Pioneer Independence Fund
Prospectus
March 16, 1998
PIONEER INDEPENDENCE FUND (the "Fund") seeks growth of capital. The Fund will
invest in a diversified portfolio of securities consisting primarily of common
stocks.
Shares of the Fund may be offered to and acquired by the general public only
by investing in Pioneer Independence Plans. The creation and sales charges for a
Plan (a "Plan") established under Pioneer Independence Plans may amount to 50%
of the first 12 investments made for the Plan. Details of Pioneer Independence
Plans, including the creation and sales charges, may be found in the attached
Pioneer Independence Plans prospectus. Please read and retain it for your future
reference.
FUND RETURNS AND SHARE PRICES FLUCTUATE AND THE VALUE OF YOUR FUND SHARES
UPON REDEMPTION MAY BE MORE OR LESS THAN YOUR PURCHASE PRICE. SHARES IN THE FUND
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR
OTHER DEPOSITORY INSTITUTION, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
This Prospectus provides information about the Fund that you should know
before investing. Please read and retain it for your future reference. More
information about the Fund is included in the Fund's Statement of Additional
Information ("SAI"), also dated March 12, 1998, as supplemented or revised from
time to time, which is incorporated into this Prospectus by reference. A copy of
the SAI may be obtained free of charge by calling Shareholder Services at
1-800-225-6541 or by written request to the Fund at 60 State Street, Boston,
Massachusetts 02109. Additional information about the Fund has been filed with
the Securities and Exchange Commission (the "SEC") and is available upon request
and without charge by calling 1-800-225-6541 or through the SEC's Internet Web
site (http://www.sec.gov).
TABLE OF CONTENTS PAGE
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I. EXPENSE INFORMATION .......................................... 2
II. INVESTMENT OBJECTIVE AND POLICIES ............................. 2
III. MANAGEMENT OF THE FUND ....................................... 5
IV. SHARE PRICE .................................................. 6
V. SALE OF FUND SHARES .......................................... 6
VI. DISTRIBUTION PLAN ............................................ 6
VII. DIVIDENDS, DISTRIBUTIONS AND TAXATION ........................ 7
VIII. SHAREHOLDER SERVICES ......................................... 7
IX. THE FUND ..................................................... 8
X. INVESTMENT RESULTS ........................................... 9
XI. APPENDIX - CERTAIN INVESTMENT PRACTICES ....................... 9
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
I. EXPENSE INFORMATION
The table below reflects only the expenses of the Fund. The general public
may only purchase Fund shares through Pioneer Independence Plans. For
information on the expenses associated with Pioneer Independence Plans, see the
attached Plan Prospectus.
This table is designed to help you understand the charges and expenses that
you, as a shareholder, will bear directly or indirectly when you invest in the
Fund. The table reflects shareholder and annual operating expenses. "Other
Expenses" is based on estimates for the fiscal period ending December 31, 1998.
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge on Purchases.....................................None
Maximum Sales Charge on Reinvestment of Dividends.....................None
Redemption Fee 1 .....................................................None
Exchange Fee .........................................................None
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets):
Management Fee 2 (after fee waiver)...................................0.00%
12b-1 Fee3............................................................0.25%
Other Expenses (including accounting and transfer agent
fees, custodian fees and printing expenses) 2.......................1.25%
TOTAL OPERATING EXPENSES: (AFTER FEE WAIVER)...........................1.50%
1 Separate fees (currently $10 and $20, respectively) apply to United States
("U.S.") and international wire transfers of redemption proceeds.
2 Pioneering Management Corporation ("PMC"), the Fund's investment adviser, has
agreed not to impose all or a portion of its management fee and to make other
arrangements, if necessary, to limit the operating expenses of the Fund to 1.50%
of average daily net assets. This agreement is voluntary and temporary and may
be revised or terminated at any time after the expiration of the 1998 fiscal
year.
3 This is the maximum annual fee rate and assumes that the Distribution Plan
(defined below) is in effect for an entire year; actual expenses are expected to
be lower.
ANNUAL OPERATING EXPENSES BEFORE FEE WAIVER
(as a percentage of average net assets)
Management Fee ........................................... 0.75%
Total Operating Expenses................................. 2.25%
Example:
You would pay the following expenses on a $1,000 investment assuming a 5%
annual return, reinvestment of all dividends and distributions and that the
percentage amounts listed under "Annual Operating Expenses" remain the same each
year.
1 Year 3 Years
Assuming complete redemption at the end of the period $15 $47
THE EXAMPLE IS DESIGNED FOR INFORMATION PURPOSES ONLY, AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RETURN. ACTUAL FUND
EXPENSES AND RETURNS WILL VARY FROM YEAR TO YEAR AND MAY BE HIGHER OR LOWER THAN
THOSE SHOWN.
For further information regarding management fees, Rule 12b-1 fees and other
expenses of the Fund, see "Management of the Fund," "Distribution Plan" and
"Sale of Fund Shares" in this Prospectus and "Management of the Fund" and
"Underwriting Agreement and Distribution Plan" in the SAI.
II. INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek growth of capital. The Fund will
invest in a diversified portfolio of securities consisting primarily of common
stocks.
Generally, the Fund invests at least 80% of its total assets in common stocks
and in securities with common stock characteristics, such as convertible bonds
and preferred stocks. Any current income produced by a security is not a
significant factor in the selection of investments. The Fund's portfolio often
includes a number of securities that are owned by other equity mutual funds
managed by PMC. See "Investment Policies and Restrictions" in the SAI for more
information.
In selecting securities for the Fund's portfolio, PMC focuses on the securities
of companies that are believed to be undervalued relative to the current stock
price. The Fund may also seek the securities of companies that are believed to
have above average growth potential. PMC's assessment of a company's relative
valuation or growth potential is based on an analysis of a company's business
operations, revenues, earnings, cash flows and management, among other factors.
The Fund may invest in U.S. and foreign securities across a broad range of
market capitalizations and industries. In managing this Fund, PMC relies
primarily on the knowledge, experience and judgment of its team of equity
investment managers and research analysts, but also who receive and use
information from a variety of outside sources, including brokerage firms,
electronic data bases, specialized research firms and technical journals.
The Fund intends to be substantially fully invested at all times. It is the
policy of the Fund not to engage in trading for short-term profits.
Nevertheless, changes in the portfolio will be made promptly when determined to
be advisable by reason of developments not foreseen at the time of the initial
investment decision, and usually without reference to the length of time a
security has been held. Accordingly, portfolio turnover rate is not considered a
limiting factor in the execution of investment decisions. The Fund's turnover
rate is not expected to exceed 100% in the current fiscal period. Short-term,
temporary investments will not normally represent more than 10% of the Fund's
assets. A short-term investment is considered to be an investment in a U.S. or
foreign debt instrument with a maturity of one year or less from the date of
issuance.
The Fund may on occasion, for temporary defensive purposes to preserve
capital, invest up to 100% of its total assets in short-term, temporary
investments. The Fund will assume a temporary defensive posture only when
political and economic factors affect equity markets to such an extent that PMC
believes there to be extraordinary risks in being substantially invested in
common stock.
The Fund's fundamental investment objective and the fundamental investment
restrictions set forth in the SAI may not be changed without shareholder
approval. Certain other investment policies and strategies and restrictions on
investment are noted throughout the Prospectus and are set forth in the SAI.
These investment policies and strategies and restrictions may be changed at any
time by a vote of the Board of Trustees.
OTHER ELIGIBLE INVESTMENTS AND INVESTMENT TECHNIQUES
REAL ESTATE INVESTMENT TRUSTS ("REITS"). The Fund may invest up to 25% of its
total assets in real estate investment trusts ("REITs"). REITs are pooled
investment vehicles which invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Like investment companies such
as the Fund, REITs are not taxed on income distributed to shareholders provided
they comply with several requirements of the Internal Revenue Code of 1986, as
amended (the "Code"). The Fund will indirectly bear its proportionate share of
any expenses paid by REITs in which it invests in addition to the expenses paid
by the Fund.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to the risks of financing projects. REITs are subject to heavy cash
flow dependency, default by borrowers, self-liquidation, and the possibilities
of failing to qualify for the exemption from tax for distributed income under
the Code and failing to maintain their exemptions from the Investment Company
Act of 1940 (the "1940 Act"). REITs whose underlying assets include long-term
health care properties, such as nursing, retirement and assisted living homes,
may be impacted by federal regulations concerning the health care industry.
REITs (especially mortgage REITs) are also subject to interest rate risks.
When interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
FOREIGN SECURITIES. While there is no requirement to do so, the Fund generally
limits its investments in foreign securities to no more than 25% of its total
assets. To the extent that the Fund invests in securities issued by foreign
companies, certain considerations and risks are involved which are not typically
associated with investing in securities of U.S. companies. Foreign companies are
not subject to uniform accounting, auditing and financial standards and
requirements comparable to those applicable to U.S. companies. There may also be
less publicly available information about foreign companies compared to reports
and ratings published about U.S. companies. In addition, foreign securities
markets have substantially less volume than U.S. markets and securities of some
foreign companies are less liquid and more volatile than securities of
comparable U.S. companies. There may also be less government supervision and
regulation of foreign securities exchanges, brokers and listed companies than
exists in the U.S. Dividends or interest paid by foreign issuers may be subject
to withholding and other foreign taxes which will decrease the net return on
such investments as compared to dividends or interest paid to the Fund by U.S.
companies. Finally, there may be the possibility of expropriations, confiscatory
taxation, political, economic or social instability or diplomatic developments
which could adversely affect assets of the Fund held in foreign countries.
The value of foreign securities may also be adversely affected by
fluctuations in the relative rates of exchange between the currencies of
different nations and by exchange control regulations. For example, the value of
a foreign security held by the Fund as measured in U.S. dollars will decrease if
the foreign currency in which the security is denominated declines in value
against the U.S. dollar. In such event, this will cause an overall decline in
the Fund's net asset value and may also reduce net investment income and capital
gains, if any, to be distributed in U.S. dollars to shareholders of the Fund.
The Fund may invest up to 10% of its total assets in securities of issuers in
countries with emerging economies or securities markets. Emerging economies or
securities markets will generally include, but not be limited to: Argentina,
Brazil, China, Chile, Columbia, Hungary, India, Indonesia, Israel, Jordan,
Mexico, Pakistan, Peru, the Philippines, Poland, Portugal, Morocco, Russia,
South Korea, Sri Lanka, Taiwan, Thailand, Turkey, Venezuela and Zimbabwe. These
countries are currently included in the MSCI Emerging Markets Index. The Fund
will generally focus on emerging markets that do not impose unusual trading
requirements which tend to restrict the flow of investments. In addition, the
Fund may invest in unquoted securities, including securities of issuers located
in such emerging markets.
Political and economic structures in many of such countries may be undergoing
significant evolution and rapid development, and such countries may lack the
social, political and economic stability characteristic of more developed
countries. Certain of such countries may have in the past failed to recognize
private property rights and have at times nationalized or expropriated the
assets of private companies. As a result, the risks described above relating to
investments in foreign countries, including the risks of nationalization or
expropriation of assets, may be heightened. In addition to risks associated with
investments in foreign private issuers, investments in foreign governmental
securities entail risk that the foreign government will repudiate its underlying
obligation or alter any favorable tax treatment associated with the obligation.
It may be difficult to enforce outside the U.S. legal rights against foreign
governments.
DEPOSITARY RECEIPTS. The Fund may hold securities of foreign issuers in the form
of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
Global Depositary Receipts ("GDRs") and other similar instruments or other
securities convertible into securities of eligible issuers. Generally, ADRs in
registered form are designed for use in U.S. securities markets and EDRs and
GDRs and other similar global instruments in bearer form are designed for use in
non-U.S. securities markets.
ADRs are denominated in U.S. dollars and represent an interest in the right
to receive securities of foreign issuers deposited in a U.S. bank or
correspondent bank. ADRs do not eliminate all the risk inherent in investing in
the securities of non-U.S. issuers. However, by investing in ADRs rather than
directly in equity securities of non-U.S. issuers, the Fund will avoid currency
risks during the settlement period for either purchases or sales. EDRs and GDRs
are not necessarily denominated in the same currency as the underlying
securities which they represent.
For purposes of the Fund's investment policies, investments in ADRs, EDRs,
GDRs and similar instruments will be deemed to be investments in the underlying
equity securities of the foreign issuers. The Fund may acquire depositary
receipts from banks that do not have a contractual relationship with the issuer
of the security underlying the depositary receipt to issue and secure such
depositary receipt. To the extent the Fund invests in such unsponsored
depositary receipts there may be an increased possibility that the Fund may not
become aware of events affecting the underlying security and thus the value of
the related depositary receipt. In addition, certain benefits (i.e., rights
offerings) which may be associated with the security underlying the depositary
receipt may not inure to the benefit of the holder of such depositary receipt.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, not to
exceed seven days, with broker-dealers and any member bank of the Federal
Reserve System. The Board of Trustees of the Fund will review and monitor the
creditworthiness of any institution which enters into a repurchase agreement
with the Fund. Such repurchase agreements will be fully collateralized with
cash, U.S. Treasury and/or agency obligations or other high grade debt
obligations with a market value of not less than 100% of the obligations, valued
daily. Collateral will be held by the Fund's custodian in a segregated,
safekeeping account for the benefit of the Fund. In the event that a repurchase
agreement is not fulfilled, the Fund could suffer a loss to the extent that the
value of the collateral falls below the repurchase price.
SECURITIES LENDING. The Fund may lend portfolio securities to member firms of
the New York Stock Exchange (the "Exchange"). As with other extensions of
credit, there are risks of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially. The Fund will
lend portfolio securities only to firms which have been approved in advance by
the Board of Trustees, which will monitor the creditworthiness of any such
firms. At no time will the value of the securities loaned exceed 331/3% of the
value of the Fund's total assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities,
including U.S. government securities, on a when-issued basis or may purchase or
sell securities for delayed delivery. In such transactions, delivery of the
securities occurs beyond the normal settlement period, but no payment or
delivery is made by the Fund prior to the actual delivery or payment by the
other party to the transaction. The purchase of securities on a when-issued or
delayed delivery basis involves the risk that the value of the securities
purchased will decline prior to the settlement date. The sale of securities for
delayed delivery involves the risk that the prices available in the market on
the delivery date may be greater than those obtained in the sale transaction.
When-issued and delayed delivery transactions will be fully collateralized with
cash, U.S. Treasury and/or agency obligations or other high-grade debt
obligations with a market value at least equal at all times to the amounts of
its when-issued and delayed delivery commitments.
OTHER INVESTMENT COMPANIES. The Fund may invest in the securities of other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the 1940 Act. The
Fund, as a shareholder of the securities of other investment companies, will
bear its pro rata portion of the other investment company's expenses, including
advisory fees. These expenses are in addition to the direct expenses of the
Fund's own operations.
WARRANTS. The Fund may invest in warrants as described in the SAI. Although the
Fund does not have a formal percentage limitation on investing in warrants, it
is not expected that PMC will invest more than 5% of the Fund's total assets in
such securities.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted securities
(i.e., securities that would be required to be registered prior to distribution
to the public), including securities eligible for resale to "qualified
institutional buyers" in accordance with Rule 144A under the Securities Act of
1933, as amended ("1933 Act"). In addition, the Fund will not invest more than
15% of its net assets in illiquid securities, which includes repurchase
agreements maturing in more than seven days, securities that are not readily
marketable and restricted securities sold and offered under Rule 144A that are
illiquid either as a result of legal or contractual restrictions or the absence
of a trading market.
The Board of Trustees of the Fund may adopt guidelines and delegate to PMC
the daily function of determining and monitoring the liquidity of restricted
securities. The Board of Trustees, however, will retain sufficient oversight and
be ultimately responsible for the determinations. Since it is not possible to
predict with assurance exactly how the market for restricted securities eligible
for resale pursuant to Rule 144A will continue to develop, the Board of Trustees
will carefully monitor the Fund's investments in these securities, focusing on
such important factors, among others, as valuation, liquidity and availability
of information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these restricted
securities.
The purchase price and subsequent valuation of restricted securities normally
reflect a discount from the price at which such securities trade when they are
not restricted to the extent that the restriction makes them less liquid. The
amount of the discount from the prevailing market price is expected to vary
depending upon the type of security, the character of the issuer, the party who
will bear the expenses of registering the restricted securities and prevailing
supply and demand conditions.
OTHER INVESTMENT TECHNIQUES. In pursuit of its objective, the Fund may employ
certain active investment management techniques including forward foreign
currency exchange contracts, options and futures contracts on currencies,
securities and securities indices and options on such futures contracts. These
techniques may be employed in an attempt to hedge foreign currency and other
risks associated with the Fund's portfolio securities. See the Appendix to this
Prospectus and the SAI for a description of these investment practices and
associated risks.
III. MANAGEMENT OF THE FUND
The Board of Trustees of the Fund has overall responsibility for management
and supervision of the Fund. The Board of Trustees meets at least quarterly. By
virtue of the functions performed by PMC as investment adviser, the Fund
requires no employees other than its executive officers, all of whom receive
their compensation from PMC or other sources. The SAI contains the names and
general business and professional background of each Trustee and executive
officer of the Fund.
Investment advisory services are provided to the Fund by PMC pursuant to a
management contract between PMC and the Fund. PMC serves as investment adviser
to the Fund and is responsible for the overall management of the Fund's business
affairs. PMC is a wholly owned subsidiary of The Pioneer Group, Inc. ("PGI"), a
publicly traded Delaware corporation. Pioneer Funds Distributor, Inc. ("PFD"),
an indirect wholly owned subsidiary of PGI, is the principal underwriter of the
Fund.
Mr. David D. Tripple, President and Chief Investment Officer of PMC and
Executive Vice President of the Fund, has general responsibility for PMC's
investment operations and chairs a committee of PMC's equity managers which
reviews PMC's research and portfolio operations, including those of the Fund.
Mr. Tripple joined PMC in 1974.
Mr. Tripple is the Fund's Portfolio Manager and has been responsible for the
day-to-day management of the Fund since its inception. Research, prospective
investments and portfolio holdings of the fund are the responsibility of PMC's
senior portfolio managers focusing on equity securities. Ms. Theresa Hamacher,
Senior Vice President of PMC, oversees U.S. equity research and portfolio
management. Dr. Norman Kurland, Vice President of PMC, is the senior member of
the foreign equity team.
In addition to the Fund, PMC also manages and serves as the investment
adviser for other mutual funds and is an investment adviser to certain other
institutional accounts. PMC's and PFD's executive offices are located at 60
State Street, Boston, Massachusetts 02109. In an effort to avoid conflicts of
interest with the Fund, the Fund and PMC have adopted a Code of Ethics that is
designed to maintain a high standard of personal conduct by directing that all
personnel defer to the interests of the Fund and its shareholders in making
personal securities transactions.
