[PIONEER LOGO]
PIONEER
INDEPENDENCE PLANS
PROSPECTUS,
MAY 3, 1999
(AS REVISED AUGUST 20, 1999)
Contents
Basic information about the plans 1
Basic information about the plans and fund 2
Investments, withdrawals and terminations 3
Plan owner options and services 10
Plan rights and policies 11
Dividends, capital gains and taxes 14
Service charges and other fees 15
Additional information 15
Financial statements 17
The plan prospectus must be accompanied by the fund's current prospectus. You
should read both prospectuses and keep them for future reference.
Shares of the fund are offered to the general public only through the plans.
You have the right to a refund of the current value of your fund shares during
the 18 months after your plan purchase. You also have other limited refund
rights under the conditions described in more detail under "Plan rights and
policies."
An investment in the fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Neither the Securities and Exchange Commission nor any state securities agency
has approved the plans or the fund's shares or determined whether these
prospectuses are accurate or complete. Any representation to the contrary is a
crime.
<PAGE>
BASIC INFORMATION ABOUT THE PLANS
Pioneer Funds Distributor, Inc., the plans' sponsor, designed PIONEER
INDEPENDENCE PLANS to help you 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 Pioneer Independence Fund. Under a plan,
you make fixed monthly investments for 15 years (a total of 180 investments),
with the option to make additional monthly investments for 25 years (a total of
300 investments).
You should consider the following aspects of the plan before making an
investment:
o A plan represents an agreement among you, Pioneer, and State Street Bank
and Trust Company, the plan's custodian. Under this agreement, the
custodian applies your plan investments (after deduction of creation and
sales charges and other fees) to the purchase of shares of the fund at net
asset value. No agent or other person has the authority to modify, alter or
otherwise change the terms of the plan or to bind Pioneer, the custodian or
the issuer of fund shares by any statement, written or oral, not contained
in this prospectus.
TEXT BOX
CREATION AND SALES CHARGE
The custodian will deduct a creation and sales charge, sometimes called a
front-end load, of up to 50% from each of your first 12 investments.
[END BOX]
o Pioneer receives a creation and sales charge as compensation for its
services and costs in creating the plans and arranging for their
administration, for making fund shares available to you at their net asset
value and for certain selling expenses and commissions with respect to the
plans. The custodian deducts this charge from each of your first 12 monthly
plan investments.
o If you complete all scheduled payments under a 15-year plan, you will pay a
maximum creation and sales charge of 3.33% of the total plan investments.
If, however, you withdraw part of your investment or terminate your plan
before making the first 12 investments in your plan, you will probably lose
money because of the creation and sales charge. If you terminate your plan
after 18 months, the creation and sales charge may amount to as much as
31.6% of your plan investments. You should therefore consider a plan a
long-term investment.
o Your plan's value is based on the value of the fund shares in your plan.
The value of the fund shares is, in turn, based on 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. A plan calls for monthly investments at regular
intervals regardless of the price of fund shares. You should therefore
consider your financial ability to continue investments in a plan. You will
lose money if you terminate your plan at a time when the value of the fund
shares in your plan is less than your plan's cost.
o Your plan investments are not direct ownership of fund shares. Rather, your
plan represents an interest in a trust that has direct ownership of the
fund's shares on behalf of each plan owner. You have only a beneficial
interest in the underlying shares of the fund. You will, however, retain
full voting rights with respect to the underlying shares of the fund. The
custodian will vote the shares held for your account in accordance with
your instructions.
o The custodian or Pioneer may terminate your plan if you fail to make
investments under your plan for a period of 12 consecutive months or if
fund shares are not available and a substitution is not made. You will be
notified of any substitution of the plan's underlying investment.
o Your dealer firm of record has proprietary rights to all commissions,
including any service fees earned from Pioneer for the duration of your
plan. The dealer is not obligated to transfer your plan to another dealer
firm as long as its dealer agreement with Pioneer is still in effect.
As a result, if you engage a new dealer, the new dealer may have no direct
incentive to provide services with respect to your plan. If the dealer firm
of record chooses to release your plan to the new dealer firm, the new
dealer firm must first complete, sign and signature guarantee a release
form that can be obtained from Pioneer. The form must be returned to BFDS
and accepted by the custodian.
o Pioneer is not required to notify you or seek your approval prior to
replacing the custodian. The terms of the custodian agreement, however,
cannot be amended to adversely affect your rights and privileges without
obtaining your written consent.
1
<PAGE>
BASIC INFORMATION ABOUT THE PLANS AND FUND
You should read the attached prospectus for the fund before investing. The
following is only a summary of the information contained in the fund's
prospectus.
INVESTMENT OBJECTIVE OF THE FUND
Growth of capital.
INVESTMENT STRATEGY
The fund invests at least 80% of its assets in common stocks and securities that
trade like common stocks. Pioneer Investment Management, Inc., the fund's
investment adviser, uses a value approach to select the fund's investments. Even
though the fund seeks capital growth, you could lose money on your investment.
<TABLE>
<CAPTION>
FEES AND EXPENSES
These are the fees and expenses, based on plan creation and sales charges and
the fund's latest fiscal year, you may pay if you invest in a plan.
PLAN OWNER FEES
paid directly from your investment
- ------------------------------------------------------------ -------------------
<S> <C>
Maximum sales charge (load) when you buy shares as
a percentage of offering price 50.00%(1)
- ------------------------------------------------------------ ----------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
PAID FROM THE ASSETS OF THE FUND
as a percentage of average daily net assets
- ------------------------------------------------------------ ----------------------
<S> <C>
Management Fee(2) 0.75%
- ------------------------------------------------------------ ----------------------
Distribution and Service (12b-1) Fee 0.25%
- ------------------------------------------------------------ ----------------------
Other Expenses 16.26%
- ------------------------------------------------------------ ----------------------
Total Annual Fund Operating Expenses(2) 17.26%
- ------------------------------------------------------------ ----------------------
(1) A creation and sales charge of up to 50% may be deducted from your first 12
investments. If you complete scheduled payments over a 15-year plan, you
will pay a creation and sales charge of up to 3.33%.
(2) Pioneer has agreed not to impose all or a portion of its management fee
and, if necessary, to limit other operating expenses of the fund to the
extent required to reduce expenses to 1.50% of the average daily net assets
of the fund. This agreement is voluntary and temporary and may be revised
or terminated at any time. Actual management fees, other expenses paid by
the fund and total fund operating expenses for the fiscal year ended
December 31, 1998 were:
Management Fee 0.00%
Distribution and Service (12b-1) Fee 0.25%
Other Expenses 1.25%
Total Annual Fund Operating Expenses 1.50%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE
This example helps you compare the costs of investing in a plan with the
cost of investing in other mutual fund investments. It assumes that: a) you make
a $75 monthly investment in the plan for the time periods shown (a total
investment of $13,500 after completing a 15-year plan), b) you reinvest all
dividends and distributions, c) your investment has a 5% return each year and d)
the fund's operating expenses remain the same.
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
IF YOU SELL YOUR SHARES IF YOU DO NOT SELL YOUR SHARES
- -------------------------------------------------------------- ------------------------------------------------------------
NUMBER OF YEARS YOU OWN YOUR SHARES
- ---------------------------------------------------------------------------------------------------------------------------
1 3 5 10 1 3 5 10
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$108 $917 $1,802 $5,411 $490 $917 $1,802 $5,411
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------- --------------
</TABLE>
2
<PAGE>
INVESTMENTS, WITHDRAWALS AND TERMINATIONS
CHOOSING A FACE AMOUNT
TEXT BOX
FACE AMOUNT
The face amount of your plan is the total value of the monthly plan investments
you have scheduled to make for your plan.
[END BOX]
Use the following tables to select among the range of available monthly plan
investment options. Each table shows the face amount of the plan, the creation
and sales charges that will be charged and the total charges as a percentage of
the total amount invested under a plan and as a percentage of the net amount
invested. This information is based solely on investments made under a plan and
does not reflect any investment performance, 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 shown are specified under the plans and may not
be increased. The fund also incurs expenses, which are not specified under the
terms of the plans and may vary from year to year.
15-YEAR PLAN
<TABLE>
<CAPTION>
Use this table to select your monthly plan investment for a 15-year plan.
