As filed with the Securities and Exchange Commission on April 26, 1995
File Nos. 2-57653; 811-2704
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. ___ /___/
Post-Effective Amendment No. 34 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /_X_/
Amendment No. 26 /_X_/
(Check appropriate box or boxes)
PIONEER TAX-FREE INCOME FUND
(Exact name of registrant as specified in charter)
60 State Street, Boston, Massachusetts 02109
(Address of principal executive office) Zip Code
Registrant's Telephone Number, including Area Code: (617) 742-7825
Joseph P. Barri, Hale and Dorr, 60 State Street, Boston, MA 02109
(Name and address of agent for service)
It is proposed that this filing will become effective:
_X_ on April 28, 1995 pursuant to paragraph (a) of Rule 485
Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f) of the Investment Company Act
of 1940. Registrant filed a Rule 24f-2 Notice for its fiscal year ended December
31, 1994 on February 27, 1995.
<PAGE>
PIONEER TAX-FREE INCOME FUND
Cross-Reference Sheet Showing Location in Prospectus and
Statement of Additional Information of Information Required by
Items of the Registration Form
Location in Prospectus
Form N-1A Item Number or Statement of
and Caption Additional Information
1. Cover Page Prospectus - Cover Page
2. Synopsis Prospectus - Expense Information
3. Condensed Financial Prospectus - Financial Highlights
Information
4. General Description of Prospectus - Investment Objective
Registrant and Policies; Management of the
Fund
5. Management of the Fund Prospectus - Management of the Fund
6. Capital Stock and Other Prospectus - Investment Objective
Securities and Policies; Fund Share
Alternatives; Share Price;
Dividends, Distribution and
Taxation
7. Purchase of Securities Prospectus - Distribution Plans;
Being Offered How to Buy Fund Shares
8. Redemption or Repurchase Prospectus - How to Sell Fund Shares;
Shareholder Services
9. Pending Legal
Proceedings Not Applicable
10. Cover Page Statement of Additional Information -
Cover Page
11. Table of Contents Statement of Additional Information -
Cover Page
12. General Information
and History Statement of Additional Information -
Cover Page; Management of the Fund;
Shares of the Fund
13. Investment Objectives
and Policy Statement of Additional Information -
Investment Objective and Policies;
Investment Restrictions
<PAGE>
Location in Prospectus
Form N-1A Item Number or Statement of
and Caption Additional Information
14. Management of the Fund Statement of Additional Information -
Management of the Fund; Investment
Adviser
15. Control Persons and
Principal Holders
of Securities Statement of Additional Information -
Management of the Fund
16. Investment Advisory and
Other Services Statement of Additional Information -
Management of the Fund; Investment
Adviser; Shareholder Servicing/
Transfer Agent; Underwriting Agreement
and Distribution Plans; Principal
Underwriter; Custodian; Independent
Public Accountant
17. Brokerage Allocation and
Other Practices Statement of Additional Information -
Portfolio Transactions
18. Capital Stock and Other
Securities Statement of Additional Information -
Shares of the Fund
19. Purchase Redemption and
Pricing of Securities
Being Offered Statement of Additional Information -
Determination of Net Asset Value;
Letter of Intention; Systematic
Withdrawal Plan
20. Tax Status Statement of Additional Information -
Tax Status and Dividends
21. Underwriters Statement of Additional Information -
Principal Underwriter
22. Calculation of Performance
Data Statement of Additional Information -
Investment Results
23. Financial Statements Statement of Additional Information -
Financial Statements
<PAGE>
[PIONEER LOGO]
Pioneer
Tax-Free
Income
Fund
Prospectus
Class A and B Shares
April 28, 1995
The investment objective of Pioneer Tax-Free Income Fund (the "Fund") is to
seek as high a level of income exempt from regular federal income tax as
possible, consistent with preservation of capital. The Fund invests primarily
in a diversified portfolio of tax-exempt bonds.
Fund returns and share prices fluctuate and the value of your account 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 (Part A of the Registration Statement) provides the
information about the Fund that you should consider before investing. Please
read and retain it for future reference. More information about the Fund is
included in the Statement of Additional Information (Part B of the Registration
Statement), dated April 28, 1995, which is incorporated by reference into this
Prospectus. A copy of the Statement of Additional Information may be obtained
free of charge by calling Shareholder Services at 1-800-225-6292 or by written
request to the Fund at 60 State Street, Boston, Massachusetts 02109. Other
information about the Fund has been filed with the Securities and Exchange
Commission (the "SEC") and is available upon request and without charge.
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C> <C>
I. EXPENSE INFORMATION 2
II. FINANCIAL HIGHLIGHTS 2
III. INVESTMENT OBJECTIVE, POLICIES AND RISKS 3
IV. MANAGEMENT OF THE FUND 5
V. FUND SHARE ALTERNATIVES 6
VI. SHARE PRICE 7
VII. HOW TO BUY FUND SHARES 7
Class A Shares 7
Class B Shares 8
VIII. HOW TO SELL FUND SHARES 9
IX. HOW TO EXCHANGE FUND SHARES 10
X. DISTRIBUTION PLANS 11
XI. DIVIDENDS, DISTRIBUTIONS AND TAXATION 12
XII. SHAREHOLDER SERVICES 12
Account and Confirmation Statements 13
Additional Investments 13
Automatic Investment Plans 13
Financial Reports and Tax Information 13
Distribution Options 13
Directed Dividends 13
Direct Deposit 13
Voluntary Tax Withholding 13
Telephone Transactions and Related Liabilities 13
Telecommunications Device for the Deaf (TDD) 13
Systematic Withdrawal Plans 14
Reinstatement Privilege (Class A only) 14
XIII. THE FUND 14
XIV. INVESTMENT RESULTS 14
XV. APPENDIX 15
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
I. EXPENSE INFORMATION
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 estimated annual operating expenses based on actual
expenses of the Class A shares for the fiscal year ended December 31, 1994.
<TABLE>
<CAPTION>
Class A Class B+
<S> <C> <C>
Shareholder Transaction Expenses:
Maximum Initial Sales Charge on Purchases (as a
percentage of offering price) 4.50%(1) None
Maximum Sales Charge on Reinvestment of
Dividends None None
Maximum Deferred Sales Charge None(1) 4.00%
Redemption Fee(2) None None
Exchange Fee None None
Annual Operating Expenses
(As a Percentage of Net Assets):(3)
Management Fees 0.46% 0.46%
12b-1 Fees 0.25% 1.00%
Other Expenses (including accounting fees,
transfer agent fees, custodian fees and
printing expenses) 0.20% 0.20%
Total Operating Expenses: 0.91% 1.66%
</TABLE>
+Class B shares are a new class of shares first offered on April 28, 1995.
(1) Purchases of $1,000,000 or more and purchases by participants in certain
group plans are not subject to an initial sales charge but may be subject
to a contingent deferred sales charge as further described under "How to
Sell Fund Shares."
(2) Separate fees (currently $10 and $20, respectively) apply to domestic and
international wire transfers of redemption proceeds.
(3) For Class B shares, operating expenses are based on estimated expenses that
would have been incurred during the previous fiscal year had Class B shares
been outstanding.
Example:
You would pay the following dollar amounts on a $1,000 investment in the
Fund, assuming 5% annual return and redemption at the end of each of the time
periods:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class A Shares $54 $73 $ 93 $152*
Class B Shares
--Assuming complete
redemption at end of
period $57 $82 $110 $177*
- --Assuming no redemption $17 $52 $ 90 $177*
</TABLE>
*Class B shares convert to Class A shares eight years after purchase;
therefore, Class A expenses are used after year eight.
The example above assumes the reinvestment of all dividends and
distributions and that the percentage amounts listed under "Annual Operating
Expenses" remain the same each year.
The example is designed for information purposes only, and should not be
considered a representation of future expenses or return. Actual Fund expenses
and return will vary from year to year and may be higher or lower than those
shown.
For further information regarding management fees, 12b-1 fees and other
expenses of the Fund, including information regarding the basis upon which
management fees and 12b-1 fees are paid, see "Management of the Fund,"
"Distribution Plans" and "How To Buy Fund Shares" in this Prospectus and
"Management of the Fund" and "Underwriting Agreement and Distribution Plans" in
the Statement of Additional Information. The Fund's imposition of a Rule 12b-1
fee may result in long-term shareholders indirectly paying more than the
economic equivalent of the maximum sales charge permitted under the Rules of
Fair Practice of the National Association of Securities Dealers, Inc. ("NASD").
The maximum initial sales charge is reduced on purchases of specified larger
amounts of Class A shares and the value of shares owned in other Pioneer mutual
funds is taken into account in determining the applicable initial sales charge.
See "How to Buy Fund Shares." No sales charge is applied to exchanges of shares
of the Fund for shares of other publicly available Pioneer mutual funds. See
"How to Exchange Fund Shares."
II. FINANCIAL HIGHLIGHTS
The following information for the year ended December 31, 1994 has been
derived from financial statements of the Fund which have been audited by Arthur
Andersen LLP, independent public accountants, in connection with their
examination of the Fund's financial statements. Arthur Andersen LLP's report on
the Fund's financial statements as of December 31, 1994 appears in the Fund's
Annual Report which is incorporated by reference into the Statement of
Additional Information. The information for the years from 1985 through 1993
has been derived from financial statements which were audited by the Fund's
then independent public accountants, Coopers & Lybrand. Class B shares are a
new class of shares; no financial highlights exist for Class B shares. The
Annual Report includes more information about the Fund's performance and is
available free of charge by calling Shareholder Services at 1-800-225-6292.
2
<PAGE>
PIONEER TAX-FREE INCOME FUND
Selected Data For a Class A Share Outstanding For The Years Presented
<TABLE>
<CAPTION>
For the Year Ended December 31,+
1994 1993 1992 1991 1990 1989 1988 1987
1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Net asset value,
beginning of period $ 12.68 $ 12.08 $ 11.99 $ 11.52 $ 11.47 $ 11.17 $ 10.70 $ 11.69 $
10.81 $ 9.70
Income from investment
operations--
Net investment income $ 0.64 $ 0.67 $ 0.71 $ 0.74 $ 0.76 $ 0.79 $ 0.80 $ 0.80 $
0.86 $ 0.86
Net realized and
unrealized gain (loss)
on investments (1.44) 0.87 0.31 0.65 0.06 0.31 0.47 (0.98)
1.52 1.12
Total income (loss)
from investment
operations $ (0.80) $ 1.54 $ 1.02 $ 1.39 $ 0.82 $ 1.10 $ 1.27 $ (0.18) $
2.38 $ 1.98
Distribution to
shareholders from--
Net investment income (0.64) (0.67) (0.71) (0.74) (0.76) (0.80) (0.80) (0.81)
(0.86) (0.87)
Net realized capital
gains (0.00) (0.27) (0.22) (0.18) (0.01) 0.00 0.00 0.00
(0.64) 0.00
Net increase (decrease)
in net asset value $ (1.44) $ 0.60 $ 0.09 $ 0.47 $ 0.05 $ 0.30 $ 0.47 $ (0.99) $
0.88 $ 1.11
Net asset value, end of
period $ 11.24 $ 12.68 $ 12.08 $ 11.99 $ 11.52 $ 11.47 $ 11.17 $ 10.70 $
11.69 $ 10.81
Total return(1) (6.38%) 12.98% 8.73% 12.49% 7.40% 10.12% 12.25% (1.56%)
22.67% 21.25%
Ratio of net operating
expenses to average
net assets 0.91% 0.86% 0.87% 0.87% 0.78% 0.63% 0.64% 0.63%
0.61% 0.64%
Ratio of net investment
income to average net
assets 5.37% 5.37% 5.80% 6.26% 6.69% 6.96% 7.26% 7.24%
7.30% 8.40%
Portfolio turnover rate 55% 58% 62% 56% 40% 54% 73% 89%
153% 258%
Net assets end of period
(in thousands) $452,661 $532,491 $466,586 $408,990 $362,887 $357,388 $324,116 $307,266
$307,266 $307,266
</TABLE>
+Prior to December 1, 1993, Mutual of Omaha Fund Management Company ("FMC")
acted as the investment adviser to the Fund.
(1)Assumes initial investment at net asset value at the beginning of each year,
reinvestment of all dividends and distributions, the complete redemption of
the investment at net asset value at the end of each year, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
III. INVESTMENT OBJECTIVE, POLICIES AND RISKS
The investment objective of the Fund is to seek as high a level of income
exempt from regular federal income tax as possible, consistent with
preservation of capital. To achieve this objective, the Fund invests in a
diversified portfolio of obligations issued by or on behalf of states, counties
and municipalities of the United States and the authorities and political
subdivisions thereof (herein called "Tax-Exempt Bonds"), the interest on which
is excluded from gross income for federal income tax purposes, in the opinion
of counsel to the issuer of the bond. The Fund's portfolio will primarily
consist of Tax-Exempt Bonds rated at the time of purchase within the three
highest grades assigned by Moody's Investors Services, Inc. ("Moody's") (Aaa,
Aa or A) or Standard & Poor's Ratings Group ("S&P") (AAA, AA or A). Securities
in which the Fund invests may not yield as high a level of current income on a
pre-tax basis as securities subject to regular federal income tax or securities
of lower quality which generally are less liquid and have greater market risk
and price fluctuation.
The Fund may also invest in temporary investments consisting of: (1) notes
issued by or on behalf of municipal issuers backed by the U.S. government; (2)
notes of issuers having, at the time of purchase, an issue of outstanding Tax-
Exempt Bonds rated within the three highest grades of the rating services as
described above; (3) securities of other investment companies*; (4) obligations
of the U.S. government, its agencies or instrumentalities*; (5) commercial
paper rated in the highest grade by either of such rating services (Prime-I or
A-I, respectively)*; (6) bank instruments (including certificates of deposit,
time deposits and bankers' acceptances) of domestic or foreign banks with
assets of $1 billion or more*; and (7) repurchase agreements on such
securities* with banks or broker-dealers. During periods of normal market
conditions, the Fund will have at least 80% of its net assets invested in
Tax-Exempt Bonds, with up to 20% of the Fund's assets in temporary investments
or cash. When the investment adviser believes that market conditions dictate a
defensive posture, a greater percentage of the Fund's assets may be invested in
temporary investments. The asterisk (*) indicates that the income from these
securities is or may be subject to federal income tax.
The Fund may invest more than 25% of its total assets in securities,
payments on which are derived from funds provided by companies in the gas,
electric, telephone, sewer and water, public and private utility segments of
the municipal bond market. The Fund will not purchase securities if, as a
result of such transaction, more than 25% of its total assets would be invested
in any one industry. For purposes of this limitation, Tax-Exempt Bonds, except
those issued for the benefit of non-governmental users, are not considered to
be part of an industry. The Fund may invest 25% or more of its total assets in
Tax-Exempt Bonds of issuers in any one state and may invest 25% or more of its
total assets in industrial development bonds.
3
<PAGE>
Investment Company Securities
The Fund may invest up to 10% of the value of its total assets in securities
of other investment companies, with up to 5% of the value of the Fund's total
assets invested in securities of any one investment company, but may not own
more than 3% of the outstanding voting securities of any one investment
company. Because investments in other investment companies involve expenses
being incurred by those companies as well as comparable expenses being incurred
by the Fund, investments in other investment companies will generally be used
only for short-term investing and only when the Fund reasonably anticipates
that the net return to the Fund's shareholders will be advantageous, as
compared to available alternatives, while maintaining the appropriate level of
liquidity. It is expected that most of such investing will be in no-load,
tax-free money market funds that invest, as far as practicable, in the same
quality of investments as the Fund may invest in directly.
Options
The Fund may write (sell) "covered" put and call options on fixed-income
securities. Call options are "covered" by the Fund when it owns the underlying
securities, or owns securities convertible into or carrying rights to acquire
such securities without payment of additional consideration, which the option
holder has the right to purchase, and put options are "covered" by the Fund
when it has established a segregated account of cash or liquid, high-grade debt
obligations sufficient to satisfy the Fund's obligation to purchase the
underlying securities. The Fund receives a premium from writing a put or call
option, which increases the Fund's gross income in the event the option expires
unexercised or is closed out at a profit. By writing a call option, the Fund
limits its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option. By writing a put
option, the Fund assumes the risk that it may be required to purchase the
underlying security for an exercise price higher than its then current market
value, resulting in a capital loss unless the security subsequently appreciates
in value.
The Fund intends to write and purchase options on securities primarily for
hedging purposes and also in an effort to increase current income.
Distributions to shareholders of any gains from options transaction will be
taxable. Options on securities that are written or purchased by the Fund will
be entered into on U.S. exchanges and in the over-the-counter market.
Over-the-counter transactions involve certain risks which may not be present in
a transaction on an exchange. The staff of the SEC has taken the position that
over-the- counter options and assets used to cover over-the-counter options are
illiquid and, therefore, together with other illiquid securities, cannot exceed
15% of the Fund's net assets.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of options for
hedging purposes depends in part on the investment adviser's ability to predict
future price fluctuations and the degree of correlation between the options and
securities markets. If the investment adviser is incorrect in its determination
of the correlation between the securities or indices on which the options are
written and purchased and the securities in the Fund's investment portfolio,
the investment performance of the Fund will be less favorable than it would
have been in the absence of such option transactions. The Fund pays brokerage
commissions or spreads in connection with its options transactions. The writing
of options could significantly increase the Fund's portfolio turnover rate.
Futures Contracts and Options on Futures Contracts
To hedge against changes in interest rates and securities prices or for
non-hedging purposes, the Fund may purchase and sell futures contracts on fixed
income securities or indices composed of such securities, including municipal
bonds and U.S. Treasury securities, and purchase and write call and put options
on 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 (such as U.S. government
securities), securities indices and other financial instruments and indices.
The Fund will engage in futures and related options transactions only for bona
fide hedging purposes as defined in regulations of the Commodities Futures
Trading Commission or for non-hedging, speculative purposes to the extent
permitted by such regulations.
The Fund may not purchase or sell futures contracts or purchase or sell
related options for non-hedging purposes, except for closing purchase or sale
transactions, if immediately thereafter the sum of the amount of initial
margins and premiums on the Fund's outstanding non-hedging positions in futures
and related options would exceed 5% of the market value of the Fund's net
assets. Transactions in futures contracts and options on futures involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating it to purchase securities, require the Fund to segregate
assets with a value equal to the amount of the Fund's obligations. The Fund
will not enter into option transactions or futures contracts or options thereon
if immediately thereafter more than 35% of the market value of the Fund's net
assets would be represented by such instruments.
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 interest rates or 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. The loss incurred by the Fund in
writing options on futures is potentially unlimited and may exceed the amount
of the premium received. 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. Perfect correlation between the Fund's futures positions and portfolio
positions may be impossible to achieve. The Fund's transactions in options and
futures contracts may be limited by the requirements of the Internal Revenue
Code of 1986, as amended (the "Code"), for qualification as a regulated
4
<PAGE>
investment company, and distributions to shareholders of any gains from such
transactions will be taxable.
Other Information
The yields and market values of municipal securities are determined
primarily by the general level of interest rates, the creditworthiness of the
issuers of municipal securities and economic and political conditions affecting
such issuers. Due to their tax exempt status, the yields and market prices of
municipal securities may be adversely affected by changes in tax rates and
policies, which may have less effect on the market for taxable fixed income
securities. Moreover, certain types of municipal securities, such as housing
revenue bonds, involve prepayment risks which could affect the yield on such
securities.
Investments in municipal securities are subject to the risk that the issuer
could default on its obligations. Such a default could result from the
inadequacy of the sources or revenues from which interest and principal
payments are to be made or the assets collateralizing such obligations. Revenue
bonds, including private activity bonds, are backed only by specific assets or
revenue sources and not by the full faith and credit of the governmental
issuer.
The Fund will limit portfolio turnover to the extent practicable and
consistent with its investment objective and policies. While it does not intend
to engage in short-term trading, the Fund is not precluded from taking
advantage of short-term trends and yield disparities that might occur from
time to time. A higher portfolio turnover rate (over 100%) may result in
correspondingly higher transaction costs and may increase the realization of
net short-term capital gains, distributions of which are taxable to
shareholders as ordinary income.
When Issued Securities
The Fund may also purchase and sell securities on a "when issued" and
"delayed delivery" basis. These transactions are subject to market fluctuation;
the value at the time of delivery may be more or less than the purchase price.
Since the Fund will rely on the buyer or seller, as the case may be, to
consummate the transaction, failure by the other party to complete the
transaction may result in the Fund missing the opportunity of obtaining a price
or yield considered to be advantageous. No interest accrues to the Fund prior
to delivery. When the Fund is the buyer in such a transaction, however, it will
maintain, in a segregated account with its custodian, cash, U.S. government
securities, or high-grade, liquid debt obligations having an aggregate value
equal to the amount of such purchase commitments until payment is made. The
Fund will make commitments to purchase securities on such basis only with the
intention of actually acquiring these securities, but the Fund may sell such
securities prior to the settlement date if such sales are considered to be
advisable. To the extent the Fund engages in "when issued" and "delayed
delivery" transactions, it will do so for the purpose of acquiring securities
for the Fund's portfolio consistent with the Fund's investment objective and
policies and not for the purpose of investment leverage.
Repurchase Agreements
A repurchase agreement is an instrument under which the purchaser acquires
ownership of the obligation but the seller agrees, at the time of sale, to
repurchase the obligation at a mutually agreed upon time and price. The resale
price is in excess of the purchase price and reflects an agreed upon market
rate unrelated to the coupon rate on the purchased security. Such transactions
afford an opportunity for the Fund to invest temporarily available cash. In the
event of the insolvency of the seller, or an order to stay execution of an
agreement by a court or regulatory authority, the Fund could incur costs before
being able to sell the underlying obligations and the Fund's realization of the
underlying obligations could be delayed or limited, which could adversely
affect the price the Fund receives for such obligations. There is also a risk
that the seller may fail to repurchase the underlying obligations in which case
the Fund may incur possible disposition costs and a loss if the proceeds of the
sale of such obligations to a third party are less than the repurchase price.
To guard against these possibilities, the investment adviser, under guidelines
established by the Fund's Board of Trustees, will evaluate the creditworthiness
of the seller. The Fund will enter into repurchase agreements only with those
institutions that the investment adviser believes present minimal credit risks
and which furnish collateral at least equal in value or market price to the
amount of the repurchase obligations. Repurchase agreements maturing in more
than seven days are considered by the Fund to be illiquid. Distributions to
shareholders of income from repurchase agreements are taxable.
Risk Factors
Because prices of securities fluctuate from day to day, the value of an
investment in the Fund will vary based upon the Fund's investment performance.
The value of your shares in the Fund may, at any time, be higher or lower than
your original cost. The Fund may invest in debt securities with varying
maturities. In general, the longer the maturity of a security, the higher the
yield and the greater the potential for price fluctuations. A decline in
interest rates generally produces an increase in the value of debt securities
in the Fund's portfolio, while an increase in interest rates usually reduces
the value of these securities.
Additional Restrictions
In addition to the investment objective and policies discussed above, the
Fund's investments are subject to other restrictions which are described in its
Statement of Additional Information. Unless otherwise stated, the Fund's
investment objective and restrictions are considered fundamental and cannot be
changed without shareholder approval. Unless expressly designated as a
fundamental policy, the Fund's investment policies may be changed without
shareholder approval by the Board of Trustees of the Fund.
IV. MANAGEMENT OF THE FUND
The Board of Trustees of the Fund has overall responsibility for management
and supervision of the Fund. There are currently eight Trustees, six of whom
are not "interested persons" of the Fund as defined in the Investment Company
Act of 1940 (the "1940 Act"). The Board meets at least quarterly. By virtue of
the functions performed by Pioneering Management Corporation ("PMC") as
investment adviser, the Fund requires no employees other than its executive
officers, all of whom receive their compensation from PMC or other
5
<PAGE>
sources. The Statement of Additional Information contains the names of and
general background information regarding each Trustee and executive officer of
the Fund.
Each domestic fixed income portfolio managed by PMC, including the Fund, is
overseen by the Domestic Fixed Income Portfolio Management Committee, which
consists of PMC's most senior domestic fixed income professionals. The
committee is chaired by Mr. David Tripple, PMC's President and Chief Investment
Officer and Executive Vice President of each of the Pioneer mutual funds. Mr.
Tripple joined PMC in 1974 and has had general responsibility for PMC's
investment operations and specific portfolio assignments for over five years.
Fixed income investments at PMC, including those made on behalf of the Funds,
are under the general supervision of Mr. Sherman Russ, a Senior Vice President
of PMC. Mr. Russ joined PMC in 1983. Mr. Mark Winter, Vice President of the
Fund and PMC, is primarily responsible for the day-to-day management of the
Fund. Mr. Winter assumed responsibility for the Fund in 1986 when it was
managed by FMC. Mr. Winter joined PMC in 1993. In certain instances where the
individual named above is unavailable, primary responsibility for the
day-to-day management of the Fund may be assumed temporarily by Ms. Kathleen D.
McClaskey who joined PMC in 1986 and is a Vice President of PMC.
The Fund is managed under a contract with PMC. PMC serves as investment
adviser to the Fund and is responsible for the overall management of the Fund's
business affairs, subject only to the authority of the Fund's Board of
Trustees. PMC is a wholly owned subsidiary of The Pioneer Group, Inc. ("PGI"),
a Delaware corporation. PGI's subsidiary, Pioneer Funds Distributor, Inc.
("PFD"), is the principal underwriter of shares of the Fund. Prior to December
1, 1993, FMC acted as investment adviser and principal underwriter to the Fund.
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.
Under the terms of its contract with the Fund, PMC provides the Fund with an
investment program consistent with its investment objective and policies. PMC
furnishes the Fund with office space, equipment and personnel for managing the
affairs of the Fund. PMC also pays all expenses in connection with the
management of the affairs of the Fund except (i) charges and expenses for fund
accounting, pricing and appraisal services and related overhead, including, to
the extent such services are performed by personnel of PMC or its affiliates,
office space and facilities and personnel compensation, training and benefits;
(ii) the charges and expenses of auditors; (iii) the charges and expenses of
any custodian, transfer agent, plan agent, dividend disbursing agent and
registrar appointed by the Fund; (iv) issue and transfer taxes, chargeable to
the Fund in connection with securities transactions to which the Fund is a
party; (v) insurance premiums, interest charges, dues and fees for membership
in trade associations and all taxes and corporate fees payable by the Fund to
federal, state or other governmental agencies; (vi) fees and expenses involved
in registering and maintaining registrations of the Fund and/or its shares with
the SEC, state or blue sky securities agencies and foreign countries, including
the preparation of Prospectuses and Statements of Additional Information for
filing with the SEC; (vii) all expenses of shareholders' and Trustees' meetings
and of preparing, printing and distributing prospectuses, notices, proxy
statements and all reports to shareholders and to governmental agencies; (viii)
charges and expenses of legal counsel to the Fund and the Trustees; (ix)
distribution fees paid by the Fund in accordance with Rule 12b-1 promulgated by
the SEC pursuant to the 1940 Act; (x) compensation of those Trustees of the
Fund who are not affiliated with or interested persons of PMC, the Fund (other
than as Trustees), PGI or PFD; (xi) the cost of preparing and printing share
certificates; and (xii) 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.
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 where two or more broker-dealers are in a position to offer
comparable prices and execution, consideration may be given to whether the
broker-dealer provides investment research or brokerage services or sells
shares of the Fund or other Pioneer mutual funds. See the Statement of
Additional Information for a further description of PMC's brokerage allocation
practices.
As compensation for its management services for the Fund and certain
expenses which PMC incurs, PMC is entitled to a management fee from the Fund at
the annual rates set forth below as a percentage of average daily net assets:
<TABLE>
<CAPTION>
Net Assets Annual Fee
<S> <C>
For assets up to $250,000,000 .50%
For assets in excess of $250,000,000 to $300,000,000 .48%
Over $300,000,000 .45%
</TABLE>
PMC has agreed that until December 1, 1995, its fee shall not exceed the fee
that would have been payable under the prior management contract with FMC. See
the Statement of Additional Information for a discussion of the fee payable
under the prior management agreement.
For the fiscal year ended December 31, 1994, the Fund paid a management fee
of $2,266,099 to PMC.
John F. Cogan, Jr., Chairman and President of the Fund, Chairman of PFD,
President and a Director of PGI and Chairman and a Director of PMC, owned
approximately 15% of the outstanding capital stock of PGI as of March 31, 1995.
V. FUND SHARE ALTERNATIVES
The Fund continuously offers two Classes of shares designated as Class A and
Class B shares, as described more fully in "How to Buy Fund Shares." If you do
not specify in your instructions to the Fund which Class of shares you wish to
purchase, exchange or redeem, the Fund will assume that your instructions apply
to Class A shares.
Class A Shares. If you invest less than $1 million in Class A shares, you
will pay an initial sales charge. Certain pur-
6
<PAGE>
chases may qualify for reduced initial sales charges. If you invest $1 million
or more in Class A shares, no sales charge will be imposed at the time of
purchase, however, shares redeemed within 12 months of purchase may be subject
to a contingent deferred sales charge ("CDSC"). Class A shares are subject to
distribution and service fees at a combined annual rate of up to 0.25% of the
Fund's average daily net assets attributable to Class A shares.
Class B Shares. If you plan to invest up to $250,000, Class B shares are
available to you. Class B shares are sold without an initial sales charge, but
are subject to a CDSC of up to 4% if redeemed within six years. Class B shares
are subject to distribution and service fees at a combined annual rate of 1.00%
of the Fund's average daily net assets attributable to Class B shares. Your
entire investment in Class B shares is available to work for you from the time
you make your investment, but the higher distribution fee paid by Class B
shares will cause your Class B shares (until conversion) to have a higher
expense ratio and to pay lower dividends, to the extent dividends are paid,
than Class A shares. Class B shares will automatically convert to Class A
shares, based on relative net asset value, eight years after the initial
purchase.
Purchasing Class A or Class B Shares. The decision as to which Class to
purchase depends on the amount you invest, the intended length of the
investment and your personal situation. If you are making an investment that
qualifies for reduced sales charges, you might consider Class A shares. If you
prefer not to pay an initial sales charge on an investment of $250,000 or less
and you plan to hold the investment for at least six years, you might consider
Class B shares.
Investment dealers or their representatives may receive different
compensation depending on which Class of shares they sell. Shares may be
exchanged only for shares of the same Class of another Pioneer fund and shares
acquired in the exchange will continue to be subject to any CDSC applicable to
the shares of the Fund originally purchased. Shares sold outside the U.S. to
persons who are not U.S. citizens may be subject to different sales charges,
CDSCs and dealer compensation arrangements in accordance with local laws and
business practices.
VI. SHARE PRICE
Shares of the Fund are sold at the public offering price, which is the net
asset value per share plus the applicable sales charge. Net asset value per
share of a Class of the Fund is determined by dividing the value of its assets,
less liabilities attributable to that Class, by the number of shares of that
Class outstanding. The net asset value is computed once daily, on each day the
New York Stock Exchange (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. All assets of the
Fund for which there is no other readily available valuation method are valued
at their fair value as determined in good faith by the Trustees.
VII. HOW TO BUY FUND SHARES
You may buy Fund shares at the public offering price from any securities
broker-dealer which has a sales agreement with PFD. If you do not have a
securities broker-dealer, please call 1-800-225-6292 for assistance.
The minimum initial investment is $1,000 for Class A and Class B shares
except as specified below. The minimum initial investment is $50 for Class A
accounts being established to utilize monthly bank drafts, government
allotments, payroll deduction and other similar automatic investment plans.
Separate minimum investment requirements apply to retirement plans and to
telephone and wire orders placed by broker-dealers; no sales charges or minimum
requirements apply to the reinvestment of dividends or capital gains
distributions. The minimum subsequent investment is $50 for Class A shares and
$500 for Class B shares except that the subsequent minimum investment amount
for Class B share accounts may be as little as $50 if an automatic investment
plan is established (see "Automatic Investment Plans").
Class A Shares
You may buy Class A shares at the public offering price, that is, at the net
asset value per share next computed after receipt of a purchase order, plus a
sales charge as follows:
<TABLE>
<CAPTION>
Sales Charge as a % of
Dealer
Allowance
Net as a % of
Offering Amount Offering
Amount of Purchase Price Invested Price
<S> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.00%
$100,000 but less than $250,000 3.50% 3.63% 3.00%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more -0- -0- See below
</TABLE>
No sales charge is payable at the time of purchase on investments of
$1,000,000 or more or for participants in certain group plans (described below)
subject to a CDSC of 1% which may be imposed in the event of a redemption of
Class A shares within 12 months of purchase. See "How to Sell Fund Shares." PFD
may, in its discretion, pay a commission to broker-dealers who initiate and are
responsible for such purchases as follows: 1% on the first $1 million invested;
0.50% on the next $4 million; and 0.10% on the excess over $5 million. These
commissions will not be paid if the purchaser is affiliated with the
broker-dealer or if the purchase represents the reinvestment of a redemption
made during the previous 12 calendar months. Broker-dealers who receive a
commission in connection with Class A share purchases at net asset value by
401(a) or 401(k) retirement plans with 1,000 or more eligible participants or
with at least $10 million in plan assets will be required to return any
commission paid or a pro rata portion thereof if the retirement plan redeems
its shares within 12 months of purchase. See also "How to Sell Fund Shares." In
connection with PGI's acquisition of FMC and contingent upon the achievement of
certain sales objectives, PFD pays to Mutual of Omaha Investor Services, Inc.
50% of PFD's retention of any sales commission on sales of the Fund's Class A
shares through such dealer.
The schedule of sales charges above is applicable to purchases of Class A
shares of the Fund by (i) an individual,
7
<PAGE>
(ii) an individual and his or her spouse and children under the age of 21 and
(iii) a trustee or other fiduciary of a trust estate or fiduciary account or
related trusts or accounts including pension, profit-sharing and other employee
benefit trusts qualified under Section 401 or 408 of the Code, although more
than one beneficiary is involved. The sales charges applicable to a current
purchase of Class A shares of the Fund by a person listed above is determined
by adding the value of shares to be purchased to the aggregate value (at the
then current offering price) of shares of any of the other Pioneer mutual funds
previously purchased (except direct purchases of Pioneer Money Market Trust's
Class A shares) and then owned, provided PFD is notified by such person or his
or her broker-dealer each time a purchase is made which would qualify. Pioneer
mutual funds include all mutual funds for which PFD serves as principal
underwriter. See the "Letter of Intention" section of the Account Application.
Qualifying for a Reduced Sales Charge. Class A shares of the Fund may be
sold at a reduced or eliminated sales charge to certain group plans ("Group
Plans") under which a sponsoring organization makes recommendations to, permits
group solicitation of, or otherwise facilitates purchases by, its employees,
members or participants. Class A shares of a Fund may be sold at net asset
value per share without a sales charge to Optional Retirement Program
participants if (i) the employer has authorized a limited number of investment
company providers for the Program, (ii) all authorized investment company
providers offer their shares to Program participants at net asset value, (iii)
the employer has agreed in writing to actively promote the authorized
investment providers to Program participants and (iv) the Program provides for
a matching contribution for each participant contribution. Information about
such arrangements is available from PFD.
Class A shares of the Fund may also be sold at net asset value per share
without a sales charge to: (a) current or former Trustees and officers of the
Fund and partners and employees of its legal counsel; (b) current or former
directors, officers, employees or sales representatives of PGI or its
subsidiaries; (c) current or former directors, officers, employees or sales
representatives of any subadviser or predecessor investment adviser to any
investment company for which PMC serves as investment adviser, and the
subsidiaries or affiliates of such persons; (d) current or former officers,
partners, employees or registered representatives of broker-dealers which have
entered into sales agreements with PFD; (e) members of the immediate families
of any of the persons above; (f) any trust, custodian, pension, profit-sharing
or other benefit plan of the foregoing persons; (g) insurance company separate
accounts; (h) certain "wrap accounts" for the benefit of clients of financial
planners adhering to standards established by PFD; (i) other funds and accounts
for which PMC or any of its affiliates serves as investment adviser or manager;
and (j) certain unit investment trusts. Shares so purchased are purchased for
investment purposes and may not be resold except through redemption or
repurchase by or on behalf of the Fund. The availability of this privilege is
conditioned upon the receipt by PFD of written notification of eligibility.
Class A shares of the Fund may also be sold at net asset value without a sales
charge in connection with certain reorganization, liquidation or acquisition
transactions involving other investment companies or personal holding
companies.
Reduced sales charges for Class A shares are available through an agreement
to purchase a specified quantity of Fund shares over a designated 13-month
period by completing the "Letter of Intention" section of the Account
Application. Information about the Letter of Intention procedure, including its
terms, is contained in the Statement of Additional Information. Investors who
are clients of a broker-dealer with a current sales agreement with PFD may
purchase Class A shares of the Fund at net asset value, without a sales charge,
to the extent that the purchase price is paid out of proceeds from one or more
redemptions by the investor of shares of certain other mutual funds. In order
for a purchase to qualify for this privilege, the investor must document to the
broker-dealer that the redemption occurred within the 60 days immediately
preceding the purchase of Class A shares; that the client paid a sales charge
on the original purchase of the shares redeemed; and that the mutual fund whose
shares were redeemed also offers net asset value purchases to redeeming
shareholders of any of the Pioneer funds. Further details may be obtained from
PFD.
Class B Shares
You may buy Class B shares at net asset value without the imposition of an
initial sales charge; however, Class B shares redeemed within six years of
purchase will be subject to a CDSC at the rates shown in the table below. The
charge will be assessed on the amount equal to the lesser of the current market
value or the original purchase cost of the shares being redeemed. No CDSC will
be imposed on increases in account value above the initial purchase price,
including shares derived from the reinvestment of dividends or capital gains
distributions.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of purchase until the time of redemption of Class B shares. For
the purpose of determining the number of years from the time of any purchase,
all payments during a quarter will be aggregated and deemed to have been made
on the first day of that quarter. In processing redemptions of Class B shares,
the Fund will first redeem shares not subject to any CDSC, and then shares held
longest during the six-year period. As a result, you will pay the lowest
possible CDSC.
<TABLE>
<CAPTION>
Year Since CDSC as a Percentage of Dollar
Purchase Amount Subject to CDSC
<S> <C>
First 4.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter none
</TABLE>
Proceeds from the CDSC are paid to PFD and are used in whole or in part to
defray PFD's expenses related to providing distribution-related services to the
Fund in connection with the sale of Class B shares, including the payment of
compensation to broker-dealers.
Class B shares will automatically convert into Class A shares at the end of
the calendar quarter that is eight years
8
<PAGE>
after the purchase date, except as noted below. Class B shares acquired by
exchange from Class B shares of another Pioneer fund will convert into Class A
shares based on the date of the initial purchase and the applicable CDSC. Class
B shares acquired through reinvestment of distributions will convert into Class
A shares based on the date of the initial purchase to which such shares relate.
For this purpose, Class B shares acquired through reinvestment of distributions
will be attributed to particular purchases of Class B shares in accordance with
such procedures as the Trustees may determine from time to time. The conversion
of Class B shares to Class A shares is subject to the continuing availability
of a ruling from the Internal Revenue Service ("IRS"), for which the Fund is
applying or an opinion of counsel that such conversions will not constitute
taxable events for federal tax purposes. There can be no assurance that such
ruling or opinion will be available at the time any particular conversion would
normally occur. The conversion of Class B shares to Class A shares will not
occur if such ruling or opinion will be available is not available and,
therefore, Class B shares would continue to be subject to higher expenses than
Class A shares for an indeterminate period.
Waiver or Reduction of Contingent Deferred Sales Charge. The CDSC on Class B
shares and on any Class A shares subject to a CDSC may be waived or reduced for
non-retirement accounts if: (a) the redemption results from the death of all
registered owners of an account (in the case of UGMAs, UTMAs and trust
accounts, the waiver applies upon the death of all beneficial owners) or a
total and permanent disability (as defined in Section 72 of the Code) of all
registered owners occurring after the purchase of the shares being redeemed or
(b) the redemption is made in connection with limited automatic redemptions as
set forth in "Systematic Withdrawal Plans" (limited in any year to 10% of the
value of the account in the Fund at the time the withdrawal plan is
established).
The CDSC on Class B shares and on any Class A shares subject to a CDSC may
be waived or reduced for retirement plan accounts if: (a) the redemption
results from the death or a total and permanent disability (as defined in
Section 72 of the Code) occurring after the purchase of the shares being
redeemed of a shareholder or participant in an employer-sponsored retirement
plan; (b) the distribution is to a participant in an Individual Retirement
Account ("IRA"), 403(b) or employer-sponsored retirement plan, is part of a
series of substantially equal payments made over the life expectancy of the
participant or the joint life expectancy of the participant and his or her
beneficiary or as scheduled periodic payments to a participant (limited in any
year to 10% of the value of the participant's account at the time the
distribution amount is established; a required minimum distribution due to the
participant's attainment of age 70-1/2 may exceed the 10% limit only if the
distribution amount is based on plan assets held by Pioneer); (c) the
distribution is from a 401(a) or 401(k) retirement plan and is a return of
excess employee deferrals or employee contributions or a qualifying hardship
distribution as defined by the Code or results from a termination of employment
(limited with respect to a termination to 10% per year of the value of the
plan's assets in the Fund as of the later of the prior December 31 or the date
the account was established unless the plan's assets are being rolled over to
or reinvested in the same class of shares of a Pioneer mutual fund subject to
the CDSC of the shares originally held); (d) the distribution is from an IRA,
403(b) or employer-sponsored retirement plan and is to be rolled over to or
reinvested in the same class of shares in a Pioneer mutual fund and which will
be subject to the applicable CDSC upon redemption; (e) the distribution is in
the form of a loan to a participant in a plan which permits loans (each
repayment of the loan will constitute a new sale which will be subject to the
applicable CDSC upon redemption); or (f) the distribution is from a qualified
defined contribution plan and represents a participant's directed transfer
(provided that this privilege has been pre-authorized through a prior
agreement with PFD regarding participant directed transfers).
The CDSC on Class B shares and on any Class A shares subject to a CDSC may
be waived or reduced for either non-retirement or retirement plan accounts if:
(a) the redemption is made by any state, county, or city, or any
instrumentality, department, authority, or agency thereof, which is prohibited
by applicable laws from paying a CDSC in connection with the acquisition of
shares of any registered investment management company; or (b) the redemption
is made pursuant to the Fund's right to liquidate or involuntarily redeem
shares in a shareholder's account.
Broker-Dealers. An order for either Class of Fund shares received by PFD
from a broker-dealer prior to the close of regular trading on the Exchange is
confirmed at the price appropriate for that Class as determined at the close of
regular trading on the Exchange on the day the order is received, provided the
order is received by PFD prior to PFD's close of business (usually, 5:30 p.m.
Eastern Time). It is the responsibility of broker-dealers to transmit orders so
that they will be received by PFD prior to its close of business.
General. The Fund reserves the right in its sole discretion to withdraw all
or any part of the offering of shares when, in the judgment of the Fund's
management, such withdrawal is in the best interest of the Fund. An order to
purchase shares is not binding on, and may be rejected by, PFD until it has
been confirmed in writing by PFD and payment has been received.
VIII. HOW TO SELL 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.
You may sell your shares either through your broker-dealer or directly to
the Fund. Please note the following:
* If you are selling shares from a retirement account, you must make your
request in writing (except for exchanges to other Pioneer funds which can
be requested by phone or in writing). Call 1-800-622-0176 for more
information.
* If you are selling shares from a non-retirement account, you may use any
of the methods described below.
Your shares will be sold at the share price next calculated after your order
is received and accepted less any applicable
9
<PAGE>
CDSC. Sale proceeds generally will be sent to you in cash, normally within
seven days after your order is accepted. 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.
In Writing. You may sell your shares by delivering a written request, signed
by all registered owners, in good order to Pioneering Services Corporation
("PSC"), however, you must use a written request, including a signature
guarantee, to sell your shares if any of the following situations applies:
* you wish to sell over $50,000 worth of shares,
* your account registration or address has changed within the last 30 days,
* the check is not being mailed to the address on your account (address of
record),
* the check is not being made out to the account owners, or
* the sale proceeds are being transferred to a Pioneer account with a
different registration.
Your request should include your name, the Fund's name, your fund account
number, the Class of shares to be redeemed, the dollar amount or number of
shares to be redeemed, and any other applicable requirements as described
below. Unless instructed otherwise, Pioneer will send the proceeds of the sale
to the address of record. Fiduciaries or corporations are required to submit
additional documents. For more information, contact PSC at 1-800-225-6292.
Written requests will not be processed until they are received in good order
and accepted by PSC. Good order means that there are no outstanding claims or
requests to hold redemptions on the account, 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"). For additional information
about the necessary documentation for redemption by mail, please contact PSC at
1-800-225-6292.
