Plan
investments may be accrued and periodically paid in a lump sum to make a Plan
that is in arrears current (see "Planholders May Qualify for Reduced Sales
Charges"). These prepayment rules may be waived for a transfer or rollover of an
IRA into a Plan or in the event of the death of the Planholder. There is no
reduction in the Creation and Sales Charge for advance investments.
CHANGING THE FACE AMOUNT OF YOUR PLAN
The face amount of a Plan is the total value of the monthly Plan
investments scheduled by the Planholder to be made in his or her Plan. The range
of face amounts offered is listed under "Plan Investments and Deductions."
Increases and decreases in face amount can be made by a written notice to the
Custodian, accompanied by a new completed Plan Application. A Planholder may
change the face amount of a Plan under the following circumstances.
A Planholder may increase the face amount of his or her Plan at any
time, provided the new face amount is a face amount offered by the Sponsor. An
increase in the face amount of a Plan does not create new cancellation and
refund rights as to the new Plan that is created.
A Planholder may decrease the face amount of his or her Plan by 50% within
12 investments of the commencement of a Plan. If a decrease is to occur on an
existing Plan that previously has been increased, the decrease cannot result in
a new face amount lower than that of the original Plan.
For each face amount change, the Creation and Sales Charge already paid
on the existing Plan will be recomputed to reflect the new Plan face amount. The
Creation and Sales Charges already paid on the existing Plan will be credited to
the Creation and Sales Charge applicable to the new face
6
<PAGE>
amount. Excess Creation and Sales Charges under a Plan will be invested
directly in Fund shares for the Planholder at the net asset value as of the day
the change occurs. Any additional Creation and Sales Charges due under a Plan
will be assessed on the next 12 monthly Plan investments.
PARTIAL WITHDRAWAL OR REDEMPTION WITHOUT TERMINATION OF THE PLAN
A Planholder may request a partial withdrawal or redemption of his or
her Fund shares without terminating the Plan, only if the Planholder has owned
his or her Plan for at least 45 days. Withdrawal or redemption of all of a
Planholder's Fund shares will normally result in termination of the Plan.
For Plans that have been owned for at least 45 days, the Planholder may
elect to withdraw up to 90% of the underlying Fund shares from his or her Plan
(and hold such Fund shares directly) or may direct the Custodian, as the
Planholder's agent, to withdraw and then redeem up to 90% of the Planholder's
Fund shares and pay the proceeds to the Planholder. Requests under this
privilege that exceed 90% of the net asset value of the Fund shares in the
Planholder's account may result in full redemption of the entire balance in the
Plan.
A request for a partial withdrawal or redemption may be made in writing
or by telephone. While there is currently no limit to the number of partial
withdrawals or redemptions that can be made by a Planholder, each partial
withdrawal or redemption must be at least $100. Shares are withdrawn or redeemed
at their net asset value next determined after a request in proper form
(including signature guarantees and other documentation, if applicable) is
received by the Custodian. Requests received in proper form prior to the close
of the New York Stock Exchange (the "Exchange") on any business day of the Fund
will be confirmed at the price determined as of the close of that day. No
partial withdrawal or redemption shall affect the total number of monthly Plan
investments to be made or the unpaid balance of monthly Plan investments. As
discussed under "Taxes," there may be federal income tax consequences upon a
partial redemption of Fund shares.
WRITTEN REQUESTS. Written requests must be signed by all registered
Planholders and should be sent to the Custodian. Redemption proceeds will be
mailed to the address of record unless instructions to the contrary are received
with the Planholders' signatures guaranteed. In the case of a cash withdrawal (a
redemption), the Custodian or Sponsor may require additional documentation.
If a cash withdrawal is: (a) more than $100,000, (b) made payable to an
individual other than the Planholder of record, or (c) to be sent to an address
other than the address of record, a letter of instruction will be required,
signed by all Planholders with signatures guaranteed in a form acceptable to the
Custodian. A Planholder should be able to obtain an acceptable signature
guarantee from a bank, broker, dealer, credit union (if authorized under state
law), securities exchange or association, clearing agency or savings
association. Signature guarantees are not accepted by facsimile. A notarized
signature will not be sufficient for the request to be in proper order. A
signature guarantee is not required for cash withdrawals of $100,000 or less, if
requested by and payable to all Planholders of record, and to be sent to the
address of record for that Plan account. However, the Sponsor reserves the right
to require signature guarantees on all redemptions. A signature guarantee is
required in connection with most requests for transfer of Plan ownership. Also,
a signature guarantee is required if the Sponsor or the Custodian, in the sole
discretion of either, believes that a signature guarantee is warranted. All
documents must be in proper order before any withdrawals or redemptions can be
executed.
TELEPHONE REQUESTS. Telephone withdrawals and redemptions by
Planholders will automatically be authorized for each Plan (except Plans
established as retirement accounts) unless the Planholder indicates otherwise on
his or her Plan Application. For personal assistance, call the Custodian at
1-800-765-9565 between 8 a.m. and 6 p.m. Eastern time on weekdays. YOU ARE
STRONGLY URGED TO CONSULT WITH YOUR FINANCIAL REPRESENTATIVE PRIOR TO REQUESTING
ANY TELEPHONE TRANSACTION, AS THERE MAY BE TAX CONSEQUENCES AND/OR PENALTIES.
A cash withdrawal can be made as a telephone transaction only if: (1)
the proceeds are made payable to the Planholder(s) of record and mailed to the
address of record; (2) there has been no change in the address of record on the
Plan within the preceding 30 days; (3) the person requesting the withdrawal can
provide proper identification information; and (4) the proceeds do not exceed
$100,000. The cancellation and refund rights set forth on page 8 of this
Prospectus may not be exercised by telephone. No telephone transaction request
will be accepted which specifies a particular transaction date or any other
special conditions.
The Sponsor has made arrangements with certain dealers to accept
telephone transaction instructions from the dealer on behalf of Plans for which
the dealer is the firm of record. The Sponsor reserves the right to impose
conditions on these dealers, including the condition that they enter into
agreements (which contain additional conditions with respect to effecting
telephone transactions) with the Sponsor. Any resulting loss from the dealer's
failure to submit a telephone transaction within the prescribed time frame will
be borne by that dealer.
To confirm that each transaction instruction received by telephone is
genuine, the Custodian will record each telephone transaction, require the
caller to provide proper personal identification information and send the
Planholder a written confirmation of each telephone transaction. If reasonable
procedures, such as those described above, are followed, neither Pioneer
Independence Plans, the Fund, the Custodian nor the Sponsor will be responsible
for the authenticity of instructions received by telephone; therefore, the
Planholder bears the risk of loss for unauthorized or fraudulent telephone
transactions. The Custodian or Sponsor may implement other procedures from time
to time. During times of economic turmoil or market volatility or as a result of
severe weather or a natural disaster, it may be difficult to contact the
Custodian by telephone to institute a transaction. At such times, a Planholder
should communicate with the Custodian in writing.
7
<PAGE>
VOLUNTARY TAX WITHHOLDING. A Planholder may request (in writing) that the
Custodian withhold 28% of the dividends and capital gains distributions paid on
any Fund shares held in his or her Plan account (before any reinvestment) and
forward the amount withheld to the IRS as a credit against the Planholder's
federal income taxes. This option is not available for Plan accounts registered
as retirement plan accounts or for Plan accounts subject to backup withholding.
GENERAL. Normally, a Planholder will be sent a check as a result of
redeeming Fund shares under this or any of the options described in this
Prospectus within seven days after such a request is received by the Custodian
and all documents are in proper order. However, the Custodian will not mail
redemption proceeds to a Planholder until checks or other orders for payment
received for the Fund shares purchased by the Planholder have cleared, which may
take up to 15 calendar days, from the date on which the check or other order for
payment is received by the Custodian.