CREATION AND SALES CHARGE
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MONTHLY PLAN PER PER TO NET MONTHLY PLAN
INVESTMENT TOTAL INVESTMENT INVESTMENT TOTAL SALES TO TOTAL INVESTMENT INVESTMENT
INVESTMENT 1 THRU 12 13 THRU 180 CHARGE (A) INVESTMENT IN SHARES
- --------------- --------------- -------------- ------------- -------------- -------------- ------------- --------------
<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
(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 the fund's
prospectus.
</TABLE>
3
<PAGE>
25-YEAR PLAN EXTENDED INVESTMENT OPTION
<TABLE>
<CAPTION>
Use this table to select your monthly plan investment for a 25-year plan under
the extended investment option.
CREATION AND SALES CHARGE
---------------------------------------------------------------------------------------
MONTHLY PLAN PER PER TO NET MONTHLY PLAN
INVESTMENT TOTAL INVESTMENT INVESTMENT TOTAL SALES TO TOTAL INVESTMENT INVESTMENT
INVESTMENT 1 THRU 12 13 THRU 300 CHARGE (A) INVESTMENT IN SHARES
- --------------- --------------- -------------- ------------- -------------- -------------- ------------- --------------
<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
(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 the fund's
prospectus.
</TABLE>
4
<PAGE>
A TYPICAL $100 MONTHLY INVESTMENT PLAN
This table shows you the investments and deductions under a plan for a typical
$100 monthly investment plan. The 15-year schedule assumes that all investments
were made in accordance with the terms of Pioneer Independence Plans. The
25-year schedule reflects the charges applicable to a 15-year plan that is
continued under the extended investment option. The table does not reflect fund
performance, fund expenses or the payment of any dividends or distributions by
the fund.
<TABLE>
<CAPTION>
AT THE END OF 6 MONTHS AT THE END OF 1 YEAR AT THE END OF 2 YEARS
AGGREGATE 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> <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>
MAKING YOUR MONTHLY INVESTMENTS
To start a plan, complete the plan application indicating your monthly plan
investment amount. You may make plan payments automatically or by check.
TEXT BOX
AUTOMATIC INVESTMENTS
Consider investing automatically through military or government allotments or
preauthorized check transactions (PACT). The plans are specifically designed for
regular monthly investing.
[END BOX]
AUTOMATIC INVESTMENTS
To use an automatic investment option complete the
required forms and have your investment dealer forward them to Boston Financial
Data Services (BFDS), the custodian's transfer agency subsidiary. Each plan for
which you elect an automatic investment option is funded automatically each
month through your bank account, PACT or, for U.S. military personnel, a
government allotment. BFDS must receive a request to terminate a PACT at least
15 days prior to the date of the next scheduled monthly plan investment.
BY CHECK
To invest by check, have your investment dealer send your check to BFDS
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.
After the custodian accepts your plan application and BFDS receives your initial
investment, you will receive a confirmation statement showing the number of
whole and fractional fund shares purchased for your plan. After the initial
investment, you should send regularly scheduled monthly plan investments, made
payable to State Street Bank and Trust Company, directly to BFDS. If BFDS does
not receive monthly plan investments for a period of 12 consecutive months,
Pioneer or the custodian may terminate your plan.
Address all correspondence regarding your plan to your investment dealer or to
Boston Financial Data Services, P.O. Box 8300, Boston, Massachusetts 02266-8300.
5
<PAGE>
EXTENDED INVESTMENT OPTION
Under the extended investment option, you may continue making monthly
investments after you complete all scheduled investments under your 15-year
plan. You must exercise the extended investment option within six months after
completing all scheduled investments.
If you fail to make regularly scheduled investments for six consecutive months
after being credited for any advance investments made under the extended
investment option, you forfeit your right to make such additional investments.
When you complete 300 monthly plan investments, your extended investment option
will terminate. The custodian will not accept investments after that date.
CREATION AND SALES CHARGES
Pioneer receives a creation and sales charge as compensation for its services
and costs in creating the plans and arranging for their administration, for
making fund shares available to you at their net asset value and for certain
selling expenses and commissions with respect to the plans. The custodian
deducts this charge from each of your first 12 monthly plan investments. For
example, on a $100 a month plan, the custodian deducts $50 from each of the
first 12 plan investments. After you make your twelfth investment, the custodian
will not deduct a creation and sales charges unless you increase your monthly
plan investment amount. The larger your plan, the smaller the creation and sales
charge.
QUALIFYING FOR REDUCED SALES CHARGES
To qualify for reduced creation and sales charges, you must submit a written
request that the applicable creation and sales charge for the new plan(s) be
calculated by combining the face amounts of existing plans and/or the then
current net asset value of other Pioneer mutual fund accounts with the face
amounts indicated on any new plan applications.
PURCHASING TWO OR MORE PLANS
The face amounts of two or more plans purchased at
one time by "any person" 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.
TEXT BOX
ANY PERSON
The term "any person" includes:
o You, your spouse, your children under the age of 21 and your grandchildren
under age 21 who are beneficiaries of a Uniform Gifts to Minors Act or
Uniform Transfers to Minors Act account in which you serve as custodian, or
o 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).
[END BOX]
RIGHTS OF ACCUMULATION
You may have a right of accumulation when purchasing any
new plan(s) or increasing the face amount of any existing plan(s). 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 Pioneer Investment
Management, Inc. or an affiliate is the investment manager.
Your 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. To
qualify for rights of accumulation, your plan must be current. Your plan is
current if:
o It has been completed and not redeemed;
o 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
o The plan owner is a tax-qualified plan or an individual retirement account
(IRA).
6
<PAGE>
MAKING INVESTMENTS AHEAD OF SCHEDULE TO COMPLETE A PLAN EARLY
You will normally make 12 scheduled investments each calendar year. If you wish
to complete your plan ahead of schedule, you may make up to 36 monthly plan
investments in advance of their normal due date during the life of your 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. 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 plan owner. You pay the same creation and
sales charge when you make advance investments.
CHANGING THE FACE AMOUNT OF YOUR PLAN
You may increase or decrease the face amount of your plan by writing to BFDS and
sending a new completed plan application. You may change the face amount of a
plan under the following circumstances.
o You may increase the face amount of your plan at any time, provided the
new face amount is a face amount offered by Pioneer. 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.
o You may decrease the face amount of your plan by 50% within 12 investments
of the start of a plan. You may not request a decrease on an existing plan
that previously had been increased if the decrease will result in a new
face amount lower than that of the original plan.
Each time you change the face amount of a plan, the custodian will recompute the
creation and sales charge already paid on the existing plan to reflect the new
plan face amount. The creation and sales charges you have already paid on your
existing plan will be credited to the creation and sales charge applicable to
the new face amount. If you paid excess creation and sales charges, the
custodian will invest the excess directly in fund shares for your plan at the
net asset value calculated on the day the change is made. If you owe any
additional creation and sales charges due under a plan, the custodian will
deduct the amount due from the next 12 monthly plan investments.
GENERAL RULES ON WITHDRAWALS AND TERMINATIONS
Normally, when you sell some or all of the fund shares held in your plan, BFDS
will send you a check within seven days after it receives, in good order, your
request and any other required documents. However, BFDS will not mail redemption
proceeds to you until your checks or other orders for payment for fund shares
have cleared. This may take up to 15 calendar days from the date on which BFDS
receives the check or other order for payment. BFDS will mail your sale proceeds
to your address of record unless you provide other instructions.
GOOD ORDER Good order means that:
o You have provided adequate instructions
o There are no outstanding claims against your account
o There are no transaction limitations on your account
o Your request includes a signature guarantee if you:
-- Are withdrawing or selling over $100,000 worth of shares
-- Changed your account registration or address within the last 30 days
-- Instruct BFDS to mail the check to an address different from the
one on your account
-- Want the check paid to someone other than the plan owner(s)
-- Are transferring the sale proceeds to a Pioneer mutual fund account
with a different registration
TEXT BOX
Withdrawals and sales may be taxable transactions to plan owners.