By Telephone or by Fax. Your account is automatically authorized to have the
telephone redemption privilege unless you indicated otherwise on your Account
Application or by writing to the Fund. You may redeem up to $50,000 of your
shares by telephone or fax and receive the proceeds by check or by wire. The
redemption proceeds must be made payable exactly as the account is registered.
To receive the proceeds by check: 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: the wire must be sent to your previously designated 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
1-800-225-4240. The telephone redemption option is not available to retirement
plan accounts. You may always elect to deliver redemption instructions to PSC
by mail. See "Telephone Transactions and Related Liabilities" below. Telephone
and fax redemptions will be priced as described above.
Selling Shares Through Your Broker-Dealer. The Fund authorized PFD to act as
its agent in the repurchase 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.
Small Accounts. The minimum account value is $500. If you hold shares of the
Fund in an account with a net asset value of less than the minimum required
amount due to redemptions or exchanges, the Fund may redeem the shares held in
this account at net asset value if you have not increased the net asset value
of the account to at least the minimum required amount within six months of
notice by the Fund to you of the Fund's intention to redeem the shares.
CDSC on Class A Shares. Purchases of Class A shares of $1,000,000 or more,
or by participants in a Group Plan which were not subject to an initial sales
charge, may be subject to a CDSC upon redemption. A CDSC is payable to PFD on
these investments in the event of a share redemption within 12 months following
the share purchase, at the rate of 1% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividend and capital gain distributions) or
the total cost of such shares. Shares subject to the CDSC which are exchanged
into another Pioneer fund will continue to be subject to the CDSC until the
original 12-month period expires. However, no CDSC is payable with respect to
purchases of Class A shares by 401(a) or 401(k) retirement plans with 1,000 or
more eligible participants or with at least $10 million in plan assets.
General. 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.
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.
IX. HOW TO EXCHANGE FUND SHARES
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. Writ-
10
<PAGE>
ten exchange requests must be si gned 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 indicated otherwise on your Account
Application or by writing to the Fund. Proper account identification will be
required for each telephone exchange. Telephone exchanges may not exceed
$500,000 per account per day. All telephone exchange requests will be recorded.
See "Telephone Transactions and Related Liabilities" below.
Automatic Exchanges. You may automatically exchange shares from one Pioneer
account for shares of the same Class in another Pioneer 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 18th day of the month.
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 account opened
through an exchange must have a registration identical to that on the original
account.
Class A or Class B 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 Class B 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 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 funds, as described in each fund's current prospectus, before making
any exchange. To prevent abuse of the exchange privilege to the detriment of
other Fund shareholders, the Fund and PFD reserve the right to limit the number
and/or frequency of exchanges and/or to charge a fee for exchanges. The
exchange privilege may be changed or discontinued and may be subject to
additional limitations, including certain restriction on purchases by market
timer accounts.
X. DISTRIBUTION PLANS
The Fund has adopted a Plan of Distribution for both Class A shares ("Class
A Plan") and Class B shares ("Class B Plan") in accordance with Rule 12b-1
under the 1940 Act pursuant to which certain distribution and service fees are
paid.
Pursuant to the Class A Plan, the Fund reimburses PFD for its actual
expenditures to finance any activity primarily intended to result in the sale
of Class A shares or to provide services to holders of Class A shares, 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 for Class A shares
of the Fund: (i) a service fee to be paid to qualified broker-dealers in an
amount not to exceed 0.25% per annum of the Fund's daily net assets
attributable to Class A shares; (ii) reimbursement to PFD for its expenditures
for broker-dealer commissions and employee compensation on certain sales of the
Fund's Class A shares with no initial sales charge (See "How to Buy Fund
Shares"); and (iii) reimbursement to PFD for expenses incurred in providing
services to Class A shareholders and supporting broker-dealers and other
organizations (such as banks and trust companies) in their efforts to provide
such services. Banks are currently prohibited under the Glass-Steagall Act
from providing certain underwriting or distribution services. If a bank was
prohibited from acting in any capacity or providing any of the described
services, management would consider what action, if any, would be appropriate.
Expenditures of the Fund pursuant to the Class A Plan are accrued daily and
may not exceed 0.25% of the Fund's average daily net assets attributable to
Class A shares. Distribution expenses of PFD are expected to substantially
exceed the distribution fees paid by the Fund in a given year. The Class A 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 Class B Plan provides that the Fund will pay a distribution fee at the
annual rate of 0.75% of the Fund's average daily net assets attributable to
Class B shares and will pay PFD a service fee at the annual rate of 0.25% of
the Fund's average daily net assets attributable to Class B shares. The
distribution fee is intended to compensate PFD for its distribution services to
the Fund. The service fee is intended to be additional compensation for
personal services and/or account maintenance services with respect to Class B
shares. PFD also receives the proceeds of any CDSC imposed on the redemption of
Class B shares.
Commissions of 4%, equal to 3.75% of the amount invested and a first year's
service fee equal to 0.25% of the amount invested in Class B shares, are paid
to broker-dealers who have selling agreements with PFD. PFD may advance to
dealers the first year service fee at a rate up to 0.25% of the purchase price
of such shares and, as compensation therefore, PFD may retain the service fee
paid by the Fund with respect to such shares for the first year after purchase.
Dealers will become eligible for additional service
11
<PAGE>
fees with respect to such shares commencing in the 13th month following the
purchase. Dealers may from time to time be required to meet certain criteria in
order to receive service fees. PFD or its affiliates are entitled to retain all
service fees payable under the Class B Plan for which there is no dealer of
record or for which qualification standards have not been met as partial
consideration for personal services and/or account maintenance services
performed by PFD or its affiliates for shareholder accounts.
XI. DIVIDENDS, DISTRIBUTIONS AND TAXATION
The Fund has elected to be treated, has qualified, and intends to qualify
each year as a "regulated investment company" under the Code so that it will
not pay federal income taxes on income and capital gains distributed to
shareholders at least annually. The Code permits tax-exempt interest received
by the Fund to flow through as tax-exempt "exempt-interest dividends" to the
Fund's shareholders, provided that the Fund qualifies as a regulated investment
company and at least 50% of the value of the total assets of the Fund at the
close of each quarter of its taxable year consists of tax-exempt obligations.
However, distributions derived from interest on certain "private activity
bonds" will be subject to the federal alternative minimum tax for individuals,
estates or trusts that are subject to such tax, and all tax exempt
distributions may result in or increase a corporate shareholder's liability for
the federal corporate alternative minimum tax.
Interest on indebtedness incurred by a shareholder to purchase or carry
shares of the Fund will not be deductible for federal income tax purposes to
the extent it is deemed related to exempt-interest dividends. The Fund may not
be an appropriate investment for persons who are "substantial users" of
facilities financed by industrial revenue or private activity bonds or persons
related to substantial users. Shareholders receiving social security or certain
railroad retirement benefits may be subject to federal income tax on a portion
of such benefits as a result of receiving investment income, including
exempt-interest dividends and other distributions paid by the Fund.
Under the Code, the Fund will be subject to a nondeductible 4% federal
excise tax on a portion of its undistributed taxable 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.
Each business day the Fund declares a dividend consisting of substantially
all of the Fund's net investment income. Shareholders begin earning dividends
on the first business day following receipt of payment for purchased shares.
Shares continue to earn dividends up to and including the date of redemption.
Dividends are normally paid on the last business day of the month or shortly
thereafter. The Fund's net investment income consists of the interest income it
earns, less expenses. In computing interest income, the Fund amortizes premium
or accrues discount on long-term debt securities only to the extent required
for federal income tax purposes. The Fund will make distributions from net long
term capital gains, if any, in December. Net short-term capital gains
distributions, if any, may be paid with such dividends, and other distributions
from income and/or capital gains may also be made at such times as may be
necessary to avoid federal income or excise tax.
Unless shareholders specify otherwise, all distributions from the Fund will
be automatically reinvested in additional full and fractional shares of the
Fund. For further information on the distribution options available to
shareholders, see "Distribution Options" and "Directed Dividends" below.
The Fund's dividends from its taxable net investment income, including
taxable interest income, taxable original issue discount, market discount
income, income from securities lending and any net short-term capital gains
realized by the Fund are taxable to shareholders as ordinary income under the
Code. Dividends from the Fund's net long-term capital gains are taxable to
shareholders as long-term capital gains under the Code, regardless of a
shareholder's holding period for his Fund shares. For federal income tax
purposes, dividends are taxable as described above whether a shareholder takes
them in cash or reinvests in additional shares of the Fund.
The federal income tax status of all distributions will be reported to
shareholders annually, and taxable shareholders are required to report all
distributions, including tax-exempt distributions, on their federal income tax
returns.
The Fund's taxable dividends and other taxable distributions, and the
proceeds of redemptions, exchanges or repurchases of the Fund's shares paid to
individuals and other non-exempt payees may be subject to a 31% backup
withholding of federal income tax if the Fund is not provided with the
shareholder's correct taxpayer identification number and certification that the
number is correct and that the shareholder is not subject to such backup
withholding or if the Fund receives notice from the IRS or a broker that backup
withholding applies.
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. A state income (and possibly local income and/or intangible
property) tax exemption is generally available to the extent the Fund's
distributions are derived from interest on (or, in the case of intangibles
taxes, the value of its assets is attributable to) certain U.S. Government
obligations and/or tax-exempt municipal obligations issued by or on behalf of
the particular state or a political subdivision thereof, provided in some
states that certain thresholds for holdings of such obligations an/or reporting
requirements are satisfied. You should consult your own tax adviser regarding
this possibility and other tax consequences under state, local and other
applicable tax laws.
XII. SHAREHOLDER SERVICES
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, and
inquiries to PSC should be mailed to Pioneering Services Corporation, P.O.
12
<PAGE>
Box 9014, Boston, Massachusetts 02205-9014. 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.
Account and Confirmation Statements
PSC maintains an account for each shareholder and all transactions of the
shareholder are recorded in this account. Confirmation statements showing
details of transactions are sent to shareholders as transactions occur, except
Automatic Investment Plan transactions which are confirmed quarterly. The
Combined Account Statement, mailed quarterly, is available to shareholders who
have more than one Pioneer account.
Shareholders whose shares are held in the name of an investment
broker-dealer or other party will not normally have an account with the Fund
and might not be able to utilize some of the services available to shareholders
of record. Examples of services which might not be available are investment or
redemption of shares by mail, automatic reinvestment of dividends and capital
gains distributions, withdrawal plans, Letters of Intention, Rights of
Accumulation, telephone exchanges and redemptions and newsletters.
Additional Investments
You may add to your account by sending a check (minimum of $50 for Class A
shares and $500 for Class B shares) to PSC (account number and Class of shares
should be clearly indicated). The bottom portion of a confirmation statement
may be used as a remittance slip to make additional investments. Additions to
your account, whether by check or through a Pioneer Investomatic Plan, are
invested in full and fractional shares of the Fund at the applicable offering
price in effect as of the close of the Exchange on the day of receipt.
Automatic Investment Plans
You may arrange for regular automatic investments of $50 or more through
government/military allotments, payroll deduction or through a Pioneer
Investomatic Plan. A Pioneer Investomatic Plan provides for a monthly or
quarterly investment by means of a pre-authorized draft drawn on a checking
account. Pioneer Investomatic Plan investments are voluntary, and you may
discontinue the Plan at any time without penalty upon 30 days' written notice
to PSC. PSC acts as agent for the purchaser, the broker-dealer and PFD in
maintaining these plans.
Financial Reports and Tax Information
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 on the Account Application. Two
other options available are (a) dividends in cash and capital gains
distributions in additional shares; and (b) all dividends and capital gains
distributions in cash. These two options are not available, however, for
retirement plans or for an account with a net asset value of less than $500.
Changes in your distribution options may be made by written request to PSC.
Directed Dividends
You may elect (in writing) to have the dividends paid by one Pioneer fund
account invested in a second Pioneer fund account. The value of this second
account must be at least $1,000 ($500 for Pioneer Fund or Pioneer II). Invested
dividends may be in any amount, and there are no fees or charges for this
service. Retirement plan shareholders may only direct dividends to accounts
with identical registrations, i.e., PGI IRA Cust for John Smith may only go
into another account registered PGI IRA Cust for John Smith.
Direct Deposit
If you have elected to take distributions, whether dividends or dividends
and capital gains, in cash, or have established a Systematic Withdrawal Plan,
you may choose to have those cash payments deposited directly into your
savings, checking or NOW bank account. You may establish this service by
completing the appropriate section on the Account Application when opening a
new account or the Account Options Form for an existing 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.
Telephone Transactions and Related Liabilities
Your account is automatically authorized to have telephone transaction
privileges unless you indicated otherwise on your Account Application or by
writing to the Fund. You may sell or exchange your Fund shares by telephone by
calling 1-800-225-6292 between 8:00 a.m. and 8:00 p.m. Eastern Time on
weekdays. See "Share Price" for more information. 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.
Telecommunications Device for the Deaf (TDD)
If you have a hearing disability and your own TDD keyboard equipment, you
can call our TDD number toll-free at 1-800-225-1997, weekdays from 8:30 a.m.
to 5:30 p.m. Eastern
13
<PAGE>
Time to contact our telephone representatives with questions about your
account.
Systematic Withdrawal Plans
If your account has a total value of at least $10,000 you may establish a
Systematic Withdrawal Plan ("SWP") providing for fixed payments at regular
intervals. Withdrawals from Class B shares accounts are limited to 10% of the
value of the account at the time the plan is implemented. See "Waiver or
Reduction of Contingent Deferred Sales Charge" for more information. Periodic
checks of $50 or more will be sent to you, or any person designated by you,
monthly or quarterly, and your periodic redemptions of shares may be taxable to
you. If you direct that withdrawal checks be paid to another person after you
have opened your account, a signature guarantee must accompany your
instructions. Purchases of Class A shares of the Fund at a time when you have a
Systematic Withdrawal Plan in effect may result in the payment of unnecessary
sales charges and may therefore be disadvantageous. You may obtain additional
information by calling PSC at 1-800-225-6292 or by referring to the Statement
of Additional Information.
Reinstatement Privilege (Class A Shares Only)
If you redeem all or part of your Class A shares of the Fund, you may
reinvest all or part of the redemption proceeds without a sales charge in Class
A shares of the Fund if you send a written request to PSC not more than 90 days
after your shares were redeemed. Your redemption proceeds will be reinvested at
the next determined net asset value of the Class A shares of the Fund in effect
immediately after receipt of the written request for reinstatement. You may
realize a gain or loss for federal income tax purposes as a result of the
redemption, and special tax rules may apply if a reinvestment occurs. Subject
to the provisions outlined under "How to Exchange Fund Shares" above, you may
also reinvest in Class A shares of other Pioneer mutual funds; in this case you
must meet the minimum investment requirements for each fund you enter.
The 90-day reinstatement period may be extended by PFD for periods of up to
one year for shareholders living in areas that have experienced a natural
disaster, such as a flood, hurricane, tornado, or earthquake.
The options and services available to shareholders, including the terms of
the Exchange Privilege and the Pioneer Investomatic Plan, may be revised,
suspended or terminated at any time by PFD or by the Fund. You may establish
the services described in this section when you open your account. You may also
establish or revise many of them on an existing account by completing an
Account Options Form, which you may request by calling 1-800-225-6292.
XIII. THE FUND
The Fund, an open-end management investment company (commonly referred to as
a mutual fund), was established as a Nebraska corporation on January 19, 1968
and reorganized as a Delaware business trust on June 30, 1994. The Fund has
authorized an unlimited number of shares of beneficial interest. As an open-end
management investment company, the Fund continuously offers its shares to the
public and under normal conditions must redeem its shares upon the demand of
any shareholder at the then current net asset value per share. See "How to Sell
Fund Shares." 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.
The Trustees have the authority, without further shareholder approval, to
classify and reclassify the shares of the Fund, or any new series, into one or
more classes. As of the date of this Prospectus, the Trustees have authorized
the issuance of two classes of shares, designated as Class A and Class B. The
shares of each class represent an interest in the same portfolio of investments
of the Fund. Each class has equal rights as to voting, redemption, dividends
and liquidation, except that each class bears different distribution and
transfer agent fees and may bear other expenses properly attributable to the
particular class. Class A and Class B shareholders have exclusive voting rights
with respect to the Rule 12b-1 distribution plans adopted by holders of those
shares in connection with the distribution of shares.
In addition to the requirements under Delaware law, the 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
Statement of Additional Information, shares of the Fund are fully-paid and
non-assessable. Shares will remain on deposit with the Fund's transfer agent
and certificates will not normally be issued. The Fund reserves the right to
charge a fee for the issuance of certificates.
XIV. INVESTMENT RESULTS
The Fund may from time to time include yield information for each Class of
Fund shares in advertisements or in information furnished generally to existing
or proposed shareholders. Whenever yield information is provided, it includes a
standardized yield calculation computed by dividing the Fund's net investment
income per share for each class of Fund shares during a base period of 30 days,
or one month, by the maximum offering price per share for each class of Fund
shares on the last day of such base period. (The Fund's net investment income
per share for each Class is determined by dividing the Fund's net investment
income for each Class during the base period by the Class's average number
14
<PAGE>
of shares entitled to receive dividends during the base period). The Class's
30-day yield is then "annualized" by a computation that assumes that the
Class's net investment income is earned and reinvested for a six-month period
at the same rate as during the 30-day base period and that the resulting
six-month income will be generated over an additional six months.
The Fund may also from time to time advertise its taxable equivalent yield
for each Class of Fund Shares. The Class's taxable equivalent yield is
determined by dividing that portion of the Class's yield (calculated as
described above) that is tax exempt by one minus the stated federal income tax
rate and adding the product to that portion, if any, of the Class's yield that
is not tax exempt. For a table of sample taxable equivalent yields, please see
the Appendix.
The average annual total return (for a designated period of time) on an
investment in the Fund may also be included in advertisements, and furnished to
existing or prospective shareholders. The average annual total return for each
Class is computed in accordance with the SEC's standardized formula. The
calculation for all Classes assumes the reinvestment of all dividends and
distributions at net asset value and does not reflect the impact of federal or
state income taxes. In addition, for Class A shares the calculation assumes the
deduction of the maximum sales charge of 4.50%; for Class B shares the
calculation reflects the deduction of any applicable contingent deferred sales
charge. The periods illustrated would normally include one, five and ten years
(or since the commencement of the public offering of the shares of a Class, 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. Yield and return quotations should also
be considered in relation to the risks associated with the Fund's investment
objective and policies. Yields may be affected by sinking fund call provisions
and optional redemption features of portfolio securities which may have the
effect of reducing the stated average maturity of the Fund's portfolio.
Other investments or savings vehicles and/or unmanaged market indexes,
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 yield and investment results will be calculated separately for
each class of Fund shares and will vary from time to time depending on market
conditions, the composition of the Fund's portfolio, the operating expenses of
the Fund and the expenses attributed to a particular class of Fund shares. 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 Statement of Additional Information.
XV. APPENDIX: Taxable Equivalent Yields*
The table below shows the approximate taxable yields which are equivalent to
hypothetical tax-exempt yields from 5% to 9% under Federal income tax laws
applicable to individuals during 1995.
<TABLE>
<CAPTION>
Single Return Joint Return Tax Taxable Yield Required To Equal A Tax Free Yield Of:
(Taxable Income)* Rate 5% 6% 7% 8% 9%
<S> <C> <C> <C> <C> <C> <C> <C>
Up to $23,350 Up to $39,000 15.0% 5.88 7.06 8.24 9.41 10.59
$23,351-$56,550 $39,001-$94,250 28.0% 6.94 8.33 9.72 11.11 12.50
$56,551-$117,950 $94,251-$143,600 31.0% 7.25 8.70 10.14 11.59 13.04
$117,951-$256,500 $143,601-$256,500 36.0% 7.81 9.38 10.94 12.50 14.06
Over $256,500 Over $256,500 39.6% 8.28 9.93 11.59 13.25 14.90
</TABLE>
*Net amount subject to Federal income tax after deductions and exemptions.
Table does not reflect the effect of Deduction Limitation and Exemption
Phaseout described below** or of the alternative minimum tax, if any. Table
assumes person filing Single Return is not a married individual filing a
separate return, a surviving spouse, or a head of household.
**Deduction Limitation: Each $100 of adjusted gross income ("AGI") in excess of
$114,700 ($57,350 for marrieds filing separately) causes the loss of $3 of
itemized deductions. This limitation affects all itemized deductions other
than medical expenses, investment interest, and casualty, theft and wagering
losses. However, not more than 80% of a taxpayer's itemized deductions can be
eliminated. The threshold amounts will be adjusted for inflation from year to
year.
Exemption Phaseout: Each $2,500 or fraction thereof of AGI in excess of
$172,050 for joint filers ($114,700 for single taxpayers) causes taxpayers to
lose 2% of their personal exemptions. The threshold amounts will be adjusted
for inflation from year to year.
The following formula can be used to calculate a taxable yield
which is equivalent to the corresponding tax-free yield:
Tax Free Yield = Taxable Equivalent Yield
1 - Your Tax Bracket
For example, if you are in the 28% tax bracket and earn a tax-free
yield of 7%, the taxable equivalent yield would be 9.72%.
7% = .07 = 9.72%
1 - 28% .72
There can be no assurance that the Fund will achieve any specific tax-exempt
yield. While it is expected that a substantial portion of the interest income
distributed to investors in the Fund will be exempt from regular federal income
taxes, portions of such distributions may be subject to regular federal income
tax or federal alternative minimum tax. In addition, all or a substantial
portion of such distributions may be subject to state and local taxes.
Subsequent tax law changes could result in prospective or retroactive changes
in the tax brackets, tax rates and tax equivalent yields set forth above.
15
<PAGE>
[PIONEER LOGO]
Pioneer
Tax-Free
Income
Fund
60 State Street
Boston, Massachusetts 02109
OFFICERS
JOHN F. COGAN, JR., Chairman and President
DAVID D. TRIPPLE, Executive Vice President
MARK WINTER, Vice President
WILLIAM H. KEOUGH, Treasurer
JOSEPH P. BARRI, Secretary
INVESTMENT ADVISER
PIONEERING MANAGEMENT CORPORATION
PRINCIPAL UNDERWRITER
PIONEER FUNDS DISTRIBUTOR, INC.
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP
LEGAL COUNSEL
HALE AND DORR
SHAREHOLDER SERVICES AND TRANSFER AGENT
PIONEERING SERVICES CORPORATION
60 State Street
Boston, Massachusetts 02109
Telephone: 1-800-225-6292
SERVICES INFORMATION
If you would like information on the following, please call . . .
Existing and new accounts, prospectuses,
applications, service forms and
telephone transactions ........................................ 1-800-225-6292
Automated fund yields, prices and
account information ............................................ 1-800-225-4321
Retirement plans ................................................ 1-800-622-0176
Toll-free fax ................................................... 1-800-225-4240
Telecommunications Device for the Deaf (TDD) .................... 1-800-225-1997
0495-2461
(C)Pioneer Funds Distributor, Inc.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PIONEER TAX-FREE INCOME FUND
60 State Street
Boston, Massachusetts 02109
Class A and Class B Shares
April 28, 1995
This Statement of Additional Information (Part B of the Registration
Statement) is not a Prospectus, but should be read in conjunction with the
Prospectus dated April 28, 1995 of Pioneer Tax-Free Income Fund (the "Fund"). A
copy of the Prospectus can be obtained free of charge by calling Shareholder
Services at 1-800-225-6292 or by written request to the Fund at 60 State Street,
Boston, Massachusetts 02109.
TABLE OF CONTENTS
Page
1. Investment Objective and Policies............................2
2. Investment Restrictions......................................10
3. Management of the Fund.......................................12
4. Investment Adviser...........................................16
5. Underwriting Agreement and Distribution Plans................18
6. Shareholder Servicing/Transfer Agent.........................20
7. Custodian....................................................21
8. Principal Underwriter........................................21
9. Independent Public Accountant................................22
10. Portfolio Transactions.......................................22
11. Tax Status and Dividends.....................................24
12. Shares of the Fund...........................................28
13. Determination of Net Asset Value.............................29
14. Systematic Withdrawal Plan...................................30
15. Letter of Intention..........................................31
16. Investment Results...........................................31
17. General Information..........................................36
18. Financial Statements.........................................36
APPENDIX A...................................................A-1
APPENDIX B...................................................B-1
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 OBJECTIVE AND POLICIES
See "Investment Objective and Policies" in the Prospectus for more
information concerning the investment objective and policies of the Fund.
The investment objective of the Fund is to seek as high a level of income
exempt from federal income tax as possible, consistent with preservation of
capital. To achieve this objective, the Fund intends to invest in a diversified
portfolio of obligations issued by or on behalf of states, counties and
municipalities of the United States and the authorities and political
subdivisions thereof (herein called "Tax-Exempt Bonds"), the interest on which
is excluded from gross income for federal income tax purposes. All of the Fund's
assets will consist of: (1) Tax-Exempt Bonds which are rated at the time of
purchase within the three highest grades assigned by Moody's Investors Service,
Inc. ("Moody's") (Aaa, Aa or A) or Standard & Poor's Ratings Group ("S&P") (AAA,
AA, A); (2) temporary investments as described in the Prospectus; and (3) cash.
While ratings at the time of purchase will determine which securities may be
acquired, a subsequent reduction in rating will not require the Fund to dispose
of the securities. Investment in lower-quality securities may provide higher
yields than higher-rated securities; however, the added risk of investing in
lower quality securities might not be consistent with preservation of capital.
The ratings of Moody's and S&P represent their opinions as the quality of the
Tax-Exempt Bonds which they undertake to rate. It should be emphasized, however,
that ratings are general and are not absolute standards of quality.
Consequently, Tax-Exempt Bonds with the same maturity, coupon and rating may
have different yields while Bonds of the same maturity and coupon with different
ratings may have the same yield. There is no assurance the Fund will attain its
investment objective. For a description of the ratings of commercial paper and
the other debt securities permitted as temporary investments, see Appendix A.
Municipal Lease Obligations
Municipal lease obligations or installment purchase contract obligations
(collectively, "lease obligations") have special risks not ordinarily associated
with other Tax-Exempt Bonds (as defined in the Prospectus). Although lease
obligations do not constitute general obligations of the municipality for which
the municipality's taxing power is pledged, a lease obligation ordinarily is
backed by the municipality's covenant to budget for, appropriate and make the
payments due under the lease obligations. However, certain lease obligations
contain "non-appropriation" clauses which provide that the municipality has no
2
<PAGE>
obligation to make lease or installment purchases payments in future years
unless money is appropriated for such purpose on a yearly basis. In addition to
the "non-appropriation" risk, these securities represent a relatively new type
of financing that has not yet developed the depth of marketability associated
with more conventional bonds. Although "non-appropriation" lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. The Fund will seek to minimize these risks.
In determining the liquidity of municipal lease obligations, the Fund's
officers, under guidelines established by the Fund's Board of Trustees, will
consider: (1) the essential nature of the leased property; and (2) the
likelihood that the municipality will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to the
operation of the municipality.
If leased property is determined not to be essential in nature or if
there is a likelihood that the municipality will discontinue appropriating
funding, then the following factors will also be considered in determining
liquidity:
(1) any relevant factors related to the general credit quality of the
municipality, which may include: (a) whether the lease can be canceled; (b) what
assurance there is that the assets represented by the lease can be sold; (c) the
strength of the lessee's general credit (e.g., its debt, administrative,
economic and financial characteristics); and (d) the legal recourse in the event
of failure to appropriate.
(2) any relevant factors related to the marketability of the municipal
lease obligation which may include: (a) the frequency of trades and quotes for
the obligation; (b) the number of dealers willing to purchase or sell the
obligation and the number of other potential purchasers; (c) the willingness of
dealers to undertake to make a market in the obligation; and (d) the nature of
the marketplace trades, including, the time needed to dispose of the obligation,
the method of soliciting offers, and the mechanics of transfer.
Zero Coupon Bonds
Tax-Exempt Bonds in which the Fund may invest also include zero coupon
bonds and deferred interest bonds. Zero coupon bonds and deferred interest bonds
are debt obligations which are issued at a significant discount from face value.
While zero coupon bonds do not require the periodic payment of interest,
deferred interest bonds provide for a period of delay before the regular payment
of interest begins. The discount approximates the total amount of interest the
bonds will accrue and compound over the period until maturity or the first
interest payment date at a rate of interest reflecting the market rate of the
security at the time of issuance. Zero coupon bonds and deferred interest bonds
3
<PAGE>
benefit the issuer by mitigating its need for cash to meet debt service, but
also require a higher rate of return to attract investors who are willing to
defer receipt of such cash. Such investments may experience greater volatility
in value than debt obligations which make regular payments of interest. The Fund
will accrue income on such investments for tax and accounting purposes, which is
distributable to shareholders. Since no cash is received at the time of accrual,
the Fund may be required to liquidate other portfolio securities to satisfy its
distribution obligations.
Residual Interests in Municipal Securities
Certain municipal securities are divided into short-term and long-term
components. The short-term component has a long-term maturity, but pays interest
at a short-term rate that is reset by means of a "dutch auction" or similar
method at specified intervals (typically 35 days). The long-term component or
"residual interest" pays interest at a rate that is determined by subtracting
the interest paid on the short-term component from the coupon rate on the
municipal securities themselves. Consequently, the interest rate paid on
residual interests will increase when short-term interest rates are declining,
and will decrease when short-term interest rates are increasing. This interest
rate adjustment formula results in the market value of residual interests being
significantly more volatile than that of ordinary municipal securities. In a
declining interest rate environment, residual interests can provide the Fund
with a means of increasing or maintaining the level of tax-exempt interest paid
to shareholders. However, because of the market volatility associated with
residual interests, the Fund will not invest more than 10% of its total assets
in residual interests in municipal securities.
Options
The Fund can write (sell) "covered" put and call options on fixed-income
securities. Call options written by the Fund give the holder the right to buy
the underlying securities from the Fund at a fixed exercise price up to a stated
expiration date or, in the case of certain options, on such date. Put options
written by the Fund give the holder the right to sell the securities to the Fund
during the term of the option at a fixed exercise price up to a stated
expiration date or, in the case of certain options, on such date. Call options
are "covered" by the Fund, for example, when it owns the underlying securities
which the option holder has the right to purchase, and put options are "covered"
by the Fund, for example, when it has established a segregated account of cash
or short-term money market instruments which can be liquidated promptly to
satisfy any obligation of the Fund to purchase the underlying securities. The
Fund will receive a premium from writing a put or call option, which increases
the Fund's gross income in the event the option expires unexercised or is closed
out at a profit.
4
<PAGE>
By writing a call option, the Fund limits its opportunity to profit from
any increase in the market value of the underlying security above the exercise
price of the option. By writing a put option, the Fund assumes the risk that it
may be required to purchase the underlying security for an exercise price higher
than its then current market value, resulting in a potential capital loss unless
the security subsequently appreciates in value.
The Fund could terminate an option that it has written prior to its
expiration by entering into a "closing purchase transaction" in which it
purchases an option having the same terms as the option written. It is possible,
however, that illiquidity in the options markets may make it difficult from time
to time for the Fund to close out its written option positions. The Fund could
also purchase put or call options in anticipation of changes in interest rates
which may adversely affect the value of its portfolio or the prices of
securities that the Fund wants to purchase at a later date. The premium paid for
a put or call option plus any transaction costs will reduce the benefit, if any,
realized by the Fund upon exercise of the option, and, unless the price of the
underlying security changes sufficiently, the option may expire without value to
the Fund.
The Fund intends to write and purchase options on securities primarily
for hedging purposes and also in an effort to increase current income. Options
on securities that are written or purchased by the Fund will be entered into on
U.S. securities exchanges regulated by the Securities and Exchange Commission
("SEC") and in the over-the-counter market. Over-the-counter transactions
involve certain risks which may not be present in an exchange environment. The
staff of the SEC has taken the position that purchased over-the-counter options
and assets used to cover written over-the-counter options are illiquid and,
therefore, together with other illiquid securities, cannot exceed 15% of a
Fund's net assets.
Futures Contracts and Options on Futures Contracts
To hedge against changes in interest rates and securities prices or for
non-hedging purposes, the Fund may purchase and write (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 (such as U.S. Government
securities), securities indices 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") or on foreign exchanges.
5
<PAGE>
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 interest rates are rising or 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 interest rates are falling or
securities prices are rising, the Fund, through the purchase of futures
contracts, can attempt to secure better rates or 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. 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 and rate of return on
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 rise in
interest rates 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 the Fund's
investment adviser, there is a sufficient degree of correlation between price
trends for the Fund's portfolio securities and futures contracts based on other
financial instruments, securities indices or other indices, the Fund may also
enter into such futures contracts as part of its hedging strategy. Although
under some circumstances prices of securities in the Fund's portfolio may be
more or less volatile than prices of such futures contracts, the Fund's
investment adviser 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 securities portfolio. 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.
6
<PAGE>
On other occasions, the Fund may take a "long" position by purchasing
futures contracts. This would be done, for example, when the Fund anticipates
the subsequent purchase of particular securities when it has the necessary cash,
but expects the prices or interest rates then available in the applicable market
to be less favorable than prices or rates 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, 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 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 Investment Company Act of 1940, as amended (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
7
<PAGE>
fluctuations in securities held by the Fund or which it 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 in the cash market 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
non-hedging options on futures (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 options only to the
extent such transactions are consistent with the requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), for maintaining its qualification
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, 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 interest rates or 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. The only futures contracts available to
hedge the Fund's portfolio are various futures on U.S. Government securities,
futures on a municipal securities index and stock index futures.
Tax-Exempt Bonds
8
<PAGE>
Tax-Exempt Bonds include debt obligations issued to obtain funds for
various public purposes, including the construction of a wide range of public
facilities such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets, and water and sewer works. Other public
purposes for which Tax-Exempt Bonds may be issued include the refunding of
outstanding obligations, obtaining funds for general operating expenses, and the
obtaining of funds to loan to other public institutions and facilities. In
addition, certain types of industrial development bonds are, or have been under
prior law, issued by or on behalf of public authorities to obtain funds to
provide privately-operated housing facilities, sports facilities, convention or
trade show facilities, airports, mass transit, port or parking facilities, air
or water pollution control facilities, and certain local facilities for water
supply, gas, electricity, or sewage or solid waste disposal. Such obligations
are included within the term Tax-Exempt Bonds if the interest paid thereon
qualifies as excluded from gross income for federal income tax purposes. Other
types of industrial development bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may constitute Tax-Exempt Bonds, although the current
federal tax laws place substantial limitations on the size of such issues.
The two principal classifications of Tax-Exempt Bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source. Industrial
development bonds which are Tax-Exempt Bonds are in most cases revenue bonds and
do not generally constitute the pledge of the credit of the issuer of such
bonds. There are, of course, variations in security of Tax-Exempt Bonds, both
within a particular classification and between classifications, depending on
numerous factors.
The Fund may invest more than 25% of its total assets in securities of
companies in the gas, electric, telephone, sewer and water, public and private
utility segments of the municipal bond market. In view of this, an investment in
the Fund should be made with an understanding of the characteristics of these
industries and the potential risks of such an investment. Industry-wide problems
include the effects of fluctuating economic conditions, energy conservation
practices on levels of usage, difficulties in obtaining timely and adequate rate
relief, compliance with environmental regulations, increasing capital
expenditures and uncertainties with respect to fuel availability at reasonable
prices. The Fund will not purchase securities if more than 25% of its total
assets would be invested in any one industry. For purposes of this limitation,
9
<PAGE>
Tax-Exempt Bonds, except those issued for the benefit of non-governmental users,
are not considered to be part of an industry. The Fund may invest 25% or more of
its total assets in Tax-Exempt Bonds of issuers in any one state or it may
invest 25% or more of its total assets in industrial development bonds.
The yields on Tax-Exempt Bonds are dependent on a variety of factors,
including general money market conditions, general conditions of the Tax-Exempt
Bond market, the size of a particular offering, the maturity of the obligation,
and the rating of the issue. The value of outstanding Tax-Exempt Bonds will vary
as a result of changing evaluations of the ability of their issuers to meet the
interest and principal payments. Such values will also change in response to
changes in the interest rates payable on new issues of Tax-Exempt Bonds; should
such interest rates rise, the values of outstanding bonds, including those held
in the Fund's portfolio, will decline and (if purchased at principal amount)
would sell at a discount, and, if such interest rates fall, the values of
outstanding bonds will increase and (if purchased at principal amount) would
sell at a premium. Changes in the value of the Tax-Exempt Bonds held in the
Fund's portfolio arising from these or other factors will cause changes in the
net asset value per share of the Fund.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on Tax-Exempt Bonds. It can be expected that similar proposals may be
introduced in the future. If such a proposal were enacted, the availability of
Tax-Exempt Bonds for investment by the Fund and the value of the Fund's
portfolio would be affected. Additionally, the Fund would reevaluate its
investment objective and policies and consider changes in the structure of the
Fund.
The Fund will limit portfolio turnover to the extent practicable and
consistent with its investment objective and policies. While it does not intend
to engage in short-term trading, the Fund will not preclude itself from taking
advantage of short-term trends and yield disparities that might occur from time
to time, but not to the extent that such trading would jeopardize the Fund's
qualification as a regulated investment company under Subchapter M of the
Internal Revenue Code. A higher portfolio turnover rate will result in
correspondingly higher transaction costs.
2. INVESTMENT RESTRICTIONS
The Fund considers the investment objective and the following
restrictions as fundamental policies which cannot be changed without approval by
a "majority" of the Fund's outstanding voting securities (as such vote is
defined in Section 2(a)(42) of the 1940 Act) which means: (a) 67% or more of the
10
<PAGE>
voting securities present at a special or annual meeting if the holders of more
than 50% of the outstanding voting securities of the Fund are present or
represented by proxy; or (b) more than 50% of the outstanding voting securities
of the Fund, whichever is less. All other investment policies are considered
non-fundamental and may be changed by approval of the Trustees without the vote
of shareholders.
The Fund may not:
1. Purchase any security (other than obligations of the U.S. Government, its
agencies or instrumentalities), if as a result: (a) more than 25% of the
value of the Fund's total assets would then be invested in securities of any
single issuer; or (b) as to 75% of the value of the Fund's total assets,
more than 5% of the value of the Fund's total assets would then be invested
in securities of any single issuer. For the purpose of this limitation, the
Fund will regard each state and each political subdivision, agency or
instrumentality of such state and each multi-state agency of which such
state is a member as a separate issuer;
2. Borrow money, except from a bank for temporary or emergency purposes and not
for investment purposes, and then only in an amount not exceeding 5% of the
value of the Fund's total assets at the time of borrowing;
3. Pledge, mortgage or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph (2) above, it may pledge securities
having a market value at the time of pledge not exceeding 5% of the value of
the Fund's total assets;
4. Knowingly purchase or otherwise acquire any securities which are subject to
legal or contractual restrictions on resale or which are not readily
marketable, or purchase the securities of any other investment company,
except that it may make purchases of securities of investment companies in
accordance with its investment objective, policies, and restrictions or as
part of a merger, consolidation or acquisition of assets;
5. Underwrite any issue of securities, except in connection with the purchase
of securities in accordance with its investment objective, policies and
limitations, or participate on a joint or joint-and-several basis in any
securities trading account;
6. Purchase or sell real estate (or real estate limited partnerships), but this
shall not prevent the Fund from investing in Tax-Exempt Bonds or other
permitted obligations secured by real estate or interests therein;
11
<PAGE>
7. Purchase or sell commodities or commodity contracts except options,
financial futures or options on financial futures contracts in accordance
with its investment objective, policies, and restrictions, or invest in oil,
gas or other mineral leases, exploration or development programs, or write
or purchase puts, calls, straddles, spreads or any combination thereof;
8. Make loans, except through the purchase of securities, including repurchase
agreements, in accordance with its investment objective, policies and
limitations;
9. Make short sales of securities or purchase any securities on margin, except
for such short-term credits as are necessary for the clearance of
transactions and margin payments in connection with options, financial
futures contracts and options on financial futures contracts; or
10. Purchase or retain the securities of any issuer other than the securities of
the Fund, if, to the Fund's knowledge, those officers and trustees of the
Fund, or of the Investment Advisor or Underwriter, who own individually or
beneficially more than 1/2 of 1% of the outstanding securities of such issuer
together own beneficially more than 5% of such outstanding securities.
If a percentage restriction on investment or utilization of assets set
forth in any of the above is adhered to at the time an investment is made, a
later change in percentage resulting from changing values or a change in the
rating of a portfolio security will not be considered a violation of policy.
3. MANAGEMENT OF THE FUND
The 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.*, President and Director of The
Chairman of the Board, Pioneer Group, Inc. ("PGI");
President and Trustee Chairman and Director of Pioneering
Management Corporation ("PMC"); Chairman
of the Board and Chief Executive Officer
of Pioneer Winthrop Advisers ("PWA") since
1993; Chairman of the Board of Pioneer
Funds Distributor, Inc. ("PFD"); Director
of Pioneering Services Corporation ("PSC")
12
<PAGE>
and Pioneer Capital Corporation ("PCC");
President and Director of Pioneer Plans
Corporation ("PPC"); Chairman and Director
of Teberebie Goldfields Limited; and
Chairman and Partner, Hale and Dorr
(counsel to the Fund).
RICHARD H. EGDAHL, M.D., Professor of Management, Boston
Trustee University School of Management;
Boston University Health since 1988; Professor of Public
Policy Institute Health, Boston University School of
53 Bay State Road Public Health; Professor of Surgery,
Boston, Massachusetts Boston University School of Medicine and
Boston University Health Policy Institute;
Director, 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 utilization management firm) and
Springer-Verlag New York, Inc.
(publisher); Honorary Director, Franciscan
Children's Hospital.
MARGARET B.W. GRAHAM, Manager of Research Operations,
Trustee Xerox Palo Alto Research Center,
The Keep since September 1991; Professor of
Post Office Box 110 Operations Management and Management
Little Deer Isle, Maine of Technology, Boston University
School of Management ("BUSM"), since 1989;
Associate Dean, BUSM, 1988 to 1990 and
previously, Associate Professor,
Department of Operations Management, BUSM.
JOHN W. KENDRICK, Professor Emeritus of Economics,
Trustee George Washington University and
6363 Waterway Drive Adjunct Scholar, American Enterprise
Falls Church, Virginia Institute.
MARGUERITE A. PIRET, President, Newbury, Piret & Company,
Trustee Inc. (a merchant banking firm).
One Boston Place,
13
<PAGE>
Suite 2363
Boston, Massachusetts.
DAVID D. TRIPPLE*, Executive Vice President and
Trustee and Executive Director of PGI; Director of PFD,
Vice President Pioneer Investment Corp. ("PIC")
Pioneer International Corp. ("PIntl") and
Pioneer SBIC Corporation; President, Chief
Investment Officer and Director of PMC.
STEPHEN K. WEST Partner, Sullivan & Cromwell (a law
Trustee firm).
125 Broad Street
New York, New York
JOHN WINTHROP, President, John Winthrop & Co., Inc.
Trustee (a private investment firm); and
One North Adgers Wharf Trustee of NUI Corp., and Alliance
Charleston, South Carolina Capital Reserves, Alliance Government
Reserves and Alliance Tax Exempt Reserves.
MARK L. WINTER Vice President of the Fund since
Vice President 1993; formerly, Portfolio Manager, Mutual
of Omaha Fund Management Company (until
1993).
WILLIAM H. KEOUGH, Senior Vice President, Chief
Treasurer Financial Officer and Treasurer of PGI;
Treasurer of PFD, PMC, PSC, PCC, PPC and
Pioneer SBIC Corporation; and Treasurer and
Director of PPC.
JOSEPH P. BARRI, Secretary of PGI, PMC, PPC,
Secretary PIC and PCC; Clerk of PFD and PSC and
Partner, Hale and Dorr (counsel to the
Fund).
ERIC RECKARD, Manager of Fund Accounting and
Assistant Treasurer Compliance of PMC since 1994;
and Manager of Auditing and Business
Analysis for PGI until May, 1994.
ROBERT NAULT, General Counsel of PGI since 1995;
Assistant Secretary formerly of Hale and Dorr
(counsel to the Trust) where he most
recently served as a junior partner.
14
<PAGE>
The business address of all officers is 60 State Street, Boston,
Massachusetts 02109.
Each of the above (except for Mr. Winter) is also an officer and/or
Trustee or Director of each Pioneer Fund listed below.
All of the outstanding capital stock of PMC and PSC is owned by PGI, a
Delaware corporation. All of the outstanding capital stock of PFD is indirectly
owned by PGI. The table below lists all the Pioneer Funds, including the Fund,
currently offered to the public and the investment adviser and principal
underwriter for each fund.