Redemptions may be suspended and payments of redemption proceeds may be
postponed during any period in which any of the following conditions exist: the
Exchange is closed, other than for customary weekends and holidays; trading on
the Exchange is restricted; an emergency exists as a result of which disposal by
the Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund to fairly determine the value of the net
assets of its portfolio; or the Securities and Exchange Commission, by order, so
permits.
REPLACEMENTS OF PARTIAL WITHDRAWALS
After a partial cash withdrawal, the Planholder may, but is not
required to, restore the value of his or her Plan by remitting to the Custodian
an amount equal to the amount redeemed. The reinvested amount will be used to
purchase Fund shares for the Planholder's account at the next determined net
asset value for the Fund's shares. Any repayment of a partial cash withdrawal
may not be made before 90 days from the date of redemption, except in the case
of Planholder accounts that are IRAs, for which a reinvestment may be made after
a period of 45 days. Full reinstatement of a partial cash withdrawal need not be
accomplished in one transaction if the amount redeemed exceeds $500. However,
the minimum for each reinvestment is 25% of the amount withdrawn or $500,
whichever is less. Replacements of partial cash withdrawals must be clearly
identified as such to distinguish them from regular monthly Plan investments.
EXTENDED INVESTMENT OPTION
Under the extended investment option, a Planholder may continue making
monthly investments after completing all scheduled investments under a Plan. The
extended investment option must be exercised within six months after completing
all scheduled investments under a Plan.
If under this option a Planholder fails to make regularly scheduled
investments for six consecutive months, after being credited for any advance
investments made under the extended investment option, the Planholder forfeits
his or her right to make such additional investments. All extended investment
options will terminate on the date the 300th monthly investment is made under
the Plan, and no further investments will be accepted after that date.
SYSTEMATIC WITHDRAWAL PROGRAM
A Planholder may elect a systematic withdrawal program upon completion
of all regularly scheduled investments. A Planholder may also elect a systematic
withdrawal program from an incomplete Plan if the withdrawal is to be taken from
a Plan that is part of an IRA and the Planholder has reached age 59 1/2.
Under a systematic withdrawal program, the Custodian, as the
Planholder's agent, will redeem sufficient Fund shares from the Plan at the net
asset value at the time of such redemption to provide regular withdrawal
payments of $50 or more on a monthly or quarterly basis, as elected by the
Planholder. Except for the $50 minimum, there is no limitation on the size of
withdrawals. All systematic withdrawal program transactions will be made as of
the end of the day specified by the Planholder for the withdrawal (or, if such a
day is not a business day, the first business day after that date).
A Planholder has the right to change the dollar amount of withdrawals
paid to him or her under the systematic withdrawal program or to discontinue a
systematic withdrawal program at any time. There are no charges imposed for any
regular withdrawals under a systematic withdrawal program.
The Plan will remain in full force and effect with all rights and
privileges until all Fund shares have been withdrawn from the Planholder's
account. While the systematic withdrawal program is in effect, a Planholder must
elect to reinvest all dividends and distributions in Fund shares to be held in
his or her Plan account. A Planholder should realize that withdrawals in excess
of dividends and distributions will be made from principal and may eventually
exhaust the Planholder's account. Also, a gain or loss for tax purposes may be
realized by the Planholder on each withdrawal payment.
The Sponsor reserves the right to discontinue offering the systematic
withdrawal program at any time after 90 days' notification to all Planholders.
CANCELLATION AND REFUND RIGHTS
A Planholder has certain rights of cancellation.
Within 60 days after the first investment under a Plan (which, for this
purpose, is the date appearing on the confirmation statement following the
initial investment), the Custodian will send a notice to the Planholder
regarding the Planholder's cancellation rights. A Planholder may elect to cancel
his or her Plan within 45 days of the mailing date of that notice by submitting
a written request for cancellation to the Custodian, signed by the Planholder.
In addition, a cancellation request involving a Plan with current net assets
valued at more than $100,000 must be signature guaranteed, as described under
"Partial Withdrawal or Redemption Without Termination of the Plan." The
Planholder will receive a payment equal to the sum of (1) the total current net
asset value of the Fund shares credited to the Planholder's account as of the
end of the business day that the cancellation request is received by the
Custodian and (2) a refund of all Creation and Sales Charges paid under the
Plan.
8
<PAGE>
In addition, at any time within an 18-month period after the purchase of a
Plan, the Planholder may surrender his or her Plan. To surrender a Plan, the
Planholder should send to the Custodian a written request signed by the
Planholder. In addition, a surrender request involving a Plan with current net
assets valued at more than $100,000 must be signature guaranteed, as described
under "Partial Withdrawal or Redemption Without Termination of the Plan." Upon
surrender, the Planholder will receive from the Custodian a payment equal to the
sum of (a) the total current net asset value of the Fund shares credited to the
Planholder's account as of the end of the business day of the surrender and (b)
a refund equal to the amount of all Creation and Sales Charges paid to the date
of surrender minus 15% of the gross amount the Planholder has paid as of that
date. Service charges and other fees will not be refunded.
If a Planholder surrenders his or her Plan under this cancellation and
refund privilege, the Planholder may not reinstate his or her Plan at net asset
value until all Creation and Sales Charges included in the redemption amount are
first deducted from the reinstatement amount. This requirement is more fully
explained below in "Replacement Privilege on Termination." Exercise of
cancellation rights may be a taxable event for the Planholder. Planholders
should consult their tax advisers.
The Custodian will send the Planholder a written notice of the 18-month
right of cancellation if either of the following occurs:
(1) If, during the first 15 months after the date of issuance of the
Plan, the Planholder has missed three or more investments; or
(2) Following the first 15 months after the date of issuance of
the Plan, but prior to the expiration of 18 months after such date, the
Planholder has missed one or more investments. (If the Custodian has already
sent a notice at 15 months, a second notice will not be required even if
additional investments are missed.)
These notices will inform the Planholder of his or her rights of
cancellation as set forth above and will also include the value of the
Planholder's account at the time the notice is sent.
TERMINATION OF A PLAN BY THE PLANHOLDER AND WITHDRAWAL OF SHARES
A Planholder may terminate a Plan at any time by sending a written
request to the Custodian.
In terminating a Plan, the Planholder may, by written request signed by
the Planholder, instruct the Custodian to: (a) redeem the Fund shares held in
the Planholder's account or (b) deliver a confirmation statement for the Fund
shares held under the Plan to the Planholder.
If the Planholder directs the redemption of Fund shares, the Custodian will
withdraw the Fund shares from the Plan account, redeem the Fund shares and send
the proceeds directly to the Planholder. If the amount of the redemption is more
than $100,000, is made payable to an individual other than the Planholder of
record, or is to be sent to an address other than the address of record, the
Planholder's request must be signature guaranteed as described under "Partial
Withdrawal or Redemption Without Termination of the Plan." All documents must be
in good order before a redemption can be executed. The redemption price will be
the net asset value of the Fund shares next determined after such documents have
been received in proper order by the Custodian. The redemption of Fund shares
may be a taxable event for the Planholder.
If the Planholder directs the delivery of the Fund shares held under
the Plan, sufficient shares of the Fund will be redeemed by the Custodian to pay
any authorized deductions and/or transfer taxes and the remaining Fund shares
will be registered in the name of the Planholder. A Planholder who chooses to
receive Fund shares, may exchange his or her Fund shares for shares of certain
other Pioneer mutual funds for which Pioneering Management Corporation or an
affiliate is the investment manager. The exchange privilege is more fully
described in the Fund's Prospectus under the caption "Shareholder Services."