[END BOX]
7
<PAGE>
SIGNATURE GUARANTEES AND OTHER REQUIREMENTS
You are required to obtain an acceptable signature guarantee when you are:
o Requesting certain types of transactions including transfers of plan
ownership and sales of fund shares
o Requesting certain types of changes for your existing plan
You can obtain a signature guarantee from most broker-dealers, banks, credit
unions (if authorized under state law) and federal savings and loan
associations. BFDS will not accept signature guarantees by facsimile. You cannot
obtain a signature guarantee from a notary public.
Pioneer reserves the right to require signature guarantees on all withdrawals or
sales of fund shares. Pioneer or the custodian may require a signature guarantee
if either believes that a signature guarantee is warranted. The custodian will
determine whether a guarantee is acceptable.
The custodian or Pioneer may require you to submit additional documentation for
a cash withdrawal (a sale of fund shares) or for requests made by fiduciaries or
corporations.
REQUESTING A TRANSACTION
You may withdraw or sell fund shares held by your plan by writing or calling
BFDS.
WRITTEN REQUESTS
You must use a written request if you are withdrawing or
selling more than $100,000 and/or if you need to provide a signature guarantee.
Send your letter of instruction, signed by all plan owners, to BFDS. Include in
your request your name, your account number and the dollar amount or number of
fund shares to be sold.
TELEPHONE REQUESTS
You are automatically authorized to make telephone
withdrawals and sales from your plan (except plans established as retirement
accounts) unless you indicate otherwise on your plan application. You may not
terminate your plan or exercise your cancellation or surrender rights by phone.
For personal assistance, call BFDS at 1-800-765-9565 weekdays between 8 a.m. and
6 p.m. Eastern time.
You may make a cash withdrawal by telephone only if:
o The proceeds are payable to the plan owner(s) of record and mailed to the
address of record;
o There has been no change in the address of record on the plan within the
preceding 30 days;
o The person requesting the withdrawal can provide proper identification
information; and
o The proceeds do not exceed $100,000 per plan per day.
BFDS will not accept telephone transaction requests that specify a particular
transaction date or any other special conditions.
Pioneer 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. Pioneer reserves the right to impose conditions on these
dealers, including the condition that they enter into agreements (which contain
additional conditions for telephone transactions) with Pioneer. The dealer will
bear any loss resulting from its failure to submit a telephone transaction
within the prescribed time frame.
To confirm that each transaction instruction received by telephone is genuine,
BFDS will record each telephone transaction, require the caller to provide
proper personal identification information and send the plan owner 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 Pioneer will be responsible for the authenticity of
instructions received by telephone. You, the plan owner, bear the risk of loss
from unauthorized or fraudulent telephone transactions. The custodian and/or
Pioneer 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 BFDS by telephone. At such
times, you should communicate with BFDS by writing.
8
<PAGE>
PARTIAL WITHDRAWALS WITHOUT TERMINATING A PLAN
If you withdraw or sell all of the fund shares in your plan, your plan will
normally be terminated. You may also request a partial withdrawal or sale of
your fund shares without terminating your plan and keep your plan in effect, if
you have owned your plan for at least 45 days.
If you have owned your plan for at least 45 days and intend to keep your plan in
effect, you may elect to withdraw up to 90% of the underlying fund shares from
your plan (and hold fund shares directly). Or, you may direct BFDS, as your
agent, to withdraw and then sell up to 90% of your fund shares and pay the sale
proceeds to you. If you request a withdrawal of more than 90% of the net asset
value of the fund shares in your account, BFDS may sell all the fund shares in
your plan.
You may request a partial withdrawal or sale in writing or by telephone. While
there is currently no limit to the number of partial withdrawals or sales that
you can make, each partial withdrawal or redemption must be at least $100.
Shares are withdrawn or sold at the net asset value determined after BFDS
receives a request in good order (including signature guarantees and other
documentation, if applicable). If BFDS receives your request in good order prior
to the close of the New York Stock Exchange on any business day that the fund is
open, it will process it at the net asset value determined as of the close of
that day. No partial withdrawal or sale will affect the total number of monthly
plan investments to be made or the unpaid balance of monthly plan investments.
REPLACEMENTS OF PARTIAL WITHDRAWALS
After a partial cash withdrawal, you may, but are not required to, restore the
value of your plan by remitting to BFDS an amount equal to the amount redeemed.
BFDS will use the reinvested amount to purchase fund shares for your account at
the net asset value determined after your request is received in good order. You
may make a repayment of a partial cash withdrawal after a period of 90 days from
the date of redemption, except in the case of plan accounts that are IRAs, for
which a reinvestment may be made after a period of 45 days. If the amount
redeemed exceeds $500, you need not make a full reinstatement of your withdrawal
in one transaction. However, you must reinvest at least 25% of the amount
withdrawn or $500, whichever is less. You must clearly identify replacements of
partial cash withdrawals to distinguish them from regular monthly plan
investments.
TERMINATING YOUR PLAN
You may terminate your plan at any time. To terminate your plan, you must send a
written request to BFDS. You should instruct BFDS to:
(1) Redeem the fund shares held in your account or
(2) Transfer the fund shares held in your account to the fund and deliver to
you a confirmation statement for the transfer.
If you direct the sale of your fund shares, BFDS will withdraw the fund shares
from your plan account, redeem the fund shares and send the proceeds directly to
you.
If you direct BFDS to transfer the fund shares held under the plan to a fund
account, it will first sell sufficient shares of the fund to pay any authorized
deductions and/or transfer taxes and then instruct the fund's transfer agent to
register the remaining fund shares in your name. If you choose to receive fund
shares, you may then exchange your fund shares for shares of certain other
Pioneer mutual funds for which Pioneer Investment Management, Inc. or an
affiliate is the investment manager. The exchange privilege is more fully
described in the fund's prospectus. You will not be permitted to exchange these
shares back into the fund or to make additional direct investments in the fund.
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REPLACEMENT PRIVILEGE ON TERMINATION
If you have completely terminated a plan, the replacement privilege allows you
to reinvest an amount equal to not less than 10% of the net asset value of the
fund shares you redeemed from your plan, without any creation and sales charge
except as described below. Your new account registration must be identical to
your terminated account's registration. You reinvest at the net asset value per
fund share next determined after BFDS receives your replacement order and
payment. You must exercise the replacement privilege within 90 days following
the date you terminate your plan.
TEXT BOX
Replacements and reinvestments may be taxable to plan owners.
[END BOX]
The replacement privilege is available to plan owners who have not previously
exercised this privilege. The replacement privilege does not eliminate your
privilege of partial withdrawal or sale. If you have redeemed fund shares from a
plan under your cancellation or surrender rights, you will not be permitted to
replace the proceeds of the cancellation or surrender at net asset value until
all refunded creation and sales charges have been deducted from the amount
offered for the replacement.
Pioneer may in its sole discretion offer additional replacement options from
time to time.
PLAN OWNER OPTIONS AND SERVICES
RETIREMENT PLANS
Tax-sheltered retirement plans, including IRAs and qualified pension and
profit-sharing plans, may purchase plans. Pioneer also offers the Pioneer
Individual Retirement Plan (the "Pioneer IRA"). 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.
Pioneer offers detailed information concerning the Pioneer IRA. You should read
this information carefully and you should consult with an attorney or tax
adviser before establishing 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. You pay a maintenance fee 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 would have the financial resources to honor a
15-year commitment to making monthly plan investments.
SYSTEMATIC WITHDRAWAL PROGRAM
You may elect a systematic withdrawal program after you complete all regularly
scheduled investments. You 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 you have reached age 59 1/2.
Under a systematic withdrawal program, BFDS, as your 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 you have elected. 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 you have specified for the
withdrawal (or, if not a business day, the first business day after that date).
You have the right to change the dollar amount of withdrawals paid to you 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.
Your plan will remain in full force and effect with all rights and privileges
until all fund shares have been withdrawn from your plan. While the systematic
withdrawal program is in effect, you must elect to reinvest all dividends and
distributions in fund shares to be held in your plan account. You should realize
that withdrawals in excess of dividends and distributions will be made from
principal and may eventually exhaust your plan account. Also, you may realize a
gain or loss for tax purposes on each withdrawal payment.
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Pioneer reserves the right to discontinue offering the systematic withdrawal
program at any time after 90 days' notification to all plan owners.