<TABLE>
<CAPTION>
Investment Principal
Fund Name Adviser Underwriter
<S> <C> <C>
Pioneer Fund PMC PFD
Pioneer II PMC PFD
Pioneer Three PMC PFD
Pioneer Growth Shares PMC PFD
Pioneer Capital Growth Fund PMC PFD
Pioneer Equity-Income Fund PMC PFD
Pioneer Gold Shares PMC PFD
Pioneer Winthrop Real Estate Investment Fund * PFD
Pioneer Europe Fund PMC PFD
Pioneer International Growth Fund PMC PFD
Pioneer Bond Fund PMC PFD
Pioneer America Income Trust PMC PFD
Pioneer Short-Term Income Trust PMC PFD
Pioneer Income Fund PMC PFD
Pioneer Tax-Free Income Fund PMC PFD
Pioneer Intermediate Tax-Free Fund PMC PFD
Pioneer California Double Tax-Free Fund PMC PFD
Pioneer New York Triple Tax-Free Fund PMC PFD
Pioneer Massachusetts Double Tax-Free Fund PMC PFD
Pioneer Cash Reserves Fund PMC PFD
Pioneer U.S. Government Money Fund PMC PFD
Pioneer Tax-Free Money Fund PMC PFD
Pioneer Interest Shares, Inc. PMC **
Pioneer Emerging Markets Fund PMC PFD
Pioneer India Fund PMC PFD
<FN>
- -----------
* PWA is the investment adviser for this fund.
** This fund is a closed-end investment company.
</FN>
</TABLE>
PMC, the Fund's investment adviser, also manages the investments of certain
institutional private accounts. Messrs. Cogan, Tripple, Keough and Barri,
officers and/or Trustees of the Fund, are also officers and/or directors of PFD,
15
<PAGE>
PMC, PSC and PGI. As of March 31, 1995, 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. As of March 31, 1995, the officers and Trustees held in aggregate less than
1% of the outstanding shares of the Fund. As of March 31, 1995, to the knowledge
of the management of the Fund, no person beneficially owned 5% or more of the
outstanding shares of the Fund.
Compensation of Officers and Trustees. The Fund pays no salaries or
compensation to any of its officers. The Fund pays an annual fee of $1,000, plus
$100 per meeting attended, to each Trustee who is not affiliated with PMC, PFD
or PSC. Fees paid to affiliated Trustees are reimbursed to the Fund by PMC. The
Fund pays the Chairman of the Audit Committee an annual fee of $250 and pays
each member of the Audit Committee an annual fee of $200. All Trustees are
reimbursed for expenses incurred in attending Trustee and committee meetings.
The Fund also pays an annual trustees' fee of $500 plus expenses to each Trustee
affiliated with PMC, PSC or PFD. Any such fees and expenses paid to affiliates
or interested persons of PMC, PFD or PSC are reimbursed to the Fund under its
Management Contract.
The following table sets forth certain information with respect to the
compensation of each Trustee of the Fund:
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Aggregate Benefits from Fund and
Compensation Accrued as Pioneer
From Part of Family
Name of Trustee the Fund* Trust's Expense of Funds**
<S> <C> <C> <C>
John F. Cogan, Jr. $ 500 $0 $11,750
Donald D. Tripple 500 0 11,750
Richard H. Egdahl, M.D. 3,000 0 55,650
Margaret B. W. Graham 3,000 0 55,650
John W. Kendrick 3,000 0 55,650
Marguerite A. Piret 3,300 0 66,650
Stephen K. West 3,200 0 63,650
John Winthrop 3,200 0 63,650
<FN>
* As of Fund's fiscal year end.
** As of December 31, 1994 (calendar year end for all 25 Pioneer Funds).
</FN>
</TABLE>
4. INVESTMENT ADVISER
As stated in the Prospectus, PMC, 60 State Street, Boston, Massachusetts,
serves as the Fund's investment adviser. PMC became the Fund's investment
adviser on December 1, 1993. Prior to that date, Mutual of Omaha Fund Management
16
<PAGE>
Company ("FMC") served as the Fund's investment adviser. The management contract
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 by vote of its
Board of Trustees or a majority of its outstanding voting securities and the
giving of 60 days' written notice.
As compensation for its management services and expenses incurred, PMC is
entitled to a management fee at the following rates per annum of the Fund's
average daily net assets. The fee is computed and accrued daily and paid
monthly.
Net Assets Annual Rate
For assets up to $250,000,000........................... 0.50%
For assets in excess of $250,000,000
to $300,000,000........................................0.48%
Over $300,000,000........................................0.45%
PMC has agreed that until December 1, 1995, its fee shall not exceed the
fee that would have been payable under the previous management contact with FMC,
without giving effect to any expense limitation. Under the previous management
contract with FMC, which was terminated on December 1, 1993, the Fund paid FMC a
management fee at an annual rate equal to the following percentages of the
Fund's average daily net assets:
Net Assets Annual Rate
For assets up to and including $100,000,000..............50%
For assets in excess of $100,000,000
to $200,000,000........................................48%
For assets in excess of $200,000,000
to $300,000,000........................................46%
For assets in excess of $300,000,000
to $400,000,000........................................44%
For assets in excess of $400,000,000
to $500,000,000........................................42%
For assets of $500,000,000 and over......................40%
Under the previous management contract with FMC, FMC agreed to reimburse
the Fund quarterly for all expenses (excluding interest, brokerage commissions,
taxes and extraordinary expenses) incurred in each year by the Fund in excess of
1.50% of the first $30,000,000 of the Fund's average daily net assets plus 1.00%
of any additional net assets, up to an amount not exceeding its management fee
for the period for which reimbursements, if any, where made. PMC has agreed that
17
<PAGE>
if in any fiscal year the aggregate expenses of the Fund exceed the expense
limitation established by any state having jurisdiction over the Fund, PMC will
reduce its management fee to the extent required by state law. The most
restrictive state expense limit currently applicable to the Fund provides that
the Fund's expenses in any fiscal year may not exceed 2.5% of the first $30
million of average daily net assets, 2.0% of the next $70 million of such assets
and 1.5% of such assets in excess of $100 million.
The Fund paid $2,024,972 in management fees to FMC for the fiscal year
ended December 31, 1992, and $2,111,066 for the period from January 1 to
November 30, 1993. The Fund paid $205,922 in management fees to PMC for the
period from December 1, 1993 to December 31, 1993. The Fund paid $2,266,099 in
management fees to PMC for the fiscal year ended December 31, 1994. No expense
reimbursements were paid by FMC or PMC to the Fund during these periods.
5. 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 certain
distribution expenses not borne by the Fund.
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.
The Fund and PFD have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
Under the Underwriting Agreement, PFD will use its best efforts in rendering
services to the Fund.
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 under
the 1940 Act with respect to Class A Shares (the "Class A Plan") and a plan of
distribution with respect to Class B Shares (the "Class B Plan") (together, the
"Plans").
Class A Plan
Pursuant to the Class A Plan, the Fund may reimburse PFD for its
expenditures in financing any activity primarily intended to result in the sale
of Fund shares. Certain categories of such expenditures have been approved by
18
<PAGE>
the Board of Trustees and are set forth in the Prospectus under the caption
"Distribution Plans." The expenses of the Fund pursuant to the Class A Plan are
accrued on a fiscal year basis and may not exceed, with respect to the Class A
Shares, the annual rate of .25% of the Fund's average daily net assets
attributable to Class A.
Class B Plan
The Class B Plan provides that the Fund shall pay PFD, as the Fund's
distributor for its Class B shares, a daily distribution fee equal on an annual
basis to 0.75% of the Fund's average daily net assets attributable to Class B
shares and will pay PFD a service fee equal to 0.25% of the Fund's average daily
net assets attributable to Class B shares (which PFD will in turn pay to
securities dealers which enter into a sales agreement with PFD at a rate of up
to 0.25% of the Fund's average daily net assets attributable to Class B shares
owned by investors for whom that securities dealer is the holder or dealer of
record). This service fee is intended to be in consideration of personal
services and/or account maintenance services rendered by the dealer with respect
to Class B shares. PFD will advance to dealers the first-year service fee at a
rate equal to 0.25% of the amount invested. As compensation therefor, PFD may
retain the service fee paid by the Fund with respect to such shares for the
first year after purchase. Dealers will become eligible for additional service
fees with respect to such shares commencing in the thirteenth month following
purchase. Dealers may from time to time be required to meet certain other
criteria in order to receive service fees. PFD or its affiliates are entitled to
retain all service fees payable under the Class B Plan for which there is no
dealer of record or for which qualification standards have not been met as
partial consideration for personal services and/or account maintenance services
performed by PFD or its affiliates for shareholder accounts.
The purpose of distribution payments to PFD under the Class B Plan is to
compensate PFD for its distribution services to the Fund. PFD pays commissions
to dealers as well as expenses of printing prospectuses and reports used for
sales purposes, expenses with respect to the preparation and printing of sales
literature and other distribution related expenses, including, without
limitation, the cost necessary to provide distribution-related services, or
personnel, travel office expenses and equipment. The Class B Plan also provides
that PFD will receive all CDSCs attributable to Class B shares. See
"Distributions Plans" in the Prospectus.
General
In accordance with the terms of the Plans, PFD provides to the Fund for
review by the Trustees a quarterly written report of the amounts expended under
the respective Plan and the purpose for which such expenditures were made. In
19
<PAGE>
the Trustees' quarterly review of the Plans, they will consider the continued
appropriateness and the level of reimbursement or compensation the Plans
provide.
No interested person of the Fund, nor any Trustee of the Fund who is not an
interested person of the Trust, has any direct or indirect financial interest in
the operation of the Plans except to the extent that OPFD and certain of its
employees may be deemed to have such an interest as a result of receiving a
portion of the amounts expended under the Plans by the Fund and except to the
extent certain officers may have an interest in PFD's ultimate parent, PGI.
The Plans were adopted by a majority vote of the Board of Trustees,
including all of the Trustees who are not, and were not at the time they voted,
interested persons, as defined in the 1940 Act (none of whom had or have any
direct or indirect financial interest in the operation of the Plan) of the Fund,
cast in person at a meeting called for the purpose of voting on the Plans. In
approving the Plans, the Trustees identified and considered a number of
potential benefits which the Plans may provide. The Board of Trustees believes
that there is a reasonable likelihood that the Plans will benefit the Fund and
its current and future shareholders. Under their terms, the Plans remain in
effect from year to year provided such continuance is approved annually by vote
of the Trustees in the manner described above. The Plans may not be amended to
increase materially the annual percentage limitation of average net assets which
may be spent for the services described therein without approval of the
shareholders of the Fund affected thereby, and material amendments to the Plans
must also be approved by the Trustees in the manner described above. A Plan may
be terminated at any time, without payment of any penalty, by vote of the
majority of the Trustees who are not interested persons of the Fund and have no
direct or indirect financial interest in the operations of the Plan, or by a
vote of a majority of the outstanding voting securities of the respective Class
of the Fund (as defined in the 1940 Act). A Plan will automatically terminate in
the event of its assignment (as defined in the 1940 Act). In the Trustees'
quarterly review of the Plans, they will consider a Plan's continued
appropriateness and the level of compensation it provides.
During the fiscal year ended December 31, 1994, the Fund incurred total
distribution fees pursuant to the Fund's Class A Plan of $1,233,748.
Distribution fees were paid by the Fund to PFD in reimbursement of expenses
related to servicing of shareholder accounts and to compensate dealers and sales
personnel. No payments were made during the fiscal year ended December 31, 1994
by the Fund with respect to Class B Shares.
6. SHAREHOLDER SERVICING/TRANSFER AGENT
20
<PAGE>
The Fund has contracted with PSC, 60 State Street, Boston, Massachusetts,
to act as shareholder servicing agent and transfer agent for the Fund. This
contract terminates if assigned and may be terminated without penalty by either
party by vote of its Board of Trustees or a majority of its outstanding voting
securities and the giving of ninety days' written notice.
Under the terms of its contract with the Fund, PSC will service shareholder
accounts, and its duties will 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 routine shareholder inquiries.
PSC receives an annual fee of $28.00 per Class A shareholder account and
$28.00 per Class B account from the Fund as compensation for the services
described above. This 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.
7. CUSTODIAN
Brown Brothers Harriman & Co. (the "Custodian"), 40 Water Street, Boston,
Massachusetts 02109, is the custodian of the Fund's assets. The Custodian's
responsibilities include safekeeping and controlling the Fund's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Fund's investments. The Custodian also provides
fund accounting, bookkeeping and pricing assistance to the Fund.
The Custodian does not determine the investment policies of the Fund or
decide which securities it will buy or sell. The Fund may invest in securities
issued by the Custodian, deposit cash in the Custodian and 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, serves as the principal
underwriter for the Fund in connection with the continuous offering of the Class
A and Class B shares of each Fund. Under the Fund's previous underwriting
agreement with FMC, FMC received $2,599,535 and $2,640,000 in aggregate
underwriting commissions for the fiscal year ended December 31, 1992 and for the
period from January 1 to November 30, 1993, respectively, of which $338,384 and
$387,593 was retained, respectively. Under the Fund's current underwriting
21
<PAGE>
agreement with PFD, for the period from December 1, 1993 to December 31, 1993
for the fiscal year ended to December 31, 1994, PFD received $150,000 and
$1,145,352, respectively, in aggregate underwriting income commissions which
$19,058 and $135,694, respectively was retained.
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 (other than
municipal debt securities issued by state political subdivisions or their
agencies or instrumentalities) provided (i) the securities meet the investment
objectives and policies of the Fund; (ii) the securities are acquired by the
Fund for investment and not for resale; (iii) the securities are not restricted
as to transfer either by law or liquidity of market; and (iv) the securities
have a value which is readily ascertainable (and not established only by
evaluation procedures) as evidenced by a listing on the American Stock Exchange
or the New York Stock Exchange or the NASDAQ National Market.
9. INDEPENDENT PUBLIC ACCOUNTANT
Effective January 1, 1994, Arthur Andersen LLP (formerly Arthur Andersen &
Co.), One International Place, Boston, MA 02110, was selected as the independent
public accountant for the Fund. Previously, Coopers & Lybrand had served as
independent public accountant to the Fund. Arthur Anderson's election as
independent public accountant was approved, at a meeting called for the purpose
of voting on such approval, by the vote of a majority of those Trustees on the
Board of Trustees who are not interested persons of the Fund.
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 broker-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 or who
sell shares of the Pioneer Funds. In addition, if PMC determines in good faith
that the amount of commissions charged by a broker-dealer is reasonable in
relation to the value of the brokerage and research services provided by such
22
<PAGE>
broker-dealer, the Fund may pay commissions to such broker-dealer in an amount
greater than the amount another firm may charge. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement). PMC
maintains a listing of broker-dealers who provide such services on a regular
basis. However, because it is anticipated that many transactions on behalf of
the Fund and other investment companies managed by PMC are placed with
broker-dealers (including broker-dealers on the listing) without regard to the
furnishing of such services, it is not possible to estimate the proportion of
such transactions directed to such broker-dealers solely because such services
were provided.
The research received from broker-dealers may be useful to PMC in rendering
investment management services to the Fund as well as other investment companies
managed by PMC, although not all such research may be useful to the Fund.
Conversely, such information provided by broker-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.
The Board of Trustees periodically reviews PMC's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Fund.
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.
In addition to the Fund, PMC acts as investment adviser or subadviser to
the other Pioneer Funds, Pioneer Interest Shares, Inc. and certain private
accounts with investment objectives similar to that of the Fund. Securities
frequently 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
23
<PAGE>
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 more than one of the Fund,
another Pioneer Fund, Pioneer Interest Shares, Inc. 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.
The Fund paid no brokerage commissions for the fiscal years ended December
31, 1992, 1993 and 1994.
11. TAX STATUS AND DIVIDENDS
The Fund's policy is to declare on each business day dividends from the
Fund's net investment income and to pay them to shareholders of record on the
last business day of each month or shortly thereafter and to distribute net
realized capital gains, if any, once a year. Additional distributions may be
made for the purpose of avoiding liability for federal income or excise tax.
It is the Fund's policy to meet the requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), for qualification as a
regulated investment company. These requirements relate to the sources of its
income, the diversification of its assets and the distribution of its income to
shareholders. If the Fund meets all such requirements and distributes to its
shareholders, in accordance with the Code's timing requirements, 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 accordance with its investment objectives, the Fund invests its assets
in a manner which will provide as high a level of tax-exempt income as is
24
<PAGE>
consistent with the preservation of shareholders' capital. Since the
preservation of capital is an important aspect of the Fund's investment
objectives, the Fund may from time to time invest a portion of its portfolio in
short-term obligations and may engage in transactions generating income or gain
which is not tax-exempt, e.g., purchase non-municipal securities, sell or lend
portfolio securities, enter into repurchase agreements, dispose of rights to
when-issued securities prior to issuance, acquire certain stripped tax-exempt
obligations or coupons, acquire obligations at a market discount, and enter into
options and futures transactions.
The Code permits tax-exempt interest received by the Fund to flow through
as exempt-interest dividends to the Fund's shareholders, provided that the Fund
qualifies as a regulated investment company and at least 50% of the value of the
Fund's total assets at the close of each quarter of its taxable year consists of
tax-exempt obligations. That part of the Fund's net investment income which is
attributable to interest from tax-exempt obligations and which is distributed to
shareholders will be designated by the Fund as an "exempt-interest dividend"
under the Code and will be excluded from a shareholder's gross income for
regular federal income tax purposes. The percentage of income designated as
tax-exempt is applied uniformly to all distributions made during each taxable
year and may differ from the actual tax-exempt percentage earned during any
particular month. That portion of net investment income distributions not
designated as tax-exempt and any distributions of the excess of net short-term
capital gain over net long-term capital loss are taxable to shareholders as
ordinary income, and any distributions of the excess of net long-term capital
gain over net short-term capital loss (after taking into account any capital
loss carryovers) are taxable to shareholders as long-term capital gains,
regardless of the shareholder's holding period for the shares. Dividends
declared by the Fund in October, November or December as of a record date in
such a month and paid the following January will be treated for federal income
tax purposes as received by shareholders on December 31 of the calendar year in
which they are declared.
If the Fund invests in certain zero coupon or 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 prior to the receipt
of the corresponding cash payments. However, the Fund must distribute, at least
annually, all or substantially all of its net taxable and tax-exempt 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
25
<PAGE>
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 capital gains, if any, during the eight
years following the year of the loss. To the extent subsequent capital gains are
offset by such losses, they would not result in federal income tax liability to
the Fund and are not expected to be distributed as such to shareholders.
Options written or purchased and futures contracts entered into by the Fund
on certain securities or securities indices may cause the Fund to recognize
gains or losses from marking to market at the end of its taxable year even
though such options may not have lapsed, been closed out, or exercised or such
futures contracts may not have been offset or otherwise terminated and may
affect the characterization as long-term or short-term of some capital gains and
losses realized by the Fund. Losses on certain options or futures contracts
and/or offsetting positions (portfolio securities or other positions with
respect to which the Fund's risk or loss is substantially diminished by one or
more options or futures 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. These tax rules applicable to options, futures contracts, and
straddles may affect the amount, timing and character of the Fund's income and
loss and hence of its distributions to shareholders.
Because none of the Fund's income will arise from dividends, no part of its
distributions to its corporate shareholders will qualify for the
dividends-received deduction for corporations.
Any loss realized by a shareholder on the redemption, exchange or other
disposition of Fund shares that have a tax holding period of six months or less
is disallowed to the extent of any exempt-interest dividends with respect to
such shares and, to the extent not thus disallowed, will be treated as a
long-term capital loss to the extent of any distributions of long-term capital
gains with respect to such shares. In addition, if Class A shares redeemed or
exchanged have been held for less than 91 days, (1) in the case of a
reinvestment at net asset value pursuant to the reinvestment privilege, 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
26
<PAGE>
reinvestment or exchange. Losses on certain redemptions may be disallowed under
"wash sale" rules in the event of other investments in the Fund within a period
of 61 days beginning 30 days before and ending 30 days after a redemption or
other sale of shares.
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 from such sources (not including tax-exempt interest)
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.
Interest on the indebtedness incurred (directly or indirectly) by
shareholders to purchase or carry shares of the Fund will not be deductible for
federal income tax purposes to the extent it is deemed to relate to
exempt-interest dividends received from the Fund.
Federal law generally requires that the Fund withhold as "backup
withholding" 31% of reportable payments, including taxable income dividends (but
not including exempt-interest dividends), capital gain dividends, and the
proceeds of redemptions (including exchanges) (and repurchases?) to shareholders
who have not complied with IRS regulations. In order to avoid this withholding
requirement, shareholders must certify on their Account Applications, or on
separate W-9 Forms, that the Social Security or other Taxpayer Identification
Number they provide is their correct number 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 under-reporting of interest or dividend
income. Backup withholding may be inapplicable for any year in which the Fund
reasonably estimates that at least 95% of its dividends paid with respect to
such year are exempt-interest dividends.
Provided that 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, and, subject to compliance with certain income-source
requirements under Delaware law, it should also not be required to pay Delaware
corporate income tax.
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.
27
<PAGE>
domestic corporations, partnerships, trusts or estates, and who are subject to
U.S. federal income tax. The description does not address special tax rules
applicable to certain classes of investors such as insurance companies and
financial institutions. Investors other than U.S. persons may be subject to
different U.S. tax treatment, including a possible 30% U.S. nonresident alien
withholding tax (or nonresident alien 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.
The exemption of exempt-interest dividends for federal income tax purposes
does not necessarily result in exemption under the tax laws of any state or
local taxing authority, which vary with respect to the taxation of such dividend
income. Many states will exempt from tax that portion of an exempt-interest
dividend which represents interest received by the Fund from that state's
securities, subject in some cases to compliance with concentration and/or
reporting requirements, which the Fund does not make any commitment to seek to
satisfy. However, the Fund will report annually to its shareholders the
percentage of interest income received by the Fund during the preceding year on
municipal bonds indicating, on a state-by-state basis only, the source of such
income. Each shareholder is advised to consult his own tax adviser regarding the
exemption, if any, of exempt-interest dividends under applicable state and local
law.
12. SHARES OF THE FUND
General
The Fund is an open-end investment company established as a Nebraska
corporation in 1968 and reorganized as a Delaware business trust in June 1994.
Prior to December 1, 1993 the Fund was called Mutual of Omaha Tax-Free Income
Fund, Inc. and prior to June 30, 1994 was called Pioneer Tax-Free Income Fund,
Inc. Reference to the Fund includes both the Delaware business trust and the
Nebraska corporation. The Board of Trustees, as of the date of this Statement of
Additional Information, has authorized the issuance of two classes of shares,
Class A and Class B.
Unless otherwise required by the 1940 Act or the Agreement and Declaration
of Trust (the "Declaration of Trust"), the Fund has no intention of holding
annual meetings of shareholders. Shareholders may remove a Trustee by the
affirmative vote of at least two-thirds of the Fund's outstanding shares and the
Trustees shall promptly call a meeting for such purpose when requested to do so
in writing by the record holders of not less than 10% of the outstanding shares
of the Fund. Shareholders may, under certain circumstances communicate with
other shareholders in connection with requesting a special meeting of
28
<PAGE>
shareholders. However, at any time that less than a majority of the Trustees
holding office were elected by the shareholders, the Trustees will call a
special meeting of shareholders for the purpose of electing Trustees.
The Declaration of Trust permits the issuance of series of shares in
addition to the Fund which would represent interests in separate portfolios of
investments. No series would be entitled to share in the assets of any other
series or be liable for the expenses or liabilities of any other series.
In addition to the requirements under Delaware law, the Declaration of
Trust provides that shareholders 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 to
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.
Shareholder and Trustee Liability
The Fund is organized as a Delaware business trust, and, under Delaware
law, the shareholders of such a trust are not generally subject to liability for
the debts or obligations of the Trust. Similarly, Delaware law provides that the
Fund will not be liable for the debts or obligations of any other series of the
Trust. However, no similar statutory or other authority limiting business trust
shareholder liability exists in many other states. As a result, to the extent
that a Delaware business trust or a shareholder is subject to the jurisdiction
of courts in such other states, the courts may not apply Delaware law and may
thereby subject the Delaware business trust shareholders to liability. To guard
against this risk, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund. Notice of such
disclaimer will normally be given in each agreement, obligation or instrument
entered into or executed by the Fund or a Trustee. The Declaration of Trust
provides for indemnification by the Fund for any loss suffered by a shareholder
as a result of an obligation of the Fund. The Declaration of Trust also 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. The Trustees believe that, in view of the above, the risk of personal
liability of shareholders is remote.
29
<PAGE>
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
or her office.
13. DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of the Fund is determined as of
the close of regular trading on the New York Stock Exchange (the "Exchange")
(currently 4:00 p.m., Eastern Time) on each day the Exchange is open for
business. As of the date of this Statement of Additional Information, the
Exchange is open for business every weekday except for the following holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share of
each class of the Fund is also determined on any other day in which the level of
trading in its portfolio securities is sufficiently high that the current net
asset value per share might be materially affected by changes in the value of
its portfolio securities. On any day in which no purchase orders for the shares
of the Fund become effective and no shares are tendered for redemption, the
Fund's net asset value per share may not be determined.
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 its
liabilities attributable to that class, and dividing it by the number of
outstanding shares of the class. For purposes of determining net asset value,
expenses of the Fund are accrued daily and taken into account.
In determining the value of the assets of the Fund for the purpose of
obtaining the net asset value, securities for which reliable quotations are
readily available shall be valued on the basis of valuations furnished by
pricing services which utilize electronic data processing techniques to
determine the valuations for normal institutional-size trading units of such
securities. Securities not valued by the pricing service for which reliable
quotations are readily available, shall be valued at market values furnished by
recognized dealers in such securities. Short-term obligations with remaining
maturities of 60 days or less shall be valued at amortized cost. Securities and
other assets for which reliable quotations are not readily available, shall be
valued at their fair value as determined in good faith under consistently
applied guidelines established by and under the general supervision of the Board
of Trustees of the Fund, although the actual calculations may be made by persons
acting pursuant to the direction of the Board.
30
<PAGE>
14. SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan ("SWP"), which is available for Class A
shares only, is designed to provide a convenient method of receiving fixed
payments at regular intervals from Class A shares of the Fund deposited by the
applicant under the SWP. The applicant must deposit or purchase for deposit with
PSC shares of the Fund having a total value of not less than $10,000. Periodic
checks of $50 or more will be sent to the applicant, or any person designated by
him, monthly or quarterly. A designation of a third party to receive checks
requires an acceptable signature guarantee. The CDSC on any share subject to a
CDSC (see "How to Buy Fund Shares" in the Prospectus) may be waived or reduced
for non-retirement accounts if the redemption is made in connection with a SWP
(limited to in any year to 10% of the value of the account at the time the
withdrawal plan is established).
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 Plan account. Redemptions are taxable transactions
to shareholders. 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. In addition, the amounts received by a shareholder cannot be considered
as an actual 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 Plan have been redeemed.
15. LETTER OF INTENTION
Purchases in the Fund of $100,000 or over of Class A shares (excluding any
reinvestments of dividends and capital gains distributions) made within a
13-month period pursuant to a Letter of Intention provided to PFD will qualify
for a reduced sales charge. Such reduced sales charge will be the charge that
would be applicable to the purchase of all Class A shares purchased during such
13-month period pursuant to a Letter of Intention had such shares been purchased
all at once. For example, a person who signs a Letter of Intention providing for
a total investment in Fund shares of $100,000 over a 13-month period would be
charged at the 3.50% sales charge rate with respect to all purchases during that
period. Should the amount actually purchased during the 13-month period be more
31
<PAGE>
or less than that indicated in the Letter, an adjustment in the sales charge
will be made. A purchase not made pursuant to a Letter of Intention may be
included thereafter if the Letter is filed within 90 days of such purchase. Any
shareholder may also obtain the reduced sales charge by including the value (at
current offering price) of all his Class A Shares in the Fund and other Pioneer
funds, except directly purchased Class A shares of Pioneer Money Market Trust,
held of record as of the date of his or her Letter of Intention as a credit
toward determining the applicable scale of sales charge for the shares to be
purchased under the Letter of Intention.
The Letter of Intention authorizes PSC to escrow Class A Shares having a
purchase price equal to 5% of the stated investment in the Letter of Intention.
A Letter of Intention is not a binding obligation upon the investor to purchase,
or the Fund to sell, the full amount indicated and the investor should carefully
read the provisions of the Letter of Intention set forth in the Account
Application before signing.
16. INVESTMENT RESULTS
Other Quotations, Comparisons, and General Information
From time to time, in advertisements, in sales literature, or in reports to
shareholders, the past performance of the Fund may be illustrated and/or
compared with that of other mutual funds with similar investment objectives, and
to other relevant indices. For example, the Fund may compare its yield and total
return to the Shearson Lehman Hutton Municipal Bond Index, or other comparable
indices or investment vehicles. In addition, the performance of the Fund may be
compared to alternative investment or savings vehicles (such as individual
securities, bank deposits, or certificates of deposit) and/or indices or
indicators of economic activity, e.g., inflation, interest rates, or the
Consumer Price Index, 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, Personal Investor, 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 CDA Weisenberger,
Donoghue's Mutual Fund Almanac, Investment Company Data, Inc., Ibbotson
Associates, Johnson's Charts, Kanon Bloch Carre and Company, Lipper Analytical
Services, Inc., Micropal, Inc., Morningstar, Inc., Schabacker Investment
Management and Towers Data Systems, Inc.
32
<PAGE>
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 methods used to measure the Fund's performance is "total
return." "Total return" will normally represent the percentage change in value
of an account, or of a hypothetical investment in the Fund, over any period up
to the lifetime 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.
Other data that may be advertised or published about the Fund include the
average portfolio quality, the average portfolio maturity, and the average
portfolio duration.
In determining the average annual total return (calculated as provided
above), recurring fees, if any, that are charged to all shareholder accounts 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 the Fund's mean account size.
The Fund's yield quotations and average annual total return quotations as
33
<PAGE>
they may appear in the Prospectus, this Statement of Additional Information or
in advertising are calculated by standard methods prescribed by the SEC.
Standardized Yield Quotations
The Fund's yield is computed by dividing the Fund's net investment income
per share during a base period of 30 days, or one month, by the maximum offering
price per share of the Fund on the last day of such base period in accordance
with the following formula:
YIELD = 2[ (a-b +1 ) 6 -1]
cd
Where: a = interest earned during the period
b = net expenses accrued for the period
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends
d = the maximum offering price per share on
the last day of the period
For purposes of calculating interest earned on debt obligations as provided in
item "a" above:
(i) The yield to maturity of each obligation held by the Fund is computed
based on the market value of the obligation (including actual accrued interest,
if any) at the close of business each day during the 30-day base period, or,
with respect to obligations purchased during the month, the purchase price (plus
actual accrued interest, if any) on settlement date, and with respect to
obligations sold during the month the sale price (plus actual accrued interest,
if any) between the trade and settlement dates;
(ii) The yield to maturity of each obligation is then divided by 360 and
the resulting quotient is multiplied by the market value of the obligation
(including actual accrued interest, if any) to determine the interest income on
the obligation for each day. The yield to maturity calculation has been made on
each obligation during the 30 day base period;
(iii) Interest earned on all debt obligations during the 30-day or one
month period is then totaled;
(iv) The maturity of an obligation with a call provision(s) is the next
call date on which the obligation reasonably may be expected to be called or, if
none, the maturity date;
34
<PAGE>
(v) Obligations with sinking fund call provisions may be regarded as
maturing as to that portion to be retired on each sinking fund call date or
during a twelve-month period; and
(vi) In the case of a tax exempt obligation issued without original issue
discount and having a current market discount, the coupon rate of interest of
the obligation is used in lieu of yield to maturity to determine interest income
earned on the obligation. In the case of a tax exempt obligation with original
issue discount where the discount based on the current market value of the
obligation exceeds the then remaining portion of original issue discount (i.e.
market discount), the yield to maturity used to determine interest income earned
on the obligation is the imputed rate based on the original issue discount
calculation. In the case of a tax exempt obligation with original issue discount
where the discount based on the current market value of the obligation is less
than the then remaining portion of the original issue discount (market premium),
the yield to maturity used to determine interest income earned on the obligation
is based on the market value of the obligation.
Taxable Equivalent Yield
The Fund may also from time to time advertise its taxable equivalent yield
which is determined by dividing that portion of the Fund's yield (calculated as
described above) that is tax exempt by one minus the stated federal income tax
rate and adding the product to that portion, if any, of the Fund's yield that is
not tax exempt. The Fund's tax-equivalent yield assuming a 39.6% tax rate for
the period ended December 31, 1994 was 9.02%. For a description of how to
compare yields on municipal bonds and taxable securities, see the Taxable
Equivalent Formula set forth in Appendix A to the Prospectus.
Standardized Average Annual Total Return Quotations
Average annual total return quotations 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 to equal the ending redeemable
value of such hypothetical investment on the last day of the designated period
in accordance with the following formula:
P(1+T) n = ERV
Where: P = a hypothetical initial payment of $1,000
(less the maximum sales load for Class A
Shares or the deduction of the CDSC on
Class B Shares at the end of the period.
T = average annual total return
35
<PAGE>
n = number of years
ERV = ending redeemable value of the hypothetical
$1,000 initial payment made at the beginning of
the designated period (or fractional portion thereof)
The computation above assumes 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%. The
Fund's average annual total return for the one- , five-, ten-year and
life-of-fund periods ended December 31, 1994 were -10.61%, 5.82%, 9.15% and
6.14%, respectively. The Fund's SEC yield for the 30-day period ended December
31, 1994 was 5.45%.
Automated Information Line (FactFone)
FactFone, 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 funds;
o annualized 30-day yields on Pioneer's bond funds;
o annualized 7-day yields and 7-day effective (compound) yields for
Pioneer's money market funds; and
o dividends and capital gains distributions on all funds.
Yields are calculated in accordance with SEC mandated standard formulas.
In addition, by using a personal identification number (PIN), shareholders
may access their account balance and last three transactions and may order a
duplicate statement.
All performance numbers communicated through FactFone represent past
performance, and figures for all bond funds include the maximum applicable sales
charge. A shareholder's actual yield and total return will vary with changing
market conditions. The value of Class A and Class B shares (except for Pioneer
money market funds, which seek a stable $1.00 share price) will also vary, and
such shares may be worth more or less at redemption than their original cost.
17. GENERAL INFORMATION
The Fund is registered with the SEC as a diversified open-end management
investment company. Such registration does not involve supervision by the
Commission of the management or policies of the Fund. For further information
36
<PAGE>
with respect to the Fund and the securities offered hereby, reference is made to
the registration statement filed with the SEC, including all exhibits thereto.
Annual and semiannual reports of the Fund are mailed to each shareholder.
18. FINANCIAL STATEMENTS
The audited financial statements and related report of Arthur Andersen LLP
contained in the Fund's 1994 Annual Report are attached hereto. A copy of the
Annual Report which is incorporated by reference herein may be obtained without
charge by calling Shareholder Services at 1-800-225-6292 or by written request
to the Fund at 60 State Street, Boston, Massachusetts 02109.
<PAGE>
APPENDIX A
The three highest ratings of Moody's for Tax-Exempt Bonds are Aaa, Aa and
A. Tax-Exempt Bonds rated Aaa are judged to be of the "best quality." The rating
of Aa is assigned to Tax-Exempt Bonds which are of "high quality by all
standards," but as to which margins of protection or other elements make
long-term risks appear somewhat larger than Aaa rated Tax- Exempt Bonds. The Aaa
and Aa rated Tax-Exempt Bonds comprise what are generally known as "high grade
bonds." Tax-Exempt Bonds which are rated A by Moody's possess many favorable
investment attributes and are considered "upper medium grade obligations."
Factors giving security to principal and interest of A rated Tax-Exempt bonds
are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future. Bonds in the A group which
offer the maximum security are rated A-1.
The three highest ratings of S&P for Tax-Exempt Bonds are AAA (Prime), AA
(High Grade) and A (Good Grade). Tax-Exempt Bonds rated AAA are "obligations of
the highest quality." The rating of AA is accorded issues with investment
characteristics "only slightly less marked than those of the prime quality
issues." The category of A describes the "third strongest capacity for payment
of debt service." Principal and interest payments on bonds in this category are
regarded as safe. It differs from the two higher ratings because: with respect
to general obligation bonds, there is some weakness either in the local economic
base, in debt burden, in the balance between revenues and expenditures, or in
quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at some
future date. With respect to revenue bonds, debt service coverage is good, but
not exceptional. Stability of the pledged revenues could show some variations
because of increased competition or economic influences on revenues. Basic
security provisions, while satisfactory, are less stringent. Management
performance appears adequate. AA and A rated bonds may be modified with a (+) or
(-) when appropriate to provide more detailed indications on credit quality.
The "other debt securities" included in the definition of temporary
investments are corporate (as opposed to municipal) debt obligation rated AAA,
AA or A by S&P or Aaa, Aa or A by Moody's. Corporate debt obligations rated AAA
by S&P are "highest grade obligations." Obligations bearing the rating of AA
also qualify as "high grade obligations" and "in the majority of instances
differ from AAA issues only in small degree." Corporate debt obligations rates A
by S&P are regarded as "upper medium grade" and have "considerable investment
strength, but are not entirely free from adverse effects of changes in economic
and trade conditions." The Moody's corporate debt ratings of Aaa, Aa and A do
not differ materially from those set forth above for Tax-Exempt Bonds.
A-1
<PAGE>
The commercial paper ratings of A-1 by S&P and P-1 by Moody's are the
highest commercial paper ratings of the respective agencies. The issuer's
earnings, quality of long-term debt, management and industry position are among
the factors considered in assigning such ratings.
Subsequent to its purchase by the Fund, an issue of Tax-Exempt Bonds or a
temporary investment may cease to be rated or its rating may be reduced below
the minimum required for purchase by the Fund. Neither event requires the
elimination of such obligation from the Fund's portfolio, but PMC will consider
such an event in its determination of whether the Fund should continue to hold
such obligation in its portfolio. To the extent that the ratings accorded by S&P
and Moody's for Tax-Exempt Bonds or temporary investments may change as a result
of changes in such organizations, or changes in their ratings systems, the Fund
will attempt to use comparable ratings as standards for its investments in
Tax-Exempt Bonds or temporary investments in accordance with the investment
policies contained herein.
A-2
<PAGE>
APPENDIX B
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, most respected and successful
money managers in the United States.
As of December 31, 1994, PMC employed a professional investment staff of
46, with a combined average of 14 years experience in the financial services
industry.
At December 31, 1994, there were non-retirement shareholder accounts and
retirement shareholder accounts in the Fund. Total assets for all Pioneer Funds
at December 31, 1994 were approximately $10,038,000,000 representing 928,769
shareholder accounts.
B-1
<PAGE>
<TABLE>
<CAPTION>
Pioneer Tax-Free Income Fund
Date Initial Investment Offering Price Sales Charge Shares Purchased Net Asset Value Initial Net Asset
Included Per Share Value
<S> <C> <C> <C> <C> <C> <C>
1/1/85 $10,000 $10.16 4.50% 984.252 $9.70 $9,550
</TABLE>
<TABLE>
<CAPTION>
Dividends and Capital Gains Reinvested
Value of Shares
Date From Investment From Cap. Gains From Dividends Total Value
Reinvested Reinvested
<S> <C> <C> <C> <C>
12/31/85 $10,640 $0 $936 $11,576
12/31/86 $11,506 $722 $1,972 $14,200
12/31/87 $10,531 $661 $2,786 $13,978
12/31/88 $10,994 $690 $4,007 $15,691
12/31/89 $11,290 $708 $5,281 $17,279
12/31/90 $11,338 $719 $6,500 $18,557
12/31/91 $11,801 $1,063 $8,011 $20,875
12/31/92 $11,890 $1,473 $9,334 $22,697
12/31/93 $12,481 $2,077 $11,086 $25,644
12/31/94 $11,063 $1,848 $11,098 $24,009
</TABLE>
<PAGE>
INDEX DESCRIPTIONS
LONG-TERM MUNICIPAL BOND PORTFOLIO *
For the 1926 to 1984 period, returns are calculated form yields on 20-year prime
issues from Solomon Brothers' Analytical Record of Yields and Yields Spreads,
assuming coupon equals previous year-end yield and a 20-year maturity. For 1985
to the present, returns are calculated using Moody's Bond Record, using the
December average municipal yield as the beginning-of-following year coupon
(average of Aaa, Aa, A, Baa grades).
LONG-TERM CORPORATE BONDS *
For 1969 through 1991, corporate bond total returns are represented by the
Salomon Brothers Long-Term High-Grade Corporate Bond Index. Since most large
corporate bond transactions take place over the counter, a major dealer is the
natural source of these data. The index includes nearly all Aaa- and Aa-rated
bonds. If a bond is downgraded during a particular month, its return for the
month is included in the index before removing the bond from future portfolios.
For 1926 through 1968, total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946 through 1968,
Ibbotson and Sinquefield backdated the Salomon Brothers' index, using Salomon
Brothers' monthly yield data with a methodology similar to that used by Salomon
for 1969-1991. Capital appreciation returns were calculated from yields assuming
(at the beginning of each monthly holding period) a 20-year maturity, a bond
price equal to par, and a coupon equal to the beginning-of-period yield. For the
period 1926-1945, the Standard and Poor's monthly High-Grade Corporate Composite
yield data were used, assuming a 4 percent coupon and a 20-year maturity. The
conventional present-value formula for bond price for the beginning and
end-of-month prices was used. (This formula is presented in Ross, Stephen A.,
and Randolph W. Westerfield, Corporate Finance, Times Mirror/ Mosby, St. Louis,
1990, p. 97 ["Level-Coupon Bonds"].) The monthly income return was assumed to be
one-twelfth the coupon.
LONG-TERM GOVERNMENT BOND TOTAL RETURN *
The total returns on long-term government bonds from 1977 to 1991 are
constructed with data from The Wall Street Journal. Over 1926-1976, data are
obtained from the Government Bond File at the Center for Research in Security
Prices (CRSP), Graduate School of Business, University of Chicago. Each year, a
one-bond portfolio with a term of approximately 20 years and a reasonably
current coupon was used, and whose returns did not reflect potential tax
benefits, impaired negotiability, or special redemption or call privileges.
Where callable bonds had to be used, the term of the bond was assumed to be a
simple average of the maturity and first call dates minus the current date. The
bond was "held" for the calendar year and returns were computed. Total returns
for 1977-1991 are calculated as the change in the flat price or and-interest
price.
INTERMEDIATE-TERM GOVERNMENT BONDS TOTAL RETURN *
Total returns of the intermediate-term government bonds for 1977-1991 are
calculated from The Wall Street Journal prices, using the change in flat price.
Returns for 1934 through 1986 are obtained from the CRSP Government Bond File.
<PAGE>
INDEX DESCRIPTIONS
Each year, one-bond portfolios are formed, the bond chosen is the shortest
noncallable bond with a maturity not less than 5 years, and this bond is "held"
for the calendar year. Monthly returns are computed. (Bonds with impaired
negotiability or special redemption privileges are omitted, as are partially or
fully tax-exempt bonds starting with 1943.) For the period from 1934 through
1942, almost all bonds with maturities near 5 years were partially or full
tax-exempt and were selected using the rules described above. Personal tax rates
were generally low in that period, so that yields on tax-exempt bonds were
similar to yields on taxable bonds. Between 1926 and 1933, there are few bonds
suitable for construction of a series with a 5-year maturity.
For this period, five year bond yield estimates are used.
U.S. (30 DAY) TREASURY BILL TOTAL RETURNS *
For the U.S. Treasury bill index, data from The Wall Street Journal are used for
1977-1991; the CRSP U.S. Government Bond File is the source of data through
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.
BANK SAVINGS ACCOUNT **
Data sources include the U.S. League of Savings Institutions Sourcebook; average
annual yield on savings deposits in FSLIC [FDIC] insured savings institutions
for the years 1963-1987 and The Wall Street Journal for the years 1988-1994.
6 MONTH CD **
Data sources include the Federal Reserve Bulletin and The Wall Street Journal.