Planholders will not be permitted to exchange such shares back into the Fund or
to make additional direct investments in the Fund.
REPLACEMENT PRIVILEGE ON TERMINATION
For Plans that have been completely terminated, the replacement
privilege allows reinvestment of an amount equal to at least 10% of the net
asset value of the Fund shares redeemed from a Plan, without any Creation and
Sales Charge except as described below, in a reopened identically registered
Plan account. Reinvestment is made at the net asset value per Fund share next
determined following the timely receipt by the Custodian of a replacement order
and payment. The replacement privilege must be exercised within 90 days
following the date of termination of the Plan. For the federal income tax
effects of replacement and reinvestment, see "Taxes."
The replacement privilege is available to Planholders who have not
previously exercised this privilege. The replacement privilege does not abrogate
the partial withdrawal or redemption without termination privilege described on
page 7. If a Planholder has redeemed Fund shares from a Plan under the
procedures described under "Cancellation and Refund Rights" on page 8, the
Planholder will not be permitted to replace at net asset value the proceeds from
such a cancellation or refund until all refunded Creation and Sales Charges have
been deducted from the amount offered for the replacement.
The Sponsor may in its sole discretion offer additional replacement
options from time to time.
DIVIDENDS AND DISTRIBUTIONS
All Fund dividends and distributions, after any applicable deductions,
are reinvested automatically in additional shares of the Fund as of the payment
date, at the net asset value determined on the ex-dividend date of the dividend
or distribution, unless the Planholder elects to receive the dividends or
distributions by check. See "Service Charges and Other Fees." No Creation and
Sales Charge is made on any such reinvestments. If the Planholder wishes to
receive the dividends and other distributions in cash - rather than in
addi-
9
<PAGE>
tional shares of the Fund - the Planholder must so instruct the Custodian in
writing. Such instructions must be received at least seven days prior to
the record date of a dividend or distribution. A Planholder may change these
instructions at any time.
Dividends and other distributions by the Fund are made on a per-share
basis. After every distribution, the value of a Fund share drops by the amount
of the distribution. If a Plan investment is made shortly before the ex-dividend
date of the dividend or distribution, the Planholder will pay the full price for
the shares including the amount that is soon to be paid as a dividend.
VOTING RIGHTS IN FUND SHARES
Pioneer Independence Plans, as a shareholder of the Fund, has certain
voting rights in Fund shares which are held on behalf of the Plans. Each
Planholder is permitted to exercise voting rights attributable to the Fund
shares held in the Planholder's account. The Custodian will vote the Fund shares
held in a Planholder's account in accordance with that Planholder's
instructions. In the absence of such instructions, the Custodian will vote a
Planholder's shares in the same proportion as it votes the shares for which it
has received instructions from other Planholders.
Planholders may attend any shareholder meetings of the Fund, and if a
Planholder wishes to vote in person the Fund shares held in his or her Plan
account, the Planholder may submit a written request to the Custodian prior to
the meeting for a proxy which will permit the Fund shares to be voted in person
by the Planholder.
TRANSFER OR ASSIGNMENT OF RIGHTS IN A PLAN
If a Planholder desires to secure a loan, the Planholder (other than a
tax-qualified retirement plan or an IRA) may assign his or her rights to a bank
or other lending institution. The bank or other lending institution, however,
will not be entitled to exercise the right of partial withdrawal or redemption.
During the term of the assignment, the Planholder will be entitled to all
dividends and distributions on Fund shares.
A Planholder may also transfer his or her rights to another person: for
example, a relative, charitable institution or trust. This may be accomplished
in several ways:
(1) A Planholder may transfer his or her right, title and interest
to another person whose only right shall be the privilege of complete and prompt
withdrawal from the Plan; or
(2) A Planholder may transfer his or her entire right, title and
interest to another person, trustee or custodian acceptable to the Sponsor, who
has made application to the Sponsor for a similar Plan.
The Custodian will provide Planholders with the appropriate assignment
forms upon request. Transfers may be subject to income and other taxes and may
be restricted for those Plans held in connection with IRAs or qualified
retirement plans.
STATEMENTS, REPORTS AND NOTICES
For the first 18 months after the issuance of a Plan, the Custodian
will mail to each Planholder a confirmation statement for each financial
transaction as it occurs. Beginning after the 19th month, the Custodian may mail
statements to Planholders quarterly. Each transaction confirmation statement,
quarterly statement or other statement, as required, will state the price per
share of the Fund shares purchased after applicable deductions and the total
number of Fund shares held in the Planholder's account. Any notices, reports or
documents required or authorized to be given or sent to a Planholder under this
Prospectus will be conclusively deemed to have been given or sent upon mailing
to the Planholder's address of record, and the date of such mailing shall be
deemed the date of the giving of such notice.
X. TERMINATION OF A PLAN BY THE SPONSOR OR CUSTODIAN
Although a Plan calls for regular monthly investments over a 15-year
period or for an extended 25-year period, neither the Sponsor nor the Custodian
can elect to terminate a Plan until 300 investments have been made unless the
Planholder has not made investments under his or her Plan for more than 12
consecutive months or unless Fund shares are not obtainable and a substitution
is not made. The period of default will not start until a Planholder has been
given full credit for a period equal to the number of any advance monthly Plan
investments made.
After 300 investments, or if other events justify termination, the
Sponsor or the Custodian has the right to terminate a Plan 60 days after mailing
a written notice to the Planholder. Such notice will request that the Planholder
elect to have the Plan distributed either in cash or in Fund shares after
deduction of all authorized charges, fees and expenses. On termination, the
Custodian (as the Planholder's agent) may surrender for liquidation all of the
Fund shares credited to a Planholder's account, or sufficient Fund shares to pay
all authorized deductions. The balance of Fund shares and/or cash, after payment
of all authorized deductions, will be held by the Custodian for delivery to a
Planholder against the surrender of a Plan.
No interest will be paid by the Custodian on any cash balances. If the
Plan is not surrendered within 60 days after the notice of termination, the
Custodian, at its discretion, may at any time thereafter fully discharge its
obligations by mailing a confirmation statement for the Fund shares or a check,
drawn in accordance with the terms of the Plan, to the address of record noted
in the Plan account. The Planholder will then have no further rights under his
or her Plan except that if the confirmation statement or check is returned to
the Custodian undelivered, the Custodian will continue to hold these assets for
the benefit of the Planholder, subject only to the escheatment laws.
XI. SERVICE CHARGES AND OTHER FEES
Except as described below, there are currently no deductions against
Planholders' accounts or against Fund dividends and/or distributions to
compensate the Sponsor or the Custodian for its services.
If a Plan is not current and no Plan investments have been made for a
12-month period, the Custodian will deduct for its services a fee of $12 per
year. A charge of $5.00 will be deducted for each monthly Plan investment
received by check
10
<PAGE>
or other order for the payment of money which is not honored by the bank on
which it is drawn. A charge of $2.50 will be made for terminating a Plan on
which investments have not been completed.
Plans established as IRAs are subject to an annual IRA custodial fee of
$10, a portion of which is paid to The Pioneer Group, Inc., as IRA custodian.
This annual fee will be deducted from the Plan account unless a separate check
is received in payment of the IRA custodial fee.
The Fund and the Sponsor reserve the right to impose a processing fee of
$1.50 for each monthly Plan investment received by check (up to a maximum of $5
per event). No charge will be imposed on the initial investment to establish a
Plan. There is no processing fee on monthly Plan investments made through an
automatic investment option. The check processing fee is not currently in
effect.