VOLUNTARY TAX WITHHOLDING
You may request, in writing, that BFDS withhold 28% of the dividends and capital
gains distributions paid on any fund shares held in your plan account (before
any reinvestment) and forward the amount withheld to the IRS as a credit against
your federal income taxes. This option is not available for plan accounts
registered as retirement plan accounts or for plan accounts subject to backup
withholding.
STATEMENTS, REPORTS AND NOTICES
For the first 18 months after the issuance of your plan, BFDS will mail you a
confirmation statement for each financial transaction as it occurs. Beginning
after the nineteenth month, BFDS may mail statements to you quarterly rather
than for each transaction. 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 your account. The custodian or Pioneer is required or may be
authorized to provide you with certain notices, reports or documents under the
plans. When you are given or sent these documents, the custodian or Pioneer will
consider the mailing date to be the date you received them.
PLAN RIGHTS AND POLICIES
CANCELLATION RIGHTS
You have a right to cancel your plan subject to the following conditions.
Within 60 days after your first investment under a plan (which, for this
purpose, is the date appearing on the confirmation statement following the
initial investment), BFDS will send a notice to you regarding your cancellation
rights. You may elect to cancel your plan within 45 days of the mailing date of
that notice by submitting a signed, written request for cancellation to BFDS. In
addition, if you are canceling a plan with current net assets valued at more
than $100,000, you must get a signature guarantee.
Upon cancellation, you will receive a payment equal to:
(1) The total current net asset value of the fund shares credited to your plan
account as of the end of the business day that BFDS receives your
cancellation request in good order and
(2) A refund of all the creation and sales charges you paid under the plan.
SURRENDER RIGHTS
BFDS will send you a written notice of your 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, you
have 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, you
have missed one or more investments. (If BFDS 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 you of your rights and will also include the value of
your account at the time the notice is sent.
You have a right to surrender (terminate) your plan subject to the following
conditions.
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At any time within an 18-month period after you purchase a plan, you may
surrender your plan. To surrender a plan, you must send BFDS a signed, written
request. In addition, if you are surrendering a plan with current net assets
valued at more than $100,000, you must get a signature guarantee.
Upon surrender, you will receive a payment equal to:
(1) The total current net asset value of the fund shares credited to your plan
account as of the end of the business day that BFDS receives your
surrender request in good order and
(2) A refund equal to all creation and sales charges you paid up to the date
of surrender minus 15% of the gross amount you have paid as of that date.
You will not receive a refund of any service charges or other fees you may
have paid.
If you surrender your plan, you may not reinstate your plan at net asset value
until all creation and sales charges included in the sale amount are first
deducted from the reinstatement amount. This requirement is more fully explained
above in "Replacement privilege on termination." Exercise of cancellation rights
may be a taxable event for you. You should consult your tax adviser.
VOTING RIGHTS IN FUND SHARES
Pioneer Independence Plans is a direct shareholder of the fund and has certain
voting rights in fund shares which are held on behalf of the plans. You are
permitted to exercise voting rights attributable to the fund shares held in your
account. The custodian will vote the fund shares held in your account in
accordance with your instructions. If you do not vote your fund shares, the
custodian will vote your shares in the same proportion as it votes the shares
for which it has received instructions from other plan owners.
Plan owners may attend any shareholder meetings of the fund. If you wish to vote
the fund shares held in your plan account in person, you may submit a written
request for a proxy to BFDS prior to the meeting.
The proxy will permit you to vote the fund shares in person.
TRANSFER OR ASSIGNMENT OF RIGHTS IN A PLAN
If you want to secure a loan, you may assign your rights (other than for a
tax-qualified retirement plan or an IRA) 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 sale. During the term of the assignment, you
will be entitled to all dividends and distributions on fund shares.
You may also transfer your rights to another person: for example, a
relative, charitable institution or trust. You may accomplish this two ways:
(1) You may transfer your right, title and interest to another person
whose only right shall be the privilege of complete and prompt
withdrawal from the plan; or
(2) You may transfer your entire right, title and interest to another
person, trustee or custodian acceptable to Pioneer, who has applied
to Pioneer for a similar plan.
BFDS will provide you 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.
TERMINATION OF A PLAN BY PIONEER OR STATE STREET BANK
Although a plan calls for regular monthly investments over a 15-year period or
for an extended 25-year period, neither Pioneer nor the custodian can elect to
terminate a plan until 300 investments have been made unless:
o You have not made investments under your plan for more than 12
consecutive months or
o Fund shares are not obtainable and a substitution is not made.
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If you have not made investments under your plan for more than 12 consecutive
months, BFDS will first count as monthly investments any advance monthly plan
investments you have made and then determine the beginning of the default
period.
After 300 investments, or if other events justify termination, Pioneer or the
custodian has the right to terminate your plan 60 days after mailing you a
written notice. The notice will request that you elect to have your plan
distributed either in cash or in fund shares after deduction of all authorized
charges, fees and expenses. Upon termination, BFDS (as your agent) may surrender
for liquidation all of the fund shares credited to your plan account, or
sufficient fund shares to pay all authorized deductions. BFDS will hold the
balance of fund shares and/or cash, after payment of all authorized deductions,
for delivery to you against the surrender of your plan.
The custodian will not pay interest on any cash balances. If you do not
surrender your plan within 60 days after the notice of termination, the
custodian may, at its discretion, fully discharge its obligations by mailing to
you:
o A confirmation statement for the fund shares or
o A check, drawn in accordance with the terms of the plan, to your
address of record.
You will then have no further rights under your plan except that if the
confirmation statement or check is returned to BFDS as undeliverable, the bank
will continue to hold these assets for your benefit, subject to any applicable
laws including the escheatment laws.
FUND SUBSTITUTION
Pioneer may substitute the shares of another investment as the underlying
investment for the shares of the fund if it deems such action to be in the best
interests of plan owners. Substituted shares generally will be comparable in
character and quality to the fund's shares and will be registered with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
Before any substitution is made, Pioneer 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 Investment Company Act of 1940;
(2) Submit written notice of the proposed substitution to the custodian;
(3) Submit written notice of the proposed substitution to each plan
owner, 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 plan owner 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
(4) Provide the custodian with a signed certificate stating that the
required notice has been given to plan owners.
If you do not surrender your plan within 30 days from the date of the
substitution notice, the custodian shall purchase the shares of the substituted
fund for the plan with the proceeds of any plan investments received from you
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, Pioneer 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 plan owners.
If fund shares are not available for purchase for a period of 120 days or
longer, and Pioneer fails to substitute other shares, the custodian may, but is
not required to, select a substitute investment or terminate Pioneer
Independence Plans. If the custodian selects a substitute investment, it will,
to the extent required, first obtain an order from the Securities and Exchange
Commission approving such substitution as specified above and then notify you.
If, within 30 days after mailing such notice, you give written approval of the
substitution and agree to bear your pro rata share of actual expenses, including
tax liability sustained by the bank, the custodian may thereafter purchase such
substituted shares. Pioneer will have authority to terminate the plan if you
fail to give such written approval within the 30-day period.
If shares of the fund are not available for purchase for a period of 120 days or
longer, and neither Pioneer nor the custodian substitutes other shares, the bank
will have authority, without further action on its part, to terminate the plans.
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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.
OTHER POLICIES
Transactions in fund shares may be suspended and payments of sale proceeds may
be postponed during any period in which any of the following conditions exist:
o The New York Stock Exchange is closed, other than for customary
weekends and holidays;
o Trading on the New York Stock Exchange is restricted;
o 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
o The Securities and Exchange Commission, by order, so permits.
DIVIDENDS, CAPITAL GAINS AND TAXES
All fund dividends and capital gains 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 you elect to receive the dividends or
distributions by check. No creation and sales charge is deducted from any
reinvestments. If you wish to receive the dividends and other distributions by
check, rather than in additional shares of the fund, you must notify BFDS in
writing. BFDS must receive these instructions at least seven days prior to the
fund's record date for a dividend or distribution. You 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, you will pay the full price for the shares
including the amount that is soon to be paid as a dividend.
Under the tax code, you are deemed, for federal income tax purposes, to directly
own the fund shares accumulated in your 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 in the fund's prospectus, dividends and distributions
paid by the fund are reportable for federal income tax purposes by plan owners
who are otherwise subject to federal income tax. Dividends and distributions are
reportable by plan owners regardless of whether the amounts are invested in
additional shares of the fund or are received in cash.