Sources: * Ibbotson Associates
** Towers Data Systems
<PAGE>
<TABLE>
<CAPTION>
COMPARATIVE PERFORMANCE STATISTICS
Municipal U.S. Long Term U.S. Long Term U.S. Interm. U.S.(30Day) Bank Savings
Long term Corporate Bds Govt Bonds Govt Bonds Treasury Bill Account 6 Month CD
%TR * %Total Return * %Total Return * %Total Return * %Total Return * %Total Return ** %Total Return **
<S> <C> <C> <C> <C> <C> <C> <C>
Dec 1928 0.55 2.84 0.10 0.92 3.56 N/A N/A
Dec 1929 3.22 3.27 3.42 6.01 4.75 N/A N/A
Dec 1930 6.52 7.98 4.66 6.72 2.41 5.30 N/A
Dec 1931 -3.53 -1.85 -5.31 -2.32 1.07 5.10 N/A
Dec 1932 8.19 10.82 16.84 8.81 0.96 4.10 N/A
Dec 1933 -2.17 10.38 -0.07 1.83 0.30 3.40 N/A
Dec 1934 21.66 13.84 10.03 9.00 0.16 3.50 N/A
Dec 1935 9.18 9.61 4.98 7.01 0.17 3.10 N/A
Dec 1936 -15.13 6.74 7.52 3.06 0.18 3.20 N/A
Dec 1937 28.38 2.75 0.23 1.56 0.31 3.50 N/A
Dec 1938 9.24 6.13 5.53 6.23 -0.02 3.50 N/A
Dec 1939 5.70 3.97 5.94 4.52 0.02 3.40 N/A
Dec 1940 10.52 3.39 6.09 2.96 0.00 3.30 N/A
Dec 1941 -0.80 2.73 0.93 0.50 0.06 3.10 N/A
Dec 1942 2.09 2.60 3.22 1.94 0.27 3.00 N/A
Dec 1943 6.51 2.83 2.08 2.81 0.35 2.90 N/A
Dec 1944 4.15 4.73 2.81 1.80 0.33 2.80 N/A
Dec 1945 5.76 4.08 10.73 2.22 0.33 2.50 N/A
Dec 1946 -3.77 1.72 -0.10 1.00 0.35 2.20 N/A
Dec 1947 -4.04 -2.34 -2.62 0.91 0.50 2.30 N/A
Dec 1948 3.79 4.14 3.40 1.85 0.81 2.30 N/A
Dec 1949 14.39 3.31 6.45 2.32 1.10 2.40 N/A
Dec 1950 4.15 2.12 0.06 0.70 1.20 2.50 N/A
Dec 1951 -3.65 -2.69 -3.93 0.36 1.49 2.60 N/A
Dec 1952 -3.21 3.52 1.16 1.63 1.66 2.70 N/A
Dec 1953 0.38 3.41 3.64 3.23 1.82 2.80 N/A
Dec 1954 3.74 5.39 7.19 2.68 0.86 2.90 N/A
Dec 1955 -1.21 0.48 -1.29 -0.65 1.57 2.90 N/A
Dec 1956 -7.61 -6.81 -5.59 -0.42 2.46 3.00 N/A
Dec 1957 5.92 8.71 7.46 7.84 3.14 3.30 N/A
Dec 1958 -2.56 -2.22 -6.09 -1.29 1.54 3.38 N/A
Dec 1959 -3.43 -0.97 -2.26 -0.39 2.95 3.53 N/A
Dec 1960 8.61 9.07 13.78 11.76 2.66 3.86 N/A
Dec 1961 2.37 4.82 0.97 1.85 2.13 3.90 N/A
Dec 1962 7.68 7.95 6.89 5.56 2.73 4.08 N/A
Dec 1963 -0.84 2.19 1.21 1.64 3.12 4.17 N/A
Dec 1964 4.59 4.77 3.51 4.04 3.54 4.19 4.18
Dec 1965 -2.74 -0.46 0.71 1.02 3.93 4.23 4.68
Dec 1966 0.58 0.20 3.65 4.69 4.76 4.45 5.75
Dec 1967 -4.41 -4.95 -9.18 1.01 4.21 4.67 5.48
<PAGE>
COMPARATIVE PERFORMANCE STATISTICS
Municipal U.S. Long Term U.S. Long Term U.S. Interm. U.S.(30Day) Bank Savings
Long term Corporate Bds Govt Bonds Govt Bonds Treasury Bill Account 6 Month CD
%TR * %Total Return * %Total Return * %Total Return * %Total Return * %Total Return ** %Total Return **
<S> <C> <C> <C> <C> <C> <C> <C>
Dec 1968 -0.96 2.57 -0.26 4.54 5.21 4.68 6.44
Dec 1969 -15.39 -8.09 -5.07 -0.74 6.58 4.80 8.71
Dec 1970 21.10 18.37 12.11 16.86 6.52 5.14 7.06
Dec 1971 12.26 11.01 13.23 8.72 4.39 5.30 5.36
Dec 1972 1.51 7.26 5.69 5.16 3.84 5.37 5.38
Dec 1973 4.27 1.14 -1.11 4.61 6.93 5.51 8.60
Dec 1974 -10.66 -3.06 4.35 5.69 8.00 5.96 10.20
Dec 1975 11.55 14.64 9.20 7.83 5.80 6.21 6.51
Dec 1976 15.79 18.65 16.75 12.87 5.08 6.23 5.22
Dec 1977 3.87 1.71 -0.69 1.41 5.12 6.39 6.12
Dec 1978 -3.98 -0.07 -1.18 3.49 7.18 6.56 10.21
Dec 1979 1.02 -4.18 -1.23 4.09 10.38 7.29 11.90
Dec 1980 -17.57 -2.76 -3.95 3.91 11.24 8.78 12.33
Dec 1981 -15.52 -1.24 1.86 9.45 14.71 10.71 15.50
Dec 1982 47.94 42.56 40.36 29.10 10.54 11.19 12.18
Dec 1983 3.34 6.26 0.65 7.41 8.80 9.71 9.65
Dec 1984 8.41 16.86 15.48 14.02 9.85 9.92 10.65
Dec 1985 24.03 30.09 30.97 20.33 7.72 9.02 7.82
Dec 1986 27.31 19.85 24.53 15.14 6.16 7.84 6.30
Dec 1987 -5.06 -0.27 -2.71 2.90 5.47 6.92 6.58
Dec 1988 11.47 10.70 9.67 6.10 6.35 7.20 8.15
Dec 1989 14.64 16.23 18.11 13.29 8.37 7.91 8.27
Dec 1990 6.54 6.78 6.18 9.73 7.81 7.8 7.85
Dec 1991 11.18 19.89 19.30 15.46 5.60 4.61 4.95
Dec 1992 10.80 9.39 8.05 7.19 3.51 2.89 3.27
Dec 1993 14.16 13.19 18.24 11.24 2.90 2.73 2.88
Dec 1994 -8.63 -5.76 -7.77 -5.14 3.90 4.96 5.4
* Source: Ibbotson Associates
** Source: Towers Data Systems
</TABLE>
<PAGE>
PIONEER TAX-FREE INCOME FUND
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
The financial statements of the Registrant are incorporated
by reference from the 1994 Annual Report to Shareholders
which is incorporated by reference into Part B, the
Statement of Additional Information. The 1994 Annual Report
to Shareholders is attached hereto as Exhibit 12.
(b) Exhibits:
(1) Agreement and Declaration of Trust.
(1)(a) Establishment and Designation of Class B Shares.
(2) By-Laws.
(3) Inapplicable.
(4) Inapplicable.
(5) Management Contract with Pioneering Management
Corporation.
(6) Underwriting Agreement with Pioneer Funds Distributor,
Inc.
(7) Inapplicable.
(8) Custodian Agreement
(9) Service Agreement with Pioneering Services Corporation.
(10) Inapplicable.
(11)(a) Consent of Independent Public Accountants (Coopers &
Lybrand LLP).
C-1
<PAGE>
(b) Consent of Independent Public Accountants
(Arthur Andersen LLP).
(12) 1994 Annual Report to Shareholders.
(13) Understanding - Incorporated herein by reference to
Post-effective Amendment No. 8 filed March 18, 1980.
(14) Inapplicable.
(15)(a) Class A Plan of Distribution.
(b) Class B Plan of Distribution.
(16) None.
(17) Financial Data Schedule.
Item 25. Persons Controlled By or Under
Common Control With Registrant.
The Pioneer Group, Inc., a Delaware corporation ("PGI"), owns 100% of the
outstanding capital stock of Pioneering Management Corporation, a Delaware
corporation ("PMC"), Pioneering Services Corporation ("PSC"), Pioneer Funds
Distributor, Inc. ("PFD"), Pioneer Capital Corporation ("PCC"), Pioneer Fonds
Marketing GmbH ("GmbH"), Pioneer SBIC Corp. ("SBIC"), Pioneer Associates, Inc.,
Pioneer International Corporation, Pioneer Plans Corporation ("PPC"), Pioneer
Goldfields Limited ("PGL"), and Pioneer Investments Corporation ("PIC"), all
Massachusetts corporations. PGI also owns 100% of the outstanding capital stock
of Pioneer Metals and Technology, Inc. ("PMT"), a Delaware corporation, and
Pioneer First Polish Trust Fund Joint Stock Company ("First Polish"), a Polish
corporation. PGI owns 90% of the outstanding shares of Teberebie Goldfields
Limited ("TGL"). Pioneer Winthrop Advisers ("PWA"), a Massachusetts general
partnership, is a joint venture between PGI and Winthrop Financial Associates, a
Limited Partnership, a Delaware limited partnership. Pioneer Fund, Pioneer II,
Pioneer Three, Pioneer Bond Fund, Pioneer Intermediate Tax-Free Fund, Pioneer
Growth Trust, Pioneer Europe Fund, Pioneer International Growth Fund, Pioneer
Short-Term Income Trust, Pioneer Tax-Free State Series Trust, Pioneer Money
Market Trust and Pioneer America Income Trust (each of the foregoing, a
Massachusetts business trust), and Pioneer Interest Shares, Inc. (a Nebraska
corporation) and Pioneer Growth Shares, Pioneer Income Fund, Pioneer India Fund,
Pioneer Emerging Markets Fund and the Registrant (each of the foregoing, a
Delaware business trust) are all parties to management contracts with PMC.
Pioneer Winthrop Real Estate Investment Fund is a party to a sub-investment
C-2
<PAGE>
management contract with PMC. PCC owns 100% of the outstanding capital stock of
SBIC. SBIC is the sole general partner of Pioneer Ventures Limited Partnership,
a Massachusetts limited partnership. John F. Cogan, Jr. owns approximately 15%
of the outstanding shares of PGI. Mr. Cogan is Chairman of the Board, President
and Trustee of the Registrant and of each of the Pioneer investment companies;
Director and President of PGI; President and Director of PPC, PIC, Pioneer
International Corporation and PMT; Director of PCC and PSC; Chairman of the
Board and Director of PMC, PFD and TGL; Chairman, President and Director of PGL;
Chairman of the Supervisory Board of GmbH; Chairman and Chief Executive Officer
of PWA; Chairman and Member of Supervisory Board of First Polish; and Partner,
Hale and Dorr.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of January 31, 1995
-------------- -----------------------
Class A Shares 16,785
Class B Shares 0
Item 27. Indemnification
Except for the Agreement and Declaration of Trust establishing the
Registrant as a Trust under Delaware law, there is no contract, arrangement or
statute under which any trustee, officer, underwriter or affiliated person of
the Registrant is insured or indemnified. The Agreement and Declaration of Trust
provides that no Trustee or officer will be indemnified against any liability to
which the Registrant would otherwise be subject by reason of or for willful
misfeasance, bad faith, gross negligence or reckless disregard of such person's
duties.
Insofar as indemnification for liability arising under the Securities Act
of 1933, as amended (the "Act"), may be available to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment of the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
C-3
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
All of the information required by this item is set forth in the Form ADV,
as amended, of Pioneering Management Corporation. The following sections of such
Form ADV are incorporated herein by reference:
(a) Items 1 and 2 of Part 2;
(b) Section IV, Business Background, of each Schedule D.
Item 29. Principal Underwriter
(a) See Item 25 above.
(b) Trustees and Officers of PFD:
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
<S> <C> <C>
John F. Cogan, Jr. Trustee and Chairman Chairman of the Board,
President and Trustee
Robert L. Butler Trustee and President None
David D. Tripple Trustee Executive Vice
President and Trustee
Steven M. Graziano Senior Vice President None
Stephen W. Long Senior Vice President None
John W. Drachman Vice President None
Barry G. Knight Vice President None
William A. Misata Vice President None
Anne W. Patenaude Vice President None
Elizabeth B. Rice Vice President None
Gail A. Smyth Vice President None
Constance S. Spiros Vice President None
Marcy Supovitz Vice President None
Steven R. Berke Assistant None
Vice President
C-4
<PAGE>
Mary Sue Hoban Assistant None
Vice President
William H. Keough Treasurer Treasurer
Roy P. Rossi Assistant Treasurer None
Joseph P. Barri Clerk Secretary
</TABLE>
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts and records are maintained at the Registrant's office at 60
State Street, Boston, Massachusetts; contact the Treasurer.
Item 31. Management Services
The Registrant is not a party to any management-related service contract,
except as described in the Prospectus and the Statement of Additional
Information.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes to deliver, or cause to be delivered
with the Prospectus, to each person to whom the Prospectus is
sent or given a copy of the Registrant's report to shareholders
furnished pursuant to and meeting the requirements of Rule 30d-1
under the Investment Company Act of 1940 from which the specified
information is incorporated by reference, unless such person
currently holds securities of the Registrant and otherwise has
received a copy of such report, in which case the Registrant
shall state in the Prospectus that it will furnish, without
charge, a copy of such report on request, and the name, address
and telephone number of the person to whom such a request should
be directed.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant caused this Amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boston and The Commonwealth of Massachusetts, on the 25th day of April, 1995.
PIONEER TAX-FREE INCOME FUND
/s/ John F. Cogan, Jr.
John F. Cogan, Jr.
Chairman
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
dates indicated:
Title and Signature Date
Principal Executive Officer: )
)
)
/s/ John F. Cogan, Jr. )
John F. Cogan, Jr., President )
) April 25, 1995
Principal Financial and )
Accounting Officer: )
)
)
/s/William H. Keough )
William H. Keough, Treasurer* )
A MAJORITY OF THE BOARD OF TRUSTEES:
/s/John F. Cogan, Jr. )
John F. Cogan, Jr., Trustee* )
)
/s/Richard H. Egdahl, M.D. )
Richard H. Egdahl, Trustee* )
)
/s/Margaret B.W. Graham )
Margaret B.W. Graham, Trustee* )
)
/s/John W. Kendrick )
John W. Kendrick, Trustee* )
<PAGE>
)
/s/Marguerite A. Piret )
Marguerite A. Piret, Trustee* )
)
/s/David D. Tripple )
David D. Tripple, Trustee* )
)
/s/Stephen K. West )
Stephen K. West, Trustee* )
)
/s/John Winthrop )
John Winthrop, Trustee* )
*By /s/Joseph P. Barri April 25, 1995
Joseph P. Barri
Attorney-in-fact
<PAGE>
Exhibit Index
Exhibit Page
Number Document Title Number
(1) Agreement and Declaration of Trust.
(1)(a) Establishment and Designation of Class B Shares.
(2) By-Laws.
(5) Management Contract with Pioneering Management Corporation.
(6) Underwriting Agreement with Pioneer Funds Distributor, Inc..
(8) Custodian Agreement
(9) Service Agreement with Pioneering Services Corporation.
(11)(a) Consent of Independent Public Accountants (Coopers & Lybrand LLP).
(b) Consent of Independent Public Accountants (Arthur Andersen LLP).
(12) 1994 Annual Report to Shareholders.
(15)(a) Class A Plan of Distribution.
(b) Class B Plan of Distribution.
(17) Financial Data Schedule.
PIONEER TAX FREE INCOME FUND
AGREEMENT AND DECLARATION OF TRUST
This AGREEMENT AND DECLARATION OF TRUST is made on June 16, 1994 by John F.
Cogan, Jr., Richard H. Egdahl, M.D., Margaret B.W. Graham, John W. Kendrick,
Marguerite A. Piret, David D. Tripple, Stephen K. West and John Winthrop
(together with all other persons from time to time duly elected, qualified and
serving as Trustees in accordance with the provisions of Article II hereof, the
"Trustees").
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the Trust shall be held and managed in trust pursuant to this
Agreement and Declaration of Trust.
ARTICLE I
NAME AND DEFINITIONS
Section 1. Name. The name of the Trust created by this Agreement and Declaration
of Trust is "Pioneer Tax Free Income Fund."
Section 2. Definitions. Unless otherwise provided or required by the context:
(a) "Administrator" means the party, other than the Trust, to the contract
described in Article III, Section 3 hereof.
(b) "By-laws" means the By-laws of the Trust adopted by the Trustees, as
amended from time to time, which By-laws are expressly herein incorporated by
reference as part of the "governing instrument" within the meaning of the
Delaware Act.
(c) "Class" means each class of Shares of a Series established pursuant to
Article V.
<PAGE>
(d) "Commission," "Interested Person" and "Principal Underwriter" have the
meanings provided in the 1940 Act. Except as such term may be otherwise defined
by the Trustees in conjunction with the establishment of any Class or Series of
Shares, the term "vote of a majority of the Shares outstanding and entitled to
vote" shall have the same meaning as is assigned to the term "vote of a majority
of the outstanding voting securities" in the 1940 Act.
(e) "Covered Person" means a person so defined in Article IV, Section 3.
(f) "Custodian" means any Person other than the Trust who has custody of
any Trust Property as required by Section 17(f) of the 1940 Act, but does not
include a system for the central handling of securities described in said
Section 17(f).
(g) "Declaration" shall mean this Agreement and Declaration of Trust, as
amended or restated from time to time. Reference in this Declaration of Trust to
"Declaration," "hereof," "herein," and "hereunder" shall be deemed to refer to
this Declaration rather than exclusively to the article or section in which such
words appear unless the context clearly requires otherwise.
(h) "Delaware Act" means Chapter 38 of Title 12 of the Delaware Code
entitled "Treatment of Delaware Business Trusts," as amended from time to time.
(i) "Distributor" means the party, other than the Trust, to the contract
described in Article III, Section 1 hereof.
(j) "His" shall include the feminine and neuter, as well as the masculine,
genders.
(k) "Investment Adviser" means the party, other than the Trust, to the
contract described in Article III, Section 2 hereof.
(l) "Net Asset Value" means the net asset value of each Series of the
Trust, determined as provided in Article VI, Section 3.
(m) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures, estates and other entities, and
governments and agencies and political subdivisions, thereof, whether domestic
or foreign.
2
<PAGE>
(n) "Series" means a series of Shares established pursuant to Article V.
(o) "Shareholder" means a record owner of Outstanding Shares;
(p) "Shares" means the equal proportionate transferable units of interest
into which the beneficial interest of each Series or Class is divided from time
to time (including whole Shares and fractions of Shares). "Outstanding Shares"
means Shares shown in the books of the Trust or its transfer agent as then
issued and outstanding, but does not include Shares which have been repurchased
or redeemed by the Trust and which are held in the treasury of the Trust.
(q) "Transfer Agent" means any Person other than the Trust who maintains
the Shareholder records of the Trust, such as the list of Shareholders, the
number of Shares credited to each account, and the like.
(r) "Trust" means Pioneer Tax Income Fund, the Delaware business trust
established hereby, and reference to the Trust, when applicable to one or more
Series or Classes, refers to such Series or Classes.
(s) "Trustees" means the persons who have signed this Declaration of Trust,
so long as they shall continue in office in accordance with the terms hereof,
and all other persons who may from time to time be duly qualified and serving as
Trustees in accordance with Article II, in all cases in their capacities as
Trustees hereunder.
(t) "Trust Property" means any and all property, real or personal, tangible
or intangible, which is owned or held by or for the Trust or any Series or the
Trustees on behalf of the Trust or any Series or Class.
3
<PAGE>
(u) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
ARTICLE II
THE TRUSTEES
Section 1. Management of the Trust. The business and affairs of the Trust
shall be managed by or under the direction of the Trustees, and they shall have
all powers necessary or desirable to carry out that responsibility. The Trustees
may execute all instruments and take all action they deem necessary or desirable
to promote the interests of the Trust. Any determination made by the Trustees in
good faith as to what is in the interests of the Trust shall be conclusive. In
construing the provisions of this Declaration, the presumption shall be in favor
of a grant of power to the Trustees.
Section 2. Powers. The Trustees in all instances shall act as principals,
free of the control of the Shareholders. The Trustees shall have full power and
authority to take or refrain from taking any action and to execute any contracts
and instruments that they may consider necessary or desirable in the management
of the Trust. The Trustees shall not in any way be bound or limited by current
or future laws or customs applicable to trust investments, but shall have full
power and authority to make any investments which they, in their sole
discretion, deem proper to accomplish the purposes of the Trust. The Trustees
may exercise all of their powers without recourse to any court or other
authority. Subject to any applicable limitation herein or in the By-laws or
resolutions of the Trust, the Trustees shall have power and authority, without
limitation:
(a) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operations.
(b) To invest in, hold for investment, or reinvest in, cash; securities,
including common, preferred and preference stocks; warrants; subscription
rights; profit-sharing interests or participations and all other contracts for
4
<PAGE>
or evidence of equity interests; bonds, debentures, bills, time notes and all
other evidences of indebtedness; negotiable or non-negotiable instruments;
government securities, including securities of any state, municipality or other
political subdivision thereof, or any governmental or quasi-governmental agency
or instrumentality; and money market instruments including bank certificates of
deposit, finance paper, commercial paper, bankers' acceptances and all kinds of
repurchase agreements, of any corporation, company, trust, association, firm or
other business organization however established, and of any country, state,
municipality or other political subdivision, or any governmental or
quasi-governmental agency or instrumentality; or any other security, property or
instrument in which the Trust or any of its Series or Classes shall be
authorized to invest.
(c) To acquire (by purchase, subscription or otherwise), to hold, to trade
in and deal in, to acquire any rights or options to purchase or sell, to sell or
otherwise dispose of, to lend and to pledge any such securities, to enter into
repurchase agreements, reverse repurchase agreements, firm commitment agreements
and forward foreign currency exchange contracts, to purchase and sell options on
securities, securities indices, currency and other financial assets, futures
contracts and options on futures contracts of all descriptions and to engage in
all types of hedging and risk-management transactions.
(d) To exercise all rights, powers and privileges of ownership or interest
in all securities and repurchase agreements included in the Trust Property,
including the right to vote thereon and otherwise act with respect thereto and
to do all acts for the preservation, protection, improvement and enhancement in
value of all such securities and repurchase agreements.
(e) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property, real or
personal, including cash or foreign currency, and any interest therein.
(f) To borrow money or other property in the name of the Trust exclusively
for Trust purposes and in this connection issue notes or other evidence of
indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; and to endorse, guarantee, or
undertake the performance of any obligation or engagement of any other Person
and to lend Trust Property.
5
<PAGE>
(g) To aid by further investment any corporation, company, trust,
association or firm, any obligation of or interest in which is included in the
Trust Property or in the affairs of which the Trustees have any direct or
indirect interest; to do all acts and things designed to protect, preserve,
improve or enhance the value of such obligation or interest; and to guarantee or
become surety on any or all of the contracts, stocks, bonds, notes, debentures
and other obligations of any such corporation, company, trust, association or
firm.
(h) To adopt By-laws not inconsistent with this Declaration providing for
the conduct of the business of the Trust and to amend and repeal them to the
extent such right is not reserved to the Shareholders.
(i) To elect and remove such officers and appoint and terminate such agents
as they deem appropriate.
(j) To employ as custodian of any assets of the Trust, subject to any
provisions herein or in the By-laws, one or more banks, trust companies or
companies that are members of a national securities exchange, or other entities
permitted by the Commission to serve as such.
(k) To retain one or more transfer agents and shareholder servicing agents,
or both.
(l) To provide for the distribution of Shares either through a Principal
Underwriter as provided herein or by the Trust itself, or both, or pursuant to a
distribution plan of any kind.
(m) To set record dates in the manner provided for herein or in the
By-laws.
(n) To delegate such authority as they consider desirable to any officers
of the Trust and to any agent, independent contractor, manager, investment
adviser, custodian or underwriter.
(o) To hold any security or other property (i) in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form, or
(ii) either in the Trust's or Trustees' own name or in the name of a custodian
or a nominee or nominees, subject to safeguards according to the usual practice
of business trusts or investment companies.
6
<PAGE>
(p) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes, and with
separate Shares representing beneficial interests in such Series, and to
establish separate Classes, all in accordance with the provisions of Article V.
(q) To the full extent permitted by Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular Series
and assets, liabilities and expenses to a particular Class or to apportion the
same between or among two or more Series or Classes, provided that any
liabilities or expenses incurred by a particular Series or Class shall be
payable solely out of the assets belonging to that Series or Class as provided
for in Article V, Section 4.
(r) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern whose securities are held
by the Trust; to consent to any contract, lease, mortgage, purchase, or sale of
property by such corporation or concern; and to pay calls or subscriptions with
respect to any security held in the Trust.
(s) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes.
(t) To make distributions of income, capital gains, returns of capital (if
any) and redemption proceeds to Shareholders in the manner hereinafter provided
for.
(u) To establish committees for such purposes, with such membership, and
with such responsibilities as the Trustees may consider proper, including a
committee consisting of fewer than all of the Trustees then in office, which may
act for and bind the Trustees and the Trust with respect to the institution,
prosecution, dismissal, settlement, review or investigation of any legal action,
suit or proceeding, pending or threatened.
(v) To issue, sell, repurchase, redeem, cancel, retire, acquire, hold,
resell, reissue, dispose of and otherwise deal in Shares; to establish terms and
conditions regarding the issuance, sale, repurchase, redemption, cancellation,
retirement, acquisition, holding, resale, reissuance, disposition of or dealing
in Shares; and, subject to Articles V and VI, to apply to any such repurchase,
7
<PAGE>
redemption, retirement, cancellation or acquisition of Shares any funds or
property of the Trust or of the particular Series with respect to which such
Shares are issued.
(w) To invest part or all of the Trust Property (or part or all of the
assets of any Series), or to dispose of part or all of the Trust Property (or
part or all of the assets of any Series) and invest the proceeds of such
disposition, in securities issued by one or more other investment companies
registered under the 1940 Act all without any requirement of approval by
Shareholders. Any such other investment company may (but need not) be a trust
(formed under the laws of the State of New York or of any other state) which is
classified as a partnership for federal income tax purposes.
(x) To sell or exchange any or all of the assets of the Trust, subject to
Article IX, Section 4.
(y) To enter into joint ventures, partnerships and other combinations and
associations.
(z) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such Committee, depositary or trustee as the Trustees shall deem
proper.
(aa) To purchase and pay for entirely out of Trust Property such insurance
as the Trustees may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust or payment of distributions and principal on its portfolio
investments, and, subject to applicable law and any restrictions set forth in
the By-Laws, insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, investment advisers, Principal Underwriters, or independent
contractors of the Trust, individually, against all claims and liabilities of
every nature arising by reason of holding Shares, holding, being or having held
any such office or position, or by reason of any action alleged to have been
taken or omitted by any such Person as Trustee, officer, employee, agent,
investment adviser, Principal underwriter, or independent contractor, including
any action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such Person against
liability.
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(bb) To adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans and trusts, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other benefits, for any or
all of the Trustees, officers, employees and agents of the Trust.
(cc) To enter into contracts of any kind and description.
(dd) To interpret the investment policies, practices or limitations of any
Series or Class.
(ee) To guarantee indebtedness and contractual obligations of others.
(ff) To carry on any other business in connection with or incidental to any
of the foregoing powers, to do everything necessary or desirable to accomplish
any purpose or to further any of the foregoing powers, and to take every other
action incidental to the foregoing business or purposes, objects or powers.
The clauses above shall be construed as objects and powers, and the
enumeration of specific powers shall not limit in any way the general powers of
the Trustees. Any action by one or more of the Trustees in their capacity as
such hereunder shall be deemed an action on behalf of the Trust or the
applicable Series, and not an action in an individual capacity. No one dealing
with the Trustees shall be under any obligation to make any inquiry concerning
the authority of the Trustees, or to see to the application of any payments made
or property transferred to the Trustees or upon their order. In construing this
Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
Section 3. Certain Transactions. Except as prohibited by applicable law,
the Trustees may, on behalf of the Trust, buy any securities from or sell any
securities to, or lend any assets of the Trust to, any Trustee or officer of the
Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with any investment adviser, administrator,
distributor or transfer agent for the Trust or with any Interested Person of
such person. The Trust may employ any such person or entity in which such person
is an Interested Person, as broker, legal counsel, registrar, investment
adviser, administrator, distributor, transfer agent, dividend disbursing agent,
custodian or in any other capacity upon customary terms.
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Section 4. Initial Trustees; Election and Number of Trustees. The initial
Trustees shall be the persons initially signing this Declaration. The number of
Trustees (other than the initial Trustees) shall be fixed from time to time by a
majority of the Trustees; provided, that there shall be at least one (1) Trustee
and no more than fifteen (15). The Shareholders shall elect the Trustees (other
than the initial Trustees) on such dates as the Trustees may fix from time to
time.
Section 5. Term of Office of Trustees. Each Trustee shall hold office for
life or until his successor is elected or the Trust terminates; except that (a)
any Trustee may resign by delivering to the other Trustees or to any Trust
officer a written resignation effective upon such delivery or a later date
specified therein; (b) any Trustee may be removed with or without cause at any
time by a written instrument signed by at least a majority of the then Trustees,
specifying the effective date of removal; (c) any Trustee who requests to be
retired, or who is declared bankrupt or has become physically or mentally
incapacitated or is otherwise unable to serve, may be retired by a written
instrument signed by a majority of the other Trustees, specifying the effective
date of retirement; and (d) any Trustee may be removed at any meeting of the
Shareholders by a vote of at least two-thirds of the Outstanding Shares.
Section 6. Vacancies; Appointment of Trustees. Whenever a vacancy shall
exist in the Board of Trustees, regardless of the reason for such vacancy, the
remaining Trustees shall appoint any person as they determine in their sole
discretion to fill that vacancy, consistent with the limitations under the 1940
Act. Such appointment shall be made by a written instrument signed by a majority
of the Trustees or by a resolution of the Trustees, duly adopted and recorded in
the records of the Trust, specifying the effective date of the appointment. The
Trustees may appoint a new Trustee as provided above in anticipation of a
vacancy expected to occur because of the retirement, resignation or removal of a
Trustee, or an increase in number of Trustees, provided that such appointment
shall become effective only at or after the expected vacancy occurs. As soon as
any such Trustee has accepted his appointment in writing, the trust estate shall
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vest in the new Trustee, together with the continuing Trustees, without any
further act or conveyance, and he shall be deemed a Trustee hereunder. The
Trustees' power of appointment is subject to Section 16(a) of the 1940 Act.
Whenever a vacancy in the number of Trustees shall occur, until such vacancy is
filled as provided in this Article II, the Trustees in office, regardless of
their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by the Declaration. The
death, declination to serve, resignation, retirement, removal or incapacity of
one or more Trustees, or all of them, shall not operate to annul the Trust or to
revoke any existing agency created pursuant to the terms of this Declaration of
Trust.
Section 7. Temporary Vacancy or Absence. Whenever a vacancy in the Board of
Trustees shall occur, until such vacancy is filled, or while any Trustee is
absent from his domicile (unless that Trustee has made arrangements to be
informed about, and to participate in, the affairs of the Trust during such
absence), or is physically or mentally incapacitated, the remaining Trustees
shall have all the powers hereunder and their certificate as to such vacancy,
absence, or incapacity shall be conclusive. Any Trustee may, by power of
attorney, delegate his powers as Trustee for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees.
Section 8. Chairman. The Trustees shall appoint one of their number to be
Chairman of the Board of Trustees. The Chairman shall preside at all meetings of
the Trustees, shall be responsible for the execution of policies established by
the Trustees and the administration of the Trust, and may be the chief
executive, financial and/or accounting officer of the Trust.
Section 9. Action by the Trustees. The Trustees shall act by majority vote
at a meeting duly called at which a quorum is present, including a meeting held
by conference telephone, teleconference or other electronic media or
communication equipment by means of which all persons participating in the
meeting can communicate with each other; or by written consent of a majority of
Trustees (or such greater number as may be required by applicable law) without a
meeting. A majority of the Trustees shall constitute a quorum at any meeting.
Meetings of the Trustees may be called orally or in writing by the President or
by any one of the Trustees. Notice of the time, date and place of all Trustees'
meetings shall be given to each Trustee as set forth in the By-laws; provided,
however, that no notice is required if the Trustees provide for regular or
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stated meetings. Notice need not be given to any Trustee who attends the meeting
without objecting to the lack of notice or who signs a waiver of notice either
before or after the meeting. The Trustees by majority vote may delegate to any
Trustee or Trustees or committee authority to approve particular matters or take
particular actions on behalf of the Trust. Any written consent or waiver may be
provided and delivered to the Trust by facsimile or other similar electronic
mechanism.
Section 10. Ownership of Trust Property. The Trust Property of the Trust
and of each Series shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in and beneficial ownership of all of the
assets of the Trust shall at all times be considered as vested in the Trust,
except that the Trustees may cause legal title in and beneficial ownership of
any Trust Property to be held by, or in the name of one or more of the Trustees
acting for and on behalf of the Trust, or in the name of any person as nominee
acting for and on behalf of the Trust. No Shareholder shall be deemed to have a
severable ownership in any individual asset of the Trust or of any Series or any
right of partition or possession thereof, but each Shareholder shall have, as
provided in Article V, a proportionate undivided beneficial interest in the
Trust or Series or Class thereof represented by Shares. The Shares shall be
personal property giving only the rights specifically set forth in this Trust
Instrument. The Trust, or at the determination of the Trustees one or more of
the Trustees or a nominee acting for and on behalf of the Trust, shall be deemed
to hold legal title and beneficial ownership of any income earned on securities
of the Trust issued by any business entities formed, organized, or existing
under the laws of any jurisdiction, including the laws of any foreign country.
Upon the resignation or removal of a Trustee, or his otherwise ceasing to be a
Trustee, he shall execute and deliver such documents as the remaining Trustees
shall require for the purpose of conveying to the Trust or the remaining
Trustees any Trust Property held in the name of the resigning or removed
Trustee. Upon the incapacity or death of any Trustee, his legal representative
shall execute and deliver on his behalf such documents as the remaining Trustees
shall require as provided in the preceding sentence.
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Section 11. Trustees, etc. as Shareholders. Subject to any restrictions in
the By-laws, any Trustee, officer, agent or independent contractor of the Trust
may acquire, own and dispose of Shares to the same extent as any other
Shareholder; the Trustees may issue and sell Shares to and buy Shares from any
such person or any firm or company in which such person is interested, subject
only to any general limitations herein.
Section 12. Series of Trustees. In connection with the establishment of one
or more Series or Classes, the Trustees establishing such Series or Class may
appoint, to the extent permitted by the Delaware Act, separate Trustees with
respect to such Series or Classes (the "Series Trustees"). Series Trustees may,
but are not required to, serve as Trustees of the Trust or any other Series or
Class of the Trust. The Series Trustees shall have, to the exclusion of any
other Trustee of the Trust, all the powers and authorities of Trustees hereunder
with respect to such Series or Class as to which they are Series Trustees, but
shall have no power or authority with respect to any other Series or Class. Any
provision of this Declaration relating to election of Trustees by Shareholders
only shall entitle the Shareholders of a Series or Class for which Series
Trustees have been appointed to vote with respect to the election of such Series
Trustees and the Shareholders of any other Series or Class shall not be entitled
to participate in such vote. In the event that Series Trustees are appointed,
the Trustees initially appointing such Series Trustees shall, without the
approval of any Outstanding Shares, amend either the Declaration or the By-laws
to provide for the respective responsibilities of the Trustees and the Series
Trustees in circumstances where an action of the Trustees or Series Trustees
affects all Series of the Trust or two or more Series represented by different
Trustees.
ARTICLE III
CONTRACTS WITH SERVICE PROVIDERS
Section 1. Underwriting Contract. The Trustees may in their discretion from
time to time enter into an exclusive or nonexclusive distribution contract or
contracts providing for the sale of the Shares whereby the Trustees may either
agree to sell the Shares to the other party to the contract or appoint such
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other party as their sales agent for the Shares, and in either case on such
terms and conditions, if any, as may be prescribed in the By-laws, and such
further terms and conditions as the Trustees may in their discretion determine
not inconsistent with the provisions of this Article III or of the By-laws; and
such contract may also provide for the repurchase of the Shares by such other
party as agent of the Trustees.
Section 2. Advisory or Management Contract. The Trustees may in their
discretion from time to time enter into one or more investment advisory or
management contracts or, if the Trustees establish multiple Series, separate
investment advisory or management contracts with respect to one or more Series
whereby the other party or parties to any such contracts shall undertake to
furnish the Trust or such Series management, investment advisory,
administration, accounting, legal, statistical and research facilities and
services, promotional or marketing activities, and such other facilities and
services, if any, as the Trustees shall from time to time consider desirable and
all upon such terms and conditions as the Trustees may in their discretion
determine. Notwithstanding any provisions of the Declaration, the Trustees may
authorize the Investment Adviser or persons to whom the Investment Adviser
delegates certain or all of their duties, or any of them, under any such
contracts (subject to such general or specific instructions as the Trustees may
from time to time adopt) to effect purchases, sales, loans or exchanges of
portfolio securities and other investments of the Trust on behalf of the
Trustees or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of such
Investment Advisers, or any of them (and all without further action by the
Trustees). Any such purchases, sales, loans and exchanges shall be deemed to
have been authorized by all of the Trustees.
Section 3. Administration Agreement. The Trustees may in their discretion
from time to time enter into an administration agreement or, if the Trustees
establish multiple Series or Classes separate administration agreements with
respect to each Series or Class, whereby the other party to such agreement shall
undertake to manage the business affairs of the Trust or of a Series or Class
thereof of the Trust and furnish the Trust or a Series or a Class thereof with
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office facilities, and shall be responsible for the ordinary clerical,
bookkeeping and recordkeeping services at such office facilities, and other
facilities and services, if any, and all upon such terms and conditions as the
Trustees may in their discretion determine.
Section 4. Service Agreement. The Trustees may in their discretion from
time to time enter into service agreements with respect to one or more Series or
Classes of Shares whereby the other parties to such Service Agreements will
provide administration and/or support services pursuant to administration plans
and service plans, and all upon such terms and conditions as the Trustees in
their discretion may determine.
Section 5. Transfer Agent. The Trustees may in their discretion from time
to time enter into a transfer agency and shareholder service contract whereby
the other party to such contract shall undertake to furnish transfer agency and
shareholder services to the Trust. The contract shall have such terms and
conditions as the Trustees may in their discretion determine not inconsistent
with the Declaration. Such services may be provided by one or more Persons.
Section 6. Custodian. The Trustees may appoint or otherwise engage one or
more banks or trust companies, each having an aggregate capital, surplus and
undivided profits (as shown in its last published report) of at least two
million dollars ($2,000,000), or any other entity satisfying the requirements of
the 1940 Act, to serve as Custodian with authority as its agent, but subject to
such restrictions, limitations and other requirements, if any, as may be
contained in the By-laws of the Trust. The Trustees may also authorize the
Custodian to employ one or more sub-custodians, including such foreign banks and
securities depositories as meet the requirements of applicable provisions of the
1940 Act, and upon such terms and conditions as may be agreed upon between the
Custodian and such sub-custodian, to hold securities and other assets of the
Trust and to perform the acts and services of the Custodian, subject to
applicable provisions of law and resolutions adopted by the Trustees.
Section 7. Affiliations of Trustees or Officers, Etc. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust or
any Series thereof is a shareholder, director, officer, partner, trustee,
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employee, manager, adviser or distributor of or for any partnership,
corporation, trust, association or other organization or of or for any
parent or affiliate of any organization, with which a contract of the
character described in this Article III or for services as Custodian,
Transfer Agent or disbursing agent or for related services may have been or
may hereafter be made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder of or has an interest in the Trust, or
that
(ii) any partnership, corporation, trust, association or other
organization with which a contract of the character described in Sections
1, 2, 3 or 4 of this Article III or for services as Custodian, Transfer
Agent or disbursing agent or for related services may have been or may
hereafter be made also has any one or more of such contracts with one or
more other partnerships, corporations, trusts, associations or other
organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE IV
COMPENSATION, LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Compensation. The Trustees as such shall be entitled to
reasonable compensation from the Trust, and they may fix the amount of such
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Section 2. Limitation of Liability. All persons contracting with or having
any claim against the Trust or a particular Series shall look only to the assets
of all Series or such particular Series for payment under such contract or
claim; and neither the Trustees nor, when acting in such capacity, any of the
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Trust's officers, employees or agents, whether past, present or future, shall be
personally liable therefor. Every written instrument or obligation on behalf of
the Trust or any Series shall contain a statement to the foregoing effect, but
the absence of such statement shall not operate to make any Trustee or officer
of the Trust liable thereunder. Provided they have exercised reasonable care and
have acted in the reasonable belief that their actions are in the best interest
of the Trust, the Trustees and officers of the Trust shall not be responsible or
liable for any act or omission or for neglect or wrongdoing of them or any
officer, agent, employee, investment adviser or independent contractor of the
Trust, but nothing contained in this Declaration or in the Delaware Act shall
protect any Trustee or officer of the Trust against liability to the Trust or to
Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Section 3. Indemnification. (a) Subject to the exceptions and limitations
contained in subsection (b) below:
(i)every person who is, or has been, a Trustee or an officer,
employee or agent of the Trust (including any individual who
serves at its request as director, officer, partner, trustee or
the like of another organization in which it has any interest as a
shareholder, creditor or otherwise) ("Covered Person") shall be
indemnified by the Trust or the appropriate Series to the fullest
extent permitted by law against liability and against all expenses
reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party
or otherwise by virtue of his being or having been a Covered
Person and against amounts paid or incurred by him in the
settlement thereof; and
(ii) as used herein, the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals), actual
or threatened, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other
liabilities.
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(b) No indemnification shall be provided hereunder to a Covered Person:
(i)who shall have been adjudicated by a court or body before which
the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office, or (B) not to have acted in good faith in
the reasonable belief that his action was in the best interest of
the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office; (A) by the court
or other body approving the settlement; (B) by at least a majority
of those Trustees who are neither Interested Persons of the Trust
nor are parties to the matter based upon a review of readily
available facts (as opposed to a full trial-type inquiry); (C) by
written opinion of independent legal counsel based upon a review
of readily available facts (as opposed to a full trial-type
inquiry) or (D) by a vote of a majority of the Outstanding Shares
entitled to vote (excluding any Outstanding Shares owned of record
or beneficially by such individual).
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not be exclusive of
or affect any other rights to which any Covered Person may now or hereafter be
entitled, and shall inure to the benefit of the heirs, executors and
administrators of a Covered Person.
(d) To the maximum extent permitted by applicable law, expenses in
connection with the preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in subsection (a) of this
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Section may be paid by the Trust or applicable Series from time to time prior to
final disposition thereof upon receipt of an undertaking by or on behalf of such
Covered Person that such amount will be paid over by him to the Trust or
applicable Series if it is ultimately determined that he is not entitled to
indemnification under this Section; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such undertaking,
(ii) the Trust is insured against losses arising out of any such advance
payments or (iii) either a majority of the Trustees who are neither Interested
Persons of the Trust nor parties to the matter, or independent legal counsel in
a written opinion, shall have determined, based upon a review of readily
available facts (as opposed to a full trial-type inquiry) that there is reason
to believe that such Covered Person will not be disqualified from
indemnification under this Section.
(e) Any repeal or modification of this Article IV by the Shareholders, or
adoption or modification of any other provision of the Declaration or By-laws
inconsistent with this Article, shall be prospective only, to the extent that
such repeal, or modification would, if applied retrospectively, adversely affect
any limitation on the liability of any Covered Person or indemnification
available to any Covered Person with respect to any act or omission which
occurred prior to such repeal, modification or adoption.
Section 4. Indemnification of Shareholders. If any Shareholder or former
Shareholder of any Series shall be held personally liable solely by reason of
his being or having been a Shareholder and not because of his acts or omissions
or for some other reason, the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives or in the case of any
entity, its general successor) shall be entitled out of the assets belonging to
the applicable Series to be held harmless from and indemnified against all loss
and expense arising from such liability. The Trust, on behalf of the affected
Series, shall, upon request by such Shareholder, assume the defense of any claim
made against such Shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
Section 5. No Bond Required of Trustees. No Trustee shall be obligated to
give any bond or other security for the performance of any of his duties
hereunder.