All other Custodian fees which would otherwise be charged to the Plan or
the Planholders, or deducted from Fund dividends and/or distributions, may be
paid by the Fund. Although there is no current intention to do so, the Fund
reserves the right to cease paying such fees, and the Sponsor reserves the right
to cause deductions in the future against the Plans, the Planholders, and Fund
dividends and/or distributions to compensate the Custodian for its services.
XII. TAXES
Under the Code, each Planholder is deemed, for federal income tax
purposes, to own directly the Fund shares accumulated in his or her Plan
account. Designated long-term capital gain distributions, which are
automatically reinvested in additional Fund shares, are treated as long-term
capital gains. The tax cost of the Fund shares acquired is the amount paid for
those shares, including the Creation and Sales Charge.
As more fully described under "Dividends Distributions and Taxation" in the
Prospectus of the Fund, dividends and distributions paid by the Fund are
reportable for federal income tax purposes by Planholders who are otherwise
subject to federal income tax. Dividends and distributions are reportable by
Planholders regardless of whether the amounts are invested in additional shares
of the Fund or are received in cash.
Gains realized on cash withdrawals (redemptions) generally also will be
subject to taxes, and the ability to deduct losses from such redemptions may be
limited. There may also be limitations on the amount of loss a Planholder may
recognize in the event of cancellation and refund or a replacement and
reinvestment. In general, the Code restricts loss recognition when securities
are sold and reacquired in a short period of time; these restrictions may in
certain circumstances apply to Planholders.
An appropriate notice regarding taxes will be sent to Planholders each year
by the Custodian. Any taxes payable with respect to any of the profits realized
on sales or transfers by the Custodian or the Sponsor of Fund shares or other
property credited to a Planholder's account in accordance with the provisions of
a Plan and any taxes levied or assessed with respect to Fund shares or the
income therefrom shall be borne by Planholders individually and not by the
Custodian or the Sponsor.
The foregoing is a brief summary of certain U.S. federal income tax
consequences to Planholders of investing in the Fund through Pioneer
Independence Plans. Planholders should consult the Fund Prospectus and Statement
of Additional Information and their tax advisers for additional information.
XIII. THE FUND
The objective and investment policies of Pioneer Independence Fund are
described in the attached Prospectus of the Fund. Shares of the Fund are
credited to a Plan, after applicable deductions are made, at the net asset value
as of the end of the business day on which the Custodian receives the Plan's
investments.
Dividends and distributions paid on Fund shares will be reinvested by
the Custodian in additional Fund shares for the Plans at the then current net
asset value, unless a Planholder elects to receive them in cash.
The Fund incurs certain advisory fees and other expenses. These fees and
expenses may vary. The Fund is governed by its Board of Trustees, and Pioneer
Independence Plans does not fix or specify the level of expenses of the Fund.
The Fund's fees and expenses, including the Fund's payment of Plan custody
charges, are described in detail in the Fund's Prospectus and Statement of
Additional Information.
The Fund has adopted a Plan of Distribution for shares of the Fund in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"), pursuant to which certain distribution and service fees are
paid.
XIV. SUBSTITUTION OF THE UNDERLYING INVESTMENT
The Sponsor may substitute the shares of another investment medium as
the underlying investment for the shares of the Fund if it deems such action to
be in the best interests of Planholders. Such substituted shares generally shall
be comparable in character and quality to the present Fund shares, and shall be
registered with the Securities and Exchange Commission under the Securities Act
of 1933, as amended. Before any substitution can be effected, the Sponsor must:
1. To the extent required, obtain an order from the Securities and
Exchange Commission approving such substitution under the
provisions of Section 26(b) of the 1940 Act;
2. Submit written notice of the proposed substitution to the
Custodian;
3. Submit written notice of the proposed substitution to each
Planholder, giving a reasonable description of the substituted
fund shares, disclosing that unless the Plan is surrendered
within 30 days of the date of mailing such notice, the Planholder
will be considered to have consented to the substitution and to
have agreed to bear his or her pro rata share of expenses and
taxes in connection with the substitution; and
11
<PAGE>
4. Provide the Custodian with a signed certificate stating that the
required notice has been given to Planholders.
If a Plan is not surrendered within 30 days from the date of such notice,
the Custodian shall purchase the shares of the substituted fund for the Plan
with the proceeds of any Plan investments received from the Planholder and any
dividends or distributions which may be reinvested for the Plan. If shares of
the substituted fund are also to be substituted for the Fund shares already
held, the Sponsor must arrange for the Custodian to be furnished, without
payment of a sales charge or fees of any kind, with shares of the substituted
fund having an aggregate value equal to the value of the Fund shares for which
they are to be exchanged. A substitution may be a taxable event for Planholders.
If the Fund shares are not available for purchase for a period of 120
days or longer, and the Sponsor fails to substitute other shares, the Custodian
may, but is not required to, select a substitute underlying investment or
terminate Pioneer Independence Plans. If the Custodian selects a substitute
investment, it shall, to the extent required, first obtain an order from the
Securities and Exchange Commission approving such substitution as specified
above and then shall notify the Planholder, and if, within 30 days after mailing
such notice, the Planholder gives written approval of the substitution and
agrees to bear his or her pro rata share of actual expenses, including tax
liability sustained by the Custodian, the Custodian may thereafter purchase such
substituted shares. The Planholder's failure to give such written approval
within the 30-day period shall give the Sponsor the authority to terminate the
Plan.
If shares of the Fund are not available for purchase for a period of
120 days or longer, and neither the Sponsor nor the Custodian substitutes other
shares, the Custodian shall have authority, without further action on its part,
to terminate the Plans.
The underlying investment could change under certain other
circumstances. For instance, the Fund could be reorganized with, or acquired by
or merge with another entity, which would result in a Plan investing in the
successor to any such transaction.
XV. RETIREMENT PLANS
A Plan may be purchased by tax-sheltered retirement plans, including IRAs
and qualified pension and profit sharing plans. The Pioneer Individual
Retirement Plan (the "Pioneer IRA") is offered by the Sponsor. Pioneer IRAs may
be established through contributions to a Plan or through a lump sum investment
in a Plan from the proceeds of a rollover of prior year qualified assets or a
direct transfer of qualified assets from other fiduciary agencies. Such
rollovers or transfers may contain either or both employer sponsored retirement
assets and owner contributions.
Detailed information concerning the Pioneer IRA is available from the
Sponsor. This information should be read carefully, and prospective investors
should consult with an attorney or tax adviser regarding the establishment of an
IRA in connection with a Plan. The information sets forth the additional service
fees charged for IRAs and describes the federal income tax consequences of
establishing an IRA. Under the Pioneer IRA, dividends and distributions will be
reinvested automatically in additional Fund shares for the Plan. As described in
"Service Charges and Other Fees," a maintenance fee is charged on Pioneer IRAs.
Premature termination of a Plan can have adverse financial consequences
and therefore prospective investors should consider carefully whether the IRA or
other qualified retirement plan will have the financial resources to honor a
15-year commitment to making monthly Plan investments.
XVI. THE SPONSOR
Pioneer Funds Distributor, Inc., 60 State Street, Boston, Massachusetts
02109-1820, is a Massachusetts corporation organized on March 2, 1989. It is a
broker-dealer registered under the Securities Exchange Act of 1934 and a member
of the National Association of Securities Dealers, Inc. (the "NASD"). The
Sponsor is an indirect wholly owned subsidiary of The Pioneer Group, Inc.
In order to establish the Plans, the Sponsor invested a lump sum in a Plan on
which the Creation and Sales Charges were waived and which is exempt from the
terms of the Plans. The Sponsor's directors and executive officers are listed
below.