Gains realized on cash withdrawals (sales) 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 you may recognize in the
event of cancellation and refund or a replacement and reinvestment. In general,
the tax code restricts loss recognition when securities are sold and reacquired
in a short period of time; these restrictions may in certain circumstances apply
to plan owners.
Each year the custodian will send you an appropriate notice regarding taxes.
You, and not the custodian or Pioneer, pay taxes levied, assessed or imposed on:
o Any of the profits realized on sales or transfers of fund shares
by the custodian or Pioneer or
o Other property credited to your account in accordance with the
provisions of the plan or o Income on fund shares.
The foregoing is a brief summary of certain U.S. federal income tax consequences
of investing in the fund through Pioneer Independence Plans. You should consult
the fund prospectus and your tax adviser for additional information.
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SERVICE CHARGES AND OTHER FEES
There are currently no deductions against plan owners' accounts or against fund
dividends and/or distributions to compensate Pioneer or the custodian for its
services except the fees and charges described below.
If your plan is not current and you have not made any plan investments for a
12-month period, BFDS will deduct from your account a fee of $12 per year for
its services. If you send a plan investment by check or other order for the
payment of money which is not honored by the bank on which it is drawn, BFDS
will deduct $5.00 from your account for each monthly plan investment. BFDS will
charge you $2.50 for terminating a plan on which investments have not been
completed.
If you established your plan as an IRA, BFDS will deduct an annual IRA custodial
fee of $10 from your account, a portion of which is paid to The Pioneer Group,
Inc., as IRA custodian. You may pay this annual fee by sending a separate check
clearly identified as an IRA custodial fee payment to BFDS.
The fund and Pioneer 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). You do not pay a fee for your 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 that would otherwise be charged to you or your plan, 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 Pioneer reserves the right to make deductions from
the plans, the plan owners, and fund dividends and/or distributions to
compensate the custodian for its services.
ADDITIONAL INFORMATION
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. (NASD). Pioneer is an
indirect wholly owned subsidiary of The Pioneer Group, Inc. In order to
establish the plans, Pioneer 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.
Pioneer'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 Pioneer Investment Management, Inc. (Pioneer
Investments), Pioneer Goldfields Limited, Teberebie Goldfields Limited, Closed
Joint-Stock Company "Amgun-Forest," Closed Joint-Stock Company "Udinskoye" and
Closed Joint-Stock Company "Tas-Yurjah" Mining Company; Director of Pioneer Real
Estate Advisors, Inc. (PREA), Pioneer Forest, Inc., Pioneer Explorer, Inc.,
Pioneer Management (Ireland) Ltd. (PMIL), Pioneer First Investment Fund and
Closed Joint-Stock Company "Forest-Starma"; President and Director of Pioneer
Metals and Technology, Inc. (PMT), Pioneer International Corp. (PIntl), Pioneer
First Russia, Inc. and Pioneer Omega, Inc. (Pioneer Omega); Chairman of the
Supervisory Board of Pioneer Fonds Marketing, GmbH (PFM), Pioneer First Polish
Investment Fund Joint Stock Company, S.A. (Pioneer First Polish) and Pioneer
Czech Investment Company, A.S. (Pioneer Czech); Member of the Supervisory Board
of Pioneer Universal Pension Fund Company; Chairman, President and Trustee of
all of the Pioneer mutual funds; Director of Pioneer Global Equity Fund Plc,
Pioneer Global Bond Fund Plc, Pioneer Euro Reserve Fund Plc, Pioneer European
Equity Fund Plc, Pioneer Emerging Europe Fund Plc, Pioneer US Real Estate Fund
Plc and Pioneer U.S. Growth Fund Plc (the Pioneer Irish Funds); and Partner,
Hale and Dorr LLP (counsel to PGI and Pioneer Independence Fund).
DAVID D. TRIPPLE, DIRECTOR AND PRESIDENT
Executive Vice President and a Director of PGI; President and a Director of
Pioneer Investments; Director of Pioneering Services Corporation (PSC), PIntl,
PREA, Pioneer Omega, PMIL, Pioneer First Investment Fund and the Pioneer Irish
Funds; Member of the Supervisory Board of Pioneer First Polish and Pioneer
Czech; and Executive Vice President and Trustee of all of the Pioneer mutual
funds.
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STEPHEN W. LONG, DIRECTOR AND EXECUTIVE VICE PRESIDENT
Senior Managing Director - Retail Sales of Pioneer Investments.
ERIC W. RECKARD, TREASURER
Executive Vice President, Chief Financial Officer and Treasurer of PGI since
June 1999; Treasurer of Pioneer Investments, Pioneer, PSC, PIntl, PREA, PMT,
Pioneer Omega and of all of the Pioneer mutual funds since June 1999 (Assistant
Treasurer of the funds prior to June 1999); Vice President-Corporate Finance of
PGI from February 1999 to June 1999; Manager of Business Planning and Internal
Audit of PGI since September 1996; Manager of Fund Accounting of Pioneer
Investments since May 1994; and Manager of Auditing, Compliance and Business
Analysis for PGI prior to May 1994.
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.
ROBERT L. BUTLER, EXECUTIVE VICE PRESIDENT
Senior Managing Director - Institutional Distribution of Pioneer Investments;
Director of PGI, Pioneer Investments, PMIL, PSC, PIntl, PREA and the Pioneer
Irish Funds; Director and Vice Chairman of PFM; and a Member/Vice Chairman of
the Supervisory Board of Pioneer Czech and Pioneer First Polish.
STEPHEN M. GRAZIANO, EXECUTIVE VICE PRESIDENT
Senior Managing Director - Marketing of Pioneer Investments.
SENIOR VICE PRESIDENTS: William A. Misata, Constance D. Spiros and Marcy L.
Supovitz.
VICE PRESIDENTS: Mark R. Kiniry, Barry G. Knight, William H. Spencer and
Elizabeth A. Watson.
Pioneer pays commissions ranging from 80% to 95% of the total creation and sales
charges to authorized investment broker-dealer firms that are members of the
NASD and have executed a sales agreement with Pioneer.
Pioneer 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 Pioneer as described in this
prospectus and the custodian agreement will be assumed by another entity that
Pioneer believes at the time of assignment is capable of fulfilling its
obligations as described in this prospectus and under terms of the custodian
agreement.
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 Pioneer, dated February 17, 1998. State Street Bank is a trust
company organized under the laws of Massachusetts.
Investments under a plan should be payable to State Street Bank and Trust
Company and sent to BFDS. After making authorized deductions, BFDS 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 that are automatically reinvested in additional fund shares for
the plan accounts, unless you elect to receive such dividends and distributions
by check.
The duties of State Street Bank under the custodian agreement include the
receipt of all investments from plan owners and income dividends and capital
gains distributions on fund shares, the processing of all authorized deductions
from plan investments and fund distributions and the purchase and retention of
fund shares for plan owner accounts. The custodian also effects partial or
complete liquidations of plans in connection with withdrawals or terminations
and the various other functions discussed above.
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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 Pioneer or the investment manager of
the fund.
The custodian agreement cannot be amended to adversely affect the rights and
privileges of the plan owners without their written consent. The custodian may
not 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 plan owners. The custodian
may terminate its obligation to accept new plans for custodianship if Pioneer
fails to perform certain activities it is required to perform under the
custodian agreement or if the bank terminates the custodian agreement upon 90
days' notice to Pioneer.
PIONEER INDEPENDENCE PLANS
Pioneer Independence Plans is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of 1940.
This 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.