Section 6. No Duty of Investigation; Notice in Trust Instruments, Etc. No
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purchaser, lender, transfer agent or other Person dealing with the Trustees or
any officer, employee or agent of the Trust or a Series thereof shall be bound
to make any inquiry concerning the validity of any transaction purporting to be
made by the Trustees or by said officer, employee or agent or be liable for the
application of money or property paid, loaned, or delivered to or on the order
of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or a
Series thereof or undertaking, and every other act or thing whatsoever executed
in connection with the Trust shall be conclusively presumed to have been
executed or done by the executors thereof only in their capacity as Trustees
under this Declaration or in their capacity as officers, employees or agents of
the Trust or a Series thereof. Every written obligation, contract, instrument,
certificate, Share, other security of the Trust or a Series thereof or
undertaking made or issued by the Trustees may recite that the same is executed
or made by them not individually, but as Trustees under the Declaration, and
that the obligations of the Trust or a Series thereof under any such instrument
are not binding upon any of the Trustees or Shareholders individually, but bind
only the Trust Property or the Trust Property of the applicable Series, and may
contain any further recital which they may deem appropriate, but the omission of
such recital shall not operate to bind the Trustees individually. The Trustees
shall at all times maintain insurance for the protection of the Trust Property
or the Trust Property of the applicable Series, its Shareholders, Trustees,
officers, employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable.
Section 7. Reliance on Experts, Etc. Each Trustee, officer or employee of
the Trust or a Series thereof shall, in the performance of his duties, powers
and discretions hereunder be fully and completely justified and protected with
regard to any act or any failure to act resulting from reliance in good faith
upon the books of account or other records of the Trust or a Series thereof,
upon an opinion of counsel, or upon reports made to the Trust or a Series
thereof by any of its officers or employees or by the Investment Adviser, the
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Administrator, the Distributor, Transfer Agent, selected dealers, accountants,
appraisers or other experts or consultants selected with reasonable care by the
Trustees, officers or employees of the Trust, regardless of whether such counsel
or expert may also be a Trustee.
ARTICLE V
SERIES; CLASSES; SHARES
Section 1. Establishment of Series or Class. The Trust shall consist of one
or more Series. The Trustees hereby establish a single Series which shall be
designated Pioneer Tax Free Income Fund. Each additional Series shall be
established and is effective upon the adoption of a resolution of a majority of
the Trustees or any alternative date specified in such resolution. The Trustees
may designate the relative rights and preferences of the Shares of each Series.
The Trustees may divide the Shares of any Series into Classes. The Shares of the
existing Series and each Class thereof herein established and designated and any
Shares of any further Series and Classes that may from time to time be
established and designated by the Trustees shall be established and designated,
and the variations in the relative rights and preferences as between the
different Series shall be fixed and determined, by the Trustees; provided, that
all Shares shall be identical except for such variations as shall be fixed and
determined between different Series or Classes by the Trustees in establishing
and designating such Class or Series. All references to Shares in this
Declaration shall be deemed to be Shares of any or all Series or Classes as the
context may require. The Trust shall maintain separate and distinct records for
each Series and hold and account for the assets thereof separately from the
other assets of the Trust or of any other Series. A Series may issue any number
of Shares or any Class thereof and need not issue Shares. Each Share of a Series
shall represent an equal beneficial interest in the net assets of such Series.
Each holder of Shares of a Series or a Class thereof shall be entitled to
receive his pro rata share of all distributions made with respect to such Series
or Class. Upon redemption of his Shares, such Shareholder shall be paid solely
out of the funds and property of such Series. The Trustees may adopt and change
the name of any Series or Class.
Section 2. Shares. The beneficial interest in the Trust shall be divided
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into transferable Shares of one or more separate and distinct Series or Classes
established by the Trustees. The number of Shares of each Series and Class is
unlimited and each Share shall have no par value or such par value per share as
the Trustees may establish. All Shares issued hereunder shall be fully paid and
nonassessable. Shareholders shall have no preemptive or other right to subscribe
to any additional Shares or other securities issued by the Trust. The Trustees
shall have full power and authority, in their sole discretion and without
obtaining Shareholder approval, to issue original or additional Shares at such
times and on such terms and conditions as they deem appropriate; to issue
fractional Shares and Shares held in the treasury; to establish and to change in
any manner Shares of any Series or Classes with such preferences, terms of
conversion, voting powers, rights and privileges as the Trustees may determine
(but the Trustees may not change Outstanding Shares in a manner materially
adverse to the Shareholders of such Shares); to divide or combine the Shares of
any Series or Classes into a greater or lesser number; to classify or reclassify
any unissued Shares of any Series or Classes into one or more Series or Classes
of Shares; to abolish any one or more Series or Classes of Shares; to issue
Shares to acquire other assets (including assets subject to, and in connection
with, the assumption of liabilities) and businesses; and to take such other
action with respect to the Shares as the Trustees may deem desirable. Shares
held in the treasury shall not confer any voting rights on the Trustees and
shall not be entitled to any dividends or other distributions declared with
respect to the Shares.
Section 3. Investment in the Trust. The Trustees shall accept investments
in any Series or Class from such persons and on such terms as they may from time
to time authorize. At the Trustees' discretion, such investments, subject to
applicable law, may be in the form of cash or securities in which that Series is
authorized to invest, valued as provided in Article VI, Section 3. Investments
in a Series shall be credited to each Shareholder's account in the form of full
Shares at the Net Asset Value per Share next determined after the investment is
received or accepted as may be determined by the Trustees; provided, however,
that the Trustees may, in their sole discretion, (a) impose a sales charge upon
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investments in any Series or Class, (b) issue fractional Shares, (c) determine
the Net Asset Value per Share of the initial capital contribution or (d)
authorize the issuance of Shares at a price other than Net Asset Value to the
extent permitted by the 1940 Act or any rule, order or interpretation of the
Commission thereunder. The Trustees shall have the right to refuse to accept
investments in any Series at any time without any cause or reason therefor
whatsoever.
Section 4. Assets and Liabilities of Series. All consideration received by
the Trust for the issue or sale of Shares of a particular Series, together with
all assets in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof (including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be), shall
be held and accounted for separately from the assets of every other Series and
are referred to as "assets belonging to" that Series. The assets belonging to a
Series shall belong only to that Series for all purposes, and to no other
Series, subject only to the rights of creditors of that Series. Any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which are
not readily identifiable as belonging to any particular Series shall be
allocated by the Trustees between and among one or more Series as the Trustees
deem fair and equitable. Each such allocation shall be conclusive and binding
upon the Shareholders of all Series for all purposes, and such assets, earnings,
income, profits or funds, or payments and proceeds thereof shall be referred to
as assets belonging to that Series. The assets belonging to a Series shall be so
recorded upon the books of the Trust, and shall be held by the Trustees in trust
for the benefit of the Shareholders of that Series. The assets belonging to a
Series shall be charged with the liabilities of that Series and all expenses,
costs, charges and reserves attributable to that Series, except that liabilities
and expenses allocated solely to a particular Class shall be borne by that
Class. Any general liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as belonging to any particular Series
or Class shall be allocated and charged by the Trustees between or among any one
or more of the Series or Classes in such manner as the Trustees deem fair and
equitable. Each such allocation shall be conclusive and binding upon the
Shareholders of all Series or Classes for all purposes.
Without limiting the foregoing, but subject to the right of the Trustees to
allocate general liabilities, expenses, costs, charges or reserves as herein
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provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular Series shall be
enforceable against the assets of such Series only, and not against the assets
of any other Series. Notice of this contractual limitation on liabilities among
Series may, in the Trustees' discretion, be set forth in the certificate of
trust of the Trust (whether originally or by amendment) as filed or to be filed
in the Office of the Secretary of State of the State of Delaware pursuant to the
Delaware Act, and upon the giving of such notice in the certificate of trust,
the statutory provisions of Section 3804 of the Delaware Act relating to
limitations on liabilities among Series (and the statutory effect under Section
3804 of setting forth such notice in the certificate of trust) shall become
applicable to the Trust and each Series. Any person extending credit to,
contracting with or having any claim against any Series may look only to the
assets of that Series to satisfy or enforce any debt, with respect to that
Series. No Shareholder or former Shareholder of any Series shall have a claim on
or any right to any assets allocated or belonging to any other Series.
Section 5. Ownership and Transfer of Shares. The Trust or a transfer or
similar agent for the Trust shall maintain a register containing the names and
addresses of the Shareholders of each Series and Class thereof, the number of
Shares of each Series and Class held by such Shareholders, and a record of all
Share transfers. The register shall be conclusive as to the identity of
Shareholders of record and the number of Shares held by them from time to time.
The Trustees may authorize the issuance of certificates representing Shares and
adopt rules governing their use. The Trustees may make rules governing the
transfer of Shares, whether or not represented by certificates. Except as
otherwise provided by the Trustees, Shares shall be transferable on the books of
the Trust only by the record holder thereof or by his duly authorized agent upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer, together with a Share certificate if one is outstanding,
and such evidence of the genuineness of each such execution and authorization
and of such other matters as may be required by the Trustees. Upon such
delivery, and subject to any further requirements specified by the Trustees or
contained in the By-laws, the transfer shall be recorded on the books of the
Trust. Until a transfer is so recorded, the Shareholder of record of Shares
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor the Trust, nor any transfer agent or registrar or any
officer, employee or agent of the Trust, shall be affected by any notice of a
proposed transfer.
Section 6. Status of Shares; Limitation of Shareholder Liability. Shares
shall be deemed to be personal property giving Shareholders only the rights
provided in this Declaration. No Shareholder, by virtue of having acquired a
Share, shall be held expressly to have assented to and agreed to be bound by the
terms of this Declaration and to have become a party hereto. No Shareholder
shall be personally liable for the debts, liabilities, obligations and expenses
incurred by, contracted for, or otherwise existing with respect to, the Trust or
any Series. The death, incapacity, dissolution, termination or bankruptcy of a
Shareholder during the existence of the Trust shall not operate to terminate the
Trust, nor entitle the representative of any such Shareholder to an accounting
or to take any action in court or elsewhere against the Trust or the Trustees,
but entitles such representative only to the rights of such Shareholder under
this Trust. Ownership of Shares shall not entitle the Shareholder to any title
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in or to the whole or any part of the Trust Property or right to call for a
partition or division of the same or for an accounting, nor shall the ownership
of Shares constitute the Shareholders as partners. Neither the Trust nor the
Trustees shall have any power to bind any Shareholder personally or to demand
payment from any Shareholder for anything, other than as provided herein or as
otherwise agreed by the Shareholder. Shareholders shall have the same limitation
of personal liability as is extended to shareholders of a private corporation
for profit incorporated in the State of Delaware. Every written obligation of
the Trust or any Series shall contain a statement to the effect that such
obligation may only be enforced against the assets of the appropriate Series or
all Series; however, the omission of such statement shall not operate to bind or
create personal liability for any Shareholder or Trustee.
ARTICLE VI
DISTRIBUTIONS AND REDEMPTIONS
Section 1. Distributions. The Trustees or a committee of one or more
Trustees and one or more officers may declare and pay dividends and other
distributions, including dividends on Shares of a particular Series and other
distributions from the assets belonging to that Series. No dividend or
distribution, including, without limitation, any distribution paid upon
termination of the Trust or of any Series (or Class) with respect to, nor any
redemption or repurchase of, the Shares of any Series (or Class) shall be
effected by the Trust other than from the assets held with respect to such
Series, nor shall any Shareholder of any particular Series otherwise have any
right or claim against the assets held with respect to any other Series except
to the extent that such Shareholder has such a right or claim hereunder as a
Shareholder of such other Series. The Trustees shall have full discretion to
determine which items shall be treated as income and which items as capital; and
each such determination and allocation shall be conclusive and binding upon the
Shareholders. The amount and payment of dividends or distributions and their
form, whether they are in cash, Shares or other Trust Property, shall be
determined by the Trustees. Dividends and other distributions may be paid
pursuant to a standing resolution adopted once or more often as the Trustees
determine. All dividends and other distributions on Shares of a particular
Series shall be distributed pro rata to the Shareholders of that Series in
proportion to the number or net asset value of Shares of that Series they held
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on the record date established for such payment, except that such dividends and
distributions shall appropriately reflect expenses allocated to a particular
Class of such Series. The Trustees may adopt and offer to Shareholders such
dividend reinvestment plans, cash dividend payout plans or similar plans as the
Trustees deem appropriate.
Section 2. Redemptions. Each Shareholder of a Series shall have the right
at such times as may be permitted by the Trustees to require the Series to
redeem all or any part of his Shares at a redemption price per Share equal to
the Net Asset Value per Share at such time as the Trustees shall have prescribed
by resolution, or, to the extent permitted by the 1940 Act, at such other
redemption price and at such times as the Trustees shall prescribe by
resolution. In the absence of such resolution, the redemption price per Share
shall be the Net Asset Value next determined after receipt by the Series of a
request for redemption in proper form less such charges as are determined by the
Trustees and described in the Trust's Registration Statement for that Series
under the Securities Act of 1933. The Trustees may specify conditions, prices,
and places of redemption, may specify binding requirements for the proper form
or forms of requests for redemption and may specify the amount of any deferred
sales charge to be withheld from redemption proceeds. Payment of the redemption
price may be wholly or partly in securities or other assets at the value of such
securities or assets used in such determination of Net Asset Value, or may be in
cash. After redemption, Shares may be reissued from time to time. The Trustees
may require Shareholders to redeem Shares for any reason under terms set by the
Trustees, including, but not limited to, the failure of a Shareholder to supply
a taxpayer identification number or tax related certification if required to do
so, or to have the minimum investment required, or to pay when due for the
purchase of Shares issued to him. To the extent permitted by law, the Trustees
may retain the proceeds of any redemption of Shares required by them for payment
of amounts due and owing (i) by a Shareholder to the Trust or any Series or
Class or any governmental authority or (ii) by the Trust or any series to any
taxing authority in satisfaction of tax withholding and/or deposit requirements
with respect to the payment or crediting by the Trust or the Series to the
shareholders of dividends, capital gains distributions, proceeds or redemptions
or similar payments. Notwithstanding the foregoing, the Trustees may postpone
payment of the redemption price and may suspend the right of the Shareholders to
require any Series or Class to redeem Shares during any period of time when and
to the extent permissible under the 1940 Act.
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Section 3. Determination of Net Asset Value. The Trustees shall cause the
Net Asset Value of Shares of each Series or Class to be determined from time to
time in a manner consistent with applicable laws and regulations. The Trustees
may delegate the power and duty to determine Net Asset Value per Share to one or
more Trustees or officers of the Trust or to a custodian, depository or other
agent appointed for such purpose. The Net Asset Value of Shares shall be
determined separately for each Series or Class at such times as may be
prescribed by the Trustees or, in the absence of action by the Trustees, as of
the close of regular trading on the New York Stock Exchange on each day for all
or part of which such Exchange is open for unrestricted trading.
Section 4. Suspension of Right of Redemption. If, as referred to in Section
2 of this Article, the Trustees postpone payment of the redemption price and
suspend the right of Shareholders to redeem their Shares, such suspension shall
take effect at the time the Trustees shall specify, but not later than the close
of business on the business day next following the declaration of suspension.
Thereafter Shareholders shall have no right of redemption or payment until the
Trustees declare the end of the suspension. If the right of redemption is
suspended, a Shareholder may either withdraw his request for redemption or
receive payment based on the Net Asset Value per Share next determined after the
suspension terminates.
Section 5. Repurchase by Agreement. The Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the Net
Asset Value per Share determined as of the time when the purchase or contract of
purchase is made or the Net Asset Value as of any time which may be later
determined, provided payment is not made for the Shares prior to the time as of
which such Net Asset Value is determined.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers. The Shareholders shall have power to vote only
with respect to (a) the election of Trustees as provided in Section 6 of Article
II; (b) the removal of Trustees as provided in Article II, Section 5(d); (c) any
investment advisory or management contract as provided in Article III, Section
2; (d) any termination of the Trust as provided in Article IX, Section 4; (e)
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the amendment of this Declaration to the extent and as provided in Article IX,
Section 8; and (f) such additional matters relating to the Trust as may be
required or authorized by law, this Declaration, or the By-laws or any
registration of the Trust with the Commission or any State, or as the Trustees
may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall be
voted by individual Series or Class, except (a) when required by the 1940 Act,
Shares shall be voted in the aggregate and not by individual Series or Class,
and (b) when the Trustees have determined that the matter affects the interests
of more than one Series or Class, then the Shareholders of all such Series or
Classes shall be entitled to vote thereon. Each whole Share shall be entitled to
one vote as to any matter on which it is entitled to vote, and each fractional
share shall be entitled to a proportionate fractional vote. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person or
by proxy or in any manner provided for in the By-laws. The By-laws may provide
that proxies may be given by any electronic or telecommunications device or in
any other manner, but if a proposal by anyone other than the officers or
Trustees is submitted to a vote of the Shareholders of any Series or Class, or
if there is a proxy contest or proxy solicitation or proposal in opposition to
any proposal by the officers or Trustees, Shares may be voted only in person or
by written proxy. Until Shares of a Series are issued, as to that Series the
Trustees may exercise all rights of Shareholders and may take any action
required or permitted to be taken by Shareholders by law, this Declaration or
the By-laws. Meetings of Shareholders shall be called and notice thereof and
record dates therefor shall be given and set as provided in the By-laws.
Section 2. Quorum; Required Vote. One-third of the Outstanding Shares of
each Series or Class, or one-third of the Outstanding Shares of the Trust,
entitled to vote in person or by proxy shall be a quorum for the transaction of
business at a Shareholders' meeting with respect to such Series or Class, or
with respect to the entire Trust, respectively. Any lesser number shall be
sufficient for adjournments. Any adjourned session of a Shareholders' meeting
may be held within a reasonable time without further notice. Except when a
larger vote is required by law, this Declaration or the By-laws, a majority of
the Shares voting at a Shareholders' meeting in person or by proxy shall decide
any matters to be voted upon with respect to the entire Trust and a plurality of
such Shares shall elect a Trustee; provided, that if this Declaration or
applicable law permits or requires that Shares be voted on any matter by
individual Series or Classes, then a majority of the Shares of that Series or
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Class voting at a Shareholders' meeting in person or by proxy on the matter
shall decide that matter (or, if required by law, a majority of Shares
outstanding and entitled to vote of that Series or Class) insofar as that Series
or Class is concerned. Shareholders may act as to the Trust or any Series or
Class by the written consent of a majority (or such other amount as may be
required by applicable law) of the Outstanding Shares of the Trust or of such
Series or Class, as the case may be.
Section 3. Additional Provisions. The By-laws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VIII
EXPENSES OF THE TRUST AND SERIES
Section 1. Payment of Expenses by the Trust. Subject to Article V, Section
4, the Trust or a particular Series shall pay, or shall reimburse the Trustees
from the assets belonging to all Series or the particular Series, for their
expenses (or the expenses of a Class of such Series) and disbursements,
including, but not limited to, interest charges, taxes, brokerage fees and
commissions; expenses of issue, repurchase and redemption of Shares; certain
insurance premiums; applicable fees, interest charges and expenses of third
parties, including the Trust's investment advisers, managers, administrators,
distributors, custodians, transfer agents and fund accountants; fees of pricing,
interest, dividend, credit and other reporting services; costs of membership in
trade associations; telecommunications expenses; funds transmission expenses;
auditing, legal and compliance expenses; costs of forming the Trust and its
Series and maintaining its existence; costs of preparing and printing the
prospectuses of the Trust and each Series, statements of additional information
and Shareholder reports and delivering them to Shareholders; expenses of
meetings of Shareholders and proxy solicitations therefor; costs of maintaining
books and accounts; costs of reproduction, stationery and supplies; fees and
expenses of the Trustees; compensation of the Trust's officers and employees and
costs of other personnel performing services for the Trust or any Series; costs
of Trustee meetings; Commission registration fees and related expenses; state or
foreign securities laws registration fees and related expenses; and for such
non-recurring items as may arise, including litigation to which the Trust or a
Series (or a Trustee or officer of the Trust acting as such) is a party, and for
all losses and liabilities by them incurred in administering the Trust. The
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Trustees shall have a lien on the assets belonging to the appropriate Series, or
in the case of an expense allocable to more than one Series, on the assets of
each such Series, prior to any rights or interests of the Shareholders thereto,
for the reimbursement to them of such expenses, disbursements, losses and
liabilities.
Section 2. Payment of Expenses by Shareholders. The Trustees shall have the
power, as frequently as they may determine, to cause each Shareholder, or each
Shareholder of any particular Series, to pay directly, in advance or arrears,
for charges of the Trust's custodian or transfer, shareholder servicing or
similar agent, an amount fixed from time to time by the Trustees, by setting off
such charges due from such Shareholder from declared but unpaid dividends owed
such Shareholder and/or by reducing the number of Shares in the account of such
Shareholder by that number of full and/or fractional Shares which represents the
outstanding amount of such charges due from such Shareholder subject to any
limitations applicable under the Internal Revenue Code that must be observed in
order to enable the Series to qualify as a regulated investment company.
ARTICLE IX
MISCELLANEOUS
Section 1. Trust Not a Partnership. This Declaration creates a trust and
not a partnership. No Trustee shall have any power to bind personally either the
Trust's officers or any Shareholder.
Section 2. Trustee Action. The exercise by the Trustees of their powers and
discretion hereunder in good faith and with reasonable care under the
circumstances then prevailing shall be binding upon everyone interested. Subject
to the provisions of Article IV, the Trustees shall not be liable for errors of
judgment or mistakes of fact or law.
Section 3. Record Dates. The Trustees may fix in advance a date up to
ninety (90) days before the date of any Shareholders' meeting or a meeting of
the holders of any Series or Class, or the date for the payment of any dividends
or other distributions, or the date for the allotment of rights, or the date
when any change or conversion or exchange of Shares shall go into effect as a
record date for the determination of the Shareholders or holders of any Series
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or Class entitled to notice of, and to vote at, any such meeting, or entitled to
receive payment of such dividend or other distribution, or to receive any such
allotment of rights, or to exercise such rights in respect of any such change,
conversion or exchange of Shares. Without fixing a record date, the Trustees may
for distribution purposes close the register or transfer books for one or more
Series (or Classes) any time prior to the payment of a distribution. Nothing in
this Section shall be construed as precluding the Trustees from setting
different record dates for different Series (or Classes, subject to any
limitations applicable under the Internal Revenue Code that must be observed in
order to enable the Series to qualify as a regulated investment company).
Section 4. Termination of the Trust. (a) This Trust shall have perpetual
existence. Subject to the vote of a majority of the Shares outstanding and
entitled to vote of the Trust or of each Series to be affected, the Trustees may
(i)sell and convey all or substantially all of the assets of all
Series or any affected Series to another Series or to another
entity which is an open-end investment company as defined in the
1940 Act, or is a series thereof, for adequate consideration,
which may include the assumption of all outstanding obligations,
taxes and other liabilities, accrued or contingent, of the Trust
or any affected Series, and which may include shares of or
interests in such Series, entity, or series thereof; or
(ii) at any time sell and convert into money all or substantially
all of the assets of all Series or any affected Series.
Upon making reasonable provision for the payment of all known liabilities of all
Series or any affected Series in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) ratably among the Shareholders of all Series or any affected
Series; however, the payment to any particular Class of such Series may be
reduced by any fees, expenses or charges allocated to that Class.
(b) The Trustees may take any of the actions specified in subsection (a)
(i) and (ii) above without obtaining the vote of a majority of the Shares
Outstanding and entitled to vote of the Trust or any Series if a majority of the
Trustees determines that the continuation of the Trust or Series is not in the
best interests of the Trust, such Series, or their respective Shareholders as a
result of factors or events adversely affecting the ability of the Trust or such
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Series to conduct its business and operations in an economically viable manner.
Such factors and events may include the inability of the Trust or a Series to
maintain its assets at an appropriate size, changes in laws or regulations
governing the Trust or the Series or affecting assets of the type in which the
Trust or Series invests, or economic developments or trends having a significant
adverse impact on the business or operations of the Trust or such Series.
(c) Upon completion of the distribution of the remaining proceeds or assets
pursuant to subsection (a), the Trust or affected Series shall terminate and the
Trustees and the Trust shall be discharged of any and all further liabilities
and duties hereunder with respect thereto and the right, title and interest of
all parties therein shall be canceled and discharged. Upon termination of the
Trust, following completion of winding up of its business, the Trustees shall
cause a certificate of cancellation of the Trust's certificate of trust to be
filed in accordance with the Delaware Act, which certificate of cancellation may
be signed by any one Trustee.
Section 5. Reorganization. (a) Notwithstanding anything else herein, to
change the Trust's form or place of organization the Trustees may, without
Shareholder approval unless such approval is required by the 1940 Act or other
applicable federal law, (i) cause the Trust to merge or consolidate with or into
one or more entities, if the surviving or resulting entity is the Trust or
another open-end management investment company under the 1940 Act, or a series
thereof, that will succeed to or assume the Trust's registration under the 1940
Act, (ii) cause the Shares to be exchanged under or pursuant to any state or
federal statute to the extent permitted by law, or (iii) cause the Trust to
incorporate under the laws of Delaware or any other U.S. jurisdiction. Any
agreement of merger or consolidation or certificate of merger may be signed by a
majority of Trustees and facsimile signatures conveyed by electronic or
telecommunication means shall be valid.
(b) Pursuant to and in accordance with the provisions of Section 3815(f) of
the Delaware Act, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 5 may effect any amendment to the
Declaration or effect the adoption of a new trust instrument of the Trust if it
is the surviving or resulting trust in the merger or consolidation.
(c) The Trustees may create one or more business trusts to which all or any
part of the assets, liabilities, profits or losses of the Trust or any Series or
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Class thereof may be transferred and may provide for the conversion of Shares in
the Trust or any Series or Class thereof into beneficial interests in any such
newly created trust or trusts or any series or classes thereof.
Section 6. Declaration of Trust. The original or a copy of this Declaration
of Trust and of each amendment hereto or Declaration of Trust supplemental shall
be kept at the office of the Trust where it may be inspected by any Shareholder.
Anyone dealing with the Trust may rely on a certificate by a Trustee or an
officer of the Trust as to the authenticity of the Declaration of Trust or any
such amendments or supplements and as to any matters in connection with the
Trust. The masculine gender herein shall include the feminine and neuter
genders. Headings herein are for convenience only and shall not affect the
construction of this Declaration of Trust. This Declaration of Trust may be
executed in any number of counterparts, each of which shall be deemed an
original.
Section 7. Applicable Law. This Declaration and the Trust created hereunder
are governed by and construed and administered according to the Delaware Act and
the applicable laws of the State of Delaware; provided, however, that there
shall not be applicable to the Trust, the Trustees or this Declaration of Trust
(a) the provisions of Section 3540 of Title 12 of the Delaware Code, or (b) any
provisions of the laws (statutory or common) of the State of Delaware (other
than the Delaware Act) pertaining to trusts which relate to or regulate (i) the
filing with any court or governmental body or agency of trustee accounts or
schedules of trustee fees and charges, (ii) affirmative requirements to post
bonds for trustees, officers, agents or employees of a trust, (iii) the
necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding of trust assets, or (vii) the establishment of fiduciary or
other standards of responsibilities or limitations on the acts or powers of
trustees, which are inconsistent with the limitations or liabilities or
authorities and powers of the Trustees set forth or referenced in this
Declaration. The Trust shall be of the type commonly called a Delaware business
trust, and, without limiting the provisions hereof, the Trust may exercise all
powers which are ordinarily exercised by such a trust under Delaware law. The
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Trust specifically reserves the right to exercise any of the powers or
privileges afforded to trusts or actions that may be engaged in by trusts under
the Delaware Act, and the absence of a specific reference herein to any such
power, privilege or action shall not imply that the Trust may not exercise such
power or privilege or take such actions.
Section 8. Amendments. The Trustees may, without any Shareholder vote,
amend or otherwise supplement this Declaration by making an amendment, a
Declaration of Trust supplemental hereto or an amended and restated trust
instrument; provided, that Shareholders shall have the right to vote on any
amendment (a) which would affect the voting rights of Shareholders granted in
Article VII, Section l, (b) to this Section 8, (c) required to be approved by
Shareholders by law or by the Trust's registration statement(s) filed with the
Commission, and (d) submitted to them by the Trustees in their discretion. Any
amendment submitted to Shareholders which the Trustees determine would affect
the Shareholders of any Series shall be authorized by vote of the Shareholders
of such Series and no vote shall be required of Shareholders of a Series not
affected. Notwithstanding anything else herein, any amendment to Article IV
which would have the effect of reducing the indemnification and other rights
provided thereby to Trustees, officers, employees, and agents of the Trust or to
Shareholders or former Shareholders, and any repeal or amendment of this
sentence shall each require the affirmative vote of the holders of two-thirds of
the Outstanding Shares of the Trust entitled to vote thereon.
Section 9. Derivative Actions. In addition to the requirements set forth in
Section 3816 of the Delaware Act, a Shareholder may bring a derivative action on
behalf of the Trust only if the following conditions are met:
(a) Shareholders eligible to bring such derivative action under the
Delaware Act who hold at least 10% of the Outstanding Shares of the Trust, 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 to 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 Trust for the expense of any such advisers
in the event that the Trustees determine not to bring such action.
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Section 10. Fiscal Year. The fiscal year of the Trust shall end on a
specified date as set forth in the By-laws. The Trustees may change the fiscal
year of the Trust without Shareholder approval.
Section 11. Severability. The provisions of this Declaration are severable.
If the Trustees determine, with the advice of counsel, that any provision hereof
conflicts with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination. If any provision hereof
shall be held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision only in such jurisdiction
and shall not affect any other provision of this Declaration.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument as of the
date first written above.
/s/ JOHN F. COGAN, JR.
John F. Cogan, Jr.,
as Trustee and not individually
975 Memorial Drive, #802
Cambridge, Massachusetts 02138
/s/ RICHARD H. EGDAHL
Richard H. Egdahl, M.D.
as Trustee and not individually
53 Bay State Road
Boston, Massachusetts 02215
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/s/ MARGARET B.W. GRAHAM
Margaret B.W. Graham,
as Trustee and not individually
776 Garland Drive
Palo Alto, California 94303
/s/ JOHN W. KENDRICK
John W. Kendrick,
as Trustee and not individually
6363 Waterway Drive
Falls Church, Virginia 22046
/s/ MARGUERITE A. PIRET
Marguerite A. Piret,
as Trustee and not individually
162 Washington Street
Belmont, Massachusetts 02178
/s/ DAVID D. TRIPPLE
David D. Tripple,
as Trustee and not individually
6 Woodbine Road
Belmont, Massachusetts 02178
/s/ STEPHEN K. WEST
Stephen K. West,
as Trustee and not individually
125 Broad Street
New York, New York 10004
/s/ JOHN WINTHROP
John Winthrop
as Trustee and not individually
52 King Street
Charleston, South Carolina 29401
36
PIONEER TAX-FREE INCOME FUND
Establishment and Designation
of
Class A Shares and Class B Shares
of Beneficial Interest of
Pioneer Tax-Free Income Fund
The undersigned, being a majority of the Trustees of Pioneer Tax-Free
Income Fund, a Delaware business trust (the "Fund"), acting pursuant to Article
V, Section 1 of the Agreement and Declaration of Trust dated June 16, 1994 of
the Fund (the "Declaration"), do hereby divide the shares of beneficial interest
of Pioneer Tax-Free Income Fund (the "Shares") to create two classes of Shares
of the Fund as follows:
1. The two classes of Shares established and designated hereby are "Class
A Shares" and "Class B Shares," respectively.
2. Class A Shares and Class B Shares shall each be entitled to all of the
rights and preferences accorded to Shares under the Declaration.
3. The purchase price of Class A Shares and of Class B Shares, the method
of determining the net asset value of Class A Shares and of Class B
Shares, and the relative dividend rights of holders of Class A Shares
and of holders of Class B Shares shall be established by the Trustees
of the Fund in accordance with the provisions of the Declaration of
Trust and shall be set forth in the Fund's Registration Statement on
Form N-1A under the Securities Act of 1933 and/or the Investment
Company Act of 1940, as amended and as in effect at the time of
issuing such Shares.
4. The Trustees, acting in their sole discretion, may determine that any
Shares of the Fund issued are Class A Shares, Class B Shares or Shares
of any other class of the Fund hereinafter established and designated
by the Trustees.
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IN WITNESS WHEREOF, the undersigned have executed this instrument this 10th
day of March, 1995.
/s/John F. Cogan, Jr. /s/Marguerite A. Piret
John F. Cogan, Jr. Marguerite A. Piret
as Trustee and not individually as Trustee and not individually
975 Memorial Drive, #802 162 Washington Street
Cambridge, MA 02138 Belmont, MA 02178
/s/Richard H. Egdahl, M.D. /s/David D. Tripple
Richard H. Egdahl, M.D. David D. Tripple
as Trustee and not individually as Trustee and not individually
Health Policy Institute 6 Woodbine Road
53 Bay State Road Belmont, MA 02178
Boston, MA 02215
/s/Margaret B.W. Graham /s/Stephen K. West, Esq.
Margaret B.W. Graham Stephen K. West, Esq.
as Trustee and not individually as Trustee and not individually
The Keep Sullivan & Cromwell
P.O. Box 110 125 Broad Street
Little Deer Isle, ME 04650 New York, NY 10004
/s/John W. Kendrick /s/John Winthrop
John W. Kendrick John Winthrop
as Trustee and not individually as Trustee and not individually
6363 Waterway Drive One North Adgers Wharf
Falls Church, VA 22044 Charleston, SC 29401
BY-LAWS
OF
PIONEER TAX-FREE INCOME FUND
ARTICLE I
DEFINITIONS
All capitalized terms have the respective meanings given them in the
Declaration of Trust of Pioneer Tax-Free Income Fund dated June 16, 1994, as
amended or restated from time to time.
ARTICLE II
OFFICES
Section 1. Principal Office. Until changed by the Trustees, the principal
office of the Trust shall be in Boston, Massachusetts.
Section 2. Other Offices. The Trust may have offices in such other places
without as well as within the State of Delaware as the Trustees may from time to
time determine.
Section 3. Registered Office and Registered Agent. The Board of Trustees
shall establish a registered office in the State of Delaware and shall appoint
as the Trust's registered agent for service of process in the State of Delaware
an individual resident of the State of Delaware or a Delaware corporation or a
corporation authorized to transact business in the State of Delaware; in each
case the business office of such registered agent for service of process shall
be identical with the registered Delaware office of the Trust.
ARTICLE III
SHAREHOLDERS
Section 1. Meetings. Meetings of the Shareholders of the Trust or a Series
or Class thereof shall be held as provided in the Declaration of Trust at such
<PAGE>
place within or without the State of Delaware as the Trustees shall designate.
The holders of one-third of the Outstanding Shares of the Trust or a Series or
Class thereof present in person or by proxy and entitled to vote shall
constitute a quorum at any meeting of the Shareholders of the Trust or a Series
or Class thereof.
Section 2. Notice of Meetings. Notice of all meetings of the Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail or telegraphic or electronic means to each Shareholder at his
address as recorded on the register of the Trust mailed at least (10) days and
not more than ninety (90) days before the meeting, provided, however, that
notice of a meeting need not be given to a Shareholder to whom such notice need
not be given under the proxy rules of the Commission under the 1940 Act and the
Securities Exchange Act of 1934, as amended. Only the business stated in the
notice of the meeting shall be considered at such meeting. Any adjourned meeting
may be held as adjourned without further notice. No notice need be given to any
Shareholder who shall have failed to inform the Trust of his current address or
if a written waiver of notice, executed before or after the meeting by the
Shareholder or his attorney thereunto authorized, is filed with the records of
the meeting.
Section 3. Record Date for Meetings and Other Purposes. For the purpose of
determining the Shareholders who are entitled to notice of and to vote at any
meeting, or to participate in any distribution, or for the purpose of any other
action, the Trustees may from time to time close the transfer books for such
period, not exceeding thirty (30) days, as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date not more than
ninety (90) days prior to the date of any meeting of Shareholders or
distribution or other action as a record date for the determination of the
persons to be treated as Shareholders of record for such purposes, except for
dividend payments which shall be governed by the Declaration of Trust.
Section 4. Proxies. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken. A
proxy shall be deemed signed if the shareholder's name is placed on the proxy
(whether by manual signature, typewriting, telegraphic transmission, facsimile,
other electronic means or otherwise) by the shareholder or the shareholder's
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<PAGE>
attorney-in-fact. Proxies may be given by any electronic or telecommunication
device except as otherwise provided in the Declaration of Trust. Proxies may be
solicited in the name of one or more Trustees or one or more of the officers of
the Trust. Only Shareholders of record shall be entitled to vote. Each whole
share shall be entitled to one vote as to any matter on which it is entitled by
the Declaration of Trust to vote and fractional shares shall be entitled to a
proportionate fractional vote. When any Share is held jointly by several
persons, any one of them may vote at any meeting in person or by proxy in
respect of such Share, but if more than one of them shall be present at such
meeting in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in respect
of such Share. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its exercise,
and the burden of proving invalidity shall rest on the challenger. If the holder
of any such share is a minor or a person of unsound mind, and subject to
guardianship or the legal control of any other person as regards the charge or
management of such Share, he may vote by his guardian or such other person
appointed or having such control, and such vote may be given in person or by
proxy.
Section 5. Abstentions and Broker Non-Votes. Outstanding Shares represented
in person or by proxy (including Shares which abstain or do not vote with
respect to one or more of any proposals presented for Shareholder approval) will
be counted for purposes of determining whether a quorum is present at a meeting.
Abstentions will be treated as Shares that are present and entitled to vote for
purposes of determining the number of Shares that are present and entitled to
vote with respect to any particular proposal, but will not be counted as a vote
in favor of such proposal. If a broker or nominee holding Shares in "street
name" indicates on the proxy that it does not have discretionary authority to
vote as to a particular proposal, those Shares will not be considered as present
and entitled to vote with respect to such proposal.
Section 6. Inspection of Records. The records of the Trust shall be open to
inspection by Shareholders to the same extent as is permitted shareholders of a
Delaware business corporation.
Section 7. Action without Meeting. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Outstanding Shares
entitled to vote on the matter (or such larger proportion thereof as shall be
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<PAGE>
required by law) consent to the action in writing and the written consents are
filed with the records of the meetings of Shareholders. Such consents shall be
treated for all purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their discretion
provide for regular or stated meetings of the Trustees. Notice of regular or
stated meetings need not be given. Meetings of the Trustees other than regular
or stated meetings shall be held whenever called by the President, the Chairman
or by any one of the Trustees, at the time being in office. Notice of the time
and place of each meeting other than regular or stated meetings shall be given
by the Secretary or an Assistant Secretary or by the officer or Trustee calling
the meeting and shall be mailed to each Trustee at least two days before the
meeting, or shall be given by telephone, cable, wireless, facsimile or other
electronic mechanism to each Trustee at his business address, or personally
delivered to him at least one day before the meeting. Such notice may, however,
be waived by any Trustee. Notice of a meeting need not be given to any Trustee
if a written waiver of notice, executed by him before or after the meeting, is
filed with the records of the meeting, or to any Trustee who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
him. A notice or waiver of notice need not specify the purpose of any meeting.
The Trustees may meet by means of a telephone conference circuit or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall be deemed to have been held at a place designated by the Trustees at the
meeting. Participation in a telephone conference meeting shall constitute
presence in person at such meeting. Any action required or permitted to be taken
at any meeting of the Trustees may be taken by the Trustees without a meeting if
a majority of the Trustees consent to the action in writing and the written
consents are filed with the records of the Trustees' meetings. Such consents
shall be treated as a vote for all purposes.
Section 2. Quorum and Manner of Acting. A majority of the Trustees shall be
present in person at any regular or special meeting of the Trustees in order to
constitute a quorum for the transaction of business at such meeting and (except
4
<PAGE>
as otherwise required by law, the Declaration of Trust or these By-laws) the act
of a majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
ARTICLE V
COMMITTEES
Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three (3) members to hold office at the
pleasure of the Trustees, which shall have the power to conduct the current and
ordinary business of the Trust while the Trustees are not in session, including
the purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust or a Series thereof, and such
other powers of the Trustees as the Trustees may delegate to them, from time to
time, except those powers which by law, the Declaration of Trust or these
By-laws they are prohibited from delegating. The Trustees may also elect from
their own number other Committees from time to time; the number composing such
Committees, the powers conferred upon the same (subject to the same limitations
as with respect to the Executive Committee) and the term of membership on such
Committees to be determined by the Trustees. The Trustees may designate a
chairman of any such Committee. In the absence of such designation the Committee
may elect its own Chairman.
Section 2. Meetings, Quorum and Manner of Acting. The Trustees may (1)
provide for stated meetings of any Committee, (2) specify the manner of calling
and notice required for special meetings of any Committee, (3) specify the
number of members of a Committee required to constitute a quorum and the number
of members of a Committee required to exercise specified powers delegated to
such Committee, (4) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a Committee
without a meeting, and (5) authorize the members of a Committee to meet by means
of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its meetings and
records of decisions taken without a meeting and cause them to be recorded in a
book designated for that purpose and kept in the office of the Trust.
5
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ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust shall be a
President, a Treasurer and a Secretary, who shall be elected by the Trustees.
The Trustees may elect or appoint such other officers or agents as the business
of the Trust may require, including one or more Vice Presidents, one or more
Assistant Secretaries, and one or more Assistant Treasurers. The Trustees may
delegate to any officer or committee the power to appoint any subordinate
officers or agents.
Section 2. Term of Office and Qualifications. Except as otherwise provided
by law, the Declaration of Trust or these By-laws, the President, the Treasurer,
the Secretary and any other officer shall each hold office at the pleasure of
the Board of Trustees or until his successor shall have been duly elected and
qualified. The Secretary and the Treasurer may be the same person. A Vice
President and the Treasurer or a Vice President and the Secretary may be the
same person, but the offices of Vice President, Secretary and Treasurer shall
not be held by the same person. The President shall hold no other office. Except
as above provided, any two offices may be held by the same person. Any officer
may be but none need be a Trustee or Shareholder.
Section 3. Removal. The Trustees, at any regular or special meeting of the
Trustees, may remove any officer with or without cause, by a vote of a majority
of the Trustees then in office. Any officer or agent appointed by an officer or
committee may be removed with or without cause by such appointing officer or
committee.
Section 4. Powers and Duties of the Chairman. The Trustees may, but need
not, appoint from among their number a Chairman. When present he shall preside
at the meetings of the Shareholders and of the Trustees. He may call meetings of
the Trustees and of any committee thereof whenever he deems it necessary. He
shall be an executive officer of the Trust and shall have, with the President,
general supervision over the business and policies of the Trust, subject to the
limitations imposed upon the President, as provided in Section 5 of this Article
VI.
6
<PAGE>
Section 5. Powers and Duties of the President. The President may call
meetings of the Trustees and of any Committee thereof when he deems it necessary
and shall preside at all meetings of the Shareholders. Subject to the control of
the Trustees and to the control of any Committees of the Trustees, within their
respective spheres, as provided by the Trustees, he shall at all times exercise
a general supervision and direction over the affairs of the Trust. He shall have
the power to employ attorneys and counsel for the Trust or any Series or Class
thereof and to employ such subordinate officers, agents, clerks and employees as
he may find necessary to transact the business of the Trust or any Series or
Class thereof. He shall also have the power to grant, issue, execute or sign
such powers of attorney, proxies or other documents as may be deemed advisable
or necessary in furtherance of the interests of the Trust or any Series thereof.
The President shall have such other powers and duties, as from time to time may
be conferred upon or assigned to him by the Trustees.
Section 6. Powers and Duties of Vice Presidents. In the absence or
disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President designated by the Trustees, shall perform all
the duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him from time to time by the Trustees and the President.
Section 7. Powers and Duties of the Treasurer. The Treasurer shall be the
principal financial and accounting officer of the Trust. He shall deliver all
funds of the Trust or any Series or Class thereof which may come into his hands
to such Custodian as the Trustees may employ. He shall render a statement of
condition of the finances of the Trust or any Series or Class thereof to the
Trustees as often as they shall require the same and he shall in general perform
all the duties incident to the office of a Treasurer and such other duties as
from time to time may be assigned to him by the Trustees. The Treasurer shall
give a bond for the faithful discharge of his duties, if required so to do by
the Trustees, in such sum and with such surety or sureties as the Trustees shall
require.
Section 8. Powers and Duties of the Secretary. The Secretary shall keep the
minutes of all meetings of the Trustees and of the Shareholders in proper books
provided for that purpose; he shall have custody of the seal of the Trust; he
shall have charge of the Share transfer books, lists and records unless the same
are in the charge of a transfer agent. He shall attend to the giving and serving
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<PAGE>
of all notices by the Trust in accordance with the provisions of these By-laws
and as required by law; and subject to these By-laws, he shall in general
perform all duties incident to the office of Secretary and such other duties as
from time to time may be assigned to him by the Trustees.
Section 9. Powers and Duties of Assistant Officers. In the absence or
disability of the Treasurer, any officer designated by the Trustees shall
perform all the duties, and may exercise any of the powers, of the Treasurer.