Under the terms of its contract with the Fund, PMC assists in the management
of the Fund and is authorized in its discretion to buy and sell securities for
the account of the Fund. PMC pays all the expenses, including executive salaries
and the rental of certain office space, related to its services for the Fund,
with the exception of the following which are to be paid by the Fund: (a)
charges and expenses for fund accounting, pricing and appraisal services and
related overhead, including, to the extent such services are performed by
personnel of PMC or its affiliates, office space and facilities and personnel
compensation, training and benefits; (b) the charges and expenses of auditors;
(c) the charges and expenses of any custodian, transfer agent, plan agent,
dividend disbursing agent and registrar appointed by the Fund; (d) issue and
transfer taxes, chargeable to the Fund in connection with securities
transactions to which the Fund is a party; (e) insurance premiums, interest
charges, dues and fees for membership in trade associations, and all taxes and
corporate fees payable by the Fund to federal, state or other governmental
agencies; (f) fees and expenses involved in registering and maintaining
registrations of the Fund and/or its shares with regulatory agencies, individual
states or blue sky securities agencies, territories and foreign countries,
including the preparation of Prospectuses and Statements of Additional
Information for filing with regulatory agencies; (g) all expenses of
shareholders' and Trustees' meetings and of preparing, printing and distributing
prospectuses, notices, proxy statements and all reports to shareholders and to
governmental agencies; (h) charges and expenses of legal counsel to the Fund and
the Trustees; (i) distribution fees paid by the Fund in accordance with Rule
12b-1 promulgated by the SEC pursuant to the 1940 Act; (j) compensation of those
Trustees of the Fund who are not affiliated with or interested persons of PMC,
the Fund (other than as Trustees), PGI or PFD; (k) the cost of preparing and
printing share certificates; and (l) interest on borrowed money, if any. In
addition to the expenses described above, the Fund shall pay all brokers' and
underwriting commissions chargeable to the Fund in connection with securities
transactions to which the Fund is a party. Currently, the Fund pays the Plans'
custodial fees. See "Plan Custodian" in the SAI.
Orders for the Fund's portfolio securities transactions are placed by PMC,
which strives to obtain the best price and execution for each transaction. In
circumstances in which two or more broker-dealers are in a position to offer
comparable price and execution, consideration may be given to whether the
broker-dealer provides investment research or brokerage services or sells shares
of any Pioneer mutual fund or other funds for which PMC or any other affiliate
or subsidiary serves as investment adviser or manager. See the SAI for a further
description of PMC's brokerage allocation practices.
As compensation for its management services and certain expenses which PMC
incurs, PMC is entitled to a management fee equal to 0.75% per annum of the
Fund's average daily net assets. The fee is normally computed daily and paid
monthly. See "Expense Information" in this Prospectus and "Investment Adviser"
in the SAI.
John F. Cogan, Jr., Chairman and President of the Fund, Chairman and a
Director of PFD and PMC and President and a Director of PGI, owned approximately
14% of the outstanding capital stock of PGI as of the date of this Prospectus.
Brown Brothers Harriman & Co. (the "Custodian") serves as custodian of the
Fund's portfolio securities and other assets. The principal business address of
the mutual fund division of the Custodian is 40 Water Street, Boston,
Massachusetts 02109.
Certain information technology experts currently predict the possibility of a
widespread failure of computer systems and certain other equipment which will be
triggered on or after certain dates -- primarily January 1, 2000 -- due to a
systemic inability to process date-related information. This scenario, commonly
known as the "Year 2000 Problem," could have an adverse impact on individuals
and businesses, including the Fund and other mutual funds and financial
organizations. PMC and its affiliates are taking steps believed to be adequate
to address the Year 2000 Problem with respect to the systems and equipment
controlled by the Fund's investment adviser, broker-dealer and transfer agent.
In addition, other entities providing services to the Fund and its shareholders
are being asked to provide assurances that they have undertaken similar measures
with respect to their systems and equipment. There can be no assurance that
these steps will be sufficient to avoid any adverse impact on the Fund.
IV. SHARE PRICE
Shares of the Fund are offered to the general public only through the Plan,
which purchases Fund shares at the net asset value per share. The net asset
value per share of the Fund is determined by dividing the value of its assets,
less liabilities attributable, by the number of shares outstanding. The net
asset value is computed once daily, on each day the Exchange is open, as of the
close of regular trading on the Exchange.
Securities are valued at the last sale price on the principal exchange or
market where they are traded. Securities which have not traded on the date of
valuation or securities for which sales prices are not generally reported are
valued at the mean between the current bid and asked prices. Securities quoted
in foreign currencies are converted to U.S. dollars utilizing foreign exchange
rates supplied by the Fund's independent pricing services. Generally, trading in
foreign securities is substantially completed each day at various times prior to
the close of the Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of the
Exchange. Occasionally, events which affect the values of such securities and
such exchange rates may occur between the times at which they are determined and
the close of the Exchange and will therefore not be reflected in the computation
of the Fund's net asset value. If events materially affecting the value of such
securities occur during such period, then these securities are valued at their
fair value as determined in good faith by the Trustees. All assets of the Fund
for which there is no other readily available valuation method may be valued at
their fair value as determined in good faith by the Trustees.
V. SALE OF FUND SHARES
Shares of the Fund may be acquired by the general public only through the
purchase of an interest in Pioneer Independence Plans. Shares of the Fund may,
however, be purchased at net asset value by: (a) employer sponsored retirement
plans established for the benefit of employees of PGI or employees of PGI's
affiliates and (b) employer sponsored retirement plans established for the
benefit of employees or affiliates of dealers which have entered into agreements
with PFD to sell the Plans. There is no minimum initial or minimum subsequent
investment amount.
The Fund has entered into an agreement with PFD under which the Fund issues
shares at the net asset value per share to State Street Bank and Trust Company
as Custodian for the Plans. The Plan Custodian will generally hold all shares of
the Fund on behalf of the Planholders in accordance with the terms of the
applicable Plan Prospectus. A Planholder may own Fund shares directly: (a) if
the Planholder has completed or terminated a Plan or (b) as a result of a
partial withdrawal from a Plan (causing Fund shares to be transferred into a
non-contributory account).
VI. DISTRIBUTION PLAN
The Fund has adopted a Plan of Distribution (the "Distribution Plan") in
accordance with Rule 12b-1 under the 1940 Act pursuant to which certain
distribution and service fees are paid.
Pursuant to the Distribution Plan, the Fund reimburses PFD for its actual
expenditures to finance any activity primarily intended to result in the sale of
Fund shares or to provide services to holders of Fund shares and Plans, provided
the categories of expenses for which reimbursement is made are approved by the
Fund's Board of Trustees. As of the date of this Prospectus, the Board of
Trustees has approved the following categories of expenses: (i) a service fee to
be paid to qualified broker-dealers and (ii) reimbursement to PFD for expenses
incurred in providing services to Fund shareholders, including Planholders, and
supporting broker-dealers in their efforts to provide such services. Service
fees are not paid to dealers on assets of the Fund that are not acquired through
the purchase of a Plan.
Expenditures of the Fund pursuant to the Distribution Plan are accrued daily
and may not exceed 0.25% of the Fund's average daily net assets. The
Distribution Plan may not be amended to increase materially the annual
percentage limitation of average net assets which may be spent for the services
described therein without approval of the shareholders of the Fund. The
Distribution Plan does not provide for the carryover of reimbursable expenses
beyond 12 months from the time the Fund is first invoiced for an expense.
VII. DIVIDENDS, DISTRIBUTIONS AND TAXATION
The Fund intends to elect to be treated and to qualify each year as a
"regulated investment company" under Subchapter M of the Code, so that it will
not pay federal income tax on income and capital gains distributed to
shareholders as required under the Code.
Under the Code, the Fund will be subject to a nondeductible federal 4% excise
tax on a portion of its undistributed ordinary income and capital gains if it
fails to meet certain distribution requirements with respect to each calendar
year. The Fund intends to make distributions in a timely manner and accordingly
does not expect to be subject to the excise tax.
The Fund makes distributions to shareholders from its net realized long-term
capital gains, if any, annually, usually in December. Income dividends, and
distributions from net realized short-term capital gains, if any, are paid to
shareholders annually, usually in the month of December. Dividends from income
and/or capital gains may also be paid at such other times as may be necessary
for the Fund to avoid federal income or excise tax. Generally, dividends from
the Fund's net investment income, market discount income, net short-term capital
gains, and certain net foreign exchange gains are taxable under the Code as
ordinary income, and dividends from the Fund's net long-term capital gains are
taxable as long-term capital gains.The Fund's distributions of long-term capital
gains to individuals or other noncorporate taxpayers are subject to different
maximum tax rates (which will be indicated in the annual tax information the
Fund provides to shareholders), depending generally upon the sources of, and the
Fund's holding period for the assets that produce, the gains.
Unless shareholders specify otherwise, all distributions will be
automatically reinvested in additional full and fractional shares of the Fund.
For federal income tax purposes, all dividends are taxable as described above
whether a shareholder takes them in cash or reinvests them in additional shares
of the Fund. Information as to the federal tax status of dividends and
distributions will be provided to shareholders annually. For further information
on the distribution options, see "Distribution Options" below. Planholders
should consult the Plan Prospectus for more information.
The description above relates only to U.S. federal income tax consequences
for shareholders who are U.S. persons, i.e. U.S. citizens or residents, or U.S.
corporations, partnerships, trusts or estates and who are subject to U.S.
federal income tax. Non-U.S. shareholders and tax-exempt shareholders are
subject to different tax treatment that is not described above. You should
consult your own tax adviser regarding state, local and other applicable tax
laws, including the application of the federal tax legislation and regulations
referred to above in their particular circumstances.
Redemptions and repurchases are taxable transactions to shareholders. The net
asset value per share received upon redemption or repurchase may be more or less
than the cost of shares to an investor, depending on the market value of the
portfolio at the time of redemption or repurchase. For federal and (generally)
state income tax purposes, an exchange is considered to be a sale of the shares
of the Fund exchanged and a purchase of shares in another Pioneer mutual fund.
Therefore, an exchange could result in a gain or loss on the shares sold,
depending on the tax basis of these shares and the timing of the transaction,
and special tax rules may apply.
VIII. SHAREHOLDER SERVICES
The following services are available only if you hold shares of the Fund
directly. For more detailed information, consult the SAI or call Pioneering
Services Corporation ("PSC") at 1-800-225-6541.
PSC is the shareholder services and transfer agent for shares of the Fund.
PSC, a Massachusetts corporation, is a wholly owned subsidiary of PGI. PSC's
offices are located at 60 State Street, Boston, Massachusetts 02109. Inquiries
relating to a Pioneer Independence Plans should be mailed to Boston Financial
Data Services, Inc., the Plans' transfer agent, P.O. Box 8330, Boston,
Massachusetts 02266-8300. Inquiries relating to Fund shares should be mailed to
Pioneering Services Corporation, Attn: Pioneer Independence Fund, P.O. Box 9150,
Boston, Massachusetts 02205-8573.
SELLING FUND SHARES. You can arrange to sell (redeem) Fund shares on any day the
Exchange is open by selling either some or all of your shares to the Fund. Your
shares will be sold at the share price next calculated after your request is
received in good order as described below. Sale proceeds generally will be sent
to you by check, bank wire or electronic funds transfer, normally within seven
days after your order is received in good order. The Fund reserves the right to
withhold payment of the sale proceeds until checks received by the Fund in
payment for the shares being sold have cleared, which may take up to 15 calendar
days from the purchase date. For more information, contact PSC at
1-800-225-6541.
You may sell your shares by delivering a written request, signed by all
registered owners, in good order to PSC. Your written request must include a
signature guarantee, if : (i) you wish to sell over $100,000 worth of shares,
(ii) your account registration or address has changed within the last 30 days,
(iii) the check is not being mailed to the address on your account (address of
record), (iv) the check is not being made out to the account owners, or (v) the
sale proceeds are being transferred to a Pioneer mutual fund account with a
different registration.
Your request should include your name, the Fund's name, your fund account
number, the dollar amount or number of shares to be redeemed, and any other
applicable requirements as described below. Unless instructed otherwise, PSC
will send the proceeds of the sale to the address of record. Fiduciaries and
corporations are required to submit additional documents.
Written requests will not be processed until they are received in good order
by PSC. Good order means that there are no outstanding claims or requests to
hold redemptions on the account, any certificates are endorsed by the record
owner(s) exactly as the shares are registered and the signature(s) are
guaranteed by an eligible guarantor. You should be able to obtain a signature
guarantee from a bank, broker, dealer, credit union (if authorized under state
law), securities exchange or association, clearing agency or savings
association. A notary public cannot provide a signature guarantee. Signature
guarantees are not accepted by facsimile ("fax").
You may also arrange to redeem your Fund shares by telephone or by fax.
Consult the Fund's SAI or call PSC at 1-800-225-6541 for more information.
Redemptions may be suspended or payment postponed during any period in which
any of the following conditions exist: the Exchange is closed or trading on the
Exchange is restricted; an emergency exists as a result of which disposal by the
Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund to fairly determine the value of the net
assets of its portfolio; or the SEC, by order, so permits.
Planholders who have redeemed shares under "Cancellation and Refund Rights"
in the Plan Prospectus, may not reinstate at net asset value the proceeds from
such a cancellation or refund until all refunded creation and sales charges
included in the cancellation have first been deducted in full from the amount
being replaced. To withdraw or redeem shares from a Plan, see the Plan
Prospectus.
EXCHANGING FUND SHARES. The exchange privilege, as described in the SAI, is
automatically available to you only if you own Fund shares directly. Directly
held Fund shares may be exchanged at net asset value, without a sales charge,
for the Class A shares of another Pioneer mutual fund, subject to certain
limitations. Exchanges may be made by written request to PSC, by phone at
1-800-225-4321 or by fax at 1-617-422-4245. Fund shares exchanged for shares of
another Pioneer mutual fund may not be exchanged back to Pioneer Independence
Fund.
MINIMUM ACCOUNT VALUE. The minimum account value is $500. If you request a
redemption or an exchange of Fund shares that will result in an account with a
net asset value of less than $500, the Fund may redeem or exchange all of the
Fund shares held in this account.
VOLUNTARY TAX WITHHOLDING. You may request (in writing) that PSC withhold 28% of
the dividends and capital gains distributions paid from your 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 retirement plan
accounts or for accounts subject to backup withholding.
CONFIRMATION STATEMENTS, FINANCIAL REPORTS AND TAX INFORMATION
PSC maintains an account for each shareholder and all shareholder
transactions are recorded in this account. Confirmation statements showing
details of transactions are sent to shareholders as transactions occur. As a
shareholder, you will receive financial reports at least semiannually. In
January of each year, the Fund will mail you information about the tax status of
dividends and distributions.
DISTRIBUTION OPTIONS
Dividends and capital gains distributions, if any, will automatically be
invested in additional shares of the Fund, at the applicable net asset value per
share, unless you indicate another option by writing to PSC. See the SAI for
more information.
IX. THE FUND
The Fund, a diversified open-end management investment company (commonly
referred to as a mutual fund), was established as a Delaware business trust on
December 8, 1997. The Fund has authorized an unlimited number of shares of
beneficial interest. As an open-end investment company, the Fund continuously
offers its shares to the general public only through Pioneer Independence Plans.
Under normal conditions the Fund must redeem its shares upon the demand of any
shareholder at the then current net asset value per share. The Fund is not
required, and does not intend, to hold annual shareholder meetings although
special meetings may be called for the purpose of electing or removing Trustees,
changing fundamental investment restrictions or approving a management contract.
The Fund reserves the right to create and issue additional series of shares.
Currently the Fund consists of one series, the Fund. The Trustees have the
authority, without further shareholder approval, to classify and reclassify the
shares of the Fund, or any additional series of the Fund, into one or more
classes. As of the date of this Prospectus, the Trustees have authorized the
issuance of one class of shares. Each share represents an equal proportionate
interest in the Fund with each other share. Shareholders who hold Fund shares
directly are entitled to one vote for each share held and may vote in the
election and removal of Trustees and on other matters submitted to shareholders.
The Plan Custodian will vote Fund shares held through the Plans as described in
the Plan Prospectus.
In addition to the requirements under Delaware law, the Fund's Declaration of
Trust provides that a shareholder of the Fund may bring a derivative action on
behalf of the Fund only if the following conditions are met: (a) shareholders
eligible to bring such derivative action under Delaware law who hold at least
10% of the outstanding shares of the Fund, or 10% of the outstanding shares of
the series or class to which such action relates, shall join in the request for
the Trustees to commence such action; and (b) the Trustees must be afforded a
reasonable amount of time to consider such shareholder request and investigate
the basis of such claim. The Trustees shall be entitled to retain counsel or
other advisers in considering the merits of the request and shall require an
undertaking by the shareholders making such request to reimburse the Fund for
the expense of any such advisers in the event that the Trustees determine not to
bring such action.
When issued and paid for in accordance with the terms of the Prospectus and
SAI, shares of the Fund are fully-paid and non-assessable. Fund shares will
remain on deposit with the Fund's transfer agent or the Plans' Custodian and
certificates will not normally be issued. In the event certificates are issued,
the Fund reserves the right to charge a fee for such certificates. In order to
supply the Fund with capital, PFD, through a Plan, beneficially owned 100% of
the Fund's issued and outstanding shares immediately prior to effectiveness of
the Fund's registration statement. The Fund expects to have significant assets
in comparison to PFD's initial investment soon after effectiveness and therefore
PFD may no longer control the Fund.
X. INVESTMENT RESULTS
The average annual total return (for a designated period of time) on an
investment in the Fund may be included in advertisements, and furnished to
existing or prospective shareholders. The average annual total return is
computed in accordance with the SEC's standardized formula. The calculation
assumes the reinvestment of all dividends and distributions at net asset value
and does not reflect the impact of federal or state income taxes. The Fund's
total return quotations will not reflect the effect of paying the creation and
sales charges associated with the purchase of shares of the Fund through the
Plan. Returns would be lower if creation and sales charges were taken into
consideration. The periods illustrated would normally include one, five and ten
years (or since the commencement of the public offering of the shares, if
shorter) through the most recent calendar quarter.
One or more additional measures and assumptions, including but not limited to
historical total returns; distribution returns; results of actual or
hypothetical investments; changes in dividends, distributions or share values;
or any graphic illustration of such data may also be used. These data may cover
any period of the Fund's existence and may or may not include the impact of
sales charges, taxes or other factors.
Other investments or savings vehicles and/or unmanaged market indices,
indicators of economic activity or averages of mutual funds results may be cited
or compared with the investment results of the Fund. Rankings or listings by
magazines, newspapers or independent statistical or rating services, such as
Lipper Analytical Services, Inc., may also be referenced.
The Fund's investment results will vary from time to time depending on market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. All quoted investment results are historical and should not be
considered representative of what an investment in the Fund may earn in any
future period. For further information about the calculation methods and uses of
the Fund's investment results, see the SAI.
<PAGE>
APPENDIX--CERTAIN INVESTMENT PRACTICES
This Appendix provides a brief description of certain investment techniques
that the Fund may employ. For a more complete discussion of these and other
practices, see "Investment Policies and Restrictions" in the SAI.
OPTIONS ON SECURITIES AND SECURITIES INDICES
The Fund may purchase put and call options on indices that are based on
securities in which it may invest to manage cash flow and to manage its exposure
to foreign and domestic stocks or stock markets instead of, or in addition to,
buying and selling stock. The Fund may also purchase options in order to hedge
against risks of market-wide price fluctuations.
The Fund may purchase put options in order to hedge against an anticipated
decline in securities prices that might adversely affect the value of the Fund's
portfolio securities. If the Fund purchases a put option on a security or
securities index, the amount of the payment it would receive upon exercising the
option would depend on the extent of any decline in the level of the securities
index below the exercise price. Such payments would tend to offset a decline in
the value of the Fund's portfolio securities. However, if the price of the
security or the level of the securities index increases and remains above the
exercise price while the put option is outstanding, the Fund will not be able to
profitably exercise the option and will lose the amount of the premium and any
transaction costs. Such loss may be partially offset by an increase in the value
of the Fund's portfolio securities.