EMPLOYER IDENTIFICATION NUMBERS
Pioneer Independence Plans: 04-3401100
Pioneer Funds Distributor, Inc.: 04-3042318
State Street Bank and Trust Company: 04-1867445
FINANCIAL STATEMENTS
PIONEER INDEPENDENCE PLANS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO PIONEER FUNDS DISTRIBUTOR, INC. AND THE PLANHOLDERS OF PIONEER INDEPENDENCE
PLANS:
We have audited the accompanying balance sheet of Pioneer Independence Plans
(the Plans) as of December 31, 1998, and the related statement of operations and
the statement of changes in net assets for the period then ended. These
financial statements are the responsibility of the Plans' management. Our
responsibility is to express an opinion on these 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. Our procedures included
confirmation of securities owned as of December 31, 1998, by correspondence with
the custodian. 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 financial position of Pioneer Independence Plans as
of December 31, 1998, the results of its operations and the change in its net
assets for the period then ended, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Boston, Massachusetts
April 28, 1999
17
<PAGE>
<TABLE>
<CAPTION>
PIONEER INDEPENDENCE PLANS
BALANCE SHEET
December 31, 1998
<S> <C>
ASSETS:
Investment in Pioneer Independence Fund, at value (cost $2,562,203) $2,733,986
Cash 51,760
Receivable for shares of Pioneer Independence Fund sold 28,226
----------
Total assets $2,813,972
----------
LIABILITIES:
Payable for shares of Pioneer Independence Fund purchased $ 42,680
Payable for plans terminated 186
Payable for creation and sales charges 37,120
----------
Total liabilities $ 79,986
----------
NET ASSETS:
Total net assets (equivalent to $9.63 per share based
on 283,903 shares of beneficial interest held for outstanding plans) $2,733,986
==========
<CAPTION>
STATEMENT OF OPERATIONS
For the Period from March 16, 1998
(Commencement of Operations) to December 31, 1998
<S> <C>
INVESTMENT INCOME:
Dividends received on shares of Pioneer Independence Fund $ 24,486
----------
Net investment income $ 24,486
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on plan liquidations $ (1,642)
Unrealized appreciation on investments 171,783
----------
Net gain on investments $ 170,141
----------
Net increase in net assets resulting from operations $ 194,627
==========
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Period from March 16, 1998
(Commencement of Operations) to December 31, 1998
<S> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
Operations:
Net investment income $ 24,486
Net realized loss on plan liquidations (1,642)
Unrealized appreciation on investments 171,783
----------
Net increase in assets from operations $ 194,627
Distributions to planholders from net investment income - net $ (12)
Capital share transactions - net 2,439,371
----------
Net increase in net assets $2,633,986
NET ASSETS:
Beginning of period (initial capitalization--equivalent to
$10.00 per share based on 10,000 shares of beneficial
interest held for outstanding plans 100,000
End of period $2,733,986
==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
18
<PAGE>
PIONEER INDEPENDENCE PLANS
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. ORGANIZATION
Pioneer Independence Plans (the Plans) is a unit investment trust registered
under the Investment Company Act of 1940. The Plans accumulate assets through
fixed periodic investments which are in turn invested in shares of Pioneer
Independence Fund (the Fund). The initial investment into the Plans was made on
February 20, 1998 by Pioneer Funds Distributor, Inc. (PFD), the sponsor for the
Plans. This initial investment is exempt from creation and sales charges as well
as certain other terms of the Plans. The Plans commenced operations on March 16,
1998. Prior to March 16, 1998, the Plans' activities were 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 shares held in Pioneer
Independence Fund.
B. TRANSACTION DATES
Share transactions are recorded on a trade date basis. Dividend income and
capital gain distributions are recorded on the ex-dividend date.
C. INCOME TAXES
No provision has been made for federal income taxes. All distributions of
net investment income and capital gains received by planholders are treated
as if received directly from the underlying Fund. A planholder realizes a
gain or loss on liquidation for cash but not on withdrawal of the
underlying Fund shares.
<TABLE>
<CAPTION>
2. CAPITAL SHARE TRANSACTIONS
At December 31, 1998, the Plan held 283,903 shares of Pioneer Independence Fund.
Transactions in Fund shares, exclusive of the initial investment by PFD of
$100,000 (10,000 shares at $10 per share), for the period ended December 31,
1998 were as follows:
DOLLARS SHARES
<S> <C> <C>
Planholder payments $ 3,931,142
Less sales charges (1,195,989)
-----------
Balance invested in Fund shares $ 2,735,153 304,121
Distributions reinvested in Fund shares 24,474 2,640
Redemptions and withdrawals in Fund shares (295,782) (32,858)
----------- -------
$ 2,463,845 273,903
=========== =======
</TABLE>
<TABLE>
<CAPTION>
3. PLANHOLDER'S COST OF PIONEER INDEPENDENCE FUND SHARES
The investment in Pioneer Independence Fund shares is carried at identified
cost, which represents the amount available for investment (including reinvested
distributions of net investment income and realized gains) in such shares after
deduction of sales charges, if applicable, and unrealized appreciation. The
total investment as of December 31, 1998 is detailed below:
<S> <C>
Total payments made by planholders on
plans outstanding (net of liquidations) $3,627,120
Reinvested distributions from net investment income 23,627
----------
Total $3,650,747
Less deduction for creation and sales charges (1,088,544)
----------
Net cost of Pioneer Independence Fund shares $2,562,203
Unrealized appreciation 171,783
----------
Net amount applicable to planholders $2,733,986
==========
</TABLE>
4. RELATED PARTY TRANSACTIONS
For the period ended December 31, 1998, creation and sales charges of $111,139
related to investments in the Plans were paid to PFD as the sponsor for the
Plans.
19
<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 Pioneer Investment Management, Inc.) as of December 31, 1998, and
the related consolidated statements of operations, changes in stockholder's
equity and cash flows for the year then ended that you are filing pursuant to
Rule 17a-5 under the Securities Exchange Act of 1934. These consolidated
financial statements, and the schedules referred to below are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and the schedules 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, 1998, 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 purposes 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.
/s/ Arthur Andersen LLP
Boston, Massachusetts
February 1, 1999
20
<PAGE>
<TABLE>
<CAPTION>
PIONEER FUNDS DISTRIBUTOR, INC.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
December 31, 1998
(Dollars in Thousands)
ASSETS
<S> <C>
CASH AND TEMPORARY INVESTMENTS, AT COST, WHICH APPROXIMATES VALUE (Note 2) .. $ 13,300
INVESTMENTS IN MARKETABLE SECURITIES, AT VALUE (Note 2) ..................... 1,870
RECEIVABLES:
From securities brokers and dealers for sales of mutual fund shares ...... 14,072
From the Pioneer family of mutual funds .................................. 2,940
From the sale of Class B share rights .................................... 2,883
Due from affiliates, net ................................................. 53,925
Other .................................................................... 730
PREPAID SERVICE FEES ........................................................ 3,984
OTHER ASSETS ................................................................ 2,034
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, AT COST (NET OF
ACCUMULATED DEPRECIATION OF $663) (Note 2) .................................. 1,180
DEALER ADVANCES (NET OF ACCUMULATED AMORTIZATION OF $1,054) (Note 9) ........ 927
DEFERRED INCOME TAXES, NET (Note 4) ......................................... 142
DEFERRED COST OF RESTRICTED STOCK PLAN (Note 5) ............................. 1,875
---------------
Total assets ....................................................... $ 99,862
===============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Payable to funds for shares sold ......................................... $ 14,053
Accrued expenses and accounts payable .................................... 11,060
Distribution fees due to brokers and dealers ............................. 1,340
---------------
Total liabilities .................................................. 26,453
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 .......................................................... 165,581
Accumulated deficit ...................................................... (91,988)
Cumulative translation adjustment ........................................ (184)
---------------
Total stockholder's equity ......................................... 73,409
---------------
Total liabilities and stockholder's equity ......................... $ 99,862
===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
21
<PAGE>
<TABLE>
<CAPTION>
PIONEER FUNDS DISTRIBUTOR, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
for the Year Ended December 31, 1998
(Dollars in Thousands)
<S> <C>
REVENUES AND OTHER INCOME (Note 2):
Distribution revenues ................................................... $ 16,233
Commissions-
Mutual funds .......................................................... 9,365
Variable annuities .................................................... 2,586
Gain on sales of Class B share rights ................................... 8,132
Other income ............................................................ 1,675
Unrealized and realized gains and losses on marketable securities, net .. (608)
---------------
37,383
---------------
DISTRIBUTION AND ADMINISTRATIVE EXPENSES:
Sales and marketing ..................................................... 26,507
Salaries and related benefits ........................................... 11,796
Amortization of dealer advances ......................................... 10,560
Other ................................................................... 12,754
---------------
61,617
---------------
Loss before benefit for income taxes .............................. (24,234)
---------------
BENEFIT (PROVISION) FOR INCOME TAXES (Note 4):
State ................................................................... 1,425
Federal ................................................................. 8,037