Each officer shall perform such other duties as from time to time may be
assigned to him by the Trustees. Each officer performing the duties and
exercising the powers of the Treasurer, if any, and any Assistant Treasurer,
shall give a bond for the faithful discharge of his duties, if required so to do
by the Trustees, in such sum and with such surety or sureties as the Trustees
shall require.
Section 10. Powers and Duties of Assistant Secretaries. In the absence or
disability of the Secretary, any Assistant Secretary designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Secretary. Each Assistant Secretary shall perform such other duties as from time
to time may be assigned to him by the Trustees.
Section 11. Compensation of Officers and Trustees and Members of the
Advisory Board. Subject to any applicable provisions of the Declaration of
Trust, the compensation of the officers and Trustees and members of an advisory
board shall be fixed from time to time by the Trustees or, in the case of
officers, by any Committee or officer upon whom such power may be conferred by
the Trustees. No officer shall be prevented from receiving such compensation as
such officer by reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of January in
each year and shall end on the last day of December in each year, provided,
however, that the Trustees may from time to time change the fiscal year. The
taxable year of each Series of the Trust shall be as determined by the Trustees
from time to time.
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ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and shall have
such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
SUFFICIENCY AND WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the
Declaration of Trust or these By-laws, a waiver thereof in writing, signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. A notice shall be deemed to
have been sent by mail, telegraph, cable, wireless, facsimile or other
electronic means for the purposes of these By-laws when it has been delivered to
a representative of any company holding itself out as capable of sending notice
by such means with instructions that it be so sent.
ARTICLE X
AMENDMENTS
These By-laws, or any of them, may be altered, amended or repealed, or new
By-laws may be adopted by (a) vote of a majority of the Outstanding Shares
voting in person or by proxy at a meeting of Shareholders and entitled to vote
or (b) by the Trustees, provided, however, that no By-law may be amended,
adopted or repealed by the Trustees if such amendment, adoption or repeal
requires, pursuant to law, the Declaration of Trust or these By-laws, a vote of
the Shareholders.
END OF BY-LAWS
9
MANAGEMENT CONTRACT
THIS AGREEMENT dated this 30th day of June, 1994 between Pioneer
Tax-Free Income Fund, a Delaware business trust (the "Fund"), and Pioneering
Management Corporation, a Delaware corporation, (the "Manager").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement") for the purpose of registering its shares for public offering under
the Securities Act of 1933, as amended,
WHEREAS, the parties hereto deem it mutually advantageous that the
Manager should be engaged, subject to the supervision of the Fund's Board of
Trustees and officers, to manage the Fund,
NOW, THEREFORE, in consideration of the mutual covenants and benefits
set forth herein, the Fund and the Manager do hereby agree as follows:
1. (a) The Manager will regularly provide the Fund with investment
research, advice and supervision and will furnish continuously an investment
program for the Fund consistent with the investment objectives and policies of
the Fund. The Manager will determine from time to time what securities shall be
purchased for the Fund, what securities shall be held or sold by the Fund and
what portion of the Fund's assets shall be held uninvested as cash, subject
always to the provisions of the Fund's Agreement and Declaration of Trust,
By-Laws and its registration statements under the 1940 Act and under the
Securities Act of 1933 covering the Fund's shares, as filed with the Securities
and Exchange Commission, and to the investment objectives, policies and
restrictions of the Fund, as each of the same shall be from time to time in
<PAGE>
effect, and subject, further, to such policies and instructions as the Board of
Trustees of the Fund may from time to time establish. To carry out such
determinations, the Manager will exercise full discretion and act for the Fund
in the same manner and with the same force and effect as the Fund itself might
or could do with respect to purchases, sales or other transactions, as well as
with respect to all other things necessary or incidental to the furtherance or
conduct of such purchases, sales or other transactions.
(b) The Manager will, to the extent reasonably required in the
conduct of the business of the Fund and upon the Fund's request, furnish to the
Fund research, statistical and advisory reports upon the industries, businesses,
corporations or securities as to which such requests shall be made, whether or
not the Fund shall at the time have any investment in such industries,
businesses, corporations or securities. The Manager will use its best efforts in
the preparation of such reports and will endeavor to consult the persons and
sources believed by it to have information available with respect to such
industries, businesses, corporations or entities.
(c) The Manager will maintain all books and records with respect
to the Fund's securities transactions required by sub-paragraphs(b)(5),(6),(9)
and (10) and paragraph (f) of Rule 31a-1 under the 1940 Act (other than those
records being maintained by the custodian or transfer agent appointed by the
Fund) and preserve such records for the periods prescribed therefor by Rule
31a-2 of the 1940 Act. The Manager will also provide to the Board of Trustees
such periodic and special reports as the Board may reasonably request.
2. (a) Except as otherwise provided herein, the Manager, at its own
expense, shall furnish to the Fund office space in the offices of the Manager or
in such other place as may be agreed upon from time to time, and all necessary
office facilities, equipment and personnel for managing the Fund's affairs and
investments, and shall arrange, if desired by the Fund, for members of the
Manager's organization to serve as officers or agents of the Fund.
(b) The Manager shall pay directly or reimburse the Fund for: (i)
the compensation (if any) of the Trustees who are affiliated with, or interested
persons of, the Manager and all officers of the Fund as such; and (ii) all
expenses not hereinafter specifically assumed by the Fund where such expenses
2
<PAGE>
are incurred by the Manager or by the Fund in connection with the management of
the affairs of, and the investment and reinvestment of the assets of, the Fund.
(c) The Fund shall assume and shall pay: (i) charges and expenses
for fund accounting, pricing and appraisal services and related overhead,
including, to the extent such services are performed by personnel of the Manager
or its affiliates, office space and facilities and personnel compensation,
training and benefits; (ii) the charges and expenses of auditors; (iii) the
charges and expenses of any custodian, transfer agent, plan agent, dividend
disbursing agent and registrar appointed by the Fund with respect to the Fund;
(iv) issue and transfer taxes, chargeable to the Fund in connection with
securities transactions to which the Fund is a party; (v) insurance premiums,
interest charges, dues and fees for membership in trade associations and all
taxes and corporate fees payable by the Fund to federal, state or other
governmental agencies; (vi) fees and expenses involved in registering and
maintaining registrations of the Fund and/or its shares with the Commission,
state or blue sky securities agencies and foreign countries, including the
preparation of Prospectuses and Statements of Additional Information for filing
with the Commission; (vii) all expenses of shareholders' and Trustees' meetings
and of preparing, printing and distributing prospectuses, notices, proxy
statements and all reports to shareholders and to governmental agencies; (viii)
charges and expenses of legal counsel to the Fund and the Trustees; (ix)
distribution fees paid by the Fund in accordance with Rule 12b-1 promulgated by
the Commission pursuant to the 1940 Act; (x) compensation of those Trustees of
the Fund who are not affiliated with or interested persons of the Manager, the
Fund (other than as Trustees), The Pioneer Group, Inc. or Pioneer Funds
Distributor, Inc.; (xi) the cost of preparing and printing share certificates;
and (xii) interest on borrowed money, if any.
(d) In addition to the expenses described in Section 2(c) above,
the Fund shall pay all brokers' and underwriting commissions chargeable to the
Fund in connection with securities transactions to which the Fund is a party.
3. (a) The Fund shall pay to the Manager, as compensation for the
Manager's services hereunder, a fee at the rates per annum of the Fund's average
daily net assets set forth in Schedule A hereto; provided, however, that until
November 30, 1995, the fee payable by the Fund shall not exceed the fee
determined at the rates per annum of the Fund's average daily net assets set
forth in Schedule B hereto. The agreement set forth in the proviso to the
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<PAGE>
preceding sentence shall not survive the merger, consolidation or other business
combination of the Fund with one or more other entities unless the Fund is the
surviving entity. The management fee payable hereunder shall be computed daily
and paid monthly in arrears. In the event of termination of this Agreement, the
fee provided in this Section shall be computed on the basis of the period ending
on the last business day on which this Agreement is in effect subject to a pro
rata adjustment based on the number of days elapsed in the current month as a
percentage of the total number of days in such month.
(b) If the operating expenses of the Fund in any year exceed the
limits set by state securities laws or regulations in states in which shares of
the Fund are sold, the amount payable to the Manager under subsection (a) above
will be reduced (but not below $0), and the Manager shall make other
arrangements concerning expenses but, in each instance, only as and to the
extent required by such laws or regulation. If amounts have already been
advanced to the Manager under this Agreement, the Manager will return such
amounts to the Fund to the extent required by the preceding sentence.
(c) In addition to the foregoing, the Manager may from time to
time agree not to impose all or a portion of its fee otherwise payable hereunder
(in advance of the time such fee or a portion thereof would otherwise accrue)
and/or undertake to pay or reimburse the Fund for all or a portion of its
expenses not otherwise required to be borne or reimbursed by the Manager. Any
such fee reduction or undertaking may be discontinued or modified by the Manager
at any time.
4. The Manager will not be liable for any error of judgment or
mistake of law or for any loss sustained by reason of the adoption of any
investment policy or the purchase, sale, or retention of any security on the
recommendation of the Manager, whether or not such recommendation shall have
been based upon its own investigation and research or upon investigation and
research made by any other individual, firm or corporation, but nothing
contained herein will be construed to protect the Manager against any liability
to the Fund or its shareholders by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement.
5. (a) Nothing in this Agreement will in any way limit or restrict
the Manager or any of its officers, directors, or employees from buying, selling
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<PAGE>
or trading in any securities for its or their own accounts or other accounts.
The Manager may act as an investment advisor to any other person, firm or
corporation, and may perform management and any other services for any other
person, association, corporation, firm or other entity pursuant to any contract
or otherwise, and take any action or do any thing in connection therewith or
related thereto; and no such performance of management or other services or
taking of any such action or doing of any such thing shall be in any manner
restricted or otherwise affected by any aspect of any relationship of the
Manager to or with the Fund or deemed to violate or give rise to any duty or
obligation of the Manager to the Fund except as otherwise imposed by law. The
Fund recognizes that Manager, in effecting transactions for its various
accounts, may not always be able to take or liquidate investment positions in
the same security at the same time and at the same price.
(b) In connection with purchases or sales of fund securities for
the account of the Fund, neither the Manager nor any of its Trustees, officers
or employees will act as a principal or agent or receive any commission except
as permitted by the 1940 Act. The Manager shall arrange for the placing of all
orders for the purchase and sale of fund securities for the Fund's account with
brokers or dealers selected by the Manager. In the selection of such brokers or
dealers and the placing of such orders, the Manager is directed at all times to
seek for the Fund the most favorable execution and net price available except as
described herein. It is also understood that it is desirable for the Fund that
the Manager have access to supplemental investment and market research and
security and economic analyses provided by brokers who may execute brokerage
transactions at a higher cost to the Fund than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price and
efficient execution. Therefore, the Manager is authorized to place orders for
the purchase and sale of securities for the Fund with such brokers, subject to
review by the Fund's Trustees from time to time with respect to the extent and
continuation of this practice. It is understood that the services provided by
such brokers may be useful to the Manager in connection with its or its
affiliates services to other clients.
(c) On occasions when the Manager deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients, the
Manager, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased in order to obtain the best
execution and lower brokerage commissions, if any. In such event, allocation of
5
<PAGE>
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Manager in the manner it considers to be the
most equitable and consistent with its fiduciary obligations to the Fund and to
such clients.
6. This Agreement shall become effective on the date hereof and shall
remain in force until November 30, 1995 and from year to year thereafter, but
only so long as its continuance is approved annually by a vote of the Trustees
of the Fund voting in person, including a majority of its Trustees who are not
parties to this Agreement or interested persons (as the term "interested
persons" is defined in the 1940 Act) of any such parties, at a meeting of
Trustees called for the purpose of voting on such approval or by a vote of a
"majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Fund, subject to the right of the Fund and the Manager to terminate this
contract as provided in Section 7 hereof.
7. Either party hereto may, without penalty, terminate this Agreement
by vote of its Board of Trustees or by vote of a "majority of its outstanding
voting securities" (as defined in the 1940 Act) of the Fund and the giving of 60
days' written notice to the other party.
8. This Agreement shall automatically terminate in the event of its
assignment. For purposes of this Agreement, the term "assignment" shall have the
meaning given it by Section 2(a)(4) of the 1940 Act.
9. The Fund agrees that in the event that neither the Manager nor any
of its affiliates acts as an investment adviser to the Fund, the name of the
Fund, and any fund thereof, will be changed to one that does not contain the
name "Pioneer" or otherwise suggest an affiliation with the Manager.
10. The Manager is an independent contractor and not an employee of
the Fund for any purpose. If any occasion should arise in which the Manager
gives any advice to its clients concerning the shares of the Fund, the Manager
will act solely as investment counsel for such clients and not in any way on
behalf of the Fund or Fund.
6
<PAGE>
11. This Agreement states the entire agreement of the parties hereto,
and is intended to be the complete and exclusive statement of the terms hereof.
It may not be added to or changed orally, and may not be modified or rescinded
except by a writing signed by the parties hereto and in accordance with the 1940
Act, when applicable.
12. This Agreement and all performance hereunder shall be governed by
the laws of The Commonwealth of Massachusetts, which apply to contracts made and
to be performed in The Commonwealth of Massachusetts.
13. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms or provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.
14. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers and their seal to be hereto
affixed as of the day and year first above written.
ATTEST: PIONEER TAX-FREE INCOME FUND
/s/ JOSEPH P. BARRI /s/ JOHN F. COGAN, JR.
Joseph P. Barri John F. Cogan, Jr
Secretary President
ATTEST: PIONEERING MANAGEMENT CORPORATION
/s/ JOSEPN P. BARRI /s/ DAVID D. TRIPPLE
Joseph P. Barri David D. Tripple
Secretary President
7
UNDERWRITING AGREEMENT
THIS UNDERWRITING AGREEMENT, dated this 30th day of June, 1994 by and
between Pioneer Tax-Free Income Fund, a Delaware business trust (the "Fund"),
and Pioneer Funds Distributor, Inc. (the "Underwriter").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and has filed a registration statement (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") for the purpose of registering shares of beneficial interest for
public offering under the Securities Act of 1933, as amended;
WHEREAS, the Underwriter, a corporation organized under the laws of
the Commonwealth of Massachusetts in 1989, engages in the purchase and sale of
securities both as a broker and a dealer and is registered as a broker-dealer
with the Commission and is a member in good standing of the National Association
of Securities Dealers, Inc. (the "NASD");
WHEREAS, the parties hereto deem it mutually advantageous that the
Underwriter should act as Principal Underwriter, as defined in the 1940 Act, for
the sale to the public of the Fund's shares of beneficial interest; and
NOW, THEREFORE, in consideration of the mutual covenants and benefits
set forth herein, Fund and the Underwriter hereby agree as follows:
1. The Fund hereby grants to the Underwriter the right and option to
purchase common shares of beneficial interest of the Fund (the "Shares") for
sale to investors either directly or indirectly through other broker-dealers.
The Underwriter is not required to purchase any specified number of Shares, but
will purchase from the Fund only a sufficient number of Shares as may be
necessary to fill unconditional orders received from time to time by the
Underwriter from investors and dealers.
<PAGE>
2. The Underwriter shall offer Shares to the public at an offering
price based upon the net asset value of the Shares, to be calculated as
described in the Registration Statement, including the Prospectus, filed with
the Commission and in effect at the time of the offering, plus sales charges as
approved by the Underwriter and the Board of Trustees of the Fund and as further
outlined in the Fund's Prospectus. The offering price shall be subject to any
provisions set forth in the Prospectus from time to time with respect thereto,
including, without limitation, rights of accumulation, letters of intention,
exchangeability of shares, reinstatement privileges, net asset value purchases
by certain persons and reinvestments of dividends and capital gain
distributions.
3. In the case of all Shares sold to investors through other
broker-dealers, all or a portion of applicable sales charges may be reallowed to
such broker-dealers who are members of the NASD or, in the case of certain sales
by banks or certain sales to foreign nationals, to brokers or dealers exempt
from registration with the Commission. The concession reallowed to
broker-dealers shall be set forth in a written sales agreement and shall be
generally the same for broker-dealers providing comparable levels of sales and
service.
4. This Agreement shall terminate on any anniversary hereof if its
terms and renewal have not been approved by a majority vote of the Board of
Trustees of the Fund voting in person, including a majority of the Trustees who
are not "interested persons" of the Fund and who have no direct or indirect
financial interest in the operation of the Underwriting Agreement (the
"Qualified Trustees"), at a meeting of the Board of Trustees called for the
purpose of voting on such approval. This Agreement may also be terminated at any
time, without payment of any penalty, by the Fund on 60 days' written notice to
the Underwriter, or by the Underwriter upon similar notice to the Fund. This
Agreement may also be terminated by a party upon five (5) days' written notice
to the other party in the event that the Commission has issued an order or
obtained an injunction or other court order suspending effectiveness of the
Registration Statement covering the Shares. Finally, this Agreement may also be
terminated by the Fund upon five (5) days' written notice to the Underwriter
provided either of the following events has occurred: (i) the NASD has expelled
the Underwriter or suspended its membership in that organization; or (ii) the
qualification, registration, license or right of the Underwriter to sell shares
in a particular state has been suspended or cancelled in a state in which sales
of the Shares during the most recent 12 month period exceeded 10% of all Shares
sold by the Underwriter during such period.
5. The compensation for the services of the Underwriter as a
principal underwriter under this Agreement shall be (i) that part of the sales
charge which is retained by the Underwriter after allowance of discounts to
dealers as set forth in the Registration Statement, including the Prospectus,
filed with the Commission and in effect at the time of the offering, as amended,
and (ii) those amounts payable to the Underwriter as reimbursement of expenses
pursuant to any distribution plan for the Fund which may be in effect. Nothing
2
<PAGE>
contained herein shall relieve the Fund of any obligation under its management
contract or any other contract with any affiliate of the Underwriter.
6. This Agreement shall automatically terminate in the event of its
assignment (as that term is defined in the 1940 Act).
7. In the event of any dispute between the parties, this Agreement
shall be construed according to the laws of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers and their seal to be hereto
affixed as of day and year first above written.
ATTEST: PIONEER TAX-FREE INCOME FUND
/s/ JOSEPH P. BARRI /s/ JOHN F. COGAN, JR.
Joseph P. Barri John F. Cogan, Jr.
Secretary President
ATTEST: PIONEER FUNDS DISTRIBUTOR, INC.
/s/ JOSEPH P. BARRI /s/ ROBERT L. BUTLER
Joseph P. Barri Robert L. Butler
Clerk President
3
AGREEMENT BETWEEN
BROWN BROTHERS HARRIMAN & CO.
AND
PIONEER TAX FREE INCOME FUND, INC.
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made this 1st day of December, 1993 between PIONEER TAX FREE INCOME
FUND, INC. (the "Fund") and Brown Brothers Harriman & Co. (the "Custodian");
WITNESSETH: That in consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:
1. Employment of Custodian: The Fund hereby employs and appoints the Custodian
as a custodian for the term and subject to the provisions of this Agreement. The
Custodian shall not be under any duty or obligation to require the Fund to
deliver to it any securities or funds owned by the Fund and shall have no
responsibility or liability for or on account of securities or funds not so
delivered. The Fund will deposit with the Custodian copies of the Declaration of
Trust or Certificate of Incorporation and By-Laws (or comparable documents) of
the Fund and all amendments thereto, and copies of such votes and other
proceedings of the Fund as may be necessary for or convenient to the Custodian
in the performance of its duties.
2. Powers and Duties of the Custodian with respect to Property of the Fund held
by the Custodian: Except for securities and funds held by any Subcustodians or
held by the Custodian through a non-U.S. securities depository appointed
pursuant to the provisions of Section 3 hereof, the Custodian shall have and
perform the following powers and duties:
A. Safekeeping - To keep safely the securities and other assets of the Fund that
have been delivered to the Custodian and, on behalf of the Fund, from time to
time to receive delivery of securities for safekeeping.
B. Manner of Holding Securities - To hold securities of the Fund (1) by physical
possession of the share certificates or other instruments representing such
securities in registered or bearer form, or (2) in book-entry form by a
Securities System (as said term is defined in Section 2U).
C. Registered Name; Nominee - To hold registered securities of the Fund (1) in
the name or any nominee name of the Custodian or the Fund, or in the name or any
nominee name of any Agent appointed pursuant to Section 6F, or (2) in street
certificate form, so-called, and in any case with or without any indication of
fiduciary capacity, provided that securities are held in an account of the
Custodian containing only assets of the Fund or only assets held as fiduciary or
custodian for customers.
D. Purchases - Upon receipt of Proper Instructions, as defined in Section X on
Page 18, insofar as funds are available for the purpose, to pay for and receive
securities purchased for the account of the Fund, payment being made only upon
receipt of the securities (1) by the Custodian, or (2) by a clearing corporation
of a national securities exchange of which the Custodian is a member, or (3) by
a Securities System. However, (i) in the case of repurchase agreements entered
into by the Fund, the Custodian (as well as an Agent) may release funds to a
Securities System or to a Subcustodian prior to the receipt of advice from the
Securities System or Subcustodian that the securities underlying such repurchase
agreement have been transferred by book entry into the Account (as defined in
Section 2U) of the Custodian (or such Agent) maintained with such Securities
System or Subcustodian, so long as such payment instructions to the Securities
System or Subcustodian include a requirement that delivery is only against
payment for securities, (ii) in the case of foreign exchange contracts, options,
time deposits, call account deposits, currency deposits, and other deposits,
contracts or options pursuant to Sections 2J, 2L, 2M and 2N, the Custodian may
make payment therefor without receiving an instrument evidencing said deposit,
contract or option so long as such payment instructions detail specific
securities to be acquired, and (iii) in the case of securities in which payment
for the security and. receipt of the instrument evidencing the security are
under generally accepted trade practice or the terms of the instrument
representing the security expected to take place in different locations or
through separate parties, such as commercial paper which is indexed to foreign
currency exchange rates, derivatives and similar securities, the Custodian may
make payment for such securities prior to delivery thereof in accordance with
such generally accepted trade practice or the terms of the instrument
representing such security.
E. Exchanges - Upon receipt of proper instructions, to exchange securities held
by it for the account of the Fund for other securities in connection with any
reorganization, recapitalization, split-up of shares, change of par value,
conversion or other event relating to the securities or the issuer of such
securities and to deposit any such securities in accordance with the terms of
any reorganization or protective plan. Without proper instructions, the
Custodian may surrender securities in temporary form for definitive securities,
may surrender securities for transfer into a name or nominee name as permitted
in Section 2C, and may surrender securities for a different number of
certificates or instruments representing the same number of shares or same
principal amount of indebtedness, provided the securities to be issued are to be
delivered to the Custodian.
F. Sales of Securities - Upon receipt of proper instructions, to make delivery
of securities which have been sold for the account of the Fund, but only against
payment therefor (1) in cash, by a certified check, bank cashier's check, bank
credit, or bank wire transfer, or (2) by credit to the account of the Custodian
with a clearing corporation of a national securities exchange of which the
Custodian is a member, or (3) by credit to the account of the Custodian or an
Agent of the Custodian with a Securities System; provided, however, that (i) in
the case of delivery of physical certificates or instruments representing
securities, the Custodian may make delivery to the broker buying the securities,
against receipt therefor, for examination in accordance with "street delivery"
custom, provided that the payment therefor is to be made to the Custodian (which
payment may be made by a broker's check) or that such securities are to be
returned to the Custodian, and (ii) in the case of securities referred to in
clause (iii) of the last sentence of Section 2D, the Custodian may make
settlement, including with respect to the form of payment, in accordance with
generally accepted trade practice relating to such securities or the terms of
the instrument representing said security.
G. Depositary Receipts - Upon receipt of proper instructions, to instruct a
Subcustodian or an Agent to surrender securities to the depositary used by an
issuer of American Depositary Receipts or International Depositary Receipts
(hereinafter collectively referred to as "ADRs") for such securities against a
written receipt therefor adequately describing such securities and written
evidence satisfactory to the Subcustodian or Agent that the depositary has
acknowledged receipt of instructions to issue with respect to such securities
ADRs in the name of the Custodian, or a nominee of the Custodian, for delivery
to the Custodian in Boston, Massachusetts, or at such other place as the
Custodian may from time to time designate.
Upon receipt of proper instructions, to surrender ADRs to the issuer thereof
against a written receipt therefor adequately describing the ADRs surrendered
and written evidence satisfactory to the Custodian that the issuer of the ADRs
has acknowledged receipt of instructions to cause its depositary to deliver the
securities underlying such ADRs to a Subcustodian or an Agent.
H. Exercise of Rights; Tender Offers - Upon timely receipt of proper
instructions, to deliver to the issuer or trustee thereof, or to the agent of
either, warrants, puts, calls, rights or similar securities for the purpose of
being exercised or sold, provided that the new securities and cash, if any,
acquired by such action are to be delivered to the Custodian, and, upon receipt
of proper instructions, to deposit securities upon invitations for tenders of
securities, provided that the consideration is to be paid or delivered or the
tendered securities are to be returned to the Custodian.
I. Stock Dividends, Rights, Etc. - To receive and collect all stock
dividends, rights and other items of like nature; and to deal with the same
pursuant to proper instructions relative thereto.
J. Options - Upon receipt of proper instructions, to receive and retain
confirmations or other documents evidencing the purchase of writing of an option
on a security or securities index by the Fund; to deposit and maintain in a
segregated account, either physically or by book-entry in a Securities System,
securities subject to a covered call option written by the Fund; and to release
and/or transfer such securities or other assets only in accordance with the
provisions of any agreement among the Fund, the Custodian and a broker-dealer
relating to such securities or other assets a notice or other communication
evidencing the expiration, termination or exercise of such covered option
furnished by The Options Clearing Corporation, the securities or options
exchange on which such covered option is traded or such other organization as
may be responsible for handling such options transactions.
K. Borrowings - Upon receipt of proper instructions, to deliver securities of
the Fund to lenders or their agents as collateral for borrowings effected by the
Fund, provided that such borrowed money is payable to or upon the Custodian's
order as Custodian for the Fund.
L. Demand Deposit Bank Accounts - To open and operate an account or accounts in
the name of the Fund on the Custodian's books subject only to draft or order by
the Custodian. All funds received by the Custodian from or for the account of
the Fund shall be deposited in said account(s). The responsibilities of the
Custodian to the Fund for deposits accepted on the Custodian's books shall be
that of a U. S. bank for a similar deposit.
If and when authorized by proper instructions, the Custodian may open and
operate an additional account(s) in such other banks or trust companies as may
be designated by the Fund in such instructions (any such bank or trust company
so designated by the Fund being referred to hereafter as a "Banking
Institution"), provided that such account(s) (hereinafter collectively referred
to as "demand deposit bank accounts") shall be in the name of the Custodian for
account of the Fund and subject only to the Custodian's draft or order. Such
demand deposit accounts may be opened with Banking Institutions in the United
States and in other countries and may be denominated in either U. S. Dollars or
other currencies as the Fund may determine. All such deposits shall be deemed to
be portfolio securities of the Fund and accordingly the responsibility of the
Custodian therefore shall be the same as and no greater than the Custodian's
responsibility in respect of other portfolio securities of the Fund.
M. Interest Bearing Call or Time Deposits - To place interest bearing fixed term
and call deposits with such banks and in such amounts as the Fund may authorize
pursuant to proper instructions. Such.deposits may be placed with the Custodian
or with Subcustodians or other Banking Institutions as the Fund may determine.
Deposits may be denominated in U. S. Dollars or other currencies and need not be
evidenced by the issuance or delivery of a certificate to the Custodian,
provided that the Custodian shall include in its records with respect to the
assets of the Fund appropriate notation as to the amount and currency of each
such deposit, the accepting Banking Institution and other appropriate details,
and shall retain such forms of advice or receipt evidencing the deposit, if any,
as may be forwarded to the Custodian by the Banking Institution. Such deposits,
other than those placed with the Custodian, shall be deemed portfolio securities
of the Fund and the responsibilities of the Custodian therefor shall be the same
as those for demand deposit bank accounts placed with other banks, as described
in Section K of this Agreement. The responsibility of the Custodian for such
deposits accepted on the Custodian's books shall be that of a U.S. bank for a
similar deposit.
N. Foreign Exchange Transactions and Futures Contracts Pursuant to proper
instructions, to enter into foreign exchange contracts or options to purchase
and sell foreign currencies for spot and future delivery on behalf and for the
account of the Fund. Such transactions may be undertaken by the Custodian with
such Banking Institutions, including the Custodian and Subcustodian(s) as
principals, as approved and authorized by the Fund. Foreign exchange contracts
and options other than those executed with the Custodian, shall be deemed to be
portfolio securities of the Fund and the responsibilities of the Custodian
therefor shall be the same as those for demand deposit bank accounts placed with
other banks as described in Section 2L of this agreement. Upon receipt of proper
instructions, to receive and retain confirmations evidencing the purchase or
sale of a futures contract or an option on a futures contract by the Fund; to
deposit and maintain in a segregated account, for the benefit of any futures
commission merchant or to pay to such futures commission merchant, assets
designated by the fund as initial, maintenance or variation "margin" deposits
intended to secure the Fund's performance of its obligations under any futures
contracts purchased or sold or any options on futures contracts written by the
Fund, in accordance with the provisions of any agreement or agreements among any
of the Fund, the Custodian and such futures commission merchant, designated to
comply with the rules of the Commodity Futures Trading Commission and/or any
contract market, or any similar organization or organizations, regarding such
margin deposits; and to release and/or transfer assets in such margin accounts
only in accordance with any such agreements or rules.
0. Stock Loans - Upon receipt of proper instructions, to deliver securities of
the Fund, in connection with loans of securities by the Fund, to the borrower
thereof prior to receipt of the collateral, if any, for such borrowing, provided
that for stock loans secured by cash collateral the Custodian's instructions to
the Securities System require that the Securities System may deliver the
securities to the borrower thereof only upon receipt of the collateral for such
borrowing.
P. Collections - To collect, receive and deposit in said account or accounts all
income, payments of principal and other payments with respect to the securities
held hereunder, and in connection therewith to deliver the certificates or other
instruments representing the securities to the issuer thereof or its agent when
securities are called, redeemed, retired or otherwise become payable; provided,
that the payment is to be made in such form and manner and at such time, which
may be after delivery by the Custodian of the instrument representing the
security, as is in accordance with the terms of the instrument representing the
security, or such proper instructions as the Custodian may receive, or
governmental regulations, the rules of Securities Systems or other U.S.
securities depositories and clearing agencies or, with respect to securities
referred to in clause (iii) of the last sentence of Section 2D, in accordance
with generally accepted trade practice; (ii) to execute ownership and other
certificates and affidavits for all federal and state tax purposes in connection
with receipt of income or other payments with respect to securities of the Fund
or in connection with transfer of securities, and (iii) pursuant to proper
instructions to take such other actions with respect to collection or receipt of
funds or transfer of securities which involve an investment decision.
Q. Dividends, Distributions and Redemptions - Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from the Fund's
shareholder servicing agent or agent with comparable duties (the "Shareholder
Servicing Agent") (given by such person or persons and in such manner on behalf
of the Shareholder Servicing Agent as the Fund shall have authorized), the
Custodian shall release funds or securities to the Shareholder Servicing Agent
or otherwise apply funds or securities, insofar as available, for the payment of
dividends or other distributions to Fund shareholders. Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from the Shareholder
Servicing Agent (given by such person or persons and in such manner on behalf of
the Shareholder Servicing Agent as the Fund shall have authorized), the
Custodian shall release funds or securities, insofar as available, to the
Shareholder Servicing Agent or as such Agent shall otherwise instruct for
payment to Fund shareholders who have delivered to such Agent a request for
repurchase or redemption of their shares of capital stock of the Fund.
R. Proxies, Notices, Etc. - Promptly to deliver or mail to the Fund all forms of
proxies and all notices of meetings and any other notices or announcements
affecting or relating to securities owned by the Fund that are received by the
Custodian, and upon receipt of proper instructions, to execute and deliver or
cause its nominee to execute and deliver such proxies or other authorizations as
may be required. Neither the Custodian nor its nominee shall vote upon any of
such securities or execute any proxy to vote thereon or give any consent or take
any other action with respect thereto (except as otherwise herein provided)
unless ordered to do so by proper instructions.
S. Nondiscretionary Details - Without the necessity of express authorization
from the Fund, (1) to attend to all nondiscretionary details in connection with
the sale, exchange, substitution, purchase, transfer or other dealings with
securities, funds or other property of the Portfolio held by the Custodian
except as otherwise directed from time to time by the Directors or Trustees of
the Fund, and (2) to make payments to itself or others for minor expenses of
handling securities or other similar items relating to the Custodian's duties
under this Agreement, provided that all such payments shall be accounted for to
the Fund.
T. Bills - Upon receipt of proper instructions, to pay or cause to be paid,
insofar as funds are available for the purpose,, bills, statements, or other
obligations of the Fund.
U. Deposit of Fund Assets in Securities Systems - The Custodian may deposit
and/or maintain securities owned by the Fund in (i) The Depository Trust
Company, (ii) any book-entry system as provided in Subpart 0 of Treasury
Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, or the book-entry
regulations of federal agencies substantially in the form of Subpart 0, or (iii)
any other domestic clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 which acts
as a securities depository and whose use the Fund has previously approved in
writing (each of the foregoing being referred to in this Agreement as a
"Securities System"). Utilization of a Securities System shall be in accordance
with applicable Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following provisions:
1) The Custodian may deposit and/or maintain Fund securities, either directly or
through one or more Agents appointed by the Custodian (provided that any such
agent shall be qualified to act as a custodian of the Fund pursuant to the
Investment Company Act of 1940 and the rules and regulations thereunder), in a
Securities System provided that such securities are represented in an account
("Account") of the Custodian or such Agent in the Securities System which shall
not include any assets of the Custodian or Agent other than assets held as a
fiduciary, custodian, or otherwise for customers;
2) The records of the Custodian with respect to securities of the Fund which are
maintained in a Securities System shall identify by book-entry those securities
belonging to the Fund;
3) The Custodian shall pay for securities purchased for the account of the Fund
upon (i) receipt of advice from the Securities System that such securities have
been transferred to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the account of the
Fund. The Custodian shall transfer securities sold for the account of the Fund
upon (i) receipt of advice from the Securities System that payment for such
securities has been transferred to the Account, and (ii) the making of an entry
on the records of the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the Securities System of
transfers of securities for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian or an Agent as referred to above, and
be provided to the Fund at its request. The Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the Fund in the form of
a written advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the Securities System
for the account of the Fund on the next business day;
4) The Custodian shall provide the Fund with any report obtained by the
Custodian or any Agent as referred to above on the Securities System's
accounting system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System; and the Custodian and such Agents
shall send to the Fund such reports on their own systems of internal accounting
control as the Fund may reasonably request from time to time.
5) At the written request of the Fund, the Custodian will terminate the use of
any such Securities System on behalf of the Fund as promptly as practicable.
V. Other Transfers - Upon receipt of proper instructions, to deliver securities,
funds and other property of the Fund to a Subcustodian or another custodian of
the Fund; and, upon receipt of proper instructions, to make such other
disposition of securities, funds or other property of the Fund in a manner other
than or for purposes other than as enumerated elsewhere in this Agreement,
provided that the instructions relating to such disposition shall include a
statement of the purpose for which the delivery is to be made, the amount of
securities to be delivered and the name of the person or persons to whom
delivery is to be made.
W. Investment Limitations - In performing its duties generally, and more
particularly in connection with the purchase, sale and exchange of securities
made by or for the Fund, the Custodian may assume unless and until notified in
writing to the contrary that proper instructions received by it are not in
conflict with or in any way contrary to any provisions of the Fund's Declaration
of Trust or Certificate of Incorporation or By-Laws (or comparable documents) or
votes or proceedings of the shareholders or Directors of the Fund. The Custodian
shall in no event be liable to the Fund and shall be indemnified by the Fund for
any violation which occurs in the course of carrying out instructions given by
the Fund of any investment limitations to which the Fund is subject or other
limitations with respect to the Fund's powers to make expenditures, encumber
securities, borrow or take similar actions affecting the Fund.
X. Restricted Securities. Notwithstanding any other provision of this Agreement,
the Custodian shall not be liable for failure to take any action in respect of a
"restricted security" (as hereafter defined) if the Custodian has not received
Proper Instructions to take such action (including but not limited to the
failure to exercise in a timely manner any right in respect of any restricted
security) unless the Custodian's responsibility to take such action is set forth
in a writing, agreed upon by the Custodian and the Fund or the investment
adviser of the Fund, which specifies particular actions the Custodian is to take
without Proper Instructions in respect of specified rights and obligations
pertaining to a particular restricted security. Further, the Custodian shall not
be responsible for transmitting to the Fund information concerning a restricted
security, such as with respect to exercise periods and expiration dates for
rights relating to the restricted security, except such information which the
Custodian actually receives or which is published in a source which is publicly
distributed and generally recognized as a major source of information with
respect to corporate actions of securities similar to the particular restricted
security. As used herein, the term "restricted securities" shall mean securities
which are subject to restrictions on transfer, whether by reason of contractual
restrictions or federal, state or foreign securities or similar laws, or
securities which have special rights or contractual features which do not apply
to publicly-traded shares of, or comparable interests representing, such
security
Y. Proper Instructions - Proper instructions shall mean a tested telex from the
Fund or a written request, direction, instruction or certification signed or
initialled on behalf of the Fund by one or more person or persons as the Board
of Directors or Trustees of the Fund shall have from time to time authorized,
provided, however, that no such instructions directing the delivery of
securities or the payment of funds to an authorized signatory of the Fund shall
be signed by such person. Those persons authorized to give proper instructions
may be identified by the Board of Directors or Trustees by name, title or
position and will include at least one officer empowered by the Board to name
other individuals who are authorized to give proper instructions on behalf of
the Fund. Telephonic or other oral instructions given by any one of the above
persons will be considered proper instructions if the Custodian reasonably
believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved oral instructions will be
confirmed by tested telex or in writing in the manner set forth above but the
lack of such confirmation shall in no way affect any action taken by the
Custodian in reliance upon such oral instructions. The Fund authorizes the
Custodian to tape record any and all telephonic or other oral instructions given
to the Custodian by or on behalf of the Fund (including any of its officers,
Directors, Trustees, employees or agents) and will deliver to the Custodian a
similar authorization from any investment manager or adviser or person or entity
with similar reponsibilities which is authorized to give proper instructions on
behalf of the Fund to the Custodian.
Proper instructions may relate to specific transactions or to types or classes
of transactions, and may be in the form of standing instructions.
Proper instructions may include communications effected directly between
electromechanical or electronic devices or systems, in addition to tested telex,
provided that the Fund and the Custodian agree to the use of such device or
system.
Z. Segregated Account - The Custodian shall upon receipt of proper instructions
establish and maintain on its books a segregated account or accounts for and on
behalf of the Fund, into which account or accounts may be transferred cash
and/or securities of the Fund, including securities maintained by the Custodian
pursuant to Section 2U hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. (or any futures commission merchant registered under
the Commodity Exchange Act) relating to compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract market), or any
similar organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund, (ii) for purposes of segregating cash
or securities in connection with options purchased, sold or written by the Fund
or commodity futures contracts or options thereon purchased or sold by the Fund,
(iii) for the purposes of compliance by the Fund with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or releases
of the Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies, and (iv) as mutually
agreed from time to time between the Fund and the Custodian.
3. Powers and Duties of the Custodian with Respect to the Appointment of
Subcustodians: The Fund hereby authorizes and instructs the Custodian to hold
securities, funds and other property of the Fund which are maintained outside
the United States at subcustodians appointed pursuant to the provisions of this
Section 3 (a "Subcustodian"). The Fund shall approve in writing (1) the
appointment of each Subcustodian and the subcustodian agreement to be entered
into between such Subcustodian and the Custodian, and (2) if the Subcustodian is
organized under the laws of a country other than the United States, the country
or countries in which the Subcustodian is authorized to hold securities, cash
and other property of the Fund. The Fund hereby further authorizes and instructs
the Custodian and any Subcustodian to utilize such securities depositories
located outside the United States which are approved in writing by the Fund to
hold securities, cash and other property of the Fund. Upon such approval by the
Fund, the Custodian is authorized on behalf of the Fund to notify each
Subcustodian of its appointment as such. The Custodian may, at any time in its
discretion, remove any Subcustodian that has been appointed as such but will
promptly notify the Fund of any such action.
Those Subcustodians, and the countries where and the securities depositories
through which they or the Custodian may hold securities, cash and other property
of the Fund which the Fund has approved to date are set forth on Appendix A
hereto. Such Appendix shall be amended from time to time as Subcustodians,
and/or countries and/or securities depositories are changed, added or deleted.
The Fund shall be responsible for informing the Custodian sufficiently in
advance of a proposed investment which is to be held in a country not listed on
Appendix A, in order that there shall be sufficient time for the Fund to give
the approval required by the preceding paragraph and for the Custodian to put
the appropriate arrangements in place with such Subcustodian, including
negotiation of a subcustodian agreement and submission of such subcustodian
agreement to the Fund for approval.
If the Fund shall have invested in a security to be held in a country before the
foregoing procedures have been completed, such security shall be held by such
agent as the Custodian may appoint. In any event, the Custodian shall be liable
to the Fund for the actions of such agent if and only to the extent the
Custodian shall have recovered from such agent for any damages caused the Fund
by such agent. At the request of the Fund, Custodian agrees to remove any
securities held on behalf of the Fund by such agent, if practical, to an
approved Subcustodian. Under such circumstances Custodian will collect income
and respond to corporate actions on a best efforts basis.
With respect to securities and funds held by a Subcustodian, either directly or
indirectly (including by a securities depository or clearing agency),
notwithstanding any provision of this Agreement to the contrary, payment for
securities purchased and delivery of securities sold may be made prior to
receipt of the securities or payment, respectively, and securities or payment
may be received in a form, in accordance with governmental regulations, rules of
securities depositories and clearing agencies, or generally accepted trade
practice in the applicable local market.
In the event that any Subcustodian appointed pursuant to the provisions of this
Section 3 fails to perform any of its obligations under the terms and conditions
of the applicable subcustodian agreement, the Custodian shall use its best
efforts to cause such Subcustodian to perform such obligations. In the event
that the Custodian is unable to cause such Subcustodian to perform fully its
obligations thereunder, the Custodian shall forthwith upon the Fund's request
terminate such Subcustodian in accordance with the termination provisions under
the applicable subcustodian agreement and, if necessary or desirable, appoint
another subcustodian in accordance with the provisions of this Section 3. At the
election of the Fund, it shall have the right to enforce, to the extent
permitted by the subcustodian agreement and applicable law, the Custodian's
rights against any such Subcustodian for loss or damage caused the Fund by such
Subcustodian.
The Custodian will not amend any subcustodian agreement or agree to change or
permit any changes thereunder except upon the prior written approval of the
Fund.
The Custodian may, at any time in its discretion upon notification to the Fund,
terminate any Subcustodian of the Fund in accordance with the termination
provisions under the applicable Subcustodian Agreement, and at the written
request of the Fund, the Custodian will terminate any Subcustodian in accordance
with the termination provisions under the applicable Subcustodian Agreement.
If necessary or desirable, the Custodian may appoint another subcustodian to
replace a Subcustodian terminated pursuant to the foregoing provisions of this
Section 3, such appointment to be made upon approval of the successor
subcustodian by the Fund's Board of Directors or Trustees in accordance with the
provisions of this Section 3.
In the event the Custodian receives a claim from a Subcustodian under the
indemnification provisions of any subcustodian agreement, the Custodian shall
promptly give written notice to the Fund of such claim. No more than thirty days
after written notice to the Fund of the Custodian's intention to make such
payment, the Fund will reimburse the Custodian the amount of such payment except
in respect of any negligence or misconduct of the Custodian.
4. Assistance by the Custodian as to Certain Matters: The Custodian may assist
generally in the preparation of reports to Fund shareholders and others, audits
of accounts, and other ministerial matters of like nature.
5. Powers and Duties of the Custodian with Respect to its Role as Financial
Agent: The Fund hereby also appoints the Custodian as the Funds financial agent.
With respect to the appointment as financial agent, the Custodian shall have and
perform the following powers and duties:
A. Records - To create, maintain and retain such records relating to its
activities and obligations under this Agreement as are required under the
Investment Company Act of 1940 and the rules and regulations thereunder
(including Section 31 thereof and Rules 3la-1 and 3la-2 thereunder) and under
applicable Federal and State tax laws. All such records will be the property of
the Fund and in the event of termination of this Agreement shall be delivered to
the successor custodian.