The Fund may purchase call options on securities or securities indices in
order to remain fully invested in a particular stock market or to lock in a
favorable price on securities that it intends to buy in the future. If the Fund
purchases a call option on a security or securities index, the amount of the
payment it receives upon exercising the option depends on the extent of an
increase in the price of the security or the level of the securities index above
the exercise price. Such payments would in effect allow the Fund to benefit from
securities market appreciation even though it may not have had sufficient cash
to purchase the underlying securities. Such payments may also offset increases
in the price of securities that the Fund intends to purchase. If, however, the
price of the security or the level of the securities index declines and remains
below the exercise price while the call option is outstanding, the Fund will not
be able to exercise the option profitably and will lose the amount of the
premium and transaction costs. Such loss may be partially offset by a reduction
in the price the Fund pays to buy additional securities for its portfolio.
The Fund may sell an option it has purchased or a similar option prior to the
expiration of the purchased option in order to close out its position in an
option which it has purchased. The Fund may also allow options to expire
unexercised, which would result in the loss of the premium paid.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES
The Fund has the ability to hold a portion of its assets in foreign
currencies and to enter into forward foreign currency contracts to facilitate
settlement of foreign securities transactions or to protect against changes in
foreign currency exchange rates. The Fund might sell a foreign currency on
either a spot or forward basis to hedge against an anticipated decline in the
dollar value of securities in its portfolio or securities it intends or has
contracted to sell or to preserve the U.S dollar value of dividends, interest or
other amounts it expects to receive. Although this strategy could minimize the
risk of loss due to a decline in the value of the hedged foreign currency, it
could also limit any potential gain which might result from an increase in the
value of the currency. Alternatively, the Fund might purchase a foreign currency
or enter into a forward purchase contract for the currency to preserve the U.S.
dollar price of securities it is authorized to purchase or has contracted to
purchase.
If the Fund enters into a forward contract to buy foreign currency, the Fund
will be required to place cash or high-grade liquid securities in a segregated
account of the Fund maintained by the Fund's custodian in an amount equal to the
value of the Fund's total assets committed to the consummation of the forward
contract.
The Fund may purchase put and call options on foreign currencies for the
purpose of protecting against declines in the dollar value of foreign portfolio
securities and against increases in the U.S. dollar cost of foreign securities
to be acquired. The purchase of an option on a foreign currency may constitute
an effective hedge against exchange rate fluctuations.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
To hedge against changes in securities prices, currency exchange rates or
interest rates, the Fund may purchase and sell various kinds of futures
contracts, and purchase and write call and put options on any of such futures
contracts. The Fund may also enter into closing purchase and sale transactions
with respect to any of such contracts and options. The futures contracts may be
based on various stock and other securities indices, foreign currencies and
other financial instruments and indices. The Fund will engage in futures and
related options transactions for bona fide hedging purposes only. These
transactions involve brokerage costs, require margin deposits and, in the case
of contracts and options obligating the Fund to purchase currencies, require the
Fund to segregate assets to cover such contracts and options.
LIMITATIONS AND RISKS ASSOCIATED WITH TRANSACTIONS IN OPTIONS, FUTURES CONTRACTS
AND FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Transactions involving options on securities and securities indices, futures
contracts and options on futures and forward foreign currency exchange contracts
involve (1) liquidity risk that contractual positions cannot be easily closed
out in the event of market changes or generally in the absence of a liquid
secondary market, (2) correlation risk that changes in the value of hedging
positions may not match the securities market and foreign currency fluctuations
intended to be hedged and (3) market risk that an incorrect prediction of
securities prices or exchange rates by the Fund's investment adviser may cause
the Fund to perform less favorably than if such positions had not been entered.
The Fund will purchase and sell options that are traded only in a regulated
market which is open to the public. Options, futures contracts and forward
foreign currency exchange contracts are highly specialized activities which
involve investment techniques and risks that are different from those associated
with ordinary portfolio transactions. The Fund may not enter into futures
contracts and options on futures contracts for speculative purposes. The percent
of the Fund's assets that may be subject to futures contracts and options on
such contracts entered into for bona fide hedging purposes or in forward foreign
currency exchange contracts is 100%. The loss that may be incurred by the Fund
in entering into future contracts and written options thereon and forward
foreign currency exchange contracts is potentially unlimited. The Fund may not
invest more than 5% of its total assets in financial instruments that are used
for non-hedging purposes and which have a leverage effect.
The Fund's transactions in options, forward foreign currency exchange
contracts, futures contracts and options on futures contracts may be limited by
the requirements for qualification of the Fund as a regulated investment company
for tax purposes. See "Tax Status" in the SAI.
<PAGE>
Pioneer Independence Fund
60 State Street
Boston, Massachusetts 02109
OFFICERS
JOHN F. COGAN, JR., Chairman and President
DAVID D. TRIPPLE, Executive Vice President
WILLIAM H. KEOUGH, Treasurer
JOSEPH P. BARRI, Secretary
INVESTMENT ADVISER
PIONEERING MANAGEMENT CORPORATION
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP
LEGAL COUNSEL
HALE AND DORR LLP
PRINCIPAL UNDERWRITER
PIONEER FUNDS DISTRIBUTOR, INC.
TRANSFER AGENT
PIONEERING SERVICES CORPORATION
60 State Street
Boston, Massachusetts 02109
Telephone: 1-800-225-6541
0298-4677
(C) Pioneer Funds Distributor, Inc.
PIONEER INDEPENDENCE FUND
60 State Street
Boston, Massachusetts 02109
STATEMENT OF ADDITIONAL INFORMATION
March 16, 1998
This Statement of Additional Information ("SAI") is not a Prospectus, but should
be read in conjunction with the Prospectus ("Prospectus"), dated March 12, 1998,
as supplemented or revised from time to time, of Pioneer Independence Fund (the
"Fund"). A copy of the Prospectus can be obtained free of charge by calling
Shareholder Services at 1-800-225-6541 or by written request to the Fund at 60
State Street, Boston, Massachusetts 02109.
TABLE OF CONTENTS
Page
1. Investment Policies and Restrictions......................... 2
2. Management of the Fund....................................... 9
3. Investment Adviser........................................... 13
4. Underwriting Agreement and Distribution Plan................. 13
5. Shareholder Servicing/Transfer Agent......................... 14
6. Plan Custodian............................................... 15
7. Custodian.................................................... 15
8. Principal Underwriter........................................ 15
9. Independent Public Accountants............................... 15
10. Portfolio Transactions....................................... 16
11. Tax Status................................................... 17
12. Description of Shares........................................ 20
13. Certain Liabilities.......................................... 21
14. Letter of Intent............................................. 21
15. How to Sell Fund Shares...................................... 21
16. How to Exchange Fund Shares.................................. 22
17. Systematic Withdrawal Plan................................... 24
18. Determination of Net Asset Value............................. 25
19. Investment Results........................................... 25
20. Financial Statements......................................... 27
Appendix A - Description of Short-Term Debt
and Corporate Bond Ratings.............................. 34
Appendix B - Performance Statistics.......................... 39
Appendix C - Other Pioneer Information....................... 50
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS
AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
<PAGE>
1. INVESTMENT POLICIES AND RESTRICTIONS
The Fund's Prospectus presents the investment objectives and the principal
investment policies of the Fund. Additional investment policies and a further
description of some of the policies described in the Prospectus appear below.
Capitalized terms not otherwise defined herein have the meaning given to them in
the Prospectus.
The following policies and restrictions supplement those discussed in the
Prospectus. Whenever an investment policy or restriction states a maximum
percentage of the Fund's assets that may be invested in any security or presents
a policy regarding quality standards, this standard or other restrictions shall
be determined immediately after and as a result of the Fund's investment.
Accordingly, any later increase or decrease resulting from a change in values,
net assets or other circumstances will not be considered in determining whether
the investment complies with the Fund's investment objectives and policies.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements not exceeding seven days in
duration. In a repurchase agreement, an investor (e.g., the Fund) purchases a
debt security from a seller which undertakes to repurchase the security at a
specified resale price on an agreed future date (ordinarily a week or less). The
resale price generally exceeds the purchase price by an amount which reflects an
agreed-upon market interest rate for the term of the repurchase agreement.
Repurchase agreements entered into by the Fund will be fully collateralized with
cash, U.S. Treasury and/or U.S. government agency obligations or other
high-grade liquid debt obligations with a market value of not less than 100% of
the obligation, valued daily. Collateral will be held in a segregated,
safekeeping account for the benefit of the Fund. In the event that a repurchase
agreement is not fulfilled, the Fund could suffer a loss to the extent that the
value of the collateral falls below the repurchase price or if the Fund is
prevented from realizing the value of the collateral by reason of an order of a
court with jurisdiction over an insolvency proceeding with respect to the other
party to the repurchase agreement.
LENDING OF PORTFOLIO SECURITIES
The Fund may lend portfolio securities to member firms of the Exchange, under
agreements which would require that the loans be secured continuously by
collateral in cash, cash equivalents or U.S. Treasury and/or U.S. government
agency obligations or other high-grade debt obligations maintained on a current
basis at an amount at least equal to the market value of the securities loaned.
The Fund would continue to receive the equivalent of the interest or dividends
paid by the issuer on the securities loaned as well as the benefit of any
increase in the market value of the securities loaned and would also receive
compensation based on investment of the collateral. The Fund would not, however,
have the right to vote any securities having voting rights during the existence
of the loan, but would call the loan in anticipation of an important vote to be
taken among holders of the securities or of the giving or withholding of consent
on a material matter affecting the investment.
As with other extensions of credit there are risks of delay in recovery or even
loss of rights in the collateral should the borrower of the securities fail
financially. The Fund will lend portfolio securities only to firms which have
been approved in advance by the Board of Trustees, which will monitor the
creditworthiness of any such firms. At no time would the value of the securities
loaned exceed 33 1/3% of the value of the Fund's total assets.
RESTRICTED AND ILLIQUID SECURITIES
With respect to liquidity determinations generally, the Board of Trustees has
the ultimate responsibility for determining whether specific securities,
including Rule 144A securities, are liquid or illiquid. The Board has delegated
the function of making day to day determinations of liquidity to PMC, pursuant
to guidelines reviewed by the Trustees. PMC takes into account a number of
factors in reaching liquidity decisions. These factors may include but are not
limited to: (i) the frequency of trading in the security; (ii) the number of
dealers who make quotes in the securities; (iii) the number of dealers who have
undertaken to make a market in the security; (iv) the number of potential
purchasers; and (v) the nature of the security and how trading is effected
(e.g., the time needed to sell the security, how offers are solicited and the
mechanics of transfer). PMC will monitor the liquidity of securities in the
Fund's portfolio and report periodically on such decisions to the Trustees.
OTHER INVESTMENT COMPANIES
Under the 1940 Act, the Fund may not acquire the securities of other domestic or
foreign investment companies or investment funds if, as a result, (i) more than
10% of the Fund"s total assets would be invested in securities of other
investment companies, (ii) such purchase would result in more than 3% of the
total outstanding voting securities of any one investment company being held by
the Fund, or (iii) more than 5% of the Fund"s total assets would be invested in
any one investment company. These limitations do not apply to the purchase of
shares of any investment company in connection with a merger, consolidation,
reorganization or acquisition of substantially all the assets of another
investment company.
OPTIONS ON SECURITIES AND SECURITIES INDICES
The Fund may purchase call and put options on securities and securities indices
for the purpose of hedging against the risk of unfavorable price movements
adversely affecting the value of the Fund's securities or securities which the
Fund intends to buy. Securities index options will not be used for speculative
purposes.
The Fund may only purchase and sell options that are traded only in a regulated
market which is open to the public. Currently, options on stock indices are
traded only on national securities exchanges or over-the-counter, both in the
United States and in foreign countries. A securities index fluctuates with
changes in the market values of the securities included in the index. For
example, some stock index options are based on a broad market index such as the
S&P 500 or the Value Line Composite Index in the U.S., the Nikkei in Japan or
the FTSE 100 in the United Kingdom.
Index options may also be based on a narrower market index such as the S&P 100
or on an industry or market segment such as the AMEX Oil and Gas Index or the
Computer and Business Equipment Index.
The Fund may purchase put options in order to hedge against an anticipated
decline in securities prices that might adversely affect the value of the Fund's
portfolio securities. If the Fund purchases a put option on a security or
securities index, the amount of the payment it would receive upon exercising the
option would depend on the extent of any decline in the value of the security or
securities index below the exercise price. Such payments would tend to offset a
decline in the value of the Fund's portfolio securities. However, if the value
of the security or securities index increases and remains above the exercise
price while the put option is outstanding, the Fund will not be able to
profitably exercise the option and will lose the amount of the premium and any
transaction costs. Such loss may be partially offset by an increase in the value
of the Fund's portfolio securities.
The Fund may purchase call options on securities and securities indices in order
to remain fully invested in the stock market or to lock in a favorable price on
securities that it intends to buy in the future. If the Fund purchases a call
option on a security or securities index, the amount of the payment it receives
upon exercising the option depends on the extent of an increase in the value of
other securities and securities indices above the exercise price. Such payments
would in effect allow the Fund to benefit from securities market appreciation
even though it may not have had sufficient cash to purchase the underlying
securities. Such payments may also offset increases in the price of securities
that the Fund intends to purchase. If, however, the value of the security or
securities index declines and remains below the exercise price while the call
option is outstanding, the Fund will not be able to exercise the option
profitably and will lose the amount of the premium and transaction costs. Such
loss may be partially offset by a reduction in the price the Fund pays to buy
additional securities for its portfolio.
The Fund may sell the security or securities index option it has purchased or
write a similar offsetting option in order to close out a position in an option
which it has purchased. These closing sale transactions enable the Fund to
immediately realize gains or minimize losses on their respective options
positions. However, there is no assurance that a liquid secondary market on an
options exchange will exist for any particular option, or at any particular
time, and for some options no secondary market may exist. In addition, security
or securities index prices may be distorted by interruptions in the trading of
securities of certain companies or of issuers in certain industries, or by
restrictions that may be imposed by an exchange on opening or closing
transactions, or both, which would disrupt trading in options on such security
or securities indices and preclude the Fund from closing out its options
positions. If the Fund is unable to effect a closing sale transaction with
respect to options that it has purchased, it would have to exercise the options
in order to realize any profit.
The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price movements
can take place in the underlying markets that can not be reflected in the
options markets. The purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions.
In addition to the risks of imperfect correlation between the Fund's respective
portfolio and the security or securities index underlying the option, the
purchase of options involves the risk that the premium and transaction costs
paid by the Fund in purchasing an option will be lost. This could occur as a
result of unanticipated movements in the price of the security or the prices of
the securities comprising the securities index on which the option is based.
FORWARD FOREIGN CURRENCY TRANSACTIONS
The Fund may engage in foreign currency transactions. These transactions may be
conducted on a spot, i.e., cash basis, at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market. The Fund also has
authority to enter into forward foreign currency exchange contracts involving
currencies of the different countries in which the Fund will invest as a hedge
against possible variations in the foreign exchange rate between these
currencies and the U.S. dollar. This is accomplished through contractual
agreements to purchase or sell a specified currency at a specified future date
and price set at the time of the contract. The Fund's transactions in forward
foreign currency contracts will be limited to hedging either specific
transactions or portfolio positions. Transaction hedging is the purchase or sale
of forward foreign currency contracts with respect to specific receivables or
payables of the Fund, accrued in connection with the purchase and sale of their
portfolio securities denominated in foreign currencies. Portfolio hedging is the
use of forward foreign currency contracts to offset portfolio security positions
denominated or quoted in such foreign currencies. There is no guarantee that the
Fund will be engaged in hedging activities when adverse exchange rate movements
occur. The Fund will not attempt to hedge all of its foreign portfolio
positions, and will enter into such transactions only to the extent, if any,
deemed appropriate by the investment adviser. The Fund will not enter into
speculative forward foreign currency contracts.
If the Fund enters into a forward contract to purchase foreign currency, the
custodian bank will segregate cash or high grade liquid debt securities in a
separate account in an amount equal to the value of the total assets committed
to the consummation of such forward contract. Those assets will be valued at
market daily and if the value of the assets in the separate account declines,
additional cash or securities will be placed in the accounts so that the value
of the account will equal the amount of the Fund's commitment with respect to
such contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also limit the opportunity
for gain if the value of the hedged currency should rise. Moreover, it may not
be possible for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the devaluation level they anticipate.
The cost to the Fund of engaging in foreign currency transactions varies with
such factors as the currency involved, the size of the contract, the length of
the contract period and the market conditions then prevailing. Since
transactions in foreign currency and forward contracts are usually conducted on
a principal basis, no fees or commissions are involved. The Fund may close out a
forward position in a currency by selling the forward contract or by entering
into an offsetting forward contract.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
To hedge against changes in securities prices, the Fund may purchase and sell
various kinds of futures contracts, and purchase and write (sell) call and put
options on any of such futures contracts. The Fund may also enter into closing
purchase and sale transactions with respect to any of such contracts and
options. The futures contracts may be based on various securities in which the
Fund may invest, securities indices that are composed of securities in which the
Fund may invest, and other financial instruments and indices. The Fund will
engage in futures and related options transactions for bona fide hedging and
non-hedging purposes as described below. All futures contracts entered into by
the Fund are traded on U.S. exchanges or boards of trade that are licensed and
regulated by the Commodity Futures Trading Commission (the "CFTC").
FUTURES CONTRACTS. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments for an
agreed price during a designated month (or to deliver the final cash settlement
price, in the case of a contract relating to an index or otherwise not calling
for physical delivery at the end of trading in the contract).
When securities prices are falling, the Fund can seek to offset a decline in the
value of its current portfolio securities through the sale of futures contracts.
When securities prices are rising, the Fund, through the purchase of futures
contracts, can attempt to secure better prices than might later be available in
the market when it effects anticipated purchases.
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities will usually be liquidated in
this manner, the Fund may instead make, or take, delivery of the underlying
securities whenever it appears economically advantageous to do so. A clearing
corporation associated with the exchange on which futures on securities are
traded guarantees that, if still open, the sale or purchase will be performed on
the settlement date.
HEDGING STRATEGIES. Hedging, by use of futures contracts, seeks to establish
with more certainty the effective price of portfolio securities and securities
that the Fund owns or proposes to acquire. The Fund may, for example, take a
"short" position in the futures market by selling futures contracts in order to
hedge against an anticipated decline in market prices that would adversely
affect the value of the Fund's portfolio securities. Such futures contracts may
include contracts for the future delivery of securities held by the Fund or
securities with characteristics similar to those of the Fund's portfolio
securities. If, in the opinion of Pioneering Management Corporation ("PMC"),
there is a sufficient degree of correlation between price trends for the Fund's
portfolio securities and futures contracts based on securities and securities
indices or other indices, the Fund may also enter into such futures contracts as
part of their hedging strategies. Although under some circumstances prices of
securities in the Fund's portfolio may be more or less volatile than prices of
such futures contracts, PMC will attempt to estimate the extent of this
volatility difference based on historical patterns and compensate for any such
differential by having the Fund enter into a greater or lesser number of futures
contracts or by attempting to achieve only a partial hedge against price changes
affecting the Fund's portfolio securities. When hedging of this character is
successful, any depreciation in the value of portfolio securities will be
substantially offset by appreciation in the value of the futures position. On
the other hand, any unanticipated appreciation in the value of the Fund's
portfolio securities would be substantially offset by a decline in the value of
the futures position.