NAME, POSITIONS AND OFFICES
JOHN F. COGAN, JR., CHAIRMAN AND DIRECTOR
President, Chief Executive Officer and a Director of The Pioneer Group,
Inc. ("PGI"); Chairman and a Director of Pioneering Management Corporation
("PMC"); Director of Pioneering Services Corporation ("PSC"), Pioneer Capital
Corporation ("PCC"), Pioneer Real Estate Advisors, Inc., Pioneer Forest, Inc.,
Pioneer Explorer, Inc., Pioneer Management (Ireland) Ltd. ("PMIL") and Closed
Joint Stock Company "Forest-Starma"; President and Director of Pioneer Metals
and Technology, Inc. ("PMT"), Pioneer International Corp. ("PIntl"), Pioneer
First Russia, Inc. ("First Russia") and Pioneer Omega, Inc. ("Omega"); 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"), Pioneer First Polish Trust Fund Joint Stock
Company, S.A. ("PFPT") and Pioneer Czech Investment Company, A.S. ("Pioneer
Czech"); Chairman, President and Trustee of all of the Pioneer mutual funds;
Director of Pioneer Global Equity Fund Plc, Pioneer Global Bond Fund Plc,
Pioneer DM Cashfonds Plc, Pioneer European Equity Fund Plc, Pioneer Central &
Eastern Europe Fund Plc, and Pioneer US Real Estate Fund Plc; and Partner, Hale
and Dorr LLP (counsel to PGI and the Fund).
ROBERT L. BUTLER, DIRECTOR AND PRESIDENT
Executive Vice President and a Director of PGI; Director of PMC, PMIL, PSC,
PIntl, Pioneer Czech, Pioneer Global Equity Fund Plc, Pioneer Global Bond Fund
Plc, Pioneer DM Cashfonds Plc, Pioneer European Equity Fund Plc, Pioneer Central
& Eastern Europe Fund Plc, and Pioneer US Real Estate Fund Plc; Vice Chairman of
Pioneer GmbH; and a Member of the Supervisory Board of PFPT.
DAVID D. TRIPPLE, DIRECTOR
Executive Vice President and a Director of PGI; President, Chief Investment
Officer and a Director of PMC; Director of PCC, PIntl, First Russia, Omega and
Pioneer SBIC Corporation
12
<PAGE>
("Pioneer SBIC"), Pioneer Global Equity Fund Plc, Pioneer Global Bond Fund
Plc, Pioneer DM Cashfonds Plc, Pioneer European Equity Fund Plc, Pioneer Central
& Eastern Europe Fund Plc, and Pioneer US Real Estate Fund Plc; and Executive
Vice President and Trustee of all of the Pioneer mutual funds.
WILLIAM H. KEOUGH, TREASURER
Senior Vice President, Chief Financial Officer and Treasurer of PGI;
Treasurer of PMC, PSC, PCC, PIntl, PMT, PGL, First Russia, Omega and Pioneer
SBIC; and Treasurer of all of the Pioneer mutual funds.
JOSEPH P. BARRI, CLERK
Corporate Secretary of PGI and most of its subsidiaries; Secretary of all
of the Pioneer mutual funds; and Partner, Hale and Dorr LLP.
SENIOR VICE PRESIDENTS: Steven M. Graziano and Stephen W. Long.
VICE PRESIDENTS: Mary Kleeman, Barry G. Knight, William A. Misata, Anne W.
Patenaude, Gail A. Smyth, Constance D. Spiros and Marcy L. Supovitz.
Commissions ranging from 80% to 95% of the total Creation and Sales
Charges will be paid to authorized investment broker-dealer firms that are
members of the NASD and have executed a sales agreement with the Sponsor.
The Sponsor may terminate its obligations under the Plans under certain
circumstances including, but not limited to, circumstances where: the underlying
fund ceases operations or is subject to a merger or acquisition; or the
shareholders of the underlying fund have approved the cessation of operations or
merger or acquisition; or the obligations of the Sponsor as described in this
Prospectus and the Custodian Agreement will be assumed by another entity that
the Sponsor believes at the time of assignment is capable of fulfilling its
obligations as described in this Prospectus and under terms of the Custodian
Agreement.
XVII. THE CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, acts as Custodian for Pioneer Independence Plans pursuant
to a custodian agreement with the Sponsor, dated February 17, 1998 (the
"Custodian Agreement"). The Custodian is a trust company organized under the
laws of Massachusetts.
Investments under a Plan should be payable to Pioneer Independence
Plans and sent to the Custodian. After making authorized deductions, the
Custodian applies the remaining balance of the investment to the purchase of
Fund shares for a Plan. The Custodian holds these shares in its custody,
receiving dividends and distributions which are automatically reinvested in
additional Fund shares for the Plan accounts, unless a Planholder elects to
receive such dividends and distributions by check.
The duties of the Custodian under the Custodian Agreement include the
receipt of all investments from Planholders and income dividends and capital
gains distributions on Fund shares, the processing of all authorized deductions
therefrom and the purchase and retention of Fund shares for the Planholders'
accounts. The Custodian also effects partial or complete liquidations of Plans
in connection with withdrawals or terminations and the various other functions
discussed above.
The Custodian has assumed only those obligations specifically imposed
on it under the Custodian Agreement. The Custodian has no responsibility for the
choice of the underlying investment, for the investment policies and practices
of the Fund or for the acts or omissions of the Sponsor or the investment
manager of the Fund.
The Custodian Agreement cannot be amended to affect adversely the
rights and privileges of the Planholders without their written consent. Neither
may the Custodian resign unless an eligible successor has been designated and
has accepted the custodianship. Such successor must be a bank or trust company
having capital, surplus and undivided profits totaling at least $2,000,000. The
Custodian may be changed without notice to, or the approval of, the Planholders.
The Custodian may terminate its obligation to accept new Plans for custodianship
if the Sponsor fails to perform certain activities it is required to perform
under the Custodian Agreement or if the Custodian terminates the Custodian
Agreement upon 90 days' notice to the Sponsor.
XVIII. PIONEER INDEPENDENCE PLANS
Pioneer Independence Plans is considered to be a unit investment trust
under the 1940 Act and is registered as such with the Securities and Exchange
Commission. Such registration does not imply supervision of management or
investment practices or policies by the Commission.
Pioneer Independence Plans is currently registered in all states. The
Plans may be offered in all states where it is lawful to do so.
13
<PAGE>
XIX. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF PIONEER FUNDS DISTRIBUTOR, INC.
(SPONSOR) AND PLANHOLDERS OF PIONEER INDEPENDENCE PLANS:
We have audited the accompanying Balance Sheet of Pioneer Independence
Plans as of February 20, 1998. This financial statement is the responsibility of
the Plans' Sponsor. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Pioneer Independence Plans as of
February 20, 1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 24, 1998
PIONEER INDEPENDENCE PLANS
FOR THE ACCUMULATION OF SHARES OF
PIONEER INDEPENDENCE FUND
BALANCE SHEET
February 20, 1998
ASSETS:
Investment in Pioneer Independence Fund,
at value (cost $100,000) $100,000
-------
Total assets $100,000
LIABILITIES: $ -
-------
NET ASSETS:
Total net assets (equivalent to $10.00 per share
based on 10,000 shares of beneficial interest owned
on outstanding plan) $100,000
=======
The accompanying notes are an integral part of this balance sheet.
NOTES TO BALANCE SHEET
1. ORGANIZATION
Pioneer Independence Plans (the Plans) was registered with the Securities
and Exchange Commission under the Investment Company Act of 1940 (the 1940 Act)
as a unit investment trust on December 12, 1997. The initial investment into the
Plans was made on February 18, 1998 by Pioneer Funds Distributor, Inc., the
sponsor for the Plans. This initial investment is exempt from creation and sales
charges as well as certain other terms of the Plans. Prior to February 18, 1998,
the Plans' activities have been limited to organizational matters with no
operating activities.