B. Accounts - To keep books of account and render statements, including interim
monthly and complete quarterly financial statements, or copies thereof, from
time to time as reasonably requested by proper instructions.
C. Access to Records - The books and records maintained by the Custodian
pursuant to Sections 5A and 5B shall at all times during the Custodian's regular
business hours be open to inspection and audit by officers of, attorneys for and
auditors employed by the Fund and by employees and agents of the Securities and
Exchange Commission, provided that all such individuals shall observe all
security requirements of the Custodian applicable to its own employees having
access to similar records within the Custodian and such regulations as may be
reasonably imposed by the Custodian.
D. Disbursements - Upon receipt of proper instructions, to pay or cause to be
paid, insofar as funds are available for the purpose, bills, statements and
other obligations of the Fund (including but not limited to interest charges,
taxes, management fees, compensation to Fund officers and employees, and other
operating expenses of the Fund).
6. Standard of Care and Related Matters:
A. Liability of the Custodian with Respect to Proper Instructions; Evidence of
Authority, Etc. The Custodian shall not be liable for any action taken or
omitted in reliance upon proper instructions believed by it to be genuine or
upon any other written notice, request, direction, instruction, certificate or
other instrument believed by it to be genuine and signed by the proper party or
parties.
The Secretary or Assistant Secretary of the Fund shall certify to the Custodian
the names, signatures and scope of authority of all persons authorized to give
proper instructions or any other such notice, request, direction, instruction,
certificate or instrument on behalf of the Fund, the names and signatures of the
officers of the Fund, the name and address of the Shareholder Servicing Agent,
and any resolutions, votes, instructions or directions of the Fund's Board of
Directors or Trustees or shareholders. Such certificate may be accepted and
relied upon by the Custodian as conclusive evidence of the facts set forth
therein and may be considered in full force and effect until receipt of a
similar certificate to the contrary.
So long as and to the extent that it is in the exercise of reasonable care, the
Custodian shall not be responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered by it pursuant
to this Agreement.
The Custodian shall be entitled, at the expense of the Fund, to receive and act
upon advice of (i) counsel regularly retained by the Custodian in respect of
custodian matters, (ii) counsel for the Fund, or (iii) such other counsel as the
Fund and the Custodian may agree upon, with respect to all matters, and the
Custodian shall be without liability for any action reasonably taken or omitted
pursuant to such advice.
B. Liability of the Custodian with Respect to Use of Securities System - With
respect to the portfolio securities, cash and other property of the Fund held by
a Securities System, the Custodian shall be liable to the Fund only for any loss
or damage to the Fund resulting from use of the Securities System if caused by
any negligence, misfeasance or misconduct of the Custodian or any of its agents
or of any of its or their employees or from any failure of the Custodian or any
such agent to enforce effectively such rights as it may have against the
Securities System. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claim against the
Securities System or any other person which the Custodian may have as a
consequence of any such loss or damage to the Fund if and to the extent that the
Fund has not been made whole for any such loss or damage.
C. Liability of the Custodian with Respect to Subcustodians The Custodian shall
be liable to the Fund for any loss or damage to the Fund caused by or resulting
from the acts or omissions of any Subcustodian to the extent that under the
terms set forth in the subcustodian agreement between the Custodian and the
Subcustodian (or in the subcustodian agreement between a Subcustodian and any
secondary Subcustodian), the Subcustodian (or secondary Subcustodian) has failed
to perform in accordance with the standard of conduct imposed under such
subcustodian agreement as determined in accordance with the law which is
adjudicated to govern such agreement and in accordance with any determination of
any court as to the duties of said Subcustodian pursuant to said agreement. The
Custodian shall also be liable to the Fund for its own negligence in
transmitting any instructions received by it from the Fund and for its own
negligence in connection with the delivery of any securities or funds held by it
to any Subcustodian.
D. Standard of Care; Liability; Indemnification - The Custodian shall be held
only to the exercise of reasonable care and diligence in carrying out the
provisions of this Agreement, provided that the Custodian shall not thereby be
required to take any action which is in contravention of any applicable law. The
Fund agrees to indemnify and hold harmless the Custodian and its nominees from
all claims and liabilities (including counsel fees) incurred or assessed against
it or its nominees in connection with the performance of this Agreement, except
such as may arise from its or its nominee's breach of the relevant standard of
conduct set forth in this Agreement. Without limiting the foregoing
indemnification obligation of the Fund, the Fund agrees to indemnify the
Custodian and any nominee in whose name portfolio securities or other property
of the Fund is registered against any liability the Custodian or such nominee
may incur by reason of taxes assessed to the Custodian or such nominee or other
costs, liability or expense incurred by the Custodian or such nominee resulting
directly or indirectly from the fact that portfolio securities or other property
of the Fund is registered in the name of the Custodian or such nominee.
It is also understood that the Custodian shall not be liable for any loss
involving any securities, currencies, deposits or other property of the Fund,
whether maintained by it, a Subcustodian, a securities depository, an agent of
the Custodian or a Subcustodian, a Securities System, or a Banking Institution,
or for any loss arising from a foreign currency transaction or contract, where
the loss results from a Sovereign Risk or where the entity maintaining such
securities, currencies, deposits or other property of the Fund, whether the
Custodian, a Subcustodian, a securities depository, an agent of the Custodian or
a Subcustodian, a Securities System or a Banking Institution, has exercised
reasonable care maintaining such property or in connection with the transaction
involving such property. A "Sovereign Risk" shall mean nationalization,
expropriation, devaluation, revaluation, confiscation, seizure, cancellation,
destruction or similar action by any governmental authority, de facto or de
jure; or enactment, promulgation, imposition or enforcement by any such
governmental authority of currency restrictions, exchange controls, taxes,
levies or other charges affecting the Fund's property; or acts of war,
terrorism, insurrection or revolution; or any other act or event beyond the
Custodian's control.
E. Reimbursement of Advances - The Custodian shall be entitled to receive
reimbursement from the Fund on demand, in the manner provided in Section 7, for
its cash disbursements, expenses and charges (including the fees and expenses of
any Subcustodian or any.Agent) in connection with this Agreement, but excluding
salaries and usual overhead expenses.
F. Security for Obligations to Custodian - If the Fund shall require the
Custodian to advance cash or securities for any purpose for the benefit of the
Fund, including in connection with foreign exchange contracts or options
(collectively, an "Advance"), or if the Custodiah or any nominee thereof shall
incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Agreement (collectively a
"Liability"), except such as may arise from its or such nominee's breach of the
relevant standard of conduct set forth in this Agreement, then in such event any
property at any time held for the account of the Fund by the Custodian or a
Subcustodian shall be security for such Advance or Liability and if the Fund
shall fail to repay or indemnify the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of the Fund's property,
including securities, to the extent necessary to obtain reimbursement or
indemnification.
G. Appointment of Agents - The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust company
as its agent (an "Agent") to carry out such of the provisions of this Agreement
as the Custodian may from time to time direct, provided, however, that the
appointment of such Agent (other than an Agent appointed pursuant to the third
paragraph of Section 3) shall not relieve the Custodian of any of its
responsibilities under this agreement.
H. Powers of Attorney - Upon request, the Fund shall deliver to the Custodian
such proxies, powers of attorney or other instruments as may be reasonable and
necessary or desirable in connection with the performance by the Custodian or
any Subcustodian of their respective obligations under this Agreement or any
applicable subcustodian agreement.
7. Compensation of the Custodian: The Fund shall pay the Custodian a custody fee
based on such fee schedule as may from time to time be agreed upon in writing by
the Custodian and the Fund. Such fee, together with all amounts for which the
Custodian is to be reimbursed in accordance with Section 6D, shall be billed to
the Fund in such a manner as to permit payment by a direct cash payment to the
Custodian.
8. Termination; Successor Custodian: This Agreement shall continue in full force
and effect until terminated by either party by an instrument in writing
delivered or mailed, postage prepaid, to the other party, such termination to
take effect not sooner than seventy five (75) days after the date of such
delivery or mailing. In the event of termination the Custodian shall be entitled
to receive prior to delivery of the securities, funds and other property held by
it all accrued fees and unreimbursed expenses the payment of which is
contemplated by Sections 6D and 7, upon receipt by the Fund of a statement
setting forth such fees and expenses.
In the event of the appointment of a successor custodian, it is agreed that the
funds and securities owned by the Fund and held by the Custodian or any
Subcustodian shall be delivered to the successor custodian, and the Custodian
agrees to cooperate with the Fund in execution of documents and performance of
other actions necessary or desirable in order to substitute the successor
custodian for the Custodian under this Agreement.
9. Amendment: This Agreement constitutes the entire understanding and agreement
of the parties hereto with respect to the subject matter hereof. No provision of
this Agreement may be amended or terminated except by a statement in writing
signed by the party against which enforcement of the amendment or termination is
sought.
In connection with the operation of this Agreement, the Custodian and the Fund
may agree in writing from time to time on such provisions interpretative of or
in addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. No interpretative or
additional provisions made as provided in the preceding sentence shall be deemed
to be an amendment of this Agreement.
The section headings in this Agreement are for the convenience of the parties
and in no way alter, amend, limit or restrict the contractual obligations of the
parties set forth in this Agreement.
10. Governing Law: This instrument is executed and delivered in The Commonwealth
of Massachusetts and shall be governed by and construed according to the laws of
said Commonwealth.
11. Notices: Notices and other writings delivered or mailed postage prepaid to
the Fund addressed to the Fund at 60 State Street, Boston, Massachusetts 02109
or to such other address as the Fund may have designated to the Custodian in
writing, or to the Custodian at 40 Water Street, Boston, Massachusetts 02109,
Attention: Manager, Securities Department, or to such other address as the
Custodian may have designated to the Fund in writing, shall be deemed to have
been properly delivered or given hereunder to the respective addressee.
12. Binding Effect: This Agreement shall be binding on and shall inure to the
benefit of the Fund and the Custodian and their respective successors and
assigns, provided that neither party hereto may assign this Agreement or any of
its rights or obligations hereunder without the prior written consent of the
other party.
13. Counterparts: This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original. This Agreement shall become effective
when one or more counterparts have been signed and delivered by each of the
parties.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
in its name and behalf on the day and year first above written.
PIONEER TAX FREE INCOME BROWN BROTHERS HARRIMAN
FUND, INC. & CO.
By _______________________ per pro
INVESTMENT COMPANY SERVICE AGREEMENT
June 30, 1994
Pioneer Tax-Free Income Fund, a Delaware business trust, with its
principal place of business at 60 State Street, Boston, Massachusetts 02109
("Customer") and Pioneering Services Corporation, a Massachusetts corporation
("PSC"), hereby agree as follows:
1. SERVICES TO BE PROVIDED BY PSC. During the term of this Agreement,
PSC will provide the Customer with the services described in Exhibits A, B, C,
and D (collectively, the "Exhibits") that are attached hereto and incorporated
herein by reference. It is understood that PSC may subcontract any of such
services to one or more firms designated by PSC, provided that PSC (i) shall be
solely responsible for all compensation payable to any such firm and (ii) shall
be liable to Customer for the acts or omissions of any such firm to the same
extent as PSC would be liable to Customer with respect to any such act or
omission hereunder.
2. EFFECTIVE DATE. This Agreement shall become effective on the date
hereof (the "Effective Date") and shall continue in effect until it is
terminated in accordance with Section 11 below.
3. DELIVERY, VERIFICATION AND RECEIPT FOR DATA AND ASSETS. Prior to
the Effective Date, Customer agrees to deliver to PSC all such documentation,
data and materials as PSC may reasonably prescribe to enable it to perform the
services contemplated by this Agreement. If PSC so requests, Customer agrees to
confirm the accuracy of any starting records of Customer's assets and accounts
produced from PSC's computer or held in other recording systems. In the event
Customer does not, prior to the Effective Date, comply fully with any of the
foregoing provisions of this Section 3, the date for commencement of PSC's
services hereunder may be postponed by PSC until such compliance has taken
place.
Customer shall, from time to time, while this Agreement is in
effect deliver all such materials and data as may be necessary or desirable to
enable PSC to perform its services hereunder, including without limitation,
those described in Section 12 hereof.
<PAGE>
4. REPORTS AND MAINTENANCE OF RECORDS BY PSC. PSC will furnish to
Customer and to properly authorized auditors, examiners, distributors, dealers,
underwriters, salesmen, insurance companies, investors, and others designated by
Customer in writing, such books, any and all records and reports at such times
as are prescribed for each service in the Exhibits attached hereto. Customer
agrees to examine or to ask any other authorized recipient to examine each such
report or copy promptly and will report or cause to be reported any errors or
discrepancies therein of which Customer then has any knowledge. PSC may at its
option at any time, and shall forthwith upon Customer's demand, turn over to
Customer and cease to retain in PSC's files, any and all records and documents
created and maintained by PSC pursuant to this Agreement which are no longer
needed by PSC in the performance of its services or for its protection.
If not so turned over to Customer, such documents and reports
will be retained by PSC for six years from the year of creation, during the
first two of which the same will be in readily accessible form. At the end of
six years, such records and documents, will be turned over to Customer by PSC
unless Customer authorizes their destruction.
5. PSC'S DUTY OF CARE. PSC shall at all time use reasonable care and
act in good faith in performing its duties hereunder. PSC shall incur no
liability to Customer in connection with its performance of services hereunder
except to the extent that it does not comply with the foregoing standards.
PSC shall at all times adhere to various procedures and systems
consistent with industry standards in order to safeguard Customer's checks,
records and other data from loss or damage attributable to fire or theft. PSC
shall maintain insurance adequate to protect against the costs of reconstructing
checks, records and other data in the event of such loss and shall notify
Customer in the event of a material adverse change in such insurance coverage.
In the event of damage or loss occurring to Customer's records or data such that
PSC is unable to meet the terms of this Agreement, PSC shall transfer all
records and data to a transfer agent of Customer's choosing upon Customer's
written authorization to do so.
Without limiting the generality of the foregoing, PSC shall not
be liable or responsible for delays or errors occurring by reason of
circumstances beyond its control including acts of civil, military or banking
authority, national emergencies, labor difficulties, fire, flood or other
2
<PAGE>
catastrophes, acts of God, insurrection, war, riots, failure of transportation,
communication or power supply.
6. CONFIDENTIALITY. PSC will keep confidential all records and
information provided by Customer or by the shareholders of the Customer to PSC,
except to the extent disclosures are required by this Agreement, are required by
the Customer's Prospectus and Statement of Additional Information, or are
required by a valid subpoena or warrant issued by a court of competent
jurisdiction or by a state or federal agency or governmental authority.
7. CUSTOMER INSPECTION. Upon reasonable notice, in writing signed by
Customer, PSC shall make available, during regular business hours, all records
and other data created and maintained pursuant to this Agreement for reasonable
audit and inspection by Customer or Customer's agents, including reasonable
visitation by Customer or Customer's agent, including inspecting PSC's operation
facilities. PSC shall not be liable for injury to or responsible in any way for
the safety of any individual visiting PSC's facilities under the authority of
this section. Customer will keep confidential and will cause to keep
confidential all confidential information obtained by its employees or agents or
any other individual representing Customer while on PSC's premises. Confidential
information shall include (1) any information of whatever nature regarding PSC's
operations, security procedures, and data processing capabilities, (2) financial
information regarding PSC, its affiliates, or subsidiaries, and (3) any
information of whatever kind or description regarding any customer of PSC, its
affiliates or subsidiaries.
8. RELIANCE BY PSC ON INSTRUCTIONS AND ADVICE; INDEMNITY. PSC shall
be entitled to seek advice of Customer's legal counsel with respect to PSC's
responsibilities and duties hereunder and shall in no event be liable to
Customer for any action taken pursuant to such advice, except to the extent that
Customer's legal counsel determines in its sole discretion that the rendering of
advice to PSC would result in a conflict of interest.
Whenever PSC is authorized to take action hereunder pursuant to
proper instructions from Customer, PSC shall be entitled to rely upon any
certificate, letter or other instrument or telephone call reasonably believed by
PSC to be genuine and to have been properly made or signed by an officer or
other authorized agent of Customer, and shall be entitled to receive as
conclusive proof of any fact or matter required to be ascertained by it
hereunder a certificate signed by an officer of Customer or any other person
authorized by Customer's Board of Trustees.
3
<PAGE>
Subject to the provisions of Section 13 of this Agreement,
Customer agrees to indemnify and hold PSC, its employees, agents and nominees
harmless from any and all claims, demands, actions and suits, whether groundless
or otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to PSC's action or non-action
upon information, instructions or requests given or made to PSC by Customer.
Notwithstanding the above, whenever Customer may be asked to
indemnify or hold PSC harmless, Customer shall be advised of all pertinent facts
arising from the situation in question. Additionally, PSC will use reasonable
care to identify and notify Customer promptly concerning any situation which
presents, actually or potentially, a claim for indemnification against Customer.
Customer shall have the option to defend PSC against any claim for which PSC is
entitled to indemnification from Customer under the terms hereof, and in the
event Customer so elects, it will notify PSC and, thereupon, Customer shall take
over complete defense of the claim and PSC shall sustain no further legal or
other expenses in such a situation for which indemnification shall be sought or
entitled. PSC may in no event confess any claim or make any compromise in any
case in which Customer will be asked to indemnify PSC except with Customer's
prior written consent.
9. MAINTENANCE OF DEPOSIT ACCOUNTS. PSC shall maintain on behalf of
Customer such deposit accounts as are necessary or desirable from time to time
to enable PSC to carry out the provisions of this Agreement.
10. COMPENSATION AND REIMBURSEMENT TO PSC. For the services rendered
by PSC under this Agreement, Customer agrees to pay an annual fee of $22.45 per
account to PSC, such fee to be payable in equal monthly installments. In
addition, Customer shall reimburse PSC monthly for out-of-pocket expenses such
as postage, forms, envelopes, checks, "outside" mailings, telephone line and
other charges, mailgrams, mail insurance on certificates and data processing
file recovery insurance.
11. TERMINATION. Either PSC or Customer may at any time terminate
this Agreement by giving 90 days' prior written notice to the other.
After the date of termination, for so long as PSC in fact
continues to perform any one or more of the services contemplated by this
4
<PAGE>
Agreement or any exhibit hereto, the provisions of this Agreement, including
without limitation the provisions of Section 8 dealing with indemnification,
shall where applicable continue in full force and effect.
12. REQUIRED DOCUMENTS. Customer agrees to furnish to PSC prior to
the Effective Date the following (to the extent not previously provided):
A. Two (2) copies of the Agreement and Declaration of Trust of
Customer, and of any amendments thereto, certified by the
proper official of the State of Delaware.
B. Two (2) copies of the following documents, currently certified
by the Secretary of Customer:
a. Customer's By-laws and any amendment thereto.
b. Certified copies of resolutions of Customer's Board of
Trustees covering the following matters.
(1) Approval of this Agreement.
(2) Authorization of specified officers of Customers
to instruct PSC hereunder (if different from other
officers of Customer previously specified by
Customer as to other Customer accounts being
serviced by PSC).
C. List of all officers of Customer together with specimen
signatures of those officers who are authorized to sign share
certificates and to instruct PSC in all other matters.
D. Two (2) copies of the following:
a. Prospectus
b. Statement of Additional Information
c. Management Agreement
d. Registration Statement
5
<PAGE>
E. Opinion of counsel for Customer as to the due authorization by
and binding effect of this Agreement on Customer, the
applicability of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, and the
approval by such public authorities as may be prerequisite to
lawful sale and deliver in the various states.
F. Amendments to, and changes in, any of the foregoing forthwith
upon such amendments and changes being available, but in no
case later than the effective date.
13. MISCELLANEOUS. In connection with the operation of this
Agreement, PSC and Customer may agree from time to time on such provisions
interpretive of or in addition to the provisions of this Agreement as may in
their joint opinion be consistent with the general tenor of this Agreement. Any
such interpretive or additional provisions are to be signed by both parties and
annexed hereto, but no such provision shall contravene any applicable Federal
and state law or regulation, and no such provision shall be deemed to be an
amendment of this Agreement.
This Agreement shall be construed in accordance with the laws of
The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, Customer and PSC have caused this Agreement to be
executed in their respective names by their respective officers thereunto duly
authorized as of the date first written above.
ATTEST: PIONEERING SERVICES CORPORATION
Joseph P. Barri William H. Smith, Jr.
Secretary President
PIONEER TAX-FREE INCOME FUND
Joseph P. Barri John F. Cogan, Jr.
Secretary President
6
<PAGE>
EXHIBIT A - TO INVESTMENT COMPANY SERVICE AGREEMENT
Shareholder Account Service:
As Servicing Agent for fund accounts and in accordance with the provisions of
the standard fund application and Customer's prospectus, PSC will:
1. Open, maintain and close accounts.
2. Purchase shares for the shareholder.
3. Out of the money received in payment for sales of Customer's shares
pay to the Customer's custodian the net asset value per share and pay
to the underwriter and to the dealer their commission, if any, on a
bimonthly basis.
4. Redeem shares by systematic withdrawal orders. (See Exhibit B)
5. Issue share certificates, upon instruction, resulting from withdrawals
from share accounts (It is the policy of PSC to issue share
certificates only upon request of the shareholder). Maintain records
showing name, address, certificate numbers and number of shares.
6. Deposit certificates to shareholder accounts when furnished with such
documents as PSC deems necessary to authorize the deposit.
7. Reinvest or disburse dividends and other distributions upon direction
of shareholder.
8. Establish the proper registration of ownership of shares.
9. Pass upon the adequacy of documents submitted by a shareholder or his
legal representative to substantiate the transfer of ownership of
shares from the registered owner to transferees.
10. Make transfers from time to time upon the books of the Customer in
accordance with properly executed transfer instructions furnished to
PSC.
11. Upon receiving appropriate detailed instructions and written materials
prepared by Customer and, where applicable, proxy proofs checked by
Customer, mail shareholder reports, proxies and related materials of
suitable design for automatic enclosing, receive and tabulate executed
proxies, and furnish an annual meeting list of shareholders when
required.
12. Respond to shareholder inquiries in a timely manner.
13. Maintain dealer and salesperson records.
14. Maintain and furnish to Customer such shareholder information as
Customer may reasonably request for the purpose of compliance by
Customer with the applicable tax and securities law of various
jurisdictions.
15. Mail confirmations of transactions to shareholders in a timely
fashion.
16. Provide Customer with such information regarding correspondence as
well as enable Customer to comply with related N-SAR requirements.
17. Maintain continuous proof of the outstanding shares of Customer.
18. Solicit taxpayer identification numbers.
19. Provide data to enable Customer to file abandoned property reports for
those accounts that have been indicated by the Post Office to be not
at the address of record with no forwarding address.
20. Maintain bank accounts and reconcile same on a monthly basis.
21. Provide management information reports on a quarterly basis to
Customer's Board of Trustees/Directors outlining the level of service
provided.
22. Provide sale/statistical reporting for purposes of providing fund
management with information to maximizing the return to shareholders.
<PAGE>
EXHIBIT B - TO INVESTMENT COMPANY SERVICE AGREEMENT
Redemption Service:
In accordance with the provisions of the Customer's Prospectus, as servicing
agent for the redemptions, PSC will:
1. Where applicable, establish accounts payable based on information
furnished to PSC on behalf of Customer (i.e., copies of trade
confirmations and other documents deemed necessary or desirable by PSC
on the first business day following the trade date).
2. Receive for redemption either:
a. Share certificates, supported by appropriate documentation; or
b. Written or telephone authorization (where no share certificates
are issued).
3. Verify there are sufficient available shares in an account to cover
redemption requests.
4. Transfer the redeemed or repurchased shares to Customer's treasury
share account or, if applicable, cancel such shares for retirement.
5. Pay the applicable redemption or repurchase price to the shareholder
in accordance with Customer's Prospectus and Declaration of Trust on
or before the seventh calendar day succeeding any receipt of
certificates or requests for redemption or repurchase in "good order"
as defined in the Prospectus.
6. Notify Customer and the underwriter on behalf of Customer of the total
number of shares presented and covered by such requests within a
reasonable period of time following receipt.
7. Promptly notify the shareholder if any such certificate or request for
redemption or repurchase is not in "good order" together with notice
of the documents required to comply with the good order standards.
Upon receipt of the necessary documents PSC shall effect such
redemption at the net asset value applicable at the date and time of
receipt of such documents.
8. Produce periodic reports of unsettled items, if any.
9. Adjust unsettled items, if any, relative to dividends and
distributions.
10. Report to Customer any late redemptions which must be included in
Customer's N-SAR.
<PAGE>
EXHIBIT C - TO INVESTMENT COMPANY SERVICE AGREEMENT
Exchange Service:
1. Receive and process exchanges in accordance with a duly executed
exchange authorization. PSC will redeem existing shares and use the
proceeds to purchase new shares. Shares of Customer purchased directly
or acquired through reinvestment of dividends on such shares may be
exchanged for shares of other Pioneer funds (which funds have sales
charges) only by payment of the applicable sales charge, if any, as
described in Customer's Prospectus. Shares of Customer acquired by
exchange and through reinvestment of dividends on such shares may be
re-exchanged to another Pioneer fund at their respective net asset
values.
2. Make authorized deductions of fees, if any.
3. Register new shares identically with the shares surrendered for
exchange. Mail new shares certificates, if requested, or an account
statement confirming the exchange by first class mail to the address
of record.
4. Maintain a record of unprocessed exchanges and produce a periodic
report.
<PAGE>
EXHIBIT D - TO INVESTMENT COMPANY SERVICE AGREEMENT
Income Accrual and Disbursing Service:
1. Distribute income dividends and/or capital gain distributions, either
through reinvestment or in cash, in accordance with shareholder
instructions.
2. On the mailing date, Customer shall make available to PSC collected
funds to make such distribution.
3. Adjust unsettled items relative to dividends and distribution.
4. Reconcile dividends and/or distributions with Customer.
5. Prepare and file annual Federal and State information returns of
distributions and, in the case of Federal returns, mail information
copies to shareholders and report and pay Federal income taxes
withheld from distributions made to non-resident aliens.
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Pioneer Tax-Free Income Fund, Inc.:
We consent to the incorporation by reference in Post-Effective
Amendment No. 33-25 to the Registration Statement of Pioneer Tax-Free Income
Fund, Inc. on Form N-1A (File No. 33-34801), of our report dated February 22,
1994 on our audit of the financial statements and financial highlights of the
Fund, which report is included in the Annual Report to Shareholders for the year
ended December 31, 1993, which is incorporated by reference in the Registration
Statement.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
April 28, 1995
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our report
(and to all references to our firm) included in or made a part of the Pioneer
Tax-Free Income Fund Post-Effective Amendment No. 34 to Registration Statement
File No. 2-57653 and Amendment No. 26 to Registration Statement File No.
811-2704.
Arthur Andersen LLP
Boston, Massachusetts
April 20, 1995
PIONEER TAX-FREE INCOME FUND
FELLOW SHAREOWNERS,
This annual report to shareowners of Pioneer Tax-Free Income Fund details the
Fund's performance in 1994. During the year, your Fund pursued its goal of
providing an attractive level of income free from federal taxation, consistent
with preservation of capital. The Fund did so by investing primarily in bonds
awarded one the top three investment-grade ratings: A or higher, as rated by
Moody's Investor Service or Standard & Poor's Corp. This year also represented
the first full year of stewardship by Pioneering Management Corp., which assumed
management of the Fund from Mutual of Omaha Fund Management Co. on December 1,
1993.
HOW YOUR FUND PERFORMED
In 1994, the Fund paid shareowners $0.64 per share in dividends. (In July, your
Fund began accruing dividends daily, and paying distributions on a monthly
basis, instead of quarterly.) At the end of the year the Fund's net asset value
stood at $11.24 per share, compared to $12.68 one year earlier, in part
reflecting the payment of distributions. As of year-end, the Fund provided a
30-day SEC yield of 5.45%, computed using a standard formula prescribed by the
Securities and Exchange Commission.
<TABLE>
Because your Fund's income is free from federal taxation, the yield compares
favorably with taxable bonds on an "after-tax" basis. The Fund's 5.45% SEC yield
would be equal to these taxable yields:
<CAPTION>
FEDERAL TAXABLE
TAX BRACKET EQUIVALENT YIELD
----------- ----------------
<S> <C>
39.6% 9.02%
36.0 8.52
31.0 7.90
</TABLE>
For 1994, the Fund had a total return of -6.38%, based on net asset value. Total
return measures the change in market value of the shares and assumes
reinvestment of all dividends. In comparison, the Lehman Brothers Municipal Bond
Index returned -5.17%. The average general municipal bond fund, as tracked by
Lipper Analytical Services, posted a total return of -6.53%.
Despite the Fund's negative total return in 1994, we feel it is important to
maintain focus on the long term. Over the last five and 10 years, your Fund has
provided average annual total returns of 6.80% and 9.66%, respectively.
For additional information on the Fund's performance, please turn to page 4.
MARKET OVERVIEW
In 1994, the dominant factor in the financial markets was the repeated moves by
the Federal Reserve Board to cool the economy. The Fed believed the pace of
economic growth was too rapid to be sustained without prompting inflation. Thus,
starting in February, the Fed acted six times to "tighten" monetary conditions;
in other words, it repeatedly raised key short-term rates. The series of rate
increases provided some assurance to bond investors that the Fed was committed
to holding inflation in check. Overall, however, the Fed's tightening caused
rates to rise on bonds of all maturities.
For example, intermediate U.S. Treasury notes, as measured by Ibbotson
Associates, had a total return of -5.14%. To put that in perspective, this was
the largest one-year decline in the prices of intermediate notes since record
keeping began in 1925, and more than twice the decline in 1931, the previous
worst year. The municipal bond market fared even worse, with the Lehman Brothers
Municipal Bond Index returning -5.17%, and the Lehman Brothers Long-Term
Municipal Index returning -9.10%.
<PAGE>
Your management believes that much of last year's decline in the municipal bond
market stemmed from an overreaction on the part of some investors. Indeed, in
the first weeks of 1995 the municipal bond market has bounced back to be one of
the strongest-performing sectors. Over the long term, we continue to be bullish
about the value present in the municipal arena, especially when we look at the
advantage tax-free compounding of dividends can offer shareowners.
HOW PIONEER MANAGED YOUR INVESTMENT
In a difficult environment such as last year's bond market, sometimes the moves
not undertaken by management are just as important as those that are made. Your
Fund's guiding philosophy is to follow a consistent strategy of buying quality
municipal bonds, and adjusting positions as needed without precipitous moves or
overreacting to market conditions.
In 1994, your management looked for opportunities to selectively acquire bonds
that would improve the overall quality of the portfolio. For example, we
maintained our approximate weighting in bonds issued in Nebraska -- a state
where there is relatively little supply, which tends to support the prices of
the bonds. In addition, we continue to favor bonds that are backed by revenue
streams of essential services such as sewer and water. To achieve a high level
of diversification, the portfolio comprised 158 bond issues in 37 states as of
year end.
During the course of the year, your management also sought to invest in bonds
with higher interest rate payments. This higher cash flow tends to make the
value of the bonds, and the Fund's portfolio, less vulnerable to rising interest
rates.
The accompanying charts show the Fund's maturity and quality at year-end.
MATURITY DISTRIBUTION
PORTFOLIO QUALITY
2
<PAGE>
MANAGEMENT OUTLOOK
The Fed's target is to steer the economy between paths of inflationary
overheating and a recession -- a goal known as a "soft landing." Your
management believes that the rise in interest rates that began in the early
part of 1994 is substantially over. However, economic indicators, such as last
year's strong 4% increase in Gross Domestic Product and the relatively low
unemployment rate, lead us to believe that the Fed still may wish to further
dampen the growth of the economy. Indeed, the Fed raised rates again on
February 1 and has indicated that it may do so again. The tightening by the Fed
is a normal activity at this stage of the business cycle -- it has occurred 10
times in the last 41 years.
Conditions in the municipal bond market are generally favorable. Supply is
relatively tight, while there is a high level of demand from individuals
seeking to minimize the impact of the higher federal tax brackets that
went into effect last year. Your management will continue to look for
opportunities that present themselves in this environment, while emphasizing
current income and investment-grade issues.
Please refer to the following pages for audited financial statements and the
complete list of portfolio holdings as of December 31, 1994. If you have any
questions about your investment in Pioneer Tax-Free Income Fund, contact your
investment representative, or call Pioneer at 1-800-225-6292.
Respectfully submitted,
John F. Cogan, Jr.
Chairman and President,
Pioneer Tax-Free Income Fund
February 10, 1995
3
<PAGE>
GROWTH OF A $10,000 INVESTMENT*
This chart shows the growth of a $10,000 investment made in Pioneer Tax-Free
Income Fund at public offering price, compared to the growth of the Lehman
Brothers Municipal Bond Index.
Average Annual Total Returns Chart
The Lehman Brothers Municipal Bond Index is an unmanaged measure of
approximately 15,000 bonds. Bonds in the Index have a minimum credit rating of
BBB, were part of at least a $50 million issuance made within the past five
years as part of a deal of at least $50 million and have a maturity of at least
two years. Index returns assume monthly reinvestment of dividends and, unlike
Fund returns, do not reflect any fees, expenses or sales charges. Investors
cannot directly invest in the Index.
* Reflects deduction of the 4.50% maximum sales charge at the beginning of the
period and assumes reinvestment of distributions at net asset value.
Past performance does not guarantee future results. Return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
4
<PAGE>
<TABLE>
PIONEER TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
December 31, 1994
<CAPTION>
Standard
& Poor's
Rating
Principal (Unaudited) Investment in Tax-Exempt Securities - 99.7%+ Value
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
ALABAMA -- 2.4%
$ 6,380,000 AA Birmingham General Obligation, 8.0%, 2015............................................. $ 6,874,450
4,500,000 AA- Jefferson County Sewer Revenue, 6.0%, 2013............................................ 4,145,625
ARIZONA -- 1.1%
5,000,000 AA Arizona State University Revenue -- Series A, 5.5%, 2019.............................. 4,131,250
1,000,000 AAA Maricopa County Elementary School District General Obligation, 5.4%, 2011............. 875,000
DELAWARE -- 1.2%
1,590,000 A1(1) Dover Electric Authority Revenue, 7.0%, Prerefunded, 2000*............................ 1,709,250
1,865,000 AAA State of Delaware Economic Development Authority Revenue, 7.3%, 2014.................. 1,944,263
5,000 A1(1) State of Delaware Housing Authority Revenue, 6.45%, 1995 ++........................... 5,000
1,960,000 A1(1) State of Delaware Housing Authority Revenue, 6.45%, 2013.............................. 1,847,013
DISTRICT OF COLUMBIA -- 0.8%
3,705,000 AA- District of Columbia Howard University Revenue -- Series A, 7.25%, 2020............... 3,746,681
FLORIDA -- 2.3%
5,000,000 AAA Dade County General Obligation, 12.0%, 2001........................................... 6,743,750
4,000,000 AA+ Jacksonville Health Facilities Authority Hospital Revenue, 6.75%, 2013................ 3,840,000
GEORGIA -- 0.7%
2,150,000 A+ Appling County Development Authority Revenue, 7.15%, 2021............................. 2,203,750
1,000,000 AAA Monroe County Development Authority Pollution Control Revenue, 6.8%, 2012............. 981,250
IDAHO -- 0.5%
2,500,000 A(1) University of Idaho Revenue, 6.625%, 2016............................................. 2,437,500
ILLINOIS -- 9.3%
6,900,000 AA Bryant Illinois Pollution Control Revenue, 5.9%, 2023................................. 5,847,750
3,700,000 AA- Chicago Gas Supply Revenue, 8.1%, 2020................................................ 3,954,375
10,125,000 AA(1) Illinois Education Facilities Authority Revenue Northwestern University, 5.375%, 2021. 8,201,250
1,145,000 A+ Illinois Housing Development Authority Revenue Multi-Family Housing, 7.0%,
Prerefunded, 2021*.................................................................... 1,147,863
2,500,000 AAA Illinois Metropolitan Pier & Exposition Authority State Tax Revenue, 0.0%, 2010....... 887,500
9,000,000 A+ Illinois Metropolitan Pier & Exposition Authority State Tax Revenue, 8.5%, 2006....... 10,451,250
4,100,000 A+ Illinois Metropolitan Pier & Exposition Authority State Tax Revenue, 6.5%, 2027....... 3,797,625
2,200,000 AA Illinois Metropolitan Water District General Obligation, 5.5%, 2012................... 1,922,250
6,000,000 A+ Illinois State Toll Highway Authority Revenue, 5.75%, 2017............................ 5,160,000
1,000,000 AAA Northwest Suburban Municipal Joint Action Water Agency Revenue, 5.9%, 2013............ 912,500
INDIANA -- 2.9%
2,000,000 A+ Fisher Economic Development Water Facilities Revenue., 7.875%, 2019................... 2,100,000
35,000 Aa(1) Indiana Housing Finance Authority Revenue, 8.5%, 1995 ++.............................. 35,000
345,000 Aa(1) Indiana Housing Finance Authority Revenue, 8.5%, 2012................................. 358,300
1,890,000 A+ Indiana State Office Building Commission Correctional Facilities Revenue, 6.4%, 2011.. 1,786,050
6,055,000 A+ Indianapolis Economic Development Water Facilities Revenue, 7.875%, 2019.............. 6,327,475
1,400,000 A+ Indianapolis Local Public Improvement Board Revenue, 6.75%, 2014...................... 1,375,500
1,000,000 A+ Lawrence Township Metropolitan School District Revenue, 6.75%, 2013................... 1,007,500
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<TABLE>
PIONEER TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
December 31, 1994 (Continued)
<CAPTION>
Standard
& Poor's
Rating
Principal (Unaudited) Investment in Tax-Exempt Securities - 99.7%+ Value
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
IOWA -- 0.4%
$ 1,000,000 A(1) Iowa Finance Authority Revenue, 5.5%, 2009............................................ $ 942,500
1,000,000 A(1) Iowa Finance Authority Revenue, 5.55%, 2010........................................... 931,250
KENTUCKY -- 0.9%
2,150,000 AA Jefferson County Pollution Control Revenue, 5.625%, 2019.............................. 1,830,188
660,000 A Kenton County Airport Board Revenue, 8.75%, 2015...................................... 709,500
1,000,000 AAA Kentucky State Turnpike Authority of Economic Development Revenue, 5.5%, 2009......... 908,750
495,000 AA- University of Kentucky Community College Building Revenue, 6.4%, 2011................. 476,438
LOUISIANA -- 0.6%
3,000,000 AAA New Orleans Home Mortgage Authority, 6.25%, Prerefunded, 2011*........................ 2,823,750
MASSACHUSETTS -- 0.5%
1,415,000 A+ Massachusetts Bay Transportation Authority Revenue -- Series B, 5.875%, 2014.......... 1,277,038
1,000,000 AAA South Essex Massachusetts Sewer District -- Series B, 6.75%, 2013..................... 1,006,250
MICHIGAN -- 2.3%
4,500,000 AAA Chippewa Valley School System General Obligation, 5.0%, 2021.......................... 3,515,625
1,250,000 A Grand Rapids Water Supply Revenue, 7.875%, Prerefunded, 1998*......................... 1,359,375
1,890,000 AAA Michigan Municipal Bond Authority Revenue, 7.8%, Prerefunded, 1998*................... 2,060,100
2,500,000 AA- Michigan State Trunk Line Revenue -- Series B, 5.5%, 2021............................. 2,087,500
1,500,000 AA Walled Lake School District General Obligation, 6.5%, 2003............................ 1,554,375
MINNESOTA -- 3.6%
2,000,000 AA+ Minnesota State Housing Finance Agency, 6.55%, 2011................................... 1,932,500
1,000,000 A+ Minnesota State Housing Finance Agency, 6.9%, 2012.................................... 997,500
5,000,000 A Northern Municipal Power Agency Revenue, 7.25%, 2016.................................. 5,237,500
3,000,000 A(1) Northfield St. Olaf College Revenue, 8.0%, Prerefunded, 1998*......................... 3,247,500
4,100,000 AA+ Rochester Health Care Revenue Mayo Foundation, 5.75%, 2021............................ 3,510,625
1,000,000 A(1) Southern Municipal Power Agency Revenue, 5.0%, 2018................................... 786,250
MONTANA -- 3.6%
1,495,000 AAA Forsyth Pollution Control Revenue Washington Water Power Project, 7.125%, 2013........ 1,552,931
2,250,000 AAA Forsyth Pollution Control Revenue Puget Sound Power & Light Project, 7.25%, 2021...... 2,356,875
3,000,000 AAA Forsyth Pollution Control Revenue Puget Sound Power & Light Project, 6.8%, 2022....... 2,996,250
3,250,000 AAA Forsyth Pollution Control Revenue Puget Sound Power & Light Project, 7.05%, 2021...... 3,351,563
6,000,000 AAA Montana State Board of Investments Revenue Workers Compensation Program, 6.875%, 2020. 6,150,000
NEBRASKA -- 8.6%
7,850,000 A+ Douglas County Hospital Authority Revenue Catholic Health Facilities, 7.25%, 2021..... 7,918,688
6,000,000 AAA Douglas County Hospital Authority Revenue Immanuel Medical Center, 7.0%, 2021......... 6,105,000
5,000,000 A(1) Grand Island Sanitation Sewer Revenue, 6.0%, 2014..................................... 4,600,000
7,500,000 A Hastings Electric System Revenue, 6.3%, 2019.......................................... 6,965,625
1,500,000 AA+ Lincoln Electric System Revenue, 5.75%, 2016.......................................... 1,323,750
1,325,000 AAA Municipal Energy Agency of Nebraska Revenue, 6.0%, 2008............................... 1,280,281
1,500,000 AAA Municipal Energy Agency of Nebraska Revenue, 6.0%, 2017............................... 1,389,375
1,850,000 A+ Nebraska Public Power District Revenue, 6.25%, 2022................................... 1,715,875
890,000 A+ Nebraska Public Power District Revenue, 6.125%, 2015.................................. 829,925
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
PIONEER TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
December 31, 1994 (Continued)
<CAPTION>
Standard
& Poor's
Rating
Principal (Unaudited) Investment in Tax-Exempt Securities - 99.7%+ Value
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
NEBRASKA -- (CONTINUED)
$ 3,935,000 A+ Nebraska Public Power District Revenue, 5.75%, 2020................................. $3,423,450
2,000,000 AAA Omaha Public Power District Revenue, 6.4%, Prerefunded, 2002*....................... 2,082,500
1,185,000 AA Omaha Public Power District Revenue, 6.8%, Prerefunded, 2000*....................... 1,251,656
NEVADA -- 1.1%
3,660,000 AAA Lyon County School District General Obligation, 6.875%, 2015**...................... 3,673,725
1,260,000 AAA Lyon County School District General Obligation, 6.8%, 2012**........................ 1,258,425
NEW HAMPSHIRE -- 1.7%
2,800,000 A New Hampshire Turnpike System Revenue, 8.375%, Prerefunded, 1997*................... 3,069,500
5,505,000 AA+ New Hampshire Higher Education Dartmouth College Revenue, 5.375%, 2023.............. 4,465,931
NEW JERSEY -- 1.2%
1,000,000 A New Jersey Economic Development Authority Revenue Natural Gas Project, 9.0%, 2017... 1,101,250
1,000,000 AA Rutgers State University Revenue, 6.4%, 2009........................................ 1,005,000
2,985,000 AAA Rutgers State University Revenue, 8.0%, Prerefunded, 1998*.......................... 3,268,575
NEW MEXICO -- 2.2%
5,450,000 AA Albuquerque Water & Sewer System Revenue, 6.0%, Prerefunded, 2000*.................. 5,524,938
1,000,000 A+ Albuquerque Airport Revenue, 8.75%, 2019............................................ 1,076,250
2,000,000 A+ Farmington Pollution Control Revenue, 7.2%, 2021.................................... 2,002,500
1,100,000 AA University of New Mexico Revenue, 5.0%, 2018........................................ 871,750
NORTH CAROLINA -- 3.5%
1,000,000 Aaa(1) Buncombe County Sewer District Revenue, 6.75%, Prerefunded, 2002*................... 1,070,000
4,500,000 A+ Buncombe County Sewer District Revenue, 6.75%, Prerefunded, 2002*................... 4,786,875
4,490,000 AA Charlotte-Mecklenburg Hospital Authority Revenue, 6.25%, 2020....................... 4,142,025
1,000,000 AAA Franklin County Certificate Participation, 6.625%, 2014............................. 992,500
5,980,000 A Martin County Pollution Control Authority Revenue, 5.65%, 2023...................... 4,746,625
OHIO -- 1.8%
2,000,000 AA+ Columbus Ohio General Obligation, 5.25%, 2011....................................... 1,725,000
2,000,000 AAA Hamilton City Electric System Revenue, 8.0%, Prerefunded, 1998*..................... 2,205,000
400,000 AAA Northeast Ohio Regional Sewer District Wastewater Improvement Revenue, 6.5%, 2016... 395,500
500,000 A+ Ohio State Building Authority Revenue, 6.0%, 2008................................... 481,250
2,900,000 Aa(1) Solon School District General Obligation, 7.15%, Prerefunded, 2001*................. 3,157,375
OKLAHOMA -- 4.8%
4,700,000 AAA McGee Creek Authority Water Revenue, 6.0%, 2023..................................... 4,235,875
5,300,000 A+ Oklahoma State Turnpike Authority Revenue, 6.125%, 2020............................. 4,889,250
2,700,000 AAA Sapula Municipal Authority Utility Revenue, 7.4%, 2010.............................. 2,868,750
9,240,000 AA Tulsa County Industrial Authority Health Care Revenue, 6.75%, Prerefunded, 2001*.... 9,829,050
OREGON -- 1.5%
2,000,000 AAA Oregon Metropolitan Service District Revenue Headquarters Building, 6.75%,
Prerefunded, 1999*.................................................................. 2,132,500
1,000,000 AAA Portland Hospital Facilities Authority Revenue Legacy Health Systems, 6.625%, 2011.. 1,005,000
550,000 AAA Portland International Airport Revenue, 6.75%, 2015................................. 559,625
3,250,000 A Washington County Unified Sewerage Agency Revenue, 6.2%, 2010....................... 3,140,313
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
<TABLE>
PIONEER TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
December 31, 1994 (Continued)
<CAPTION>
Standard
& Poor's
Rating
Principal (Unaudited) Investment in Tax-Exempt Securities - 99.7%+ Value
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
PENNSYLVANIA -- 4.6%
$ 2,400,000 AAA Berks County General Obligation, 7.25%, Prerefunded, 2000*............................ $ 2,631,000
2,500,000 AAA Bucks County Water & Sewer Authority, 0.00%, 2012..................................... 756,250
2,500,000 AAA Bucks County Water & Sewer Authority, 0.00%, 2012..................................... 781,250
2,500,000 AAA Bucks County Water & Sewer Authority, 0.00%, 2013..................................... 725,000
3,750,000 AAA Hempfield School District General Obligation, 5.3%, 2014.............................. 3,135,938
1,000,000 AA Pennsylvania Housing Finance Agency Revenue, 8.1%, 2010............................... 1,018,750
2,500,000 AAA Pennsylvania State Industrial Development Revenue, 5.5%, 2014......................... 2,140,625
2,500,000 A Pennsylvania State Turnpike Commission Revenue, 6.5%, 2013............................ 2,465,625
6,500,000 A Pennsylvania State University Revenue, 5.5%, 2016..................................... 5,427,500
2,460,000 AAA Philadelphia Water & Wastewater Revenue, 5.0%, 2016................................... 1,949,550
RHODE ISLAND -- 0.2%
1,000,000 AA+ Rhode Island Housing & Mortgage Finance, 6.75%, 2017.................................. 961,250
SOUTH CAROLINA -- 4.8%
3,000,000 A- Richland Cnty. Solid Waste Disposal Facilities Revenue Union Camp Project, 7.45%, 2021 3,048,750
1,000,000 AAA South Carolina Grand Strand Water & Sewer Authority, 6.375%, 2012..................... 986,250
10,000,000 A+ South Carolina Public Service Authority Revenue, 6.625%, Prerefunded, 2002*........... 10,625,000
5,750,000 A+ South Carolina Public Service Authority Revenue, 7.1%, Prerefunded, 2001*............. 6,260,313
750,000 Aa South Carolina State Housing Finance & Development Authority Revenue, 6.2%, 2009...... 710,625
SOUTH DAKOTA -- 5.7%
500,000 A(1) Rapid City Water Revenue, 7.45%, 2010................................................. 527,500
5,000,000 AA+ South Dakota Housing Development Authority, 6.0%, 2012................................ 4,568,750
17,100,000 A+ South Dakota State Building Authority Certificate Participation, 7.5%, 2016........... 17,869,500
2,730,000 A+ South Dakota Student Loan Finance Corporation Revenue, 7.7%, 2007..................... 2,695,875
TENNESSEE -- 0.5%
2,420,000 AAA Chattanooga-Hamilton County Hospital Authority Revenue, 5.625%, 2009.................. 2,211,275
TEXAS -- 2.9%
685,000 AA Arlington General Obligation, 5.375%, 2012............................................ 596,806
2,310,000 AAA Clear Creek Independent School District General Obligation, 0.0%, 2010................ 834,488
5,000,000 AAA Clear Creek Independent School District General Obligation, 0.0%, 2011................ 1,675,000
5,000,000 AAA Harris County General Obligation, 0.0%, 2007.......................................... 2,231,250
1,760,000 Aaa(1) Keller Independent School District General Obligation, 0.0%, 2013..................... 499,400
2,050,000 Aaa(1) Keller Independent School District General Obligation, 0.0%, 2010..................... 730,313
3,000,000 AAA Texas Public Finance Authority Building Revenue, 0.0%, 2007........................... 1,368,750
5,500,000 AAA Texas Public Finance Authority Building Revenue, 0.0%, 2008........................... 2,323,750
2,750,000 AAA Texas Public Finance Authority Building Revenue, 0.0%, 2010........................... 1,014,063
960,000 AA Texas State General Obligation, 6.6%, 2008............................................ 921,600
1,075,000 AA Texas State General Obligation, 6.7%, 2009............................................ 1,040,063
UTAH -- 3.8%
25,000 AA Utah Housing Finance Agency Revenue, 8.625%, 1995 ++.................................. 25,000
505,000 AA Utah Housing Finance Agency Revenue, 8.625%, 2014..................................... 527,525
140,000 Aa(1) Utah Housing Finance Agency Revenue, 5.95%, 1995 ++................................... 140,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
<TABLE>
PIONEER TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
December 31, 1994 (Continued)
<CAPTION>
Standard
& Poor's
Rating
Principal (Unaudited) Investment in Tax-Exempt Securities - 99.7%+ Value
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
UTAH -- (CONTINUED)
$ 985,000 Aa(1) Utah Housing Finance Agency Revenue, 5.95%, 2011.................................... $ 882,344
1,000,000 AA Utah Intermountain Power Agency Revenue, 7.50%, 2021................................ 1,042,500
1,270,000 AA- Utah Intermountain Power Agency Revenue, 5.0%, 2016................................. 993,775
3,010,000 AA Utah Intermountain Power Agency Revenue, 5.0%, 2018................................. 2,336,513
8,940,000 AA Utah Intermountain Power Agency Revenue, 7.75%, 2020................................ 9,409,350
2,250,000 AA Utah Intermountain Power Agency Revenue, 5.0%, 2023................................. 1,721,250
VIRGINIA -- 4.1%
1,750,000 A+ Chesapeake Water & Sewer System Revenue, 6.5%, 2012................................. 1,708,438
4,685,000 A+ Chesapeake Water & Sewer System Revenue, 6.4%, 2017................................. 4,450,750
1,750,000 A(1) Harrisonburg Redevelopment & Housing Authority Revenue, 6.5%, 2014.................. 1,690,938
2,000,000 AA Richmond Public Improvement General Obligation, 6.5%, Prerefunded, 2002*............ 2,110,000
4,715,000 AA Richmond Public Improvement General Obligation, 6.4%, Prerefunded, 2002*............ 4,944,856
1,000,000 AA Virginia State Resources Authority Water System Revenue, 5.25%, 2013................ 832,500
1,255,000 AA Virginia State Resources Authority Water & Sewer System Revenue, 5.25%, 2013........ 1,044,788
2,000,000 AA Virginia State Transportation Board Revenue U.S. Route 58 Corridor, 5.25%, 2012..... 1,705,000
WASHINGTON -- 7.3%
2,000,000 A+ Chelan County Public Utility District Revenue, 9.3%, 2062........................... 2,192,500
3,235,000 A(1) King County Vashon Island School District General Obligation, 6.65%, 2012........... 3,239,044
5,000,000 A(1) Lynnwood Water & Sewer Revenue, 7.7%, 2013.......................................... 5,281,250
5,295,000 AAA Pike Place Market Preservation and Development Authority Revenue, 8.75%,
Prerefunded, 1997*.................................................................. 5,850,975
5,700,000 AA- Seattle Metropolitan Sewer Revenue, 6.2%, 2032...................................... 5,165,625
3,500,000 A+ Snohomish County Public Utility District Revenue, 6.8%, Prerefunded, 2020*.......... 3,495,625
1,000,000 AAA Snohomish County School District General Obligation, 5.7%, 2011..................... 902,500
2,000,000 AAA Washington Health Care Facilities Authority Revenue, 6.3%, 2022..................... 1,857,500
4,000,000 AA Washington State Public Power Supply System Revenue -- Series A, 6.5%, 2015......... 3,785,000
1,475,000 AAA Washington State Public Power Supply System Revenue -- Series B, 5.6%, 2015......... 1,262,969
WEST VIRGINIA -- 0.2%
1,000,000 AA+ West Virginia State Housing Development, 7.05%, 2024................................ 986,250
WISCONSIN -- 1.6%
3,600,000 AA+ Milwaukee Local District Heating Facility Revenue, 6.85%, 2021...................... 3,501,000
4,205,000 AA+ Wisconsin State Health & Education Facilities Authority Revenue Luther Hospital,
6.25%, 2010......................................................................... 3,873,856
WYOMING -- 2.3%
9,750,000 AA Wyoming Community Development Authority Revenue -- Series B, 7.05%, 2033............ 9,603,750
1,225,000 AA- Wyoming Farm Loan Board Facilities Revenue, 5.5%, 2021.............................. 1,006,029
------------
TOTAL INVESTMENT IN TAX-EXEMPT BONDS (Cost $443,289,093)............................ $441,227,038
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
PIONEER TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
December 31, 1994 (Continued)
<TABLE>
<CAPTION>
Investment in Tax-Exempt Securities - 99.7%+ Value
<C> <S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET MUTUAL FUND -- 2.2%
Lehman Brothers Munifund (Cost $9,885,457).......................................... $ 9,885,457
------------
TOTAL INVESTMENT IN TAX-EXEMPT SECURITIES -- 99.7% (Cost $453,174,550).............. $451,112,495
------------
ALL OTHER ASSETS, LESS LIABILITIES -- 0.3%.......................................... $ 1,548,772
------------
NET ASSETS -- 100%.................................................................. $452,661,267
=============
<FN>
+ The concentration of investments in securities by type of obligation / market sector is:
</FN>
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
General Obligation 9.7%
Escrowed in U.S. Government Securities 16.9%
Revenue Bonds:
Education Revenue 6.5%
Water & Sewer Revenue 11.9%
Hospital Revenue 7.6%
Housing Revenue 3.3%
Miscellaneous 16.9%
Pollution Control Revenue 7.5%
Power Revenue 13.3%
Transportation Revenue 4.2%
Reserves 2.2%
* Prerefunded bonds have been collaterized by U.S. Treasury securities which
are held in escrow and used to pay principal and interest and to retire the
bonds in full at the earliest refunding date.