On other occasions, the Fund may take a "long" position by purchasing futures
contracts. This may be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices then available in the applicable market to be less favorable
than prices that are currently available.
OPTIONS ON FUTURES CONTRACTS. The acquisition of put and call options on futures
contracts will give the Fund the right (but not the obligation) for a specified
price to sell or to purchase, respectively, the underlying futures contract at
any time during the option period. As the purchaser of an option on a futures
contract, the Fund obtains the benefit of the futures position if prices move in
a favorable direction but limits its risk of loss in the event of an unfavorable
price movement to the loss of the premium and transaction costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of the Fund's assets. By writing a call
option, the Fund becomes obligated, in exchange for the premium, to sell a
futures contract (if the option is exercised), which may have a value higher
than the exercise price. Conversely, the writing of a put option on a futures
contract generates a premium which may partially offset an increase in the price
of securities that the Fund intends to purchase. However, the Fund becomes
obligated to purchase a futures contract (if the option is exercised) which may
have a value lower than the exercise price. Thus, the loss incurred by the Fund
in writing options on futures is potentially unlimited and may exceed the amount
of the premium received. The Fund will incur transaction costs in connection
with the writing of options on futures.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same series. There
is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
The Fund may use options on futures contracts for bona fide hedging or
non-hedging purposes as discussed below.
OTHER CONSIDERATIONS. The Fund will engage in futures and related options
transactions only for bona fide hedging or non-hedging purposes in accordance
with CFTC regulations which permit principals of an investment company
registered under the 1940 Act to engage in such transactions without registering
as commodity pool operators. The Fund is not permitted to engage in speculative
futures trading. The Fund will determine that the price fluctuations in the
futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities held by the Fund or
which the Fund expects to purchase. Except as stated below, the Fund's futures
transactions will be entered into for traditional hedging purposes -- i.e.,
futures contracts will be sold to protect against a decline in the price of
securities that the Fund owns, or futures contracts will be purchased to protect
the Fund against an increase in the price of securities it intends to purchase.
As evidence of this hedging intent, the Fund expects that on 75% or more of the
occasions on which it takes a long futures or option position (involving the
purchase of futures contracts), the Fund will have purchased, or will be in the
process of purchasing, equivalent amounts of related securities at the time when
the futures or option position is closed out. However, in particular cases, when
it is economically advantageous for the Fund to do so, a long futures position
may be terminated or an option may expire without the corresponding purchase of
securities or other assets.
As an alternative to literal compliance with the bona fide hedging definition, a
CFTC regulation permits the Fund to elect to comply with a different test, under
which the sum of the amounts of initial margin deposits on the Fund's existing
non-hedging futures contracts and premiums paid for options on futures entered
into for non-hedging purposes (net of the amount the positions are "in the
money") would not exceed 5% of the market value of the Fund's total assets. The
Fund will engage in transactions in futures contracts and related options only
to the extent such transactions are consistent with the requirements of the
Code, for maintaining its qualifications as a regulated investment company for
federal income tax purposes.
Transaction costs associated with futures contracts and related options involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating the Fund to purchase securities or currencies, require the
Fund to segregate assets to cover such contracts and options.
While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
while the Fund may benefit from the use of futures and options on futures,
unanticipated changes in securities prices may result in a poorer overall
performance for the Fund than if it had not entered into any futures contracts
or options transactions. In the event of an imperfect correlation between a
futures position and a portfolio position which is intended to be protected, the
desired protection may not be obtained and the Fund may be exposed to risk of
loss.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. The Fund has adopted certain additional
investment restrictions which may not be changed without the affirmative vote of
the holders of a "majority" as defined in the Investment Company Act of 1940, as
amended (the "1940 Act") of the Fund's outstanding voting securities. The Fund
may not:
(1) Issue senior securities, except as permitted by the Fund's
borrowing, lending and commodity restrictions and, for purposes of this
restriction, the issuance of shares of beneficial interest in multiple classes
or series, the purchase or sale of options, futures contracts and options on
futures contracts, forward commitments, forward foreign exchange contracts,
repurchase agreements, fully covered reverse repurchase agreements, dollar
rolls, swaps and any other financial transaction entered into pursuant to the
Fund's investment policies as described in the Prospectus and this SAI and in
accordance with applicable SEC pronouncements, as well as the pledge, mortgage
or hypothecation of the Fund's assets within the meaning of the fundamental
investment restriction regarding pledging, are not deemed to be senior
securities.
(2) Borrow money, except from banks as a temporary measure to
facilitate the meeting of redemption requests or for extraordinary emergency
purposes and except pursuant to reverse repurchase agreements and dollar rolls
and then only in amounts not to exceed 33 1/3% of the Fund's total assets
(including the amount borrowed) taken at market value. The Fund will not use
leverage to attempt to increase income.
(3) Guarantee the securities of any other company, or mortgage, pledge,
hypothecate or assign or otherwise encumber as security for indebtedness its
securities or receivables in an amount exceeding the amount of the borrowing
thereby secured.
(4) Act as an underwriter, except as it may be deemed to be on
underwriter in a sale of restricted securities held in its portfolio.
(5) Invest in real estate, commodities or commodity contracts, except
that the Fund may invest in securities of issuers that invest in real estate or
interests therein, securities that are secured by real estate or interests
therein, financial futures contracts and related options and in any other
financial instruments which may be deemed to be commodities or commodity
contracts in which the Fund is not prohibited from investing by the Commodity
Exchange Act and the rules and regulations thereunder.
(6) Make loans, except by the purchase of debt obligations in which the
Fund may invest consistent with its investment policies, by entering into
repurchase agreements or through the lending of portfolio securities, in each
case only to the extent permitted by the Prospectus and this SAI .
(7) With respect to 75% of its total assets, purchase securities of an
issuer (other than the U.S. government, its agencies or instrumentalities), if
(a) such purchase would cause more than 5% of the Fund's total
assets, taken at market value, to be invested in the securities of such
issuer, or
(b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held by the
Fund.
It is the fundamental policy of the Fund not to concentrate its investments in
securities of companies in any particular industry. Following the current
opinion of the staff of the SEC, the Fund's investments are concentrated in a
particular industry if such investments aggregate 25% or more of the Fund's
total assets. The Fund's policy does not apply to investments in U.S. government
Securities.
The Fund does not intend to enter into any reverse repurchase agreements or
dollar rolls, lend portfolio securities or invest in securities index put and
call warrants, as described in fundamental investment restrictions (1), (2) and
(6) above, during the coming year. In addition, in compliance with an informal
position taken by the staff of the SEC regarding leverage, the Fund will not
purchase securities during the coming year at any time that outstanding
borrowings exceed 5% of the Fund's total assets.
2. MANAGEMENT OF THE FUND
The Fund's Board of Trustees provides broad supervision over the affairs of the
Fund. The officers of the Fund are responsible for the Fund's operations. The
Trustees and executive officers of the Fund are listed below, together with
their principal occupations during the past five years. An asterisk indicates
those Trustees who are interested persons of the Fund within the meaning of the
1940 Act.
JOHN F. COGAN, JR.*, Chairman of the Board, President and Trustee,
DOB: June 1926
President, Chief Executive Officer and a Director of The Pioneer Group,
Inc. ("PGI"); Chairman and a Director of Pioneering Management Corporation
("PMC") and Pioneer Funds Distributor, Inc. ("PFD"); Director of Pioneering
Services Corporation ("PSC"), Pioneer Capital Corporation ("PCC"); Pioneer Real
Estate Advisors, Inc., Pioneer Forest, Inc., Pioneer Explorer, Inc., Pioneer
Management (Ireland) Ltd. ("PMIL") and Closed Joint Stock Company
"Forest-Starma"; President and Director of Pioneer Metals and Technology, Inc.
("PMT"), Pioneer International Corp. ("PIntl"), Pioneer First Russia, Inc.
("First Russia") and Pioneer Omega, Inc. ("Omega"); Chairman of the Board and
Director of Pioneer Goldfields Limited ("PGL") and Teberebie Goldfields Limited;
Chairman of the Supervisory Board of Pioneer Fonds Marketing, GmbH, Pioneer
First Polish Trust Fund Joint Stock Company, S.A. and Pioneer Czech Investment
Company, A.S.; Chairman, President and Trustee of all of the Pioneer mutual
funds; Director of Pioneer Global Equity Fund Plc, Pioneer Global Bond Fund Plc,
Pioneer DM Cashfonds Plc, Pioneer European Equity Fund Plc, Pioneer Central &
Eastern Europe Fund Plc and Pioneer U.S. Real Estate Fund Plc; and Partner, Hale
and Dorr LLP (counsel to PGI and the Fund).
MARY K. BUSH, Trustee, DOB: April 1948
4201 Cathedral Avenue, NW, Washington, DC 20016
President, Bush & Co., an international financial advisory firm;
Director and Trustee of Mortgage Guaranty Insurance Corporation, Novecon
Management Company, Hoover Institution, Folger Shakespeare Library, March of
Dimes, Project 2000, Inc. (a not-for-profit educational organization), Small
Enterprise Assistance Fund and Wilberforce University; Advisory Board Member,
Washington Mutual Investors Fund, a registered investment company; and Trustee
of all the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
RICHARD H. EGDAHL, M.D., Trustee, DOB: December 1926
Boston University Health Policy Institute, 53 Bay State Road, Boston, MA 02115
Professor of Management, Boston University School of Management;
Professor of Public Health, Boston University School of Public Health; Professor
of Surgery, Boston University School of Medicine; Director, Boston University
Health Policy Institute and Boston University Medical Center; Executive Vice
President and Vice Chairman of the Board, University Hospital; Academic Vice
President for Health Affairs, Boston University; Director, Essex Investment
Management Company, Inc. (investment adviser), Health Payment Review, Inc.
(health care containment software firm), Mediplex Group, Inc. (nursing care
facilities firm), Peer Review Analysis, Inc. (health care facilities firm) and
Springer-Verlag New York, Inc. (publisher); Honorary Trustee, Franciscan
Children's Hospital; and Trustee of all of the Pioneer mutual funds.
MARGARET B.W. GRAHAM, Trustee, DOB: May 1947
The Keep, P.O. Box 110, Little Deer Isle, ME 04650
Founding Director, The Winthrop Group, Inc. (consulting firm); Manager
of Research Operations, Xerox Palo Alto Research Center, from 1991 to 1994;
Professor of Operations Management and Management of Technology and Associate
Dean, Boston University School of Management from 1989 to 1993; and Trustee of
all the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
JOHN W. KENDRICK, Trustee, DOB: July 1917
6363 Waterway Drive, Falls Church, VA 22044
Professor Emeritus, George Washington University; Director, American
Productivity and Quality Center; Adjunct Scholar, American Enterprise Institute;
Economic Consultant; and Trustee of all of the Pioneer mutual funds, except
Pioneer Variable Contracts Trust.
MARGUERITE A. PIRET, Trustee, DOB: May 1948
One Boston Place, Suite 2635, Boston, MA 02108
President, Newbury, Piret & Company, Inc. (merchant banking firm);
Trustee of Boston Medical Center; Member of the Board of Governors of the
Investment Company Institute; and Trustee of all of the Pioneer mutual funds.
DAVID D. TRIPPLE*, Trustee and Executive Vice President, DOB: February 1944
Executive Vice President and a Director of PGI; President, Chief
Investment Officer and a Director of PMC; Director of PFD, PCC, PIntl, First
Russia, Omega, Pioneer SBIC Corporation ("Pioneer SBIC"), PMIL, Pioneer Global
Equity Fund Plc, Pioneer Global Bond Fund Plc, Pioneer DM Cashfonds Plc, Pioneer
European Equity Fund Plc, Pioneer Central and Eastern Europe Fund Plc and
Pioneer U.S. Real Estate Fund Plc; and Executive Vice President and Trustee of
all of the Pioneer mutual funds.
STEPHEN K. WEST, Trustee, DOB: September 1928
125 Broad Street, New York, NY 10004
Partner, Sullivan & Cromwell (law firm); Trustee, The Winthrop Focus
Funds (mutual funds); and Trustee of all of the Pioneer mutual funds.
JOHN WINTHROP, Trustee, DOB: June 1936
One North Adgers Wharf, Charleston, SC 29401
President, John Winthrop & Co., Inc. (private investment firm);
Director of NUI Corp. (energy sales, services and distribution); Trustee of
Alliance Capital Reserves, Alliance Government Reserves and Alliance Tax Exempt
Reserves; and Trustee of all of the Pioneer mutual funds, except Pioneer
Variable Contracts Trust.
WILLIAM H. KEOUGH, Treasurer, DOB: April 1937
Senior Vice President, Chief Financial Officer and Treasurer of PGI;
Treasurer of PFD, PMC, PSC, PCC, PIntl, PMT, PGL, First Russia, Omega and
Pioneer SBIC; and Treasurer of all of the Pioneer mutual funds.
JOSEPH P. BARRI, Secretary, DOB: August 1946
Corporate Secretary of PGI and most of its subsidiaries; Secretary of
all of the Pioneer mutual funds; and Partner, Hale and Dorr LLP.
ERIC W. RECKARD, Assistant Treasurer, DOB: June 1956
Manager of Fund Accounting of PMC since May 1994; Manager of Auditing,
Compliance and Business Analysis for PGI prior to May 1994; and Assistant
Treasurer of all of the Pioneer mutual funds.
ROBERT P. NAULT, Assistant Secretary, DOB: March 1964
General Counsel and Assistant Secretary of PGI since 1995; Assistant
Secretary of PMC, PIntl, PGL, First Russia, Omega and all of the Pioneer mutual
funds; Assistant Clerk of PFD and PSC; and junior partner of Hale and Dorr LLP
prior to 1995.
The Fund's Declaration of Trust (the "Declaration") provides that the holders of
two-thirds of its outstanding shares may vote to remove a Trustee of the Fund at
any meeting of shareholders. See "Description of Shares" below. The business
address of all officers is 60 State Street, Boston, Massachusetts 02109.
The expense of organizing the Fund and initially registering its shares under
federal and state securities laws are being charged to the Fund's operations, as
an expense, over a period not to exceed 60 months from the Fund's inception
date. If any of the original shares are redeemed by any holder thereof prior to
the end of the amortization period, the redemption proceeds will be decreased by
the pro rata share of the unamortized expenses as of the date of redemption. The
pro rata shares is derived by dividing the number of original shares redeemed by
the total number of original shares outstanding at the time of redemption.
All of the outstanding capital stock of PFD, PMC and PSC is owned, directly or
indirectly, by PGI, a publicly-owned Delaware corporation. PMC, the Fund's
investment adviser, serves as the investment adviser for the Pioneer mutual
funds listed below and manages the investments of certain institutional
accounts.
The table below lists all the Pioneer U.S. mutual funds currently offered to the
public and the investment adviser and principal underwriter for each fund.
Investment Principal
Fund Name Adviser Underwriter
Pioneer International Growth Fund PMC PFD
Pioneer Europe Fund PMC PFD
Pioneer World Equity Fund PMC PFD
Pioneer Emerging Markets Fund PMC PFD
Pioneer India Fund PMC PFD
Pioneer Capital Growth Fund PMC PFD
Pioneer Mid-Cap Fund PMC PFD
Pioneer Growth Shares PMC PFD
Pioneer Small Company Fund PMC PFD
Pioneer Micro-Cap Fund PMC PFD
Pioneer Independence Fund PMC PFD
Pioneer Gold Shares PMC PFD
Pioneer Equity-Income Fund PMC PFD
Pioneer Fund PMC PFD
Pioneer II PMC PFD
Pioneer Real Estate Shares PMC PFD
Pioneer Balanced Fund PMC PFD
Pioneer Short-Term Income Trust PMC PFD
Pioneer America Income Trust PMC PFD
Pioneer Bond Fund PMC PFD
Pioneer Intermediate Tax-Free Fund PMC PFD
Pioneer Tax-Free Income Fund PMC PFD
Pioneer Cash Reserves Fund PMC PFD
Pioneer Interest Shares PMC Note 1
Pioneer Variable Contracts Trust PMC Note 2
- ------------------------------------
Note 1 This fund is a closed-end fund.
Note 2 This is a series of ten separate portfolios designed to provide
investment vehicles for the variable annuity and variable life insurance
contracts of various insurance companies or for certain qualified pension plans.
- ------------------------------------
To the knowledge of the Fund, no officer or trustee of the Fund owned 5% or more
of the issued and outstanding shares of PGI on the date of this SAI , except Mr.
Cogan who then owned approximately 14% of such shares.
COMPENSATION OF OFFICERS AND TRUSTEES
The Fund pays no salaries or compensation to any of its officers. The Fund will
pay an annual trustees' fee to each Trustee who is not affiliated with PGI, PMC,
PFD or PSC consisting of two components: (1) a base fee of $500 and (b) a
variable fee, calculated on the basis of the average net assets of the Fund. In
addition, the Fund will pay a per meeting fee to each Trustee who is not
affiliated with PGI, PMC, PFD or PSC and pays an annual trustees' fee of $500
plus expenses to each Trustee affiliated with PGI, PMC, PFD or PSC. The Fund
also will pay an annual committee participation fee to Trustees who serve as
members of committees established to act on behalf of one or more of the Pioneer
mutual funds. Committee fees will be allocated to the Fund on the basis of the
Fund's average net assets. Each Trustee who is a member of the Audit Committee
for the Pioneer mutual funds will receive an annual fee equal to 10% of the
aggregate annual trustee's fee, except the Committee Chair who will receive an
annual trustee's fee equal to 20% of the aggregate annual trustee's fee. Members
of the Pricing Committee for the Pioneer mutual funds, as well as any other
committee which renders material functional services to the Boards of Trustees
for the Pioneer mutual funds, will receive an annual fee equal to 5% of the
annual trustee's fee, except the Committee Chair who will receive an annual
trustee's fee equal to 10% of the annual trustee's fee. Each Trustee who is not
affiliated with PGI, PMC, PFD or PSC also receives $375 per meeting for
attendance at meetings of the Non-Interested Trustees Committee, except for the
Committee Chair who will receive an additional $375 per meeting. Any such fees
and expenses paid to affiliated or interested persons of PGI, PMC, PFD or PSC
are reimbursed to the Fund under its Management Contract.
The following table sets forth certain information with respect to the estimated
compensation of each Trustee of the Fund for the fiscal year ending December 31,
1998:
Pension or
Retirement Total
Estimated Benefits Compensation
Aggregate Accrued as from Fund and
Compensation Part of Other Pioneer
Name of Trustee from the Fund* Fund's Expenses Mutual Funds**
John F. Cogan, Jr. $ 500 0 $ 12,000
Mary K. Bush 1,175 0 30,000
Richard H. Egdahl, M.D. 1,307 0 62,000
Margaret B.W. Graham 1,259 0 60,000
John W. Kendrick 1,175 0 55,880
Marguerite A. Piret 1,683 0 80,000
David D. Tripple 500 0 12,000
Stephen K. West 1,344 0 63,800
John Winthrop 1,457 0 69,000
$10,500 $444,600
* As of Fund's fiscal year ending December 31, 1998 (estimated).
** For the calendar year ending December 31, 1998 (estimated).
3. INVESTMENT ADVISER
The Fund has contracted with PMC, 60 State Street, Boston, Massachusetts 02109,
to act as its investment adviser. A description of the services provided to the
Fund under its management contract and the expenses paid by the Fund under the
contract is set forth in the Prospectus under the caption "Management of the
Fund."