The following is a summary of significant accounting policies consistently
followed by the Plans, which are in conformity with those generally accepted for
unit investment trusts:
A. SECURITY VALUATION. Investments are valued at the net asset value of fund
shares held.
B. TRANSACTION DATES. Share transactions are recorded on a trade date basis.
14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF
PIONEER FUNDS DISTRIBUTOR, INC.:
We have audited the accompanying consolidated statement of financial
condition of Pioneer Funds Distributor, Inc. (a Massachusetts corporation and
wholly owned subsidiary of Pioneering Management Corporation) as of December 31,
1997, and the related consolidated statements of operations, changes in
stockholder's equity and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Pioneer Funds
Distributor, Inc. as of December 31, 1997, and the results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The information contained in
Schedules I and II is presented for the purpose of additional analysis and is
not a required part of the consolidated financial statements, but is
supplementary information required by Rule 17a-5 under the Securities Exchange
Act of 1934. Such information has been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 3, 1998
15
<PAGE>
PIONEER FUNDS DISTRIBUTOR, INC.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
ASSETS
CASH AND TEMPORARY INVESTMENTS, AT COST,
WHICH APPROXIMATES VALUE (Note 2) $ 4,418
INVESTMENTS IN MARKETABLE SECURITIES, AT VALUE (Note 2) 6,445
RECEIVABLES:
From securities brokers and dealers for sales of
mutual fund shares 11,752
Other 3,817
PREPAID SERVICE FEES 1,862
OTHER ASSETS 1,295
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, AT
COST (NET OF ACCUMULATED DEPRECIATION OF $651) (Note 2) 492
DEALER ADVANCES (NET OF ACCUMULATED AMORTIZATION
OF $18,442) (Note 9) 42,302
DEFERRED COST OF RESTRICTED STOCK PLAN (Note 5) 621
--------
Total assets $ 73,004
========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Payable to funds for shares sold $ 11,731
Accrued expenses and accounts payable 5,045
Distribution fees due to brokers and dealers 1,074
Deferred income taxes, net (Note 4) 16,201
Due to affiliates, net 426
--------
Total liabilities 34,477
--------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDER'S EQUITY:
Common stock, $0.10 par value-
Authorized--100,000 shares
Issued and outstanding--100 shares -
Paid-in capital 115,925
Accumulated deficit (77,224)
Cumulative translation adjustment (174)
--------
Total stockholder's equity 38,527
--------
Total liabilities and stockholder's equity $ 73,004
========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
16
<PAGE>
PIONEER FUNDS DISTRIBUTOR, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
REVENUES AND OTHER INCOME (Note 2):
Distribution fees $ 13,863
Commissions-
Mutual funds 7,177
Variable annuities 1,939
Other income 2,098
--------
25,077
--------
DISTRIBUTION AND ADMINISTRATIVE EXPENSES:
Sales and marketing 17,454
Salaries and related benefits 8,795
Amortization of dealer advances 9,514
Other 10,016
--------
45,779
--------
Loss before benefit for income taxes (20,702)
--------
BENEFIT (PROVISION) FOR INCOME TAXES (Note 4):
State 1,930
Federal 6,781
Foreign (150)
--------
8,561
--------
Net loss $(12,141)
========
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE TOTAL
NUMBER PAID-IN ACCUMULATED TRANSITION STOCKHOLDER'S
OF SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT EQUITY
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1996 100 $ - $ 97,200 $ (65,083) $ - $32,117
Net loss - - - (12,141) - (12,141)
Cumulative transla-
tion adjustment - - - - (174) (174)
Capital contribu-
tions (Note 7) - - 18,725 - - 18,725
-------- -------- ------- ---------- -------- -------
DECEMBER 31, 1997 100 $ - $115,925 $ (77,224) $ (174) $38,527
======== ====== ======== ========== ========= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN
INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
17
<PAGE>
PIONEER FUNDS DISTRIBUTOR, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(12,141)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation and amortization 9,840
Unrealized gains on marketable securities, net (456)
Restricted stock plan expense 242
Changes in operating assets and liabilities-
Receivable from securities brokers and dealers
for sale of mutual fund shares (2,742)
Other receivables (1,145)
Prepaid service fees (827)
Other assets 500
Dealer advances (17,228)
Payable to funds for shares sold 2,735
Accrued expenses and accounts payable 698
Distribution fees due to brokers and dealers 703
Accrued foreign income taxes 63
Deferred cost of restricted stock plan (362)
Deferred income taxes, net 2,334
--------
Total adjustments (5,645)
--------
Net cash used in operating activities (17,786)
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to furniture, equipment and leasehold
improvements (226)
Investments in marketable securities (1,031)
--------
Net cash used in investing activities (1,257)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution 18,725
Due to affiliates, net 693
--------
Net cash provided by financing activities 19,418
--------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS (174)
--------
NET INCREASE IN CASH AND TEMPORARY INVESTMENTS 201
CASH AND TEMPORARY INVESTMENTS, BEGINNING OF YEAR 4,217
--------
CASH AND TEMPORARY INVESTMENTS, END OF YEAR $ 4,418
========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Conversion of amount due to parent company to
additional paid in capital $ 18,725
========
THE ACCOMPANYING NOTES ARE AN
INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
18
<PAGE>
PIONEER FUNDS DISTRIBUTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(1) NATURE OF OPERATIONS AND ORGANIZATION
NATURE OF OPERATIONS
Pioneer Funds Distributor, Inc. (the Company) serves as the principal
underwriter of shares of the Pioneer Family of Mutual Funds, utilizing a
large network of independent broker-dealers. In addition, the Company
serves as the exclusive distributor of the Pioneer Variable Contracts
Trust.
ORGANIZATION
The Company is a wholly owned subsidiary of Pioneering Management
Corporation (PMC). Pioneer Fonds Marketing GmbH (PFM) is a wholly owned
subsidiary of the Company and performs marketing and distributor services
in Germany.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles.
Consolidated financial statements prepared in accordance with U.S.
generally accepted accounting principles require the use of management
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiary. All intercompany balances
and transactions between the Company and its subsidiary have been
eliminated in consolidation.
RECOGNITION OF REVENUE
Commissions consist of underwriting commissions earned from the
distribution of mutual fund shares and are recorded as income on the
trade (execution) date. Variable annuity commissions are earned on the
distribution of variable annuity contracts. Distribution fees are earned
based on 0.75% of certain mutual fund net assets (see Note 9). In
addition, a 0.25% basis point service fee is collected by the Company as
reimbursement for service fees prepaid to brokers and dealers in the
initial year that an account is established. In subsequent years, these
fees are collected by the Company and remitted to third-party brokers and
dealers as compensation pursuant to the underlying funds' distribution
plans. Other income primarily consists of interest and dividend income
and net realized and unrealized gains on investments in affiliated mutual
funds.
INVESTMENTS IN MARKETABLE SECURITIES
Investments in marketable securities represent investments in mutual
funds for which the Company acts as the distributor.
VALUATION OF FINANCIAL INSTRUMENTS
The Company considers the liquid nature and ready availability of market
quotations when estimating the fair value of financial instruments.
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash and temporary investments consist primarily of cash on deposit in
banks and amounts invested in Pioneer Cash Reserves Fund and Pioneer DM
Cash Fonds PLC.
The Company's net benefit for state and federal income taxes of
approximately $8,711,000 in 1997 is reflected as a reduction of amounts
due to affiliates.