Foreign ................................................................. 8
---------------
9,470
---------------
Net loss .......................................................... $ (14,764)
===============
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
for the Year Ended December 31, 1998
(Dollars in Thousands)
-----COMMON STOCK---- CUMULATIVE TOTAL
NUMBER PAID-IN ACCUMULATED TRANSLATION STOCKHOLDER'S COMPREHENSIVE
OF SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT EQUITY INCOME
<S> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1997 100 $ - $ 115,925 $ (77,224) $ (174) $ 38,527 $ -
Net loss - - - (14,764) - (14,764) (14,764)
Cumulative translation
adjustment - - - - (10) (10) (10)
Capital contributions
(Note 7) - - 49,656 - - 49,656 -
-----------
Comprehensive loss - - - - - - $ (14,774)
--------- -------- ----------- ---------- ----------- ---------- ===========
DECEMBER 31, 1998 100 $ - $ 165,581 $ (91,988) $ (184) $ 73,409
========= ======== =========== ========== =========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN
INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
22
<PAGE>
<TABLE>
<CAPTION>
PIONEER FUNDS DISTRIBUTOR, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the Year Ended December 31, 1998
(Dollars in Thousands)
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ......................................................................... $ (14,764)
Adjustments to reconcile net loss to net cash provided by
operating activities-
Gain on sale of Class B share rights ........................................... (8,132)
Deferred income taxes, net ..................................................... (16,343)
Depreciation and amortization .................................................. 10,962
Unrealized and realized gains and losses on marketable securities, net ......... 608
Restricted stock plan expense .................................................. 474
Changes in operating assets and liabilities-
Investments in marketable securities ......................................... (531)
Proceeds from sale of marketable securities .................................. 4,498
Receivable from securities brokers and dealers for sale of mutual
fund shares .................................................................. (2,320)
Receivable from Pioneer family of mutual funds ............................... (109)
Receivable from the sale of Class B share rights ............................. (2,883)
Other receivables ............................................................ 352
Prepaid service fees ......................................................... (2,122)
Other assets ................................................................. (739)
Dealer advances, net ......................................................... (22,783)
Proceeds from initial sale of Class B share rights ........................... 61,631
Payable to funds for shares sold ............................................. 2,322
Accrued expenses and accounts payable ........................................ 6,217
Distribution fees due to brokers and dealers ................................. 266
Accrued foreign income taxes ................................................. (202)
Deferred cost of restricted stock plan ....................................... (1,728)
------------
Total adjustments ..................................................... 29,438
------------
Net cash provided by operating activities ............................. 14,674
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to furniture, equipment and leasehold improvements ..................... (1,092)
------------
Net cash provided by investing activities .................................. (1,092)
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to affiliates, net ........................................................... (4,695)
------------
Net cash used by financing activities ...................................... (4,695)
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ....... (5)
------------
NET INCREASE IN CASH AND TEMPORARY INVESTMENTS ...................................... 8,882
CASH AND TEMPORARY INVESTMENTS, BEGINNING OF YEAR ................................... 4,418
------------
CASH AND TEMPORARY INVESTMENTS, END OF YEAR ......................................... $ 13,300
============
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Conversion of amount due to parent company to additional paid-in capital ......... $ 49,656
============
</TABLE>
THE ACCOMPANYING NOTES ARE AN
INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
23
<PAGE>
PIONEER FUNDS DISTRIBUTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. NATURE OF OPERATIONS AND ORGANIZATION
NATURE OF OPERATIONS
Pioneer Funds Distributor, Inc. (the Company) serves as the principal
underwriter and distributor 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 Pioneer
Variable Contracts Trust.
ORGANIZATION
The Company is a wholly owned subsidiary of Pioneer Investment
Management, Inc. (PIM), formerly Pioneering Management Corporation.
Pioneer Fonds Marketing GmbH (PFM) and Pioneer Global Funds Distributor,
Ltd. (PGFDL) are wholly owned subsidiaries of the Company. PFM performs
marketing and sales activities with respect to sales of shares of certain
of the Pioneer Family of Mutual Funds primarily in Germany, Austria and
Switzerland. PGFDL was established during 1998, and serves as the
exclusive worldwide distributor of Pioneer's Irish mutual funds.
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 subsidiaries. All intercompany
balances and transactions between the Company and its subsidiaries have
been eliminated in consolidation.
RECOGNITION OF REVENUE
Commissions consist of underwriting commissions earned from the
distribution of Class A 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 revenues
include distribution fees earned based on 0.75% of certain mutual fund
net assets and the gains on sales of Class B share rights sold pursuant
to the Class B Share Rights Program (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 intercompany revenue, commissions as dealer
and interest and dividend income.
INVESTMENTS IN MARKETABLE SECURITIES
Investments in marketable securities represent investments in mutual
funds for which the Company acts as the distributor. Net realized and
unrealized gains and losses are reported as such in the accompanying
consolidated statement of operations.
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, commercial paper, a resale agreement and amounts invested in
Pioneer Cash Reserves Fund and Pioneer DM Cash Funds PLC.
Resale agreements involve the overnight purchase of securities under
agreements to resell. It is the policy of the Company to obtain
possession of collateral with a market value equal to or in excess of the
principal amount loaned under resale agreements.
The Company's net benefit for state and federal income taxes of
approximately $9,462,000 in 1998 is reflected as an increase to amounts
due from 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.
COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 130, REPORTING COMPREHENSIVE INCOME, during 1998. SFAS No. 130
establishes standards for the reporting of comprehensive income and its
components. Comprehensive income, as defined, includes all changes in
equity during a period from non-owner sources. The Company's foreign
currency translation adjustments, which are excluded from net income, are
included in comprehensive income, as reported in the accompanying
consolidated statement of changes in stockholder's equity.
24
<PAGE>
PIONEER FUNDS DISTRIBUTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
(Continued)
CONCENTRATIONS OF CREDIT RISK
The Company is primarily engaged in the selling of mutual fund shares of
the Pioneer Family of Mutual Funds. In the event counterparties do not
fulfill their obligations to the Company, the Company may be exposed to
risk. The risk of default depends on the creditworthiness of the
counterparties. It is the Company's policy to review, as necessary, the
credit standing of each counterparty.
3. NET CAPITAL AND RESERVE REQUIREMENTS
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. Net
capital may fluctuate on a daily basis. Effective with the June 30, 1998
net capital computation, the Company changed its method of net capital
computation from the Aggregate Indebtedness method to the Alternative
Standard. The Company's net capital, as computed under Rule 15c3-1, was
$1,946,975 at December 31, 1998, which exceeded required net capital of
$250,000 by $1,696,975.
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 PIM, 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:
<TABLE>
<CAPTION>
<S> <C>
Federal statutory rate ................................. (35.0)%
(Increases) decreases in tax rate resulting from-
State income tax, new apportionment rate ............. (6.0)%
Foreign income taxes ................................. .3%
Other ................................................ 1.6%
-----------
Effective tax rate ..................................... (39.1)%
===========
</TABLE>
The increase in the Company's 1998 tax benefit above the federal
statutory rate 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 SFAS No. 109, ACCOUNTING
FOR INCOME TAXES, requires restating deferred tax liabilities and assets
to reflect the lower rate. Accordingly, in 1998, the Company recorded an
additional tax benefit of approximately $1,450,000. Absent the required
adjustment, the effective income tax rate for 1998 would have been
approximately 33%.
The components of deferred income taxes recognized in the accompanying
consolidated statement of financial condition are comprised of deferred
tax assets of approximately $470,000 and deferred tax liabilities of
approximately $328,000. The approximate income tax effect of each type of
temporary difference is as follows:
<TABLE>
<CAPTION>
<S> <C>
Dealer advances ............................... $ (325,000)
Restricted stock .............................. 203,000
Other, net .................................... 264,000
-----------------
Net deferred tax asset .............. $ 142,000
=================
</TABLE>
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 participant's
right to resell the awarded stock vests evenly over a four-year period,
and PGI may repurchase unvested restricted shares at $.10 per share upon
termination of the participant's employment. 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 upon the approval of the 1997
Plan by the stockholders of PGI on May 20, 1997. PGI's 1990 Restricted
Stock Plan (the 1990 Plan) expired in January 1995.