The term of the management contract is one year and is renewable annually by the
vote of a majority of the Board of Trustees of the Fund (including a majority of
the Board of Trustees who are not parties to the contract or interested persons
of any such parties) cast in person at a meeting called for the purpose of
voting on such renewal. This contract terminates if assigned and may be
terminated without penalty by either party upon 60 days' written notice by vote
of the Board of Directors or Trustees or a majority of the outstanding voting
securities. Pursuant to the management contract, PMC will not be liable for any
error of judgment or mistake of law or for any loss sustained by reason of the
adoption of any investment policy or the purchase, sale or retention of any
securities on the recommendation of PMC. PMC, however, is not protected against
liability by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under the respective management contract.
As compensation for its management services and expenses incurred, PMC is
entitled to a management fee from the Fund at the rate of 0.75% per annum of the
Fund's average daily net assets. The fee is normally computed and accrued daily
and paid monthly. PMC has agreed not to impose all or a portion of its
management fee and to make other arrangements, if necessary, to limit expenses
for the Fund to 1.50% of average daily net assets. This agreement is temporary
and voluntary and may be terminated at any time by PMC. See "Expense
Information" in the Prospectus.
4. UNDERWRITING AGREEMENT AND DISTRIBUTION PLANS
The Fund has entered into an Underwriting Agreement with PFD. The Underwriting
Agreement will continue from year to year if annually approved by the Trustees.
The Underwriting Agreement provides that PFD will bear expenses for the
distribution of the Fund's shares, except for expenses incurred by PFD for which
it is reimbursed by the Fund under the distribution plan (discussed below). PFD
bears all expenses it incurs in providing services under the Underwriting
Agreement. Such expenses include compensation to its employees and
representatives and to securities dealers for distribution related services
performed for the Fund. PFD also pays certain expenses in connection with the
distribution of the Fund's shares, including the cost of preparing, printing and
distributing advertising or promotional materials, and the cost of printing and
distributing prospectuses and supplements to prospective shareholders. The Fund
bears the cost of registering its shares under federal and state securities law
and the laws of certain foreign countries. The Fund and PFD have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. Under the Underwriting Agreement, PFD
will use its best efforts in rendering services to the Fund.
The Fund has adopted a plan of distribution (the "Distribution Plan") in
accordance with Rule 12b-1 under the 1940 Act pursuant to which certain
distribution and service fees are paid.
Pursuant to the Distribution Plan the Fund may reimburse PFD for its
expenditures in financing any activity primarily intended to result in the sale
of Fund shares. Certain categories of such expenditures have been approved by
the Board of Trustees and are set forth in the Prospectus. See "Distribution
Plan" in the Prospectus. The expenses of the Fund pursuant to the Distribution
Plan are accrued on a fiscal year basis and may not exceed, with respect to Fund
shares, the annual rate of 0.25% of the Fund's average annual net assets.
In accordance with the terms of the Distribution Plan, PFD provides to the Fund
for review by the Trustees a quarterly written report of the amounts expended
under the Distribution Plan and the purpose for which such expenditures were
made. In the Trustees' quarterly review of the Distribution Plan, they will
consider the continued appropriateness and the level of reimbursement or
compensation the Distribution Plan provides.
No interested person of the Fund, nor any Trustee of the Fund who is not an
interested person of the Fund, has any direct or indirect financial interest in
the operation of the Distribution Plan except to the extent that PFD and certain
of its employees may be deemed to have such an interest as a result of receiving
a portion of the amounts expended under the Distribution Plan by the Fund and
except to the extent certain officers may have an interest in PFD's ultimate
parent, PGI.
The Distribution Plan was adopted by a majority vote of the Board of Trustees,
including all of the Trustees who are not, and were not at the time they voted,
interested persons of the Fund, as defined in the 1940 Act (none of whom had or
have any direct or indirect financial interest in the operation of the Plans),
cast in person at a meeting called for the purpose of voting on the Distribution
Plan. In approving the Distribution Plan, the Trustees identified and considered
a number of potential benefits which the Distribution Plan may provide. The
Board of Trustees believes that there is a reasonable likelihood that the
Distribution Plan will benefit the Fund and its current and future shareholders.
Under its terms, the Distribution Plan remains in effect from year to year
provided such continuance is approved annually by vote of the Trustees in the
manner described above. The Distribution Plan may not be amended to increase
materially the annual percentage limitation of average net assets which may be
spent for the services described therein without approval of the shareholders of
the Fund. Material amendments of the Distribution Plan must also be approved by
the Trustees in the manner described above. The Distribution Plan may be
terminated at any time, without payment of any penalty, by vote of the majority
of the Trustees who are not interested persons of the Fund and have no direct or
indirect financial interest in the operations of the Distribution Plan, or by a
vote of a majority of the outstanding voting securities of the Fund (as defined
in the 1940 Act). A Distribution Plan will automatically terminate in the event
of its assignment (as defined in the 1940 Act).
5. SHAREHOLDER SERVICING/TRANSFER AGENT
The Fund has contracted with PSC, 60 State Street, Boston, Massachusetts 02109,
to act as shareholder servicing and transfer agent for the Fund. This contract
may be terminated without penalty by either party upon 90 days' written notice.
Under the terms of its contract with the Fund, PSC services shareholder
accounts, and its duties include: (i) processing sales, redemptions and
exchanges of shares of the Fund; (ii) distributing dividends and capital gains
associated with Fund portfolio accounts; and (iii) maintaining account records
and responding to shareholder inquiries.
PSC receives an annual fee of $22.75 for each shareholder account from the Fund
as compensation for the services described above. PSC is also reimbursed by the
Fund for its cash out-of-pocket expenditures. The annual fee is set at an amount
determined by vote of a majority of the Trustees (including a majority of the
Trustees who are not parties to the contract with PSC or interested persons of
any such parties) to be comparable to fees for such services being paid by other
investment companies. The Fund may compensate entities which have agreed to
provide certain sub-accounting services, such as specific transaction processing
or recordkeeping services. Any such payments by the Fund would be in lieu of the
per account fee which would otherwise be paid by the Fund to PSC.
6. PLAN CUSTODIAN
Shares of the Fund are offered to the general public and may only be acquired by
the general public through investments in Pioneer Independence Plans (the
"Plans"). The Fund will voluntarily pay certain Plan custodial fees to State
Street Bank and Trust Company, custodian for the Plans, which would otherwise be
charged to the Plans or the Planholders, or deducted from Fund dividends and/or
distributions. Although there is no current intention to do so, the Fund and the
sponsor of the Plans, PFD, have reserved the future right to cause deductions
against the Plans, the Planholders, and Fund dividends and/or distributions to
compensate State Street Bank and Trust Company for its custodial services to the
Plans.
7. CUSTODIAN
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts 02109 is
the custodian (the "Custodian") of the Fund's assets. The Custodian's
responsibilities include safekeeping and controlling the Fund's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Fund's investments. The Custodian does not
determine the investment policies of the Fund or decide which securities the
Fund will buy or sell. The Fund may, however, invest in securities, including
repurchase agreements, issued by the Custodian and may deal with the Custodian
as a principal in securities transactions. Portfolio securities may be deposited
into the Federal Reserve-Treasury Department Book Entry System or the Depository
Trust Company.
8. PRINCIPAL UNDERWRITER
PFD, 60 State Street, Boston, Massachusetts 02109 serves as the principal
underwriter for the Fund in connection with the continuous offering of Fund
shares.
The Fund will not generally issue Fund shares for consideration other than cash.
At the Fund's sole discretion, however, it may issue Fund shares for
consideration other than cash in connection with a bona fide reorganization,
statutory merger, or other acquisition of portfolio securities.
9. INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen, LLP, 225 Franklin Street, Boston, Massachusetts 02110 is the
Fund's independent public accountants, providing audit services, tax return
review, and assistance and consultation with respect to the preparation of
filings with the SEC.
10. PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on behalf
of the Fund by PMC pursuant to authority contained in the Fund's management
contract. In selecting brokers-dealers, PMC will consider various relevant
factors, including, but not limited to, the size and type of the transaction;
the nature and character of the markets for the security to be purchased or
sold; the execution efficiency, settlement capability, and financial condition
of the broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any broker-dealer spreads.
PMC may select broker-dealers which provide brokerage and/or research services
to the Fund and/or other investment companies managed by PMC. In addition,
consistent with Section 28(e) of the Securities Exchange Act of 1934, as
amended, the Fund may pay commissions to such broker-dealer in an amount greater
than the amount another firm may charge. Such services may include advice
concerning the value of securities; the advisability of investing in, purchasing
or selling securities; the availability of securities or the purchasers or
sellers of securities; providing stock price quotation services; furnishing
analyses, manuals and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and performance of accounts;
comparative fund statistics and credit rating service information and effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement). PMC maintains a listing of broker-dealers who provide
such services on a regular basis. However, because it is anticipated that many
transactions on behalf of the Fund and other investment companies managed by PMC
are placed with broker-dealers (including broker-dealers on the listing) without
regard to the furnishing of such services, it is not possible to estimate the
proportion of such transactions directed to such dealers solely because such
services were provided.
The research received from broker-dealers may be useful to PMC in rendering
investment management services to the Fund as well as other investment companies
or other accounts managed by PMC, although not all such research may be useful
to the Fund. Conversely, such information provided by brokers or dealers who
have executed transaction orders on behalf of such other PMC clients may be
useful to PMC in carrying out its obligations to the Fund. The receipt of such
research has not reduced PMC's normal independent research activities; however,
it enables PMC to avoid the additional expenses which might otherwise be
incurred if it were to attempt to develop comparable information through its own
staff.
In circumstances where two or more broker-dealers offer comparable prices and
executions, preference may be given to a broker-dealer which has sold shares of
the Fund as well as shares of other investment companies or accounts managed by
PMC. This policy does not imply a commitment to execute all portfolio
transactions through all broker-dealers that sell shares of the Fund.
The Trustees will periodically review PMC's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
Fund.
In addition to the Fund, PMC acts as investment adviser to other Pioneer mutual
funds and certain private accounts with investment objectives similar to those
of the Fund. Securities may meet the investment objective of the Fund, such
other funds and such private accounts. In such cases, the decision to recommend
a purchase to one fund or account rather than another is based on a number of
factors. The determining factors in most cases are the amount of securities of
the issuer then outstanding, the value of those securities and the market for
them. Other factors considered in the investment recommendations include other
investments which each fund or account presently has in a particular industry
and the availability of investment funds in each fund or account.
It is possible that at times identical securities will be held by more than one
fund and/or account. However, positions in the same issue may vary and the
length of time that any fund or account may choose to hold its investment in the
same issue may likewise vary. To the extent that the Fund, another mutual fund
in the Pioneer group or a private account managed by PMC may not be able to
acquire as large a position in such security as it desires, it may have to pay a
higher price for the security. Similarly, the Fund may not be able to obtain as
large an execution of an order to sell or as high a price for any particular
portfolio security if PMC decides to sell on behalf of another account the same
portfolio security at the same time. On the other hand, if the same securities
are bought or sold at the same time by more than one fund or account, the
resulting participation in volume transactions could produce better executions
for the Fund or the account. In the event more than one account purchases or
sells the same security on a given date, the purchases and sales will normally
be made as nearly as practicable on a pro rata basis in proportion to the
amounts desired to be purchased or sold by each.
11. TAX STATUS AND DIVIDENDS
It is the Fund's intention to meet the requirements of Subchapter M of the Code,
for qualification as a regulated investment company. These requirements relate
to the sources of the Fund's income, the diversification of its assets, and the
timing of its distributions. If the Fund meets all such requirements and
distributes to its shareholders at least annually all investment company taxable
income and net capital gain, if any, which it receives, the Fund will be
relieved of the necessity of paying federal income tax.
In order to qualify under Subchapter M, the Fund must, among other things,
derive at least 90% of its gross income for each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities, or other income (including gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies (the "90% income test") and
satisfy certain diversification and income distribution requirements.
Dividends from investment company taxable income, which includes net investment
income, net short-term capital gain in excess of net long-term capital loss, and
certain foreign exchange gains, are taxable as ordinary income, whether received
in cash or reinvested in additional shares. Dividends from net long-term capital
gain in excess of net short-term capital loss ("net capital gain"), if any,
whether received in cash or reinvested in additional shares, are taxable to the
Fund's shareholders as long-term capital gains for federal income tax purposes
without regard to the length of time shares of the Fund have been held. As a
result of the enactment of the Taxpayer Relief Act of 1997 (the "1997 TRA") on
August 5, 1997, gain recognized after May 6, 1997 from the sale of a capital
asset is taxable to individual (noncorporate) investors at different maximum
federal income tax rates, depending generally upon the tax holding period for
the asset, the federal income tax bracket of the taxpayer, and the dates the
asset was acquired and/or sold. The Treasury Department has issued guidance
under the 1997 TRA that (subject to possible modification by future "technical
corrections" legislation) enables the Fund to pass through to its shareholders
the benefits of the capital gains tax rates enacted in the 1997 TRA. The Fund
will provide appropriate information to its shareholders about its
distributions, including the tax rate(s) applicable to its distributions from
its long-term capital gains, in accordance with this and any future guidance.
Shareholders should consult their own tax advisers on the correct application of
these new rules in their particular circumstances. The federal income tax status
of all distributions will be reported to shareholders annually.
Any dividend declared by the Fund in October, November or December as of a
record date in such a month and paid during the following January will be
treated for federal income tax purposes as received by shareholders on December
31 of the calendar year in which it is declared.
Foreign exchange gains and losses realized by the Fund in connection with
transactions involving foreign currency-denominated debt securities, certain
options and futures contracts relating to foreign currency, foreign currency
forward contracts, foreign currencies, or payables or receivables denominated in
a foreign currency are subject to Section 988 of the Code, which generally
causes such gains and losses to be treated as ordinary income and losses and may
affect the amount, timing and character of distributions to shareholders. Under
future regulations, such transactions that are not directly related to the
Fund's investments in stock or securities (or its options or futures contracts
with respect to stock or securities) may need to be limited in order to enable
the Fund to satisfy the 90% income test. If the net foreign exchange loss for a
year were to exceed the Fund's investment company taxable income (computed
without regard to such loss), the resulting ordinary loss for such year would
not be deductible by the Fund or its shareholders in future years.
If the Fund invests in certain pay-in-kind securities ("PIKs"), zero coupon
securities, deferred interest securities or, in general, any other securities
with original issue discount (or with market discount if the Fund elects to
include market discount in income currently), the Fund must accrue income on
such investments for each taxable year, which generally will be prior to the
receipt of the corresponding cash payments. However, the Fund must distribute,
at least annually, all or substantially all of its net income, including such
accrued income, to shareholders to qualify as a regulated investment company
under the Code and avoid Federal income and excise taxes. Therefore, the Fund
may have to dispose of its portfolio securities under disadvantageous
circumstances to generate cash, or may have to leverage itself by borrowing the
cash, to satisfy distribution requirements.
For federal income tax purposes, the Fund is permitted to carry forward a net
capital loss in any year to offset net capital gains, if any, during the eight
years following the year of the loss. To the extent subsequent net capital gains
are offset by such losses, they would not result in federal income tax liability
to such Fund and are not expected to be distributed as such to shareholders.
At the time of an investor's purchase of Fund shares, a portion of the purchase
price may be attributable to realized or unrealized appreciation in the Fund's
portfolio or undistributed taxable income of the Fund. Consequently, subsequent
distributions by Fund on these shares from such appreciation or income may be
taxable to such investor even if the net asset value of the investor's shares
is, as a result of the distributions, reduced below the investor's cost for such
shares and the distributions in reality represent a return of a portion of the
investment.
Redemptions and exchanges are taxable events for shareholders that are subject
to tax. Shareholders should consult their own tax advisers with reference to
their individual circumstances to determine whether any particular transaction
in Fund shares is properly treated as a sale for tax purposes, as the following
discussion assumes, and the character of and tax rate applicable to any gains or
losses recognized in such transactions under the new rate structure enacted in
the 1997 TRA or, if applicable, prior law.
Any loss realized by a shareholder upon the redemption of shares with a tax
holding period of six months or less will be treated as a long-term capital loss
to the extent of any amounts treated as distributions of long-term capital gain
with respect to such shares.
In addition, if Fund shares redeemed or exchanged have been held for less than
91 days, (1) in the case of a reinvestment in the fund at net asset value, the
sales charge paid on such shares is not included in their tax basis under the
Code and (2) in the case of an exchange, all or a portion of the sales charge
paid on such shares is not included in their tax basis under the Code, to the
extent a sales charge that would otherwise apply to the shares received is
reduced pursuant to the exchange privilege. In either case, the portion of the
sales charge not included in the tax basis of the shares redeemed or surrendered
in an exchange is included in the tax basis of the shares acquired in the
reinvestment or exchange. Losses on certain redemptions may be disallowed under
"wash sale" rules in the event of other investments in the same Fund within a
period of 61 days beginning 30 days before and ending 30 days after a redemption
or other sale of shares. In such a case, the disallowed portion of any loss
would be included in the federal tax basis of the shares acquired in the other
investments.
Options written or purchased and futures contracts entered into by the Fund on
certain securities, indices and foreign currencies, as well as certain foreign
currency forward contracts, may cause the Fund to recognize gains or losses from
marking-to-market even though such options may not have lapsed, been closed out,
or exercised or such futures or forward contracts may not have been performed or
closed out. The tax rules applicable to these contracts may affect the
characterization as long-term or short-term of some capital gains and losses
realized by the Fund. Certain options, futures and forward contracts relating to
foreign currency may be subject to Section 988, as described above, and may
accordingly produce ordinary income or loss. Additionally, the Fund may be
required to recognize gain if an option, futures contract, forward contract, or
other transaction that is not subject to the mark to market rules is treated as
a "constructive sale" of an "appreciated financial position" held by the Fund
under Section 1259 of the Code. Any net mark to market gains and/or gains from
constructive sales may also have to be distributed to satisfy the distribution
requirements referred to above even though no corresponding cash amounts may
concurrently be received. Losses on certain options, futures and/or offsetting
positions (portfolio securities or other positions with respect to which the
Fund's risk of loss is substantially diminished by one or more options, futures
or forward contracts) may also be deferred under the tax straddle rules of the
Code, which may also affect the characterization of capital gains or losses from
straddle positions and certain successor positions as long-term or short-term.
Certain tax elections may be available that would enable the Fund to ameliorate
some adverse effects of the tax rules described in this paragraph. The tax rules
applicable to options, futures, and straddles may affect the amount, timing and
character of the Fund's income and loss and hence of its distributions to
shareholders.