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Depreciation and amortization are provided for financial reporting
purposes on a straight-line basis over the following estimated useful
lives: furniture and equipment--three to five years; and leasehold
improvements--over the term of the lease, not exceeding ten years. In the
event of retirement or other disposition of fixed assets, the cost of the
assets and the related accumulated depreciation and amortization amounts
are removed from the accounts, and any resulting gains or losses are
reflected in earnings.
FOREIGN CURRENCY TRANSLATION
Net assets of the Company's operations outside of the United States are
translated into U.S. dollars using current exchange rates with the
effects of translation adjustments deferred and included as a separate
component of stockholder's equity. Revenues and expenses are translated
at the average rates of exchange during the period.
(3) NET CAPITAL
As a broker-dealer, the Company is subject to the Securities and Exchange
Commission's regulations and operating guidelines, which require the
Company to maintain a specified amount of net capital, as defined, and a
ratio of aggregate indebtedness to net capital, as defined, not exceeding
15 to 1. Net capital and the related ratio of aggregate indebtedness to
net capital may fluctuate on a daily basis. The Company's net capital, as
computed under Rule 15c3-1, was $3,565,383 at December 31, 1997, which
exceeded required net capital of $1,134,105 by $2,431,278. The ratio of
aggregate indebtedness to net capital at December 31, 1997 was 4.77 to 1.
The Company is exempt from the reserve requirements of Rule 15c3-3 since
its broker-dealer transactions are limited to the purchase, sale and
redemption of redeemable securities of registered investment companies.
The Company promptly transmits all customer funds and delivers all
securities received in connection with activities as a broker-dealer and
does not otherwise hold funds or securities for, or owe money or
securities to, customers.
(4) INCOME TAXES
The Pioneer Group, Inc. (PGI), the Parent Company of PMC,
19
<PAGE>
PIONEER FUNDS DISTRIBUTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
files a consolidated federal income tax return with its direct and
indirect subsidiaries, including the Company. Consolidated income tax
benefits (provisions) are allocated among the companies based on the
income taxes that would have been benefited (accrued) had separate
returns been filed for each entity or when subsidiary losses are utilized
in consolidation.
The benefit for income taxes, as stated as a percentage of loss before
income taxes, consists of the following:
Federal statutory rate (35.0)%
(Increases) decreases in tax rate resulting from-
State income tax, new apportionment rate (4.1)
State income tax, net of federal effect (3.4)
Foreign income taxes 0.7
Other 0.4
-----
Effective tax rate (41.4)%
======
The increase in the Company's 1997 tax benefit was primarily due to the
enactment of certain changes to the method of apportioning income or loss
for purposes of calculating Massachusetts state income taxes. Statement
of Financial Accounting Standards (SFAS) No. 109, ACCOUNTING FOR INCOME
TAXES, requires restating deferred tax liabilities and assets to reflect
the lower rate. Accordingly, in 1997, the Company recorded an additional
tax benefit of approximately $840,000. Absent the required adjustment,
the effective income tax rate for 1997 would have been approximately
37.3%.
The components of deferred income taxes recognized in the accompanying
consolidated statement of financial condition are comprised of deferred
tax assets of approximately $435,000 and deferred tax liabilities of
approximately $16,636,000. The approximate income tax effect of each type
of temporary difference is as follows:
Dealer advances $(16,347,272)
Other (net) 146,272
------------
Total deferred income taxes $(16,201,000)
============
(5) STOCK PLANS
PGI has a Stock Incentive Plan (the 1997 Plan) to provide incentives to
certain employees who have contributed and are expected to contribute
materially to the success of PGI and its subsidiaries. An aggregate total
of 1,500,000 shares of PGI common stock may be awarded to participants
under the 1997 Plan. Under the 1997 Plan, PGI may grant restricted stock
awards, stock options and other stock-based awards. The 1997 Plan
expires in February 2007. The 1997 Plan is administered by the
compensation committee of PGI's Board of Directors (the Committee). PGI's
1995 Restricted Stock Plan (the 1995 Plan) and 1988 Stock Option Plan
(the 1988 Option Plan) were terminated on May 20, 1997 upon approval of
the 1997 Plan by PGI's stockholders.
PGI's 1990 Restricted Stock Plan (the 1990 Plan) expired in January 1995.
Total shares awarded, net of forfeitures, under the 1990 Plan were
715,404. Total shares awarded, net of forfeitures, under PGI's 1995 Plan
and 1997 Plan were 206,621 and 27,875, respectively.
In 1997, certain employees of the Company were awarded 17,355 shares of
PGI common stock under the 1995 Plan, with a fair market value on the
award date of approximately $408,000. Total shares awarded to certain
employees of the Company, net of forfeitures, under the 1995 Plan and
1990 Plan were 26,975 and 120,363, respectively, at December 31, 1997.
Under the 1995 Plan, the participant's right to resell the awarded stock
is restricted to 100% of the shares awarded during the first two years
following the award, 60% during the third year and 20% less each year
thereafter. PGI may repurchase unvested restricted shares at $.10 per
share upon termination of the participant's employment.
Awards under the restricted stock plans are compensatory, and
accordingly, the difference between the award price and market price of
the shares under the plans on the award date, less the applicable tax
benefit, is being amortized on a straight-line basis over a five-year
period. The Company expensed $242,000 in connection with these plans,
which is included in salaries and benefits in the accompanying
consolidated statement of operations.
Under the 1997 Plan, PGI may grant to key employees, consultants and
advisors, options to purchase PGI's common stock. Both incentive stock
options intended to qualify under Section 422A of the Internal Revenue
Code of 1986 (incentive stock options) and nonstatutory options not
intended to qualify for incentive stock option treatment (nonstatutory
options) may be granted under the 1997 Plan. Unless the 1997 Plan is
earlier terminated, no option may be granted after February 3, 2007. The
option price per share is determined by the Committee, but (i) in the
case of incentive stock options, may not be less than 100% of the fair
market value of such shares on the date of option grant, and (ii) in the
case of nonstatutory options, may not be less than 90% of the fair market
value on the date of option grant. Options issuable under the 1997 Plan
become exercisable, as determined by the Committee, not to exceed 10
years from the date of grant. Options granted to date vest over five
years at an annual rate of 20% on each anniversary date of the date of
grant. Prior to the adoption of the 1997 Plan, options were granted under
the 1988 Option Plan. During 1997, 37,500 of incentive stock options were
granted under the 1997 Plan at exercise prices ranging from $22.875 to
$29.875. As of December 31, 1997, nonstatutory options to purchase
367,500 shares of PGI common stock at exercise prices ranging from $4.188
to $27.50, equal to fair market value at the dates of the grants, were
granted to certain employees of the Company under the 1988 Option Plan.
Of such options, 52,000 shares were exercised at prices ranging from
$4.188 to $18.25, and 18,000 shares were forfeited as of December 31,
1997.
On May 4, 1995, PGI adopted the 1995 Employee Stock Purchase Plan (the
1995 Purchase Plan), which qualifies as an "Employee Stock Purchase Plan"
within the meaning of Section 423 of the Internal Revenue Code of 1986.
An aggregate total of 500,000 shares of common stock have been
20
<PAGE>
PIONEER FUNDS DISTRIBUTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
authorized for issuance under the 1995 Purchase Plan, to
be implemented through one or more offerings, each approximately
six months in length beginning on the first business day of each January
and July. The price at which shares may be purchased during each offering
will be the lower of (i) 85% of the closing price of the common stock as
reported on the NASDAQ National Market (the closing price) on the date
that the offering commences or (ii) 85% of the closing price of the
common stock on the date the offering terminates. In 1997, employees of
the Company purchased 7,491 shares under the 1995 Purchase Plan.