In 1998, certain employees of PFD were awarded 68,680 of PGI common stock
under the 1997 Plan, with a fair market value on the award date of
approximately $1,740,000. At December 31, 1998, cumulative shares awarded
to certain employees of the Company, net of forfeitures, under the 1997
Plan, the 1995 Plan and the 1990 Plan were 85,783, 26,725 and 120,363,
respectively.
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 four-year
period. The Company expensed $474,000 in connection with these plans,
which is included in salaries and related benefits expense 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
25
<PAGE>
PIONEER FUNDS DISTRIBUTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
(Continued)
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. During 1998, 15,000 incentive stock options were granted under the
1997 Plan at an exercise price of $16.125. At December 31, 1998,
nonstatutory options to purchase 52,500 shares of PGI common stock at
exercise prices ranging from $16.125 to $29.875, equal to fair market
value at the dates of the grants, were granted to certain employees of
the Company under the 1997 Plan.
Prior to the adoption of the 1997 Plan, options were granted under the
1988 Option Plan. As of December 31, 1998, 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, 152,000 shares were exercised at prices
ranging from $4.188 to $18.25, and 18,000 shares were forfeited as of
December 31, 1998.
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 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 1998, employees of the Company purchased
9,574 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 12% of their compensation, and the
Company will match this contribution up to 2%. The Company's expenses
under the Plans amounted to approximately $812,000 in 1998.
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 $112,000 in
1998.
During 1998, 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 in other expenses is $5,926,000 related to these
charges.
During 1998, obligations in the amount of $49,656,000 owed by the Company
to PIM 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 $771,000, 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 $899,000 in 1999, $848,000 in
2000, $869,000 in 2001 and $288,000 in 2002. These future minimum rental
payments include estimated annual operating expenses of approximately
$390,000 in 1999, 2000 and 2001, and $98,000 in 2002.
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
26
<PAGE>
PIONEER FUNDS DISTRIBUTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
(Continued)
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.
In September 1998, the Company entered into an agreement to sell to a
third party its rights to receive future distribution fees and deferred
sales charges from the then outstanding Class B shares of the Pioneer
Family of Mutual Funds. The Class B share rights were sold for $61.7
million resulting in a gain of $8.1 million, reported in the accompanying
consolidated statement of operations as gain on sale of Class B share
rights. In addition, the agreement (B Share Rights Program) also provides
for the sale, at a premium, of additional rights arising from future
sales of Class B shares on a monthly basis through September 2001.
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 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.
27
<PAGE>
<TABLE>
<CAPTION>
PIONEER FUNDS DISTRIBUTOR, INC.
SCHEDULE I
COMPUTATION OF NET CAPITAL UNDER RULE 15C3-1
OF THE SECURITIES EXCHANGE ACT OF 1934
<S> <C>
DECEMBER 31, 1998
COMPUTATION OF NET CAPITAL:
Consolidated stockholder's equity .................................. $ 73,408,167
Less--Retained earnings of subsidiary .............................. 85,014
---------------
Unconsolidated stockholder's equity .......................... 73,323,153
Deduct--Nonallowable assets before consolidation-
Receivables and other assets ..................................... 12,898,122
Furniture, equipment and leasehold improvements .................. 835,092
Investments in and receivables from affiliates ................... 57,676,599
Haircuts on securities and outstanding wire trades ............... 339,469
Add--Deferred income taxes, associated with dealer advances ........ 373,104
---------------
Net capital .................................................. $ 1,946,975
===============
COMPUTATION OF BASIC NET CAPITAL REQUIREMENT:
Minimum net capital required (greater of $250,000 or 2%
of aggregate debits) ............................................... $ 250,000
Net capital in excess of requirement ............................... $ 1,696,975
Reconciliation with Company's Computation
(included in Part IIA of Form X-17A-5 as of December 31,
1998)
NET CAPITAL, AS REPORTED IN COMPANY'S PART II A (UNAUDITED)
FOCUS REPORT .......................................................... $ 1,298,075
NET INCREASE RESULTING FROM DEFERRED TAX ADJUSTMENTS .................. 648,900
---------------
Net capital, as adjusted ..................................... $ 1,946,975
===============
</TABLE>
SCHEDULE II
COMPUTATION FOR DETERMINATION OF RESERVE REQUIREMENTS
FOR BROKER-DEALERS UNDER RULE 15C3-3
OF THE SECURITIES EXCHANGE ACT OF 1934
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, 1998.
THE ACCOMPANYING NOTES ARE AN
INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
28
<PAGE>
SUPPLEMENTARY REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Pioneer Funds Distributor, Inc.:
In planning and performing our audit of the consolidated financial statements
and supplemental schedules referred to below of Pioneer Funds Distributor, Inc.
(the Company) for the year ended December 31, 1998, we considered its internal
control, including control activities for safeguarding securities, in order to
determine our auditing procedures for the purpose of expressing our opinion on
the consolidated financial statements and supplemental schedules referred to
below and not to provide assurance on internal control.
Also, as required by Rule 17a-5(g)(1) of the Securities and Exchange Commission
(SEC), we have made a study of the practices and procedures followed by the
Company, including tests of such practices and procedures that we considered
relevant to the objectives stated in Rule 17a-5(g), in making the periodic
computations of aggregate debits and net capital under Rule 17a-3(a)(11) and for
determining compliance with the exemptive provisions of Rule 15c3-3. Because the
Company does not carry securities accounts for customers or perform custodial
functions relating to customer securities, we did not review the practices and
procedures followed by the Company in any of the following:
1. Making quarterly securities examinations, counts, verifications and
comparisons
2. Recordation of differences required by Rule 17a-13
3. Complying with the requirements for prompt payment for securities under
Section 8 of Federal Reserve Regulation T of the Board of Governors of the
Federal Reserve System.
The management of the Company is responsible for establishing and maintaining an
internal control and the practices and procedures referred to in the preceding
paragraph. In fulfilling this responsibility, estimates and judgments by
management are required to assess the expected benefits and related costs of
controls, and of the practices and procedures referred to in the preceding
paragraph, and to assess whether those practices and procedures can be expected
to achieve the SEC's above-mentioned objectives. Two of the objectives of
internal control and the practices and procedures are to provide management with
reasonable but not absolute assurance that assets for which the Company has
responsibility are safeguarded against loss from unauthorized use or disposition
and that transactions are executed in accordance with management's authorization
and recorded properly to permit preparation of financial statements in
accordance with generally accepted accounting principles. Rule 17a-5(g) lists
additional objectives of the practices and procedures listed in the preceding
paragraph.
Because of inherent limitations in internal control or the practices and
procedures referred to above, error or fraud may occur and not be detected.
Also, projection of any evaluation of them to future periods is subject to the
risk that they may become inadequate because of changes in conditions or that
the effectiveness of their design and operation may deteriorate.
Our consideration of internal control would not necessarily disclose all matters
in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of the
specific internal control components does not reduce to a relatively low level
the risk that error or fraud in amounts that would be material in relation to
the financial statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing their assigned
functions. However, we noted no matters involving internal control, including
control activities for safeguarding securities, that we consider to be material
weaknesses as defined above.
We understand that practices and procedures that accomplish the objectives
referred to in the second paragraph of this report are considered by the SEC to
be adequate for its purposes in accordance with the Securities Exchange Act of
1934 and related regulations, and that practices and procedures that do not
accomplish such objectives in all material respects indicate a material
inadequacy for such purposes. Based on this understanding and on our study, we
believe that the Company's practices and procedures were adequate at December
31, 1998 to meet the SEC's objectives.
This report is intended solely for the use of the Board of Directors,
management, the SEC, the National Association of Securities Dealers and other
regulatory agencies that rely on Rule 17a-5(g) under the Securities Exchange Act
of 1934 in their regulation of registered brokers and dealers and should not be
used for any other purpose.
/s/ Arthur Andersen LLP
Boston, Massachusetts
February 1, 1999
29