For purposes of the 70% dividends-received deduction available to corporations
under the Code, dividends received by the Fund from U.S. domestic corporations
in respect of any share of stock with a tax holding period of at least 46 days
(91 days in the case of certain preferred stock) held in an unleveraged position
and distributed and designated by the Fund may be treated as qualifying
dividends. Any corporate shareholder should consult its tax adviser regarding
the possibility that its tax basis in its shares may be reduced, for federal
income tax purposes, by reason of "extraordinary dividends" received with
respect to the shares. In order to qualify for the deduction, corporate
shareholders must meet the minimum holding period requirement stated above with
respect to their Fund shares, taking into account any holding period reductions
from certain hedging or other transactions that diminish risk of loss, with
respect to their Fund shares and, if they borrow to acquire Fund shares, may be
denied a portion of the dividends-received deduction. The entire qualifying
dividend, including the otherwise deductible amount, will be included in
determining the excess (if any) of a corporation's adjusted current earnings
over its alternative minimum taxable income, which may increase a corporation's
alternative minimum tax liability.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions, and certain
prohibited transactions is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
Federal law requires that the Fund withhold (as "backup withholding") 31% of
reportable payments, including dividends, capital gain dividends, and the
proceeds of redemptions (including exchanges) and repurchases, to shareholders
who have not complied with Internal Revenue Service ("IRS") regulations. In
order to avoid this withholding requirement, shareholders must certify on their
Account Applications, or on separate W-9 Forms, that their Social Security or
other Taxpayer Identification Number is correct and that they are not currently
subject to backup withholding, or that they are exempt from backup withholding.
The Fund may nevertheless be required to withhold if it receives notice from the
IRS or a broker that the number provided is incorrect or backup withholding is
applicable as a result of previous underreporting of interest or dividend
income.
If, as anticipated, the Fund qualifies as a regulated investment company under
the Code, it will not be required to pay any Massachusetts income, corporate
excise or franchise taxes or any Delaware corporation income tax.
The description of certain federal tax provisions above relates only to U.S.
federal income tax consequences for shareholders who are U.S. persons, i.e.,
U.S. citizens or residents and U.S. domestic corporations, partnerships, trusts
or estates, and who are subject to U.S. federal income tax. The description does
not address the special tax rules applicable to particular types of investors,
such as financial institutions, insurance companies, securities dealers, or
tax-exempt or tax-deferred plans, accounts or entities. Investors other than
U.S. persons may be subject to different U.S. tax treatment, including a
possible 30% U.S. withholding tax (or withholding tax at a lower treaty rate) on
amounts treated as ordinary dividends from the Fund and, unless an effective IRS
Form W-8 or authorized substitute is on file, to 31% backup withholding on
certain other payments from the Fund. Shareholders should consult their own tax
advisers on these matters and on state, local and other applicable tax laws.
12. DESCRIPTION OF SHARES
The Declaration permits the Board of Trustees to authorize the issuance of an
unlimited number of full and fractional shares of beneficial interest which may
be divided into such separate series as the Trustees may establish. Currently,
the Fund consists of only one series. The Trustees may establish additional
series of shares, and may divide or combine the shares into a greater or lesser
number of shares without thereby changing the proportionate beneficial interests
in the Fund. The Declaration further authorizes the Trustees to classify or
reclassify any series of the shares into one or more classes. Pursuant thereto,
the Trustees have authorized the issuance of one class of shares of the Fund.
Each share of a class of the Fund represents an equal proportionate interest in
the assets of the Fund. Upon liquidation of the Fund, shareholders of each class
of the Fund are entitled to share pro rata in the Fund's net assets allocable to
such class available for distribution to shareholders. The Fund reserves the
right to create and issue additional series or classes of shares, in which case
the shares of each class of a series would participate equally in the earnings,
dividends and assets allocable to that class of the particular series.
Shareholders are entitled to one vote for each share held and may vote in the
election of Trustees and on other matters submitted to a meeting of
shareholders. Although Trustees are not elected annually by the shareholders,
shareholders have, under certain circumstances, the right to remove one or more
Trustees.
The shares of the Fund are entitled to vote separately to approve investment
advisory agreements or changes in investment restrictions, but shareholders of
all series vote together in the election and selection of Trustees and
accountants. Shares of all series of the Fund vote together as a class on
matters that affect all series of the Fund in substantially the same manner. As
to matters affecting a single series or class, shares of such series or class
will vote separately. No amendment adversely affecting the rights of
shareholders may be made to the Fund's Declaration without the affirmative vote
of a majority of its shares. Shares have no preemptive or conversion rights.
Shares are fully paid and non-assessable by the Fund, except as stated below.
13. CERTAIN LIABILITIES
As a Delaware business trust, the Fund's operations are governed by its
Declaration dated December 8, 1997. A copy of the Fund's Certificate of Trust,
also dated December 8, 1997, is on file with the office of the Secretary of
State of Delaware. Generally, Delaware business trust shareholders are not
personally liable for obligations of the Delaware business trust under Delaware
law. The Delaware Business Trust Act (the "Delaware Act") provides that a
shareholder of a Delaware business trust shall be entitled to the same
limitation of liability extended to shareholders of private for-profit
corporations. The Declaration expressly provides that the Fund is organized
under the Delaware Act and that the Declaration is to be governed by Delaware
law. It is nevertheless possible that a Delaware business trust, such as the
Fund, might become a party to an action in another state whose courts refused to
apply Delaware law, in which case the trust's shareholders could become subject
to personal liability.
To guard against this risk, the Declaration (i) contains an express disclaimer
of shareholder liability for acts or obligations of the Fund and provides that
notice of such disclaimer may be given in each agreement, obligation or
instrument entered into or executed by the Fund or its Trustees, (ii) provides
for the indemnification out of Fund property of any shareholders held personally
liable for any obligations of the Fund or any series of the Fund and (iii)
provides that the Fund shall, upon request, assume the defense of any claim made
against any shareholder for any act or obligation of the Fund and satisfy any
judgment thereon. Thus, the risk of a shareholder incurring financial loss
beyond his or her investment because of shareholder liability is limited to
circumstances in which all of the following factors are present: (1) a court
refused to apply Delaware law; (2) the liability arose under tort law or, if
not, no contractual limitation of liability was in effect; and (3) the Fund
itself would be unable to meet its obligations. In light of Delaware law, the
nature of the Fund's business and the nature of its assets, the risk of personal
liability to a Fund shareholder is remote.
The Declaration further provides that the Fund shall indemnify each of its
Trustees and officers against liabilities and expenses reasonably incurred by
them, in connection with, or arising out of, any action, suit or proceeding,
threatened against or otherwise involving such Trustee or officer, directly or
indirectly, by reason of being or having been a Trustee or officer of the Fund.
The Declaration does not authorize the Fund to indemnify any Trustee or officer
against any liability to which he or she would otherwise be subject by reason of
or for willful misfeasance, bad faith, gross negligence or reckless disregard of
such person's duties.
14. LETTER OF INTENT
The Letter of Intent ("LOI") procedure may not be used for shares of the Fund.
An LOI may, however, be used in connection with the purchases of shares of other
Pioneer mutual funds. Please consult the prospectus of the Pioneer mutual fund
whose shares you wish to purchase pursuant to an LOI for more information.
15. HOW TO SELL FUND SHARES
THE FOLLOWING INFORMATION IS APPLICABLE ONLY IF YOU OWN FUND SHARES DIRECTLY. TO
WITHDRAW OR REDEEM SHARES FROM A PLAN, SEE THE PLAN PROSPECTUS.
You can arrange to sell (redeem) Fund shares on any day the Exchange is open by
selling either some or all of your shares to the Fund.
You may sell your shares either through your broker-dealer or directly to the
Fund. Please note the following:
o If you are selling shares from a retirement account, other than an IRA,
you must make your request in writing (except for exchanges to other
Pioneer mutual funds which can be requested by phone or in writing). Call
1-800-225-6541 for more information.
o If you are selling shares from a non-retirement account or IRA, you may
use any of the methods described below.
In Writing. As described in the Prospectus, you may sell your shares by
delivering a written request, signed by all registered owners, in good order to
PSC, however, you must use a written request, including a signature guarantee,
to sell your shares if any of the following situations applies:
o you wish to sell over $100,000 worth of shares,
o your account registration or address has changed within the last 30 days,
o the check is not being mailed to the address on your account (address of
record),
o the check is not being made out to the account owners, or
o the sale proceeds are being transferred to a Pioneer mutual fund account
with a different registration.
By Telephone or Fax. Your account is automatically authorized to have the
telephone redemption privilege unless you indicate otherwise on your Account
Application or by writing to PSC. Proper account identification will be required
for each telephone redemption. The telephone redemption option is not available
to retirement plan accounts, except IRAs. A maximum of $100,000 per account per
day may be redeemed by telephone or fax and the proceeds may be received by
check or by bank wire or electronic funds transfer. To receive the proceeds by
check: the check must be made payable exactly as the account is registered and
the check must be sent to the address of record which must not have changed in
the last 30 days. To receive the proceeds by bank wire or electronic funds
transfer: the proceeds must be sent to the bank wire address of record which
must have been properly pre-designated either on your Account Application or on
an Account Options Form and which must not have changed in the last 30 days. To
redeem by fax, send your redemption request to 1-800-225-6541. You may always
elect to deliver redemption instructions to PSC by mail. See "Telephone
Transactions" below. Telephone redemptions will be priced as described above.
You are strongly urged to consult with your financial representative prior to
requesting a telephone redemption.
Selling Shares Through Your Broker-Dealer. The Fund has authorized PFD to
act as its agent in the repurchase of shares of the Fund from qualified
broker-dealers and reserves the right to terminate this procedure at any time.
Your broker-dealer must receive your request before the close of business on the
Exchange and transmit it to PFD before PFD's close of business to receive that
day's redemption price. Your broker-dealer is responsible for providing all
necessary documentation to PFD and may charge you for its services.
16. HOW TO EXCHANGE FUND SHARES
The following information is applicable only if you own shares directly.
Written Exchanges. You may exchange your shares by sending a letter of
instruction to PSC. Your letter should include your name, the name of the
Pioneer mutual fund out of which you wish to exchange and the name of the
Pioneer mutual fund into which you wish to exchange, your fund account
number(s), the Class of shares to be exchanged and the dollar amount or number
of shares to be exchanged. Written exchange requests must be signed by all
record owner(s) exactly as the shares are registered.
Telephone Exchanges. Your account is automatically authorized to have the
telephone exchange privilege unless you indicate otherwise on your Account
Application or by writing to PSC. Proper account identification will be required
for each telephone exchange. Telephone exchanges may not exceed $500,000 per
account per day. Each voice-requested or FactFoneSM telephone exchange request
will be recorded. You are strongly urged to consult with your financial
representative prior to requesting a telephone exchange. See "Telephone
Transactions and Related Liabilities" below.
Automatic Exchanges. You may automatically exchange shares from one Pioneer
mutual fund account for shares of the same Class in another Pioneer mutual fund
account on a monthly or quarterly basis. The accounts must have identical
registrations and the originating account must have a minimum balance of $5,000.
The exchange will be effective on the day of the month designated on your
Account Application or Account Options Form.
General. Exchanges must be at least $1,000. You may exchange your investment
from one Class of Fund shares at net asset value, without a sales charge, for
shares of the same Class of any other Pioneer mutual fund. Not all Pioneer
mutual funds offer more than one Class of shares. A new Pioneer mutual fund
account opened through an exchange must have a registration identical to that on
the original account.
Shares which would normally be subject to a CDSC upon redemption will not be
charged the applicable CDSC at the time of an exchange. Shares acquired in an
exchange will be subject to the CDSC of the shares originally held. For purposes
of determining the amount of any applicable CDSC, the length of time you have
owned shares acquired by exchange will be measured from the date you acquired
the original shares and will not be affected by any subsequent exchange.
Exchange requests received by PSC before 4:00 p.m. Eastern time will be
effective on that day if the requirements above have been met, otherwise, they
will be effective on the next business day. PSC will process exchanges only
after receiving an exchange request in good order. There are currently no fees
or sales charges imposed at the time of an exchange. An exchange of shares may
be made only in states where legally permitted. For federal and (generally)
state income tax purposes, an exchange is considered to be a sale of the shares
of the Fund exchanged and a purchase of shares in another Pioneer mutual fund.
Therefore, an exchange could result in a gain or loss on the shares sold,
depending on the tax basis of these shares and the timing of the transaction,
and special tax rules may apply.
You should consider the differences in objectives and policies of the Pioneer
mutual funds, as described in each fund's current prospectus, before making any
exchange. For the protection of the Fund's performance and shareholders, the
Fund and PFD reserve the right to refuse any exchange request or restrict, at
any time without notice, the number and/or frequency of exchanges to prevent
abuses of the exchange privilege. Such abuses may arise from frequent trading in
response to short-term market fluctuations, a pattern of trading by an
individual or group that appears to be an attempt to "time the market," or any
other exchange request which, in the view of management, will have a detrimental
effect on the Fund's portfolio management strategy or its operations. In
addition, the Fund and PFD reserve the right to charge a fee for exchanges or to
modify, limit, suspend or discontinue the exchange privilege with notice to
shareholders as required by law.
TELEPHONE TRANSACTIONS
Your account is automatically authorized to have telephone transaction
privileges unless you indicate otherwise on your Account Application or by
writing to PSC. You may purchase, sell or exchange Fund shares by telephone. For
personal assistance, call 1-800-225-6541 between 8:00 a.m. and 9:00 p.m. Eastern
time on weekdays. See "How to Buy Fund Shares" in the Prospectus, "How to Sell
Fund Shares" in the Prospectus and this SAI and "How to Exchange Fund Shares" in
this SAI for more information. Computer-assisted transactions are available to
shareholders who have pre-recorded certain bank information (see FactFoneSM).
You are strongly urged to consult with your financial representative prior to
requesting any telephone transaction. To confirm that each transaction
instruction received by telephone is genuine, the Fund will record each
telephone transaction, require the caller to provide the personal identification
number ("PIN") for the account and send you a written confirmation of each
telephone transaction. Different procedures may apply to accounts that are
registered to non-U.S. citizens or that are held in the name of an institution
or in the name of an investment broker-dealer or other third party. If
reasonable procedures, such as those described above, are not followed, the Fund
may be liable for any loss due to unauthorized or fraudulent instructions. The
Fund may implement other procedures from time to time. In all other cases,
neither the Fund, PSC or PFD will be responsible for the authenticity of
instructions received by telephone, therefore, you bear the risk of loss for
unauthorized or fraudulent telephone transactions.
During times of economic turmoil or market volatility or as a result of severe
weather or a natural disaster, it may be difficult to contact the Fund by
telephone to institute a redemption or exchange. You should communicate with the
Fund in writing if you are unable to reach the Fund by telephone.
17. SYSTEMATIC WITHDRAWAL PLAN
The use of a Systematic Withdrawal Plan ("SWP") will be limited for this Fund
because you may not purchase additional Fund shares except through the Plans.
A SWP is designed to provide a convenient method of receiving fixed payments at
regular intervals from shares of a Pioneer mutual fund deposited by the
applicant under the SWP. The applicant must deposit or purchase for deposit with
PSC shares of the Pioneer mutual fund having a total value of not less than
$10,000. Periodic checks of $50 or more will be deposited monthly or quarterly
directly into a bank account designated by the applicant or will be sent by
check to the applicant, or any person designated by him monthly or quarterly.
Any income dividends or capital gains distributions on shares under the SWP will
be credited to the SWP account on the payment date in full and fractional shares
at the net asset value per share in effect on the record date.
SWP payments are made from the proceeds of the redemption of shares deposited
under the SWP in a SWP account. To the extent that such redemptions for periodic
withdrawals exceed dividend income reinvested in the SWP account, such
redemptions will reduce and may ultimately exhaust the number of shares
deposited in the SWP account. Redemptions are taxable transactions to
shareholders. I n addition, the amounts received by a shareholder cannot be
considered as yield or income on his or her investment because part of such
payments may be a return of his or her investment.
The SWP may be terminated at any time (1) by written notice to PSC or from PSC
to the shareholder; (2) upon receipt by PSC of appropriate evidence of the
shareholder's death; or (3) when all shares under the SWP have been redeemed.
18. DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of the Fund is determined as of the
close of regular trading on the Exchange) (currently 4:00 p.m., Eastern time) on
each day on which the Exchange is open for trading. As of the date of this SAI ,
the Exchange is open for trading every weekday except for the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value per share of each class of the Fund is also
determined on any other day in which the level of trading in its portfolio
securities is sufficiently high that the current net asset value per share might
be materially affected by changes in the value of its portfolio securities. The
Fund is not required to determine its net asset value per share on any day in
which no purchase orders for the shares of the Fund become effective and no
shares are tendered for redemption.
The net asset value per share of each class of the Fund is computed by taking
the value of all of the Fund's assets attributable to a class, less the Fund's
liabilities attributable to a class, and dividing it by the number of
outstanding shares of the class. For purposes of determining net asset value,
expenses of the classes of the Fund are accrued daily. Currently the Fund is
comprised of one class of shares.
Securities that have not traded on the date of valuation or securities for which
sales prices are not generally reported are valued at the mean between the last
bid and asked prices. Securities for which no market quotations are readily
available (excluding those whose trading has been suspended) will be valued at
fair value as determined in good faith by the Board of Trustees, although the
actual computations may be made by persons acting pursuant to the direction of
the Board of Trustees.
The Fund's shares are offered at net asset value without the imposition of an
initial sales charge.
19. INVESTMENT RESULTS
QUOTATIONS, COMPARISONS, AND GENERAL INFORMATION
From time to time, in advertisements, in sales literature, or in reports to
shareholders, the past performance of the Fund may be illustrated and/or
compared to that of other mutual funds with similar investment objectives, and
to stock or other relevant indices. For example, total return of the Fund's
classes may be compared to rankings prepared by Lipper Analytical Services,
Inc., a widely recognized independent service which monitors mutual fund
performance; the Standard & Poor's 500 Stock Index ("S&P 500"), an index of
unmanaged groups of common stock; the Dow Jones Industrial Average, a recognized
unmanaged index of common stocks of 30 industrial companies listed on the New
York Stock Exchange; or Russell U.S. Equity Indexes or the Wilshire Total Market
Value Index which are recognized unmanaged indexes of broad based common stocks.
In addition, the performance of the classes of the Fund may be compared to
alternative investment or savings vehicles and/or to indices or indicators of
economic activity, e.g., inflation or interest rates. Performance rankings and
listings reported in newspapers or national business and financial publications,
such as Barron's, Business Week, Consumers Digest, Consumer Reports, Financial
World, Forbes, Fortune, Investors Business Daily, Kiplinger's Personal Finance
Magazine, Money Magazine, New York Times, Smart Money, USA Today, U.S. News and
World Report, The Wall Street Journal, and Worth may also be cited (if the Fund
is listed in any such publication) or used for comparison, as well as
performance listings and rankings from various other sources including Bloomberg
Financial Markets, CDA/Wiesenberger, Donoghue's Mutual Fund Almanac, Investment
Company Data, Inc., Johnson's Charts, Kanon Bloch Carre and Co., Lipper
Analytical Services, Inc., Micropal, Inc., Morningstar, Inc., Schabacker
Investment Management and Towers Data Systems, Inc.
In addition, from time to time, quotations from articles from financial
publications such as those listed above may be used in advertisements in sales
literature, or in reports to shareholders of the Fund.
The Fund may also present, from time to time, historical information depicting
the value of a hypothetical account in one or more classes of the Fund since the
Fund's inception.
In presenting investment results, the Fund may also include references to
certain financial planning concepts, including (a) an investor's need to
evaluate his financial assets and obligations to determine how much to invest;
(b) his need to analyze the objectives of various investments to determine where
to invest; and (c) his need to analyze his time frame for future capital needs
to determine how long to invest. The investor controls these three factors, all
of which affect the use of investments in building assets.