The Company has determined based on the analysis and assumptions prepared
by management that the disclosure requirements pursuant to SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, are immaterial to these
financial statements taken as a whole.
(6) BENEFIT PLANS
PGI and its subsidiaries have two defined contribution benefit plans for
eligible employees: a retirement benefit plan and a savings and
investment plan (collectively, the Plans) qualified under Section 401 of
the Internal Revenue Code. PGI makes contributions to a trustee, on
behalf of eligible employees, to fund both Plans.
Both of the Plans cover all full-time employees who have met certain age
and length-of-service requirements. Regarding the retirement benefit
plan, the Company contributes an amount that would purchase a certain
targeted monthly pension benefit at the participant's normal retirement
date. In connection with the savings and investment plan, participants
may voluntarily contribute up to 10% of their compensation, and the
Company will match this contribution up to 2%. The Company's expenses
under the Plans amounted to approximately $592,000 in 1997.
(7) RELATED PARTY TRANSACTIONS
Certain officers and/or directors of the Company are partners of Hale
and Dorr LLP, the Company's legal counsel. Amounts paid by the Company
for legal services of Hale and Dorr LLP amounted to approximately $33,000
in 1997.
During 1997, the Company was charged by PGI and affiliates for office
rental, equipment expense, salaries, dealer-related services and other
operating expenses. These charges represent expenses directly
attributable to the Company's operations or an allocation of its
proportionate share of these expenses using formulas that management
believes are reasonable. Included in the accompanying consolidated
statement of operations is $3,999,000 related to these charges.
During 1997, obligations in the amount of $18,725,000 owed by the Company
to PMC were canceled. The forgiveness of debt was accounted for as a
capital contribution in the accompanying consolidated financial
statements.
Included in other income is approximately $557,000, which the Company
earned from an affiliate, Pioneer Management (Ireland) Limited, for
underwriting fees on mutual funds.
(8) COMMITMENTS AND CONTINGENCIES
In 1992, PGI entered into a 10-year lease agreement. In 1994, PGI entered
into a direct lease agreement for office space rental on an additional
floor. Future minimum payments under these agreements, which are expected
to be allocated to the Company, amount to $613,000 in 1998, $637,000 in
1999, $653,000 in 2000, $668,000 in 2001, $244,000 in 2002 and $206,000
thereafter. These future minimum rental payments include estimated annual
operating expenses of approximately $280,000.
(9) DEALER ADVANCES
Certain of the Pioneer Family of Mutual Funds maintain a multi-class
share structure whereby the participating funds offer both the
traditional front-end load shares (Class A shares) and back-end load
shares (Class B and Class C shares). Back-end load shares do not require
the investor to pay any sales charge unless there is a redemption before
the expiration of the minimum holding period, which ranges from three to
six years in the case of Class B shares and one year in the case of Class
C shares. However, the Company pays upfront sales commissions (dealer
advances) to broker-dealers ranging from 2% to 4% of the sales
transaction amount on Class B shares and 1% on Class C shares. The
participating funds pay the Company distribution fees of 0.75% and
service fees of 0.25% per annum of their net assets invested in Class B
and Class C shares, subject to annual renewal by the participating fund's
Board of Trustees. In addition, the Company is paid a contingent deferred
sales charge (CDSC) on Class B and C shares redeemed within the minimum
holding period. The CDSC is paid based on declining rates ranging from 2%
to 4% on the purchases of Class B shares and 1% for Class C shares.
The Company capitalizes and amortizes Class B share dealer advances for
financial statement purposes over periods that range from three to six
years depending on the participating fund. The Company capitalizes and
amortizes Class C share dealer advances for financial statement purposes
over a 12-month period. The Company deducts the dealer advances in full
for tax purposes in the year such advances are paid. Distribution and
service fees received by the Company from participating funds are
recorded in income as earned. CDSC received by the Company from redeeming
shareholders reduce unamortized dealer advances directly.
21
<PAGE>
PIONEER FUNDS DISTRIBUTOR, INC.
COMPUTATION OF NET CAPITAL UNDER RULE 15c3-1
OF THE SECURITIES EXCHANGE ACT OF 1934
SCHEDULE I
DECEMBER 31, 1997
COMPUTATION OF NET CAPITAL:
Consolidated stockholder's equity $38,527,466
Less--Retained earnings of subsidiary 325,073
-----------
Unconsolidated stockholder's equity 38,202,393
Deduct--Nonallowable assets before consolidation-
Receivables and other assets* 46,186,938
Furniture, equipment and leasehold improvements 447,238
Investments in and receivables from affiliates* 3,282,263
Haircuts on securities and outstanding wire trades 1,067,843
Add--Deferred income taxes, associated with dealer
advances 16,347,272
-----------
Net capital $ 3,565,383
===========
COMPUTATION OF AGGREGATE INDEBTEDNESS:
Total liabilities net of deferred income taxes
before consolidation* $17,011,572
-----------
Aggregate indebtedness $17,011,572
===========
COMPUTATION OF BASIC NET CAPITAL REQUIREMENT:
Minimum net capital required 6-2/3% of aggregate
indebtedness $ 1,134,105
Net capital in excess of requirement 2,431,278
-----------
Net capital $ 3,565,383
===========
RATIO OF AGGREGATE INDEBTEDNESS TO NET CAPITAL 4.77 to 1
===========
RECONCILIATION WITH COMPANY'S
COMPUTATION (INCLUDED IN PART IIA OF
FORM X-17A-5 AS OF DECEMBER 31, 1997)
NET CAPITAL, AS REPORTED IN COMPANY'S PART IIA
(UNAUDITED) FOCUS REPORT $ 3,537,659
NET INCREASE IN PREPAID SERVICE FEES--NONALLOWABLE
ASSET (308,000)
NET INCREASE RESULTING FROM DEFERRED TAX ADJUSTMENTS 335,724
-----------
Net capital, as adjusted $ 3,565,383
===========
* THE COMPUTATION OF NET CAPITAL AND AGGREGATE INDEBTEDNESS REQUIRES CERTAIN
RECLASSIFICATIONS FROM THE COMPANY'S CONSOLIDATED STATEMENT OF FINANCIAL
CONDITION.
22
<PAGE>
PIONEER FUNDS DISTRIBUTOR, INC.
COMPUTATION FOR DETERMINATION OF RESERVE REQUIREMENTS
FOR BROKER-DEALERS UNDER RULE 15c3-3
OF THE SECURITIES EXCHANGE ACT OF 1934
SCHEDULE II
Pioneer Funds Distributor, Inc. is exempt from the reserve requirements of Rule
15c3-3, as its transactions are limited to the purchase, sale and redemption of
redeemable securities of registered investment companies. The Company promptly
transmits all customer funds and delivers all securities received in connection
with activities as a broker-dealer, and does not otherwise hold funds or
securities for, or owe money or securities to, customers; accordingly, the
computation for determination of reserve requirements pursuant to Rule 15c3-3
and information relating to the possession or control requirements pursuant to
Rule 15c3-3 are not applicable. In the opinion of management, the Company has
complied with the exemptive provisions of Rule 15c3-3 throughout the year ended
December 31, 1997.
23
<PAGE>
[logo
PIONEER]
P i o n e e r
I n d e p e n d e n c e
P l a n s
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
INDEPENDENT PUBLIC ACCOUNTANTS SPONSOR AND PRINCIPAL UNDERWRITER
ARTHUR ANDERSEN LLP PIONEER FUNDS DISTRIBUTOR, INC.
LEGAL COUNSEL PLAN CUSTODIAN
HALE AND DORR LLP STATE STREET BANK AND TRUST COMPANY
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
(c)Pioneer Funds Distributor, Inc.