One of the primary methods used to measure the performance of a class of the
Fund is "total return." Total return will normally represent the percentage
change in value of an account, or of a hypothetical investment in a class of the
Fund, over any period up to the lifetime of that class of the Fund. Total return
calculations will usually assume the reinvestment of all dividends and capital
gains distributions and will be expressed as a percentage increase or decrease
from an initial value for the entire period or for one or more specified periods
within the entire period. Total return percentages for periods of less than one
year will usually be annualized; total return percentages for periods longer
than one year will usually be accompanied by total return percentages for each
year within the period and/or by the average annual compounded total return for
the period. The income and capital components of a given return may be separated
and portrayed in a variety of ways in order to illustrate their relative
significance. Performance may also be portrayed in terms of cash or investment
values, without percentages.
Past performance cannot guarantee any particular future result.
The Fund's average annual total return quotations for each of its classes as
that information may appear in the Fund's Prospectus, this SAI or in advertising
are calculated by standard methods prescribed by the SEC.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS
Average annual total return quotations for shares of the Fund are computed by
finding the average annual compounded rates of return that would cause a
hypothetical investment made on the first day of a designated period (assuming
all dividends and distributions are reinvested) to equal the ending redeemable
value of such hypothetical investment on the last day of the designated period
in accordance with the following formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical
$1000 initial payment made at the
beginning of the designated period (or
fractional portion thereof)
For purposes of the above computation, it is assumed that all dividends and
distributions made by the Fund are reinvested at net asset value during the
designated period. The average annual total return quotation is determined to
the nearest 1/100 of 1%.
In determining the average annual total return (calculated as provided above),
recurring fees, if any, that are charged to all shareholder accounts of a
particular class are taken into consideration. For any account fees that vary
with the size of the account, the account fee used for purposes of the above
computation is assumed to be the fee that would be charged to a class's mean
account size.
Automated Information Line
FactFoneSM, Pioneer's 24-hour automated information line, allows shareholders to
dial toll-free 1-800-225-4321 and hear recorded fund information, including:
o net asset value prices for all Pioneer mutual funds;
o annualized 30-day yields on Pioneer's fixed income funds;
o annualized 7-day yields and 7-day effective (compound) yields for
Pioneer's money market fund; and
o dividends and capital gains distributions on all Pioneer mutual
funds.
Yields are calculated in accordance with SEC mandated standard formulas.
In addition, by using a PIN, shareholders may enter purchases, exchanges and
redemptions, access their account balances and last three transactions and may
order a duplicate statement. See "FactFoneSM" in the Prospectus for more
information.
All performance numbers communicated through FactFoneSM represent past
performance, and figures for all quoted bond funds include the maximum
applicable sales charge. A shareholder's actual yield and total return will vary
with changing market conditions. The value of Pioneer mutual fund shares (except
for the Pioneer Cash Reserves Fund which seeks to maintain a stable $1.00 share
price) will also vary, and such shares may be worth more or less at redemption
than their original cost.
20. FINANCIAL STATEMENTS
The Form of Balance Sheet and the Form of Report of Independent Public
Accountants included in this SAI have been included in reliance upon the report
of Arthur Andersen, LLP, independent public accountants, as experts in
accounting and auditing.
<PAGE>
Pioneer Independence Fund
Balance Sheet
February 20, 1998
ASSETS:
Cash $ 100,000
Deferred organization costs 51,077
----------
Total assets $ 151,077
----------
LIABILITIES:
Due to affiliates $ 47,077
Accrued expenses 4,000
----------
Total liabilities $ 51,077
----------
NET ASSETS:
Total net assets (consisting of paid-in
capital for 10,000 shares outstanding) $ 100,000
==========
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized with no
par value, 10,000 fund shares outstanding) $ 10.00
==========
The accompanying notes are an integral part of this
balance sheet.
<PAGE>
Pioneer Independence Fund
Notes to Balance Sheet
February 20, 1998
1. Organization
Pioneer Independence Fund (the Fund), organized as a Delaware business trust on
December 8, 1997, is being registered with the Securities and Exchange
Commission under the Investment Company Act of 1940 (the 1940 Act) as a
diversified, open-end management investment company. The investment objective of
the Fund is to seek capital appreciation. The Fund is authorized to issue an
unlimited number of shares. Shares of the Fund are offered publicly through
Pioneer Independence Plans.
Since December 8, 1997, the Fund's activities have been limited to
organizational matters with no operating activities. The Fund intends to qualify
under Subchapter M of the Internal Revenue Code of 1986, as amended. All of the
initial Fund shares outstanding at February 20, 1998 are owned by Pioneer Funds
Distributor, Inc. (PFD), the principal underwriter for the Fund and an indirect
subsidiary of The Pioneer Group, Inc. (PGI).
2. Organizational Costs
As of February 20, 1998, the Fund deferred organization-related costs of $51,077
which will be amortized on a straight-line basis over a period of up to five
years. Included in due to affiliates are approximately $23,120 and $23,957 of
such cost payable to PFD and Pioneering Management Corporation (PMC),
respectively.
If any of the original shares are redeemed by PFD prior to the end of the
amortization period, the redemption proceeds will be decreased by the pro rata
share of the unamortized expenses as of the date of redemption. The pro rata
shares will be derived by dividing the number of original shares by the total
number of original shares outstanding at the time of redemption.
3. Fund Shares
The Fund will record sales and repurchases of its shares on trade date. Net
losses, if any, as a result of cancellations will be absorbed by PFD.
4. Management Contract
PMC, the Fund's investment adviser, will manage the Fund's portfolio and is a
wholly owned subsidiary of PGI. Management fees will be calculated daily at the
annual rate of 0.75% of the Fund's average daily net assets. Under the
management contract, the cost of certain usual and customary expenses, including
accounting, regulatory reporting and insurance premiums, will be paid by the
Fund.
PMC has agreed not to impose all or a portion of its management fee and to
assume other operating expenses of the Fund to the extent necessary to limit
fund expenses to 1.50% of the Fund's average daily net assets. PMC's agreement
is voluntary and temporary and may be revised or terminated at any time.
5. Transfer Agent
Pioneering Services Corporation (PSC), a wholly owned subsidiary of PGI, will
provide substantially all transfer agent and shareholder services to the Fund at
negotiated rates.
6. Distribution Plans
The Fund has adopted a Plan of Distribution (the Plan) in accordance with Rule
12b-1 of the 1940 Act. Pursuant to the Plan, the Fund will pay PFD a service fee
of up to 0.25% of the Fund's average daily net assets in reimbursement of its
actual expenditures to finance activities primarily intended to result in the
sale of Fund shares.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder and the Board of Trustees of
Pioneer Independence Fund:
We have audited the accompanying Balance Sheet of Pioneer Independence Fund (a
Massachusetts trust) as of February 20, 1998. This financial statement is the
responsibility of the Trust's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Pioneer Independence Fund as of
February 20, 1998, in conformity with generally accepted accounting principles.
/s/ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 24, 1998
<PAGE>
APPENDIX A
DESCRIPTION OF SHORT-TERM DEBT AND CORPORATE BOND RATINGS1
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM PRIME RATING SYSTEM
- - TAXABLE DEBT AND DEPOSITS GLOBALLY
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
Prime-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
Leading market positions in well-established industries. High rates of
return on funds employed.
Conservative capitalization structure with moderate reliance on debt
and ample asset protection. Broad margins in earnings coverage of fixed
financial charges and high internal cash generation. Well-established
access to a range of financial markets and assured sources of alternate
liquidity.
Prime-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the Characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
Not Prime: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Obligations of a branch of a bank are considered to be domiciled in the country
in which the branch is located. Unless noted as an exception, Moody's rating on
a bank's ability to repay senior obligations extends only to branches located in
countries which carry a Moody's Sovereign Rating for Bank Deposits. Such branch
obligations are rated at the lower of the bank's rating or Moody's Sovereign
Rating for Bank Deposits for the country in which the branch is located.
When the currency in which an obligation is denominated is not the same as the
currency of the country in which the obligation is domiciled, Moody's ratings do
not incorporate an opinion as to whether payment of the obligation will be
affected by actions of the government controlling the currency of denomination.
In addition, risks associated with bilateral conflicts between an investor's
home country and either the issuer's home country or the country where an
issuer's branch is located are not incorporated into Moody's short-term debt
ratings.
If an issuer represents to Moody's that its short-term debt obligations are
supported by the credit of another entity or entities, then the name or names of
such supporting entity or entities are listed within the parenthesis beneath the
name of the issuer, or there is a footnote referring the reader to another page
for the name or names of the supporting entity or entities. In assigning ratings
to such issuers, Moody's evaluates the financial strength of the affiliated
corporations, commercial banks, insurance companies, foreign governments or
other entities, but only as one factor in the total rating assessment.
MOODY'S CORPORATE BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A posses many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements
of danger with respect to principal or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicated that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicated
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
STANDARD & POOR'S SHORT-TERM ISSUE CREDIT RATINGS
A-1: A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B: A short-term obligation rated B is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C: A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
STANDARD & POOR'S CORPORATE BOND RATINGS
AAA: An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA: An obligation rated AA differs from the highest-rated obligations only in a
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to the
obligor's capacity to meet its financial commitment on the obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial or economic conditions, the obligor is not likely to
have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.
D: An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments are jeopardized.
PLUS (+) OR MINUS (-): The rating from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major categories.
r: This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk, such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
1 The ratings indicated herein are believed to be the most recent ratings
available at the date of this SAI for the securities listed. Ratings are
generally given to securities at the time of issuance. While the rating agencies
may from time to time revise such ratings, they undertake no obligation to do
so, and the ratings indicated do not necessarily represent ratings which will be
given to these securities on the date of the Fund's fiscal year-end.
<PAGE>
APPENDIX B
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
The following securities indices are well known, unmanaged measures of market
performance. Advertisements and sales literature for the Fund may refer to these
indices or may present comparisons between the performance of the Fund and one
or more of the indices. Other indices may also be used, if appropriate. The
indices are not available for direct investment. The data presented are not
meant to be indicative of the performance of the Fund, do not reflect past
performance and do not guarantee future results.
S&P 500
This index is a readily available, carefully constructed, market value weighted
benchmark of common stock performance. Currently, the S&P 500 includes 500 of
the largest stocks (in terms of stock market value) in the U.S.
DOW JONES INDUSTRIAL AVERAGE
This is a total return index based on the performance of stocks of 30 blue chip
companies widely held by individuals and institutional investors. The 30 stocks
represent about a fifth of the $8 trillion-plus market value of all U.S. stocks
and about a fourth of the value of stocks listed on the New York Stock Exchange
(NYSE).
U.S. SMALL STOCK INDEX
This index is a market value weighted index of the ninth and tenth deciles of
the NYSE, plus stocks listed on the American Stock Exchange and over the counter
with the same or less capitalization as the upper bound of the NYSE ninth
decile.
U.S. INFLATION
The Consumer Price Index for All Urban Consumers (CPI-U), not seasonally
adjusted, is used to measure inflation, which is the rate of change of consumer
goods prices. Unfortunately, the inflation rate as derived by the CPI is not
measured over the same period as the other asset returns. All of the security
returns are measured from one month-end to the next month-end. CPI commodity
prices are collected during the month. Thus, measured inflation rates lag the
other series by about one-half month. Prior to January 1978, the CPI (as
compared with CPI-U) was used. Both inflation measures are constructed by the
U.S. Department of Labor, Bureau of Labor Statistics, Washington, DC.
S&P/BARRA INDEXES
The S&P/BARRA Growth and Value Indexes are constructed by dividing the stocks in
the S&P 500 according to price-to-book ratios. The Growth Index contains stocks
with higher price-to-book ratios, and the Value Index contains stocks with lower
price-to-book ratios. Both indexes are market capitalization weighted.
MERRILL LYNCH MICRO-CAP INDEX
The Merrill Lynch Micro-Cap Index represents the performance of 2,036 stocks
ranging in market capitalization from $50 million to $220 million. Index returns
are calculated monthly.
LONG-TERM U.S. GOVERNMENT BONDS
The total returns on long-term government bonds after 1977 are constructed with
data from The Wall Street Journal and are calculated as the change in the flat
price or and-interest price. From 1926 to 1976, data are obtained from the
government bond file at the Center for Research in Security Prices (CRSP),
Graduate School of Business, University of Chicago. Each year, a one-bond
portfolio with a term of approximately 20 years and a reasonably current coupon
was used and whose returns did not reflect potential tax benefits, impaired
negotiability or special redemption or call privileges. Where callable bonds had
to be used, the term of the bond was assumed to be a simple average of the
maturity and first call dates minus the current date. The bond was "held" for
the calendar year and returns were computed.
INTERMEDIATE-TERM U.S. GOVERNMENT BONDS
Total returns of intermediate-term government bonds after 1987 are calculated
from The Wall Street Journal prices, using the change in flat price. Returns
from 1934 to 1986 are obtained from the CRSP government bond file.
Each year, one-bond portfolios are formed, the bond chosen is the shortest
noncallable bond with a maturity not less than five years, and this bond is
"held" for the calendar year. Monthly returns are computed. (Bonds with impaired
negotiability or special redemption privileges are omitted, as are partially or
fully tax-exempt bonds starting with 1943.) From 1934 to 1942, almost all bonds
with maturities near five years were partially or fully tax-exempt and were
selected using the rules described above. Personal tax rates were generally low
in that period, so that yields on tax-exempt bonds were similar to yields on
taxable bonds. From 1926 to 1933, there are few bonds suitable for construction
of a series with a five-year maturity. For this period, five-year bond yield
estimates are used.
MORGAN STANLEY CAPITAL INTERNATIONAL ("MSCI")
MSCI's international indices are based on the share prices of approximately
1,700 companies listed on stock exchanges in the 22 countries that make up the
MSCI World Index. MSCI's emerging market indices are comprised of approximately
1000 stocks from 26 countries.
Countries in the MSCI EAFE Index are: Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and
United Kingdom.
Countries in the MSCI Emerging Markets Free Index are: Argentina, Brazil, Chile,
China Free, Czech Republic, Colombia, Greece, Hungary, India, Indonesia Free,
Israel, Jordan, Korea (at 50%), Malaysia Free, Mexico Free, Pakistan, Peru,
Philippines Free, Poland, Portugal, South Africa, Sri Lanka, Taiwan (at 50%),
Thailand Free, Turkey and Venezuela.
6-MONTH CDs
Data sources include the Federal Reserve Bulletin and The Wall Street Journal.
LONG-TERM U.S. CORPORATE BONDS
Since 1969, corporate bond total returns are represented by the Salomon Brothers
Long-Term High-Grade Corporate Bond Index. As most large corporate bond
transactions take place over the counter, a major dealer is the natural source
of these data. The index includes nearly all Aaa- and Aa-rated bonds with at
least 10 years to maturity. If a bond is downgraded during a particular month,
its return for the month is included in the index before removing the bond from
future portfolios.
From 1926 to 1968 the total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946 to 1968,
Ibbotson and Sinquefield backdated the Salomon Brothers' index, using Salomon
Brothers' monthly yield data with a methodology similar to that used by Salomon
Brothers for 1969 to 1995. Capital appreciation returns were calculated from
yields assuming (at the beginning of each monthly holding period) a 20-year
maturity, a bond price equal to par, and a coupon equal to the
beginning-of-period yield. For the period 1926 to 1945, Standard & Poor's
monthly high-grade corporate composite yield data were used, assuming a 4%
coupon and a 20-year maturity. The conventional present-value formula for bond
price for the beginning and end-of-month prices was used. (This formula is
presented in Ross, Stephen A., and Westerfield, Randolph W. Corporate Finance,
Times Mirror/Mosby, St. Louis, 1990, p. 97 ["Level-Coupon Bonds"].) The monthly
income return was assumed to be one-twelfth the coupon.
U.S. (30-DAY) TREASURY BILLS
For the U.S. Treasury Bill Index, data from The Wall Street Journal are used
after 1977; the CRSP government bond file is the source until 1976. Each month a
one-bill portfolio containing the shortest-term bill having not less than one
month to maturity is constructed. (The bill's original term to maturity is not
relevant.) To measure holding period returns for the one-bill portfolio, the
bill is priced as of the last trading day of the previous month-end and as of
the last trading day of the current month.
NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT TRUSTS
("NAREIT")EQUITY REIT INDEX
All of the data are based upon the last closing price of the month for all
tax-qualified REITs listed on the NYSE, AMEX and NASDAQ. The data are
market-value-weighted. Prior to 1987 REITs were added to the index the January
following their listing. Since 1987 newly formed or listed REITs are added to
the total shares outstanding figure in the month that the shares are issued.
Only common shares issued by the REIT are included in the index. The total
return calculation is based upon the weighting at the beginning of the period.
Only those REITs listed for the entire period are used in the total return
calculation. Dividends are included in the month based upon their payment date.
There is no smoothing of income. Liquidating dividends, whether full or partial,
are treated as income.
RUSSELL U.S. EQUITY INDEXES
The Russell 3000(R) Index (the "Russell 3000") is comprised of the 3,000 largest
U.S. companies as determined by market capitalization representing approximately
98% of the U.S. equity market. The average market capitalization is
approximately $2.8 billion. The Russell 2500TM Index measures performance of the
2,500 smallest companies in the Russell 3000. The average market capitalization
is approximately $733.4 million, and the largest company in the index has an
approximate market capitalization of $2.9 billion. The Russell 2000(R) Index
measures performance of the 2,000 smallest stocks in the Russell 3000; the
largest company in the index has a market capitalization of approximately $1.1
billion. The Russell 1000(R) Index (the "Russell 1000") measures the performance
of the 1,000 largest companies in the Russell 3000. The average market
capitalization is approximately $7.6 billion. The smallest company in the index
has an approximate market capitalization of $1.1 billion. The Russell MidcapTM
Index measures performance of the 800 smallest companies in the Russell 1000.
The largest company in the index has an approximate market capitalization of
$8.0 billion.
The Russell indexes are reconstituted annually as of July 1, based on May 31
market capitalization rankings.
WILSHIRE REAL ESTATE SECURITIES INDEX
The Wilshire Real Estate Securities Index is a market capitalization weighted
index of 120 publicly traded real estate securities, such as REITs, real estate
operating companies ("REOCs") and partnerships.
The index contains performance data on five major categories of property:
office, retail, industrial, apartment and miscellaneous. The companies in the
index are 91.66% equity and hybrid REITs and 8.33% REOCs.
STANDARD & POOR'S MIDCAP 400 INDEX
The S&P 400 is a market-capitalization-weighted index. The performance data for
the index were calculated by taking the stocks presently in the index and
tracking them backwards in time as long as there were prices reported. No
attempt was made to determine what stocks "might have been" in the S&P 400 five
or ten years ago had it existed. Dividends are reinvested on a monthly basis
prior to June 30, 1991, and are reinvested daily thereafter.
LIPPER BALANCED FUNDS INDEX
This index represents equally weighted performance, adjusted for capital gains
distributions and income dividends, of approximately 30 of the largest funds
with a primary objective of conserving principal by maintaining at all times a
balanced portfolio of stocks and bonds. Typically, the stock/bond ratio ranges
around 60%/40%.
BANK SAVINGS ACCOUNT
Data sources include the U.S. League of Savings Institutions Sourcebook; average
annual yield on savings deposits in FSLIC [FDIC] insured savings institutions
for the years 1963 to 1987; and The Wall Street Journal thereafter.
Sources: Ibbotson Associates, Towers Data Systems, Lipper
Analytical Services, Inc. and PGI
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Dow S&P/ S&P/
S&P Jones U.S. Small BARRA BARRA Merrill Lynch
500 Industrial Stock U.S. 500 500 Micro-Cap
Average Index Inflation Growth Value Index
- ----------------------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 11.62 N/A 0.28 -1.49 N/A N/A N/A
Dec 1927 37.49 N/A 22.10 -2.08 N/A N/A N/A
Dec 1928 43.61 55.38 39.69 -0.97 N/A N/A N/A
Dec 1929 -8.42 -13.64 -51.36 0.20 N/A N/A N/A
Dec 1930 -24.90 -30.22 -38.15 -6.03 N/A N/A N/A
Dec 1931 -43.34 -49.03 -49.75 -9.52 N/A N/A N/A
Dec 1932 -8.19 -16.88 -5.39 -10.30 N/A N/A N/A
Dec 1933 53.99 73.71 142.87 0.51 N/A N/A N/A
Dec 1934 -1.44 8.08 24.22 2.03 N/A N/A N/A
Dec 1935 47.67 43.77 40.19 2.99 N/A N/A N/A
Dec 1936 33.92 30.23 64.80 1.21 N/A N/A N/A
Dec 1937 -35.03 -28.88 -58.01 3.10 N/A N/A N/A
Dec 1938 31.12 33.16 32.80 -2.78 N/A N/A N/A
Dec 1939 -0.41 1.31 0.35 -0.48 N/A N/A N/A
Dec 1940 -9.78 -7.96 -5.16 0.96 N/A N/A N/A
Dec 1941 -11.59 -9.88 -9.00 9.72 N/A N/A N/A
Dec 1942 20.34 14.12 44.51 9.29 N/A N/A N/A
Dec 1943 25.90 19.06 88.37 3.16 N/A N/A N/A
Dec 1944 19.75 17.19 53.72 2.11 N/A N/A N/A
Dec 1945 36.44 31.60 73.61 2.25 N/A N/A N/A
Dec 1946 -8.07 -4.40 -11.63 18.16 N/A N/A N/A
Dec 1947 5.71 7.61 0.92 9.01 N/A N/A N/A
Dec 1948 5.50 4.27 -2.11 2.71 N/A N/A N/A
Dec 1949 18.79 20.92 19.75 -1.80 N/A N/A N/A
Dec 1950 31.71 26.40 38.75 5.79 N/A N/A N/A
Dec 1951 24.02 21.77 7.80 5.87 N/A N/A N/A
Dec 1952 18.37 14.58 3.03 0.88 N/A N/A N/A
Dec 1953 -0.99 2.02 -6.49 0.62 N/A N/A N/A
Dec 1954 52.62 51.25 60.58 -0.50 N/A N/A N/A
Dec 1955 31.56 26.58 20.44 0.37 N/A N/A N/A
Dec 1956 6.56 7.10 4.28 2.86 N/A N/A N/A
Dec 1957 -10.78 -8.63 -14.57 3.02 N/A N/A N/A
Dec 1958 43.36 39.31 64.89 1.76 N/A N/A N/A
Dec 1959 11.96 20.21 16.40 1.50 N/A N/A N/A
Dec 1960 0.47 -6.14 -3.29 1.48 N/A N/A N/A
Dec 1961 26.89 22.60 32.09 0.67 N/A N/A N/A
Dec 1962 -8.73 -7.43 -11.90 1.22 N/A N/A N/A
Dec 1963 22.80 20.83 23.57 1.65 N/A N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C> <C> <C> <C> <C> <C>
Dow S&P/ S&P/
S&P Jones U.S. Small BARRA 500 BARRA Merrill Lynch
500 Industrial Stock U.S. Growth 500 Micro-Cap
Average Index Inflation Value Index
- ----------------------------------------------------------------------------------------------------------------------
Dec 1964 16.48 18.85 23.52 1.19 N/A N/A N/A
Dec 1965 12.45 14.39 41.75 1.92 N/A N/A N/A
Dec 1966 -10.06 -15.78 -7.01 3.35 N/A N/A N/A
Dec 1967 23.98 19.16 83.57 3.04 N/A N/A N/A
Dec 1968 11.06 7.93 35.97 4.72 N/A N/A N/A
Dec 1969 -8.50 -11.78 -25.05 6.11 N/A N/A N/A
Dec 1970 4.01 9.21 -17.43 5.49 N/A N/A N/A
Dec 1971 14.31 9.83 16.50 3.36 N/A N/A N/A
Dec 1972 18.98 18.48 4.43 3.41 N/A N/A N/A
Dec 1973 -14.66 -13.28 -30.90 8.80 N/A N/A N/A
Dec 1974 -26.47 -23.58 -19.95 12.20 N/A N/A N/A
Dec 1975 37.20 44.75 52.82 7.01 31.72 43.38 N/A
Dec 1976 23.84 22.82 57.38 4.81 13.84 34.93 N/A
Dec 1977 -7.18 -12.84 25.38 6.77 -11.82 -2.57 N/A
Dec 1978 6.56 2.79 23.46 9.03 6.78 6.16 27.76
Dec 1979 18.44 10.55 43.46 13.31 15.72 21.16 43.18
Dec 1980 32.42 22.17 39.88 12.40 39.40 23.59 32.32
Dec 1981 -4.91 -3.57 13.88 8.94 -9.81 0.02 9.18
Dec 1982 21.41 27.11 28.01 3.87 22.03 21.04 33.62
Dec 1983 22.51 25.97 39.67 3.80 16.24 28.89 42.44
Dec 1984 6.27 1.31 -6.67 3.95 2.33 10.52 -14.97
Dec 1985 32.16 33.55 24.66 3.77 33.31 29.68 22.89
Dec 1986 18.47 27.10 6.85 1.13 14.50 21.67 3.45
Dec 1987 5.23 5.48 -9.30 4.41 6.50 3.68 -13.84
Dec 1988 16.81 16.14 22.87 4.42 11.95 21.67 22.76
Dec 1989 31.49 32.19 10.18 4.65 36.40 26.13 8.06
Dec 1990 -3.17 -0.56 -21.56 6.11 0.20 -6.85 -29.55
Dec 1991 30.55 24.19 44.63 3.06 38.37 22.56 57.44
Dec 1992 7.67 7.41 23.35 2.90 5.07 10.53 36.62
Dec 1993 9.99 16.94 20.98 2.75 1.68 18.60 31.32
Dec 1994 1.31 5.06 3.11 2.67 3.13 -0.64 1.81
Dec 1995 37.43 36.84 34.46 2.54 38.13 36.99 30.70
Dec 1996 23.07 28.84 17.62 3.32 23.96 21.99 13.88
Dec 1997 33.36 24.88 22.78 1.92 36.52 29.98 24.61
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C> <C> <C> <C> <C>
Long- Intermediate- MSCI Long-
Term Term U.S. EAFE 6- Term U.S. U.S.
U.S. Gov't Government (Net of Month Corporate T-Bill
Bonds Bonds Taxes) CDs Bonds (30-Day)
- ------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A
Dec 1926 7.77 5.38 N/A N/A 7.37 3.27
Dec 1927 8.93 4.52 N/A N/A 7.44 3.12
Dec 1928 0.10 0.92 N/A N/A 2.84 3.56
Dec 1929 3.42 6.01 N/A N/A 3.27 4.75
Dec 1930 4.66 6.72 N/A N/A 7.98 2.41
Dec 1931 -5.31 -2.32 N/A N/A -1.85 1.07
Dec 1932 16.84 8.81 N/A N/A 10.82 0.96
Dec 1933 -0.07 1.83 N/A N/A 10.38 0.30
Dec 1934 10.03 9.00 N/A N/A 13.84 0.16
Dec 1935 4.98 7.01 N/A N/A 9.61 0.17
Dec 1936 7.52 3.06 N/A N/A 6.74 0.18
Dec 1937 0.23 1.56 N/A N/A 2.75 0.31
Dec 1938 5.53 6.23 N/A N/A 6.13 -0.02
Dec 1939 5.94 4.52 N/A N/A 3.97 0.02
Dec 1940 6.09 2.96 N/A N/A 3.39 0.00
Dec 1941 0.93 0.50 N/A N/A 2.73 0.06
Dec 1942 3.22 1.94 N/A N/A 2.60 0.27
Dec 1943 2.08 2.81 N/A N/A 2.83 0.35
Dec 1944 2.81 1.80 N/A N/A 4.73 0.33
Dec 1945 10.73 2.22 N/A N/A 4.08 0.33
Dec 1946 -0.10 1.00 N/A N/A 1.72 0.35
Dec 1947 -2.62 0.91 N/A N/A -2.34 0.50
Dec 1948 3.40 1.85 N/A N/A 4.14 0.81
Dec 1949 6.45 2.32 N/A N/A 3.31 1.10
Dec 1950 0.06 0.70 N/A N/A 2.12 1.20
Dec 1951 -3.93 0.36 N/A N/A -2.69 1.49
Dec 1952 1.16 1.63 N/A N/A 3.52 1.66
Dec 1953 3.64 3.23 N/A N/A 3.41 1.82
Dec 1954 7.19 2.68 N/A N/A 5.39 0.86
Dec 1955 -1.29 -0.65 N/A N/A 0.48 1.57
Dec 1956 -5.59 -0.42 N/A N/A -6.81 2.46
Dec 1957 7.46 7.84 N/A N/A 8.71 3.14
Dec 1958 -6.09 -1.29 N/A N/A -2.22 1.54
Dec 1959 -2.26 -0.39 N/A N/A -0.97 2.95
Dec 1960 13.78 11.76 N/A N/A 9.07 2.66
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C> <C> <C> <C> <C>
Long- Intermediate- MSCI Long-
Term Term U.S. EAFE 6- Term U.S. U.S.
U.S. Gov't Government (Net of Month Corporate T-Bill
Bonds Bonds Taxes) CDs Bonds (30-Day)
- ------------------------------------------------------------------------------------------------------
Dec 1961 0.97 1.85 N/A N/A 4.82 2.13
Dec 1962 6.89 5.56 N/A N/A 7.95 2.73
Dec 1963 1.21 1.64 N/A N/A 2.19 3.12
Dec 1964 3.51 4.04 N/A 4.18 4.77 3.54
Dec 1965 0.71 1.02 N/A 4.68 -0.46 3.93
Dec 1966 3.65 4.69 N/A 5.76 0.20 4.76
Dec 1967 -9.18 1.01 N/A 5.48 -4.95 4.21
Dec 1968 -0.26 4.54 N/A 6.44 2.57 5.21
Dec 1969 -5.07 -0.74 N/A 8.71 -8.09 6.58
Dec 1970 12.11 16.86 -11.66 7.06 18.37 6.52
Dec 1971 13.23 8.72 29.59 5.36 11.01 4.39
Dec 1972 5.69 5.16 36.35 5.38 7.26 3.84
Dec 1973 -1.11 4.61 -14.92 8.60 1.14 6.93
Dec 1974 4.35 5.69 -23.16 10.20 -3.06 8.00
Dec 1975 9.20 7.83 35.39 6.51 14.64 5.80
Dec 1976 16.75 12.87 2.54 5.22 18.65 5.08
Dec 1977 -0.69 1.41 18.06 6.12 1.71 5.12
Dec 1978 -1.18 3.49 32.62 10.21 -0.07 7.18
Dec 1979 -1.23 4.09 4.75 11.90 -4.18 10.38
Dec 1980 -3.95 3.91 22.58 12.33 -2.76 11.24
Dec 1981 1.86 9.45 -2.28 15.50 -1.24 14.71
Dec 1982 40.36 29.10 -1.86 12.18 42.56 10.54
Dec 1983 0.65 7.41 23.69 9.65 6.26 8.80
Dec 1984 15.48 14.02 7.38 10.65 16.86 9.85
Dec 1985 30.97 20.33 56.16 7.82 30.09 7.72
Dec 1986 24.53 15.14 69.44 6.30 19.85 6.16
Dec 1987 -2.71 2.90 24.63 6.58 -0.27 5.47
Dec 1988 9.67 6.10 28.27 8.15 10.70 6.35
Dec 1989 18.11 13.29 10.54 8.27 16.23 8.37
Dec 1990 6.18 9.73 -23.45 7.85 6.78 7.81
Dec 1991 19.30 15.46 12.13 4.95 19.89 5.60
Dec 1992 8.05 7.19 -12.17 3.27 9.39 3.51
Dec 1993 18.24 11.24 32.56 2.88 13.19 2.90
Dec 1994 -7.77 -5.14 7.78 5.40 -5.76 3.90
Dec 1995 31.67 16.80 11.21 5.21 27.20 5.60
Dec 1996 -0.93 2.10 6.05 5.21 1.40 5.21
Dec 1997 15.85 8.38 1.78 5.71 12.95 5.26
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C> <C> <C> <C> <C> <C>
NAREIT Lipper MSCI
Equity Russell Wilshire Balanced Emerging Bank
REIT 2000 Real Estate S&P Fund Markets Savings
Index Index Securities 400 Index Free Index Account
- -----------------------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 N/A N/A N/A N/A N/A N/A N/A
Dec 1927 N/A N/A N/A N/A N/A N/A N/A
Dec 1928 N/A N/A N/A N/A N/A N/A N/A
Dec 1929 N/A N/A N/A N/A N/A N/A N/A
Dec 1930 N/A N/A N/A N/A N/A N/A 5.30
Dec 1931 N/A N/A N/A N/A N/A N/A 5.10
Dec 1932 N/A N/A N/A N/A N/A N/A 4.10
Dec 1933 N/A N/A N/A N/A N/A N/A 3.40
Dec 1934 N/A N/A N/A N/A N/A N/A 3.50
Dec 1935 N/A N/A N/A N/A N/A N/A 3.10
Dec 1936 N/A N/A N/A N/A N/A N/A 3.20
Dec 1937 N/A N/A N/A N/A N/A N/A 3.50
Dec 1938 N/A N/A N/A N/A N/A N/A 3.50
Dec 1939 N/A N/A N/A N/A N/A N/A 3.40
Dec 1940 N/A N/A N/A N/A N/A N/A 3.30
Dec 1941 N/A N/A N/A N/A N/A N/A 3.10
Dec 1942 N/A N/A N/A N/A N/A N/A 3.00
Dec 1943 N/A N/A N/A N/A N/A N/A 2.90
Dec 1944 N/A N/A N/A N/A N/A N/A 2.80
Dec 1945 N/A N/A N/A N/A N/A N/A 2.50
Dec 1946 N/A N/A N/A N/A N/A N/A 2.20
Dec 1947 N/A N/A N/A N/A N/A N/A 2.30
Dec 1948 N/A N/A N/A N/A N/A N/A 2.30
Dec 1949 N/A N/A N/A N/A N/A N/A 2.40
Dec 1950 N/A N/A N/A N/A N/A N/A 2.50
Dec 1951 N/A N/A N/A N/A N/A N/A 2.60
Dec 1952 N/A N/A N/A N/A N/A N/A 2.70
Dec 1953 N/A N/A N/A N/A N/A N/A 2.80
Dec 1954 N/A N/A N/A N/A N/A N/A 2.90
Dec 1955 N/A N/A N/A N/A N/A N/A 2.90
Dec 1956 N/A N/A N/A N/A N/A N/A 3.00
Dec 1957 N/A N/A N/A N/A N/A N/A 3.30
Dec 1958 N/A N/A N/A N/A N/A N/A 3.38
Dec 1959 N/A N/A N/A N/A N/A N/A 3.53
Dec 1960 N/A N/A N/A N/A 5.77 N/A 3.86
Dec 1961 N/A N/A N/A N/A 20.59 N/A 3.90
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C> <C> <C> <C> <C> <C>
NAREIT Lipper MSCI
Equity Russell Wilshire Balanced Emerging Bank
REIT 2000 Real Estate S&P Fund Markets Savings
Index Index Securities 400 Index Free Index Account
- -----------------------------------------------------------------------------------------------------------------------
Dec 1962 N/A N/A N/A N/A -6.80 N/A 4.08
Dec 1963 N/A N/A N/A N/A 13.10 N/A 4.17
Dec 1964 N/A N/A N/A N/A 12.36 N/A 4.19
Dec 1965 N/A N/A N/A N/A 9.80 N/A 4.23
Dec 1966 N/A N/A N/A N/A -5.86 N/A 4.45
Dec 1967 N/A N/A N/A N/A 15.09 N/A 4.67
Dec 1968 N/A N/A N/A N/A 13.97 N/A 4.68
Dec 1969 N/A N/A N/A N/A -9.01 N/A 4.80
Dec 1970 N/A N/A N/A N/A 5.62 N/A 5.14
Dec 1971 N/A N/A N/A N/A 13.90 N/A 5.30
Dec 1972 8.01 N/A N/A N/A 11.13 N/A 5.37
Dec 1973 -15.52 N/A N/A N/A -12.24 N/A 5.51
Dec 1974 -21.40 N/A N/A N/A -18.71 N/A 5.96
Dec 1975 19.30 N/A N/A N/A 27.10 N/A 6.21
Dec 1976 47.59 N/A N/A N/A 26.03 N/A 6.23
Dec 1977 22.42 N/A N/A N/A -0.72 N/A 6.39
Dec 1978 10.34 N/A 13.04 N/A 4.80 N/A 6.56
Dec 1979 35.86 43.09 70.81 N/A 14.67 N/A 7.29
Dec 1980 24.37 38.58 22.08 N/A 19.70 N/A 8.78
Dec 1981 6.00 2.03 7.18 N/A 1.86 N/A 10.71
Dec 1982 21.60 24.95 24.47 22.68 30.63 N/A 11.19
Dec 1983 30.64 29.13 27.61 26.10 17.44 N/A 9.71
Dec 1984 20.93 -7.30 20.64 1.18 7.46 N/A 9.92
Dec 1985 19.10 31.05 22.20 35.58 29.83 N/A 9.02
Dec 1986 19.16 5.68 20.30 16.21 18.43 N/A 7.84
Dec 1987 -3.64 -8.77 -7.86 -2.03 4.13 N/A 6.92
Dec 1988 13.49 24.89 24.18 20.87 11.18 40.43 7.20
Dec 1989 8.84 16.24 2.37 35.54 19.70 64.96 7.91
Dec 1990 -15.35 -19.51 -33.46 -5.12 0.66 -10.55 7.80
Dec 1991 35.70 46.05 20.03 50.10 25.83 59.91 4.61
Dec 1992 14.59 18.41 7.36 11.91 7.46 11.40 2.89
Dec 1993 19.65 18.91 15.24 13.96 11.95 74.83 2.73
Dec 1994 3.17 -1.82 1.64 -3.57 -2.05 -7.32 4.96
Dec 1995 15.27 28.44 13.65 30.94 24.89 -5.21 5.24
Dec 1996 35.26 16.49 36.87 19.20 13.01 6.03 4.95
Dec 1997 20.29 22.36 19.80 32.26 20.05 -11.59 5.17
Source: Lipper Analytical Services. Inc.
</TABLE>
<PAGE>
APPENDIX C
OTHER PIONEER INFORMATION
The Pioneer group of mutual funds was established in 1928 with the creation of
Pioneer Fund. Pioneer is one of the oldest and most experienced money managers
in the United States.
As of December 31, 1997, PMC employed a professional investment staff of 58,
with a combined average of 12 years' experience in the financial services
industry.
Total assets of all Pioneer mutual funds at December 31, 1997, were
approximately $19.8 billion representing 1,177,148 shareholder accounts, 791,468
non-retirement accounts and 385,680 retirement accounts.
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