++ These bonds have been called by the issuer and are restricted from sale.
** When-Issued securities.
(1) Rating by Moody's.
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
<TABLE>
PIONEER TAX-FREE INCOME FUND
BALANCE SHEET
December 31, 1994
<S> <C>
ASSETS:
Investments in securities, at value (identified cost and cost for federal income tax purposes
$453,174,550; see Schedule of Investments and Notes 1, 2 and 3).................................. $451,112,495
Cash............................................................................................... 2,788
Receivables -
Interest......................................................................................... 8,604,160
Trust shares sold................................................................................ 236,162
Other.............................................................................................. 45,465
------------
Total assets............................................................................... $460,001,070
------------
LIABILITIES:
Payables -
Investment securities purchased.................................................................. $ 5,933,244
Trust shares repurchased......................................................................... 287,577
Dividends........................................................................................ 620,067
Accrued expenses -
Management fees (Note 4)......................................................................... 35,109
Other (Notes 4, 5, and 6)........................................................................ 463,806
------------
Total liabilities.......................................................................... $ 7,339,803
------------
NET ASSETS:
Trust shares (100,000,000 shares authorized), amount paid in on 40,280,376 shares outstanding,
$.01 par value (Note 1).......................................................................... $455,484,573
Accumulated distributions in excess of net investment income....................................... (46,964)
Accumulated net realized loss on investments (Note 2).............................................. (714,287)
Net unrealized loss on investments (Note 2)........................................................ (2,062,055)
------------
Total net assets (equivalent to $11.24 per share based on 40,280,376 trust shares
outstanding)............................................................................... $452,661,267
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
<TABLE>
PIONEER TAX-FREE INCOME FUND
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME (NOTE 1):
Interest.................................................................. $ 30,825,650
------------
EXPENSES:
Management fees (Note 4).................................................. $ 2,266,099
Distribution fees (Note 6)................................................ 1,233,748
Transfer fees (Note 5).................................................... 582,853
Registration fees......................................................... 84,180
Professional fees......................................................... 74,766
Accounting................................................................ 65,329
Custodian fees............................................................ 56,185
Printing.................................................................. 22,978
Fees and expenses of nonaffiliated trustees............................... 22,453
Miscellaneous expenses.................................................... 35,884
------------
Total expenses.......................................................... $ 4,444,475
------------
Net investment income............................................... $ 26,381,175
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments.......................................... $ (714,287)
Decrease in net unrealized gain on investments............................ (59,207,615)
------------
Net loss on investments................................................. $(59,921,902)
------------
Net decrease in net assets resulting from operations................ $(33,540,727)
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
<TABLE>
PIONEER TAX-FREE INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1994 and 1993
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income.......................................................... $ 26,381,175 $ 27,068,085
Net realized gain (loss) on investments........................................ (714,287) 11,224,327
Net increase (decrease) in net unrealized gain (loss) on investments........... (59,207,615) 22,969,333
------------ ------------
Net increase (decrease) in net assets resulting from operations.............. $(33,540,727) $ 61,261,745
------------ ------------
EQUALIZATION:
Net undistributed investment income included in price of shares sold, net of
shares repurchased (Note 1).................................................. $ 11,837 $ 91,286
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ($0.642 and $0.670 per share, respectively)......... $(26,474,942) $(26,974,318)
In excess of net investment income ($0.001 and $0.00 per share,
respectively)................................................................ (46,964) --
From net realized gain on investments ($0.003 and $0.270 per share,
respectively)................................................................ (131,360) (11,092,967)
------------ ------------
Decrease in net assets resulting from distributions to shareholders.............. (26,653,266) (38,067,285)
------------ ------------
</TABLE>
<TABLE>
FROM TRUST SHARE TRANSACTIONS:
<CAPTION>
Shares
------------------------
1994 1993
---------- ----------
<S> <C> <C> <C> <C>
Net proceeds from sale of shares....................... 3,231,068 6,262,915 $ 38,464,474 $ 78,849,726
Net asset value of shares issued to shareholders in
reinvestment of dividends.............................. 1,674,702 2,235,544 19,611,787 28,246,077
Cost of shares repurchased............................. (6,630,251) (5,109,790) (77,723,460) (64,477,054)
---------- ---------- ------------ ------------
(Decrease) increase in net assets resulting from trust
share transactions..................................... (1,724,481) 3,388,669 $(19,647,199) $ 42,618,749
=========== ===========
------------ ------------
Net (decrease) increase in net assets............................................ $(79,829,355) $ 65,904,495
NET ASSETS:
Beginning of year................................................................ 532,490,622 466,586,127
------------ ------------
End of year (including undistributed (distributions in excess of) net investment
income of $(46,964) and $93,767 respectively).................................... $452,661,267 $532,490,622
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
<TABLE>
PIONEER TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS -- SELECTED DATA FOR A SHARE OUTSTANDING
For the Years Presented
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------------------------------
1994 1993+ 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year................ $ 12.68 $ 12.08 $ 11.99 $ 11.52 $ 11.47 $ 11.17 $ 10.70
-------- -------- -------- -------- -------- -------- --------
Income from investment operations--
Net investment income............................ $ 0.64 $ 0.67 $ 0.71 $ 0.74 $ 0.76 $ 0.79 $ 0.80
Net realized and unrealized gain(loss) on
investments.................................... (1.44) 0.87 0.31 0.65 0.06 0.31 0.47
-------- -------- -------- -------- -------- -------- --------
Total income (loss) from investment
operations.................................... $ (0.80) $ 1.54 $ 1.02 $ 1.39 $ 0.82 $ 1.10 $ 1.27
Distribution to shareholders--
From net investment income....................... (0.64) (0.67) (0.71) (0.74) (0.76) (0.80) (0.80)
From net realized capital gains.................. (0.00) (0.27) (0.22) (0.18) (0.01) (0.00) (0.00)
-------- -------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset value........ $ (1.44) $ 0.60 $ 0.09 $ 0.47 $ 0.05 $ 0.30 $ 0.47
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of year...................... $ 11.24 $ 12.68 $ 12.08 $ 11.99 $ 11.52 $ 11.47 $ 11.17
======== ======== ======== ======== ======== ======== ========
Total return*..................................... (6.38%) 12.98% 8.73% 12.49% 7.40% 10.12% 12.25%
Ratio of net operating expenses to average net
assets........................................... 0.91% 0.86% 0.87% 0.87% 0.78% 0.63% 0.64%
Ratio of net investment income to average net
assets........................................... 5.37% 5.37% 5.80% 6.26% 6.69% 6.96% 7.26%
Portfolio turnover rate........................... 55% 58% 62% 56% 40% 54% 73%
Net assets, end of year (in thousands)............ $452,661 $532,491 $466,586 $408,990 $362,887 $357,388 $324,116
<CAPTION>
1987 1986 1985
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of year................ $ 11.69 $ 10.81 $ 9.70
-------- -------- --------
Income from investment operations--
Net investment income............................ $ 0.80 $ 0.86 $ 0.86
Net realized and unrealized gain(loss) on
investments.................................... (0.98) 1.52 1.12
-------- -------- --------
Total income (loss) from investment
operations.................................... $ (0.18) $ 2.38 $ 1.98
Distribution to shareholders--
From net investment income....................... (0.81) (0.86) (0.87)
From net realized capital gains.................. (0.00) (0.64) (0.00)
-------- -------- --------
Net increase (decrease) in net asset value........ $ (0.99) $ 0.88 $ 1.11
-------- -------- --------
Net asset value, end of year...................... $ 10.70 $ 11.69 $ 10.81
======== ======== ========
Total return*..................................... (1.56%) 22.67% 21.25%
Ratio of net operating expenses to average net
assets........................................... 0.63% 0.61% 0.64%
Ratio of net investment income to average net
assets........................................... 7.24% 7.30% 8.40%
Portfolio turnover rate........................... 89% 153% 258%
Net assets, end of year (in thousands)............ $307,266 $307,266 $307,266
<FN>
* Assumes initial investment at net asset value at the beginning of each period,
reinvestment of all distributions, and the complete redemption of the
investment at the net asset value at the end of each period and no sales
charges. Total return would be reduced if sales charges were taken into
account.
+ Prior to the assumption of the management agreement on December 1, 1993 by
Pioneering Management Corporation, the Fund was advised by Mutual of Omaha
Fund Management Company.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
PIONEER TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
1. Pioneer Tax-Free Income Fund, (the Fund) a Delaware business Trust, formerly
Mutual of Omaha Tax-Free Income Fund, is registered under the Investment Company
Act of 1940 as a diversified, open-end management company. On December 1, 1993,
Mutual of Omaha Fund Management Company (FMC) was sold to The Pioneer Group,
Inc. (PGI). Concurrent with the sale of FMC to PGI, the Fund shareholders
approved a new investment management agreement with Pioneering Management
Corporation (PMC), a wholly owned subsidiary of PGI. The following is a summary
of significant accounting policies consistently followed by the Fund which are
in conformity with those generally accepted in the investment company industry.
A. Investment Securities -- Security transactions are recorded on the date
the securities are purchased or sold. Debt securities (other than short-term
obligations), including listed issues, are valued on the basis of valuations
furnished by a pricing service which utilizes both dealer-supplied valuations
and electronic data processing techniques which take into account appropriate
factors such as institution-size trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics and other
market data. Temporary cash investments are stated at cost plus accrued
interest, which approximates market value. Interest income is recorded on the
accrual basis. Original issue discount is accreted daily on a yield to maturity
basis.
Gains and losses from sales of investments are calculated on the "identified
cost" method for both financial reporting and federal income tax purposes. It is
the Fund's practice first to select for sale those securities which have the
highest cost and also qualify for long-term capital gain or loss treatment for
tax purposes.
B. Federal Taxes -- It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and net realized capital gains, if
any, to its shareholders. Therefore, no federal tax provisions are required.
The characterization of distributions to shareholders for financial
reporting purposes is determined in accordance with income tax rules. Therefore,
the source of a portfolio's distributions may be shown in the accompanying
financial statements as either from or in excess of net investment income or net
realized gain on investment transactions, or from capital, depending on the type
of book/tax differences that may exist.
C. Trust Shares -- The Fund records sales and repurchases of its fund shares
on the trade date. Net losses, if any, as a result of cancellations, are
absorbed by Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for
the Fund and wholly owned subsidiary of PGI. For sales made from January 1, 1994
to December 31, 1994, PFD earned $135,695 in underwriting commissions. Dividends
and distributions to shareholders are recorded as of the ex-dividend date.
D. Equalization -- Through June 30, 1994, the Fund followed the accounting
practice known as equalization by which a portion of the proceeds from sales and
costs of repurchases of fund shares, which is equivalent, on a per share basis,
to the amount of undistributed net income on the date of the transaction, is
credited or charged to fund shares.
2. At December 31, 1994, the total cost of securities, the net realized gain,
the accumulated net realized gain and the decrease in net unrealized gain for
federal income tax purposes were identical to those on a financial reporting
basis. Aggregate gross unrealized gain on securities in which there was an
excess of market value over tax cost was $12,110,306. Aggregate gross unrealized
loss on securities in which there was an excess of tax cost over market value
was $14,172,361. Net unrealized loss for tax purposes was $2,062,055. At
December 31, 1994, the Fund had a net capital loss carry
15
<PAGE>
PIONEER TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1994 (Continued)
forward for tax purposes of $714,287 which will expire in the year 2002, if not
utilized.
3. During the year ended December 31, 1994, the cost of purchases and the
proceeds from sales of securities, other than temporary cash investments, were
$265,931,706 and $289,324,898, respectively.
4. PMC is the Fund's investment adviser. Management fees are calculated at the
annual rates set forth below as a percentage of average daily net assets. Such
rates are effective until December 1, 1995.
<TABLE>
<CAPTION>
Net Assets Annual Fee
- ---------- ----------
<S> <C>
For assets up to $100,000,000................. .50%
For assets in excess of $100,000,000 to
$200,000,000................................ .48%
For assets in excess of $200,000,000 to
$300,000,000................................ .46%
For assets in excess of $300,000,000 to
$400,000,000................................ .44%
For assets in excess of $400,000,000 to
$500,000,000................................ .42%
Over $500,000,000............................. .40%
</TABLE>
PMC furnishes investment advice, provides facilities and office equipment,
and pays executive salaries and certain other operating expenses under the
management agreement. No officer of the Fund receives any compensation directly
from the Fund. All officers of the Fund are directors and/or officers of the
investment adviser and/or principal underwriter. In addition, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Fund under the management agreement. Included in
Accrued expenses -- Other is $4,718 in accounting fees payable to PMC at
December 31, 1994.
5. Pioneering Services Corporation (PSC), a wholly owned subsidiary of PGI,
provides substantially all transfer agent and shareholder services to the Fund,
at negotiated rates. Included in Accrued expenses -- Other is $84,160 in
transfer fees payable to PSC at December 31, 1994.
6. The Fund has adopted a Plan of Distribution (the Plan) in accordance with
Rule 12b-1 of the Investment Company Act of 1940. The Plan generally provides
that the Fund will reimburse PFD for PFD's actual expenditures to finance
activities intended to result in the sale of the Fund's shares or to provide
services to the Fund's shareholders. Expenditures to the Fund pursuant to the
Plan may not exceed 0.25% of the Fund's average annual net assets. Included in
Accrued expenses -- Other is $297,003 in distribution fees payable to PFD at
December 31, 1994.
16
<PAGE>
<TABLE>
PIONEER TAX-FREE INCOME FUND
TAX TREATMENT OF DISTRIBUTIONS MADE DURING THE YEAR ENDED DECEMBER 31, 1994
During the year ended December 31, 1994, the Fund paid the following
distributions:
<CAPTION>
Distributions Per Share
----------------------------------------
From Net From Net
Payment Date Investment Income Realized Gain
- ------------ ----------------- -------------
<S> <C> <C>
March 31, 1994 $.160 --
June 30, 1994 .160 $.003
July 29, 1994 .052 --
August 31, 1994 .052 --
September 30, 1994 .054 --
October 31, 1994 .052 --
November 30, 1994 .052 --
December 30, 1994 .060 --
----- -----
TOTAL $.642 $.003
===== =====
</TABLE>
Of the $.6417 net investment income per share distributed during 1994, 100% is
tax exempt.
Of the $.003 net realized gain per share distributed during 1994, 100% is
long-term.
Shareholders who elected to take the Capital Gain Distribution in additional
shares of the Fund should report the distribution as explained above. The tax
cost of the shares received is $11.94 per share.
17
<PAGE>
PIONEER TAX-FREE INCOME FUND
TRUSTEES' FEES, PRINCIPAL SHAREHOLDERS AND SHARE OWNERSHIP OF TRUSTEES AND
OFFICERS
The aggregate direct remuneration paid by the Fund to nonaffiliated trustees and
officers during the year ended December 31, 1994 was approximately $16,642, plus
expenses incurred in attending trustees meetings of approximately $1,790. Fees
of trustees who are affiliated with or "interested persons" of Pioneering
Management Corporation and Pioneer Funds Distributor, Inc., investment adviser
and principal underwriter, respectively, of the Fund ($1,000 in 1994), are
reimbursed to the Fund by Pioneering Management Corporation in accordance with
the management contract with the Fund. At December 31, 1994, the trustees and
officers of the Fund owned beneficially no shares of the Fund. The Pioneer
Group, Inc., parent company of Pioneering Management Corporation and Pioneer
Funds Distributor, Inc., is a publicly-held corporation of which Mr. Cogan owned
approximately 15% of the outstanding shares of capital stock at December 31,
1994.
18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF PIONEER TAX-FREE INCOME FUND:
We have audited the accompanying balance sheet of Pioneer Tax-Free Income
Fund, including the schedule of investments, as of December 31, 1994, and the
related statement of operations, the statement of changes in net assets, and the
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The financial statements as of December
31, 1993 and financial highlights for each of the nine years in the period ended
December 31, 1993 were audited by other auditors whose report dated February 22,
1994 expressed an unqualified opinion on those statements and financial
highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Tax-Free Income Fund, as of December 31, 1994, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts,
February 3, 1995
19
<PAGE>
PIONEER TAX-FREE INCOME FUND
60 State Street
Boston, Massachusetts 02109
OFFICERS TRUSTEES
JOHN F. COGAN, JR. JOHN F. COGAN, JR.
Chairman and President RICHARD H. EGDAHL, M.D.
DAVID D. TRIPPLE MARGARET B. W. GRAHAM
Executive Vice President JOHN W. KENDRICK
MARK L. WINTER MARGUERITE A. PIRET
Vice President DAVID D. TRIPPLE
WILLIAM H. KEOUGH STEPHEN K. WEST
Treasurer JOHN WINTHROP
JOSEPH P. BARRI
Secretary
INVESTMENT ADVISER LEGAL COUNSEL
PIONEERING MANAGEMENT HALE AND DORR
CORPORATION
PRINCIPAL UNDERWRITER SHAREHOLDER
SERVICES AND
PIONEER FUNDS TRANSFER AGENT
DISTRIBUTOR, INC.
PIONEERING SERVICES
CUSTODIAN CORPORATION
60 State Street
BROWN BROTHERS Boston, Massachusetts
HARRIMAN & CO. 02109
INDEPENDENT PUBLIC
ACCOUNTANTS
ARTHUR ANDERSEN LLP
- --------------------------------------------------------------
Please call Pioneer for information on:
Existing accounts, new accounts, prospectuses,
applications and service forms................. 1-800-225-6292
Fund yields and prices......................... 1-800-225-4321
Telecommunications Device for the Deaf (TDD)... 1-800-225-1997
Toll-free fax.................................. 1-800-225-4240
Retirement plans............................... 1-800-622-0176
- --------------------------------------------------------------
When distributed to persons who are not shareholders of the Fund, this report
must be accompanied by an official prospectus, which discusses the objectives,
policies and other information concerning the Fund.
0295-2267
[Copyright] Pioneer Funds Distributor, Inc.
[LOGO]
PIONEER TAX-FREE
INCOME FUND
ANNUAL REPORT
DECEMBER 31, 1994
DISTRIBUTION PLAN
Pioneer Tax-Free Income Fund
DISTRIBUTION PLAN, dated as of June 30, 1994 of Pioneer Tax-Free
Income Fund, a Delaware business trust (the "Fund").
WITNESSETH
WHEREAS, the Fund is engaged in business as an open-end, diversified,
management investment company and is registered under the Investment Company Act
of 1940, as amended (collectively with the rules and regulations promulgated
thereunder, the "1940 Act");
WHEREAS, the Fund intends to distribute its shares of beneficial
interest (the "Shares") in accordance with Rule 12b-1 promulgated by the
Securities and Exchange Commission under the 1940 Act ("Rule 12b-1"), and
desires to adopt this Distribution Plan (the "Plan") as a plan of distribution
pursuant to such rule;
WHEREAS, the Fund desires to engage Pioneer Funds Distributor, Inc.,
a Massachusetts corporation ("PFD"), to provide certain distribution services
for the Fund in connection with the Plan;
WHEREAS, the Fund desires to enter into an underwriting agreement
with PFD, whereby PFD will provide facilities and personnel and render services
to the Fund in connection with the offering and distribution of Shares (the
"Underwriting Agreement");
WHEREAS, the Fund also recognizes and agrees that (a) PFD may retain
the services of firms or individuals to act as dealers or wholesalers
(collectively, the "Dealers") of the Shares in connection with the offering of
Shares, (b) PFD may compensate any Dealer that sells Shares in the manner and at
the rate or rates to be set forth in an agreement between PFD and such Dealer,
and (c) PFD may make such payments to the Dealers for distribution services out
of the fee paid to PFD hereunder, its profits or any other source available to
it; and
<PAGE>
WHEREAS, the Board of Trustees of the Fund, in considering whether
the Fund should adopt and implement this Plan, has evaluated such information as
it deemed necessary to make an informed determination whether this Plan should
be adopted and implemented and has considered such pertinent factors as it
deemed necessary to form the basis for a decision to use assets of the Fund for
such purposes, and has determined that there is a reasonable likelihood that the
adoption and implementation of this Plan will benefit the Fund and its
shareholders;
NOW, THEREFORE, the Board of Trustees of the Fund hereby adopts this
Plan for the Fund as a plan of distribution in accordance with Rule 12b-1, on
the following terms and conditions:
1. The Fund may expend pursuant to this Plan amounts not to exceed
0.25 of 1% of the Fund's average daily net assets per annum.
2. Subject to the limit in paragraph 1, the Fund shall reimburse PFD
for amounts expended by PFD to finance any activity which is primarily intended
to result in the sale of shares of the Fund or the provision of services to
shareholders of the Fund, including but not limited to commissions or other
payments to Dealers and salaries and other expenses of PFD relating to selling
or servicing efforts, provided, that the Board of Trustees of the Fund shall
approve categories of expenses for which reimbursement shall be made pursuant to
this paragraph 2 and, without limiting the generality of the foregoing, the
initial categories of such expenses shall be (i) a service fee to be paid to
qualified broker-dealers in an amount not to exceed .25 of 1% per annum of the
Fund's daily net assets; (ii) reimbursement to PFD for its expenditures for
broker-dealer commissions and employee compensation on certain sales of the
Fund's Shares; and (iii) reimbursement to PFD for expenses incurred providing
services to shareholders and supporting broker-dealers and other organizations,
such as banks and trust companies, in their effort to provide such services (any
addition of such categories shall be subject to the approval of the Qualified
Trustees, as defined below, of the Fund). Such reimbursement shall be paid ten
(10) days after the end of the month or quarter, as the case may be, in which
such expenses are incurred. The Fund acknowledges that PFD will charge a sales
load in connection with sales of such shares and that PFD will reallow to
Dealers all or a portion of such sales load, as described in the Fund's
Prospectus from time to time. Nothing contained herein is intended to have any
effect whatsoever on PFD's ability to charge any such sales load or to reallow
all or any portion thereof to Dealers.
2
<PAGE>
3. The Fund understands that agreements between PFD and Dealers may
provide for payment of fees to Dealers in connection with the sale of Shares and
the provision of services to shareholders of the Fund. Nothing in this Plan
shall be construed as requiring the Fund to make any payment to any Dealer or to
have any obligations to any Dealer in connection with services as a dealer of
the Shares. PFD shall agree and undertake that any agreement entered into
between PFD and any Dealer shall provide that such Dealer shall look solely to
PFD for compensation for its services thereunder and that in no event shall such
Dealer seek any payment from the Fund.
4. Nothing herein contained shall be deemed to require the Fund to
take any action contrary to its Agreement and Declaration of Trust or By-Laws or
any applicable statutory or regulatory requirement to which it is subject or by
which it is bound, or to relieve or deprive the Fund's Board of Trustees of the
responsibility for and control of the conduct of the affairs of the Fund.
5. This Plan shall become effective upon approval by a vote of the
Board of Trustees and a vote of a majority of the Trustees who are not
"interested persons" of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan
(the "Qualified Trustees"), such votes to be cast in person at a meeting called
for the purpose of voting on this Plan and (ii) a vote of a majority of the
outstanding voting securities of the Fund.
6. This Plan will remain in effect indefinitely, provided that such
continuance is "specifically approved at least annually" by a vote of both a
majority of the Trustees of the Fund and a majority of the Qualified Trustees.
If such annual approval is not obtained, this Plan shall expire on June 30,
1994.
7. This Plan may be amended at any time by the Board of Trustees,
provided that this Plan may not be amended to increase materially the limitation
on the annual percentage of average net assets which may be expended hereunder
without the approval of holders of a "majority of the outstanding voting
securities" of the Fund and may not be materially amended in any case without a
vote of a majority of both the Trustees and the Qualified Trustees. Any
amendment of this Plan to increase or modify the expense categories initially
designated by the Trustees in paragraph 2 above shall only require approval of a
majority of the Trustees and the Qualified Trustees if such amendment does not
3
<PAGE>
include an increase in the expense limitation set forth in paragraph 1 above.
This Plan may be terminated at any time by a vote of a majority of the Qualified
Trustees or by a vote of the holders of a "majority of the outstanding voting
securities" of the Fund.
8. In the event of termination or expiration of the Plan, the Fund
may nevertheless, within twelve months of such termination or expiration
reimburse any expenses which have been incurred prior to such termination or
expiration, provided that payments by the Fund during such twelve-month period
shall not exceed .25 of 1% of the Fund's average net daily assets during such
period and provided further that such payments are specifically approved by the
Board of Trustees, including a majority of the Qualified Trustees.
9. The Fund and PFD shall provide to the Fund's Board of Trustees,
and the Board of Trustees shall review, at least quarterly, a written report of
the amounts expended under this Plan and the purposes for which such
expenditures were made.
10. While this Plan is in effect, the selection and nomination of
Qualified Trustees shall be committed to the discretion of the Trustees who are
not "interested persons" of the Fund.
11. For the purposes of this Plan, the terms "interested persons,"
"majority of the outstanding voting securities" and "specifically approved at
least annually" are used as defined in the 1940 Act.
12. The Fund shall preserve copies of this Plan, and each agreement
related hereto and each report referred to in paragraph 9 hereof (collectively,
the "Records"), for a period of not less than six (6) years from the end of the
fiscal year in which such Records were made and for a period of two (2) years,
each of such Records shall be kept in an easily accessible place.
13. This Plan shall be construed in accordance with the laws of the
Commonwealth of Massachusetts and the applicable provisions of the 1940 Act.
14. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers and their seal to be hereto
affixed as of day and year first above written.
ATTEST: PIONEER TAX-FREE INCOME FUND
/s/ JOSEPH P. BARRI /s/ JOHN F. COGAN, JR.
Joseph P. Barri, John F. Cogan, Jr.
Secretary President
ATTEST: PIONEER FUNDS DISTRIBUTOR, INC.
/s/ JOSEPH P. BARRI /s/ ROBERT L. BUTLER
Joseph P. Barri, Robert L. Butler
Clerk President
5
CLASS B DISTRIBUTION PLAN
PIONEER TAX-FREE INCOME FUND
CLASS B DISTRIBUTION PLAN, dated as of April 28, 1995, of PIONEER TAX-FREE
INCOME FUND, a Delaware business trust (the "Fund").
WITNESSETH
WHEREAS, the Fund is engaged in business as an open-end management
investment company and is registered under the Investment Company Act of 1940,
as amended (collectively with the rules and regulations promulgated thereunder,
the "1940 Act");
WHEREAS, the Fund, intends to distribute shares of beneficial interest (the
"Class B Shares") of the Fund in accordance with Rule 12b-1 promulgated by the
Securities and Exchange Commission under the 1940 Act ("Rule 12b-1"), and
desires to adopt this Class B distribution plan (the "Class B Plan") as a plan
of distribution pursuant to such Rule;
WHEREAS, the Fund desires that Pioneer Funds Distributor, Inc., a
Massachusetts corporation ("PFD"), provide certain distribution services for the
Fund's Class B Shares in connection with the Class B Plan;
WHEREAS, the Fund has entered into an underwriting agreement (in a form
approved by the Fund's Board of Trustees in a manner specified in such Rule
12b-1) with PFD, whereby PFD provides facilities and personnel and renders
services to the Fund in connection with the offering and distribution of Class B
Shares (the "Underwriting Agreement");
WHEREAS, the Fund also recognizes and agrees that (a) PFD may retain the
services of firms or individuals to act as dealers or wholesalers (collectively,
the "Dealers") of the Class B Shares in connection with the offering of Class B
Shares, (b) PFD may compensate any Dealer that sells Class B Shares in the
manner and at the rate or rates to be set forth in an agreement between PFD and
such Dealer and (c) PFD may make such payments to the Dealers for distribution
services out of the fee paid to PFD hereunder, any deferred sales charges
imposed by PFD in connection with the repurchase of Class B shares, its profits
or any other source available to it;
<PAGE>
WHEREAS, the Fund recognizes and agrees that PFD may impose certain
deferred sales charges in connection with the repurchase of the Fund's Class B
shares by the Fund, and PFD may retain (or receive from the Fund as the case may
be) all such deferred sales charges; and
WHEREAS, the Board of Trustees of the Fund, in considering whether the Fund
should adopt and implement this Class B Plan, has evaluated such information as
it deemed necessary to an informed determination whether this Class B Plan
should be adopted and implemented and has considered such pertinent factors as
it deemed necessary to form the basis for a decision to use assets of the Fund
for such purposes, and has determined that there is a reasonable likelihood that
the adoption and implementation of this Class B Plan will benefit the Fund and
its Class B shareholders;
NOW, THEREFORE, the Board of Trustees of the Fund hereby adopts this Class
B Plan for the Fund as a plan of distribution of Class B Shares in accordance
with Rule 12b-1, on the following terms and conditions:
1. (a) The Fund is authorized to compensate PFD for (1) distribution
services and (2) personal and account maintenance services performed
and expenses incurred by PFD in connection with the Fund's Class B
shares. Such compensation shall be calculated and accrued daily and
paid monthly or at such other intervals as the Board of Trustees may
determine.
(b) The amount of compensation paid during any one year for
distribution services shall be .75% of the average daily net assets of
the Class B Shares of the Fund attributable to such year.
(c) Distribution services and expenses for which PFD may be compensated
pursuant to this Plan include, without limitation: compensation to and
expenses (including allocable overhead, travel and telephone expenses)
of (i) Dealers, brokers and other dealers who are members of the
National Association of Securities Dealers, Inc. ("NASD") or their
officers, sales representatives and employees, (ii) PFD and any of its
affiliates and any of their respective officers, sales representatives
and employees, (iii) banks and their officers, sales representatives
and employees, who engage in or support distribution of the Fund's
Class B shares; printing of reports and prospectuses for other than
existing shareholders; and preparation, printing and distribution of
sales literature and advertising materials.
2
<PAGE>
(d) The amount of compensation paid for personal and account
maintenance services and expenses shall be 0.25% of the average daily
net assets of the Class B Shares of the Fund attributable to such year.
As partial consideration for personal services and/or account
maintenance services provided by PFD to the Class B shares, PFD shall
be entitled to be paid any fees payable under this clause (d) with
respect to Class B shares for which no dealer of record exists, where
less than all consideration has been paid to a dealer of record or
where qualification standards have not been met.
(e) Personal and account maintenance services for which PFD or any of
its affiliates, banks or Dealers may be compensated pursuant to this
Plan include, without limitation: payments made to or on account of PFD
or any of its affiliates, banks, other brokers and dealers who are
members of the NASD, or their officers, sales representatives and
employees, who respond to inquiries of, and furnish assistance to,
shareholders regarding their ownership of Class B shares or their
accounts or who provide similar services not otherwise provided by or
on behalf of the Fund.
(f) PFD may impose certain deferred sales charges in connection with
the repurchase of the Fund's Class B shares by the Fund and PFD may
retain (or receive from the Fund as the case may be) all such deferred
sales charges.
(g) Appropriate adjustments to payments made pursuant to clauses (b)
and (d) of this paragraph 1 shall be made whenever necessary to ensure
that no payment is made by the Fund in excess of the applicable maximum
cap imposed on asset based, front-end and deferred sales charges by
subsection (d) of Section 26 of Article III of the Rules of Fair
Practice of the NASD.
2. The Fund understands that agreements between PFD and Dealers may provide
for payment of fees to Dealers in connection with the sale of the Fund's Class B
Shares and the provision of services to shareholders of the Fund. Nothing in
this Class B Plan shall be construed as requiring the Fund to make any payment
to any Dealer or to have any obligations to any Dealer in connection with
services as a dealer of the Fund's Class B Shares. PFD shall agree and undertake
that any agreement entered into between PFD and any Dealer shall provide that
3
<PAGE>
such Dealer shall look solely to PFD for compensation for its services
thereunder and that in no event shall such Dealer seek any payment from the
Fund.
3. Nothing herein contained shall be deemed to require the Fund to take any
action contrary to its Declaration of Trust, as it may be amended or restated
from time to time, or By-Laws or any applicable statutory or regulatory
requirement to which it is subject or by which it is bound, or to relieve or
deprive the Fund's Board of Trustees of the responsibility for and control of
the conduct of the affairs of the Fund.
4. This Class B Plan shall become effective upon approval by a vote of the
Board of Trustees and a vote of a majority of the Trustees who are not
"interested persons" of the Fund and who have no direct or indirect financial
interest in the operation of the Fund's Class B Plan or in any agreements
related to the Fund's Class B Plan (the "Qualified Trustees"), such votes to be
cast in person at a meeting called for the purpose of voting on this Class B
Plan.
5. This Class B Plan will remain in effect indefinitely, provided that such
continuance is "specifically approved at least annually" by a vote of both a
majority of the Trustees of the Fund and a majority of the Qualified Trustees.
If such annual approval is not obtained, this Class B Plan shall expire on April
30, 1996.
6. This Class B Plan may be amended at any time by the Board of Trustees,
provided that this Class B Plan may not be amended to increase materially the
limitations on the annual percentage of average net assets which may be expended
hereunder without the approval of holders of a "majority of the outstanding
Class B voting securities" of the Fund and may not be materially amended in any
case without a vote of a majority of both the Trustees and the Qualified
Trustees. This Class B Plan may be terminated at any time by a vote of a
majority of the Qualified Trustees or by a vote of the holders of a "majority of
the outstanding voting securities" of Class B of the Fund.
7. The Fund and PFD shall provide to the Fund's Board of Trustees, and the
Board of Trustees shall review, at least quarterly, a written report of the
amounts expended under this Class B Plan and the purposes for which such
expenditures were made.
4
<PAGE>
8. While this Class B Plan is in effect, the selection and nomination of
Qualified Trustees shall be committed to the discretion of the Trustees who are
not "interested persons" of the Fund.
9. For the purposes of this Class B Plan, the terms "interested persons,"
"majority of the outstanding voting securities" and "specifically approved at
least annually" are used as defined in the 1940 Act.
10. The Fund shall preserve copies of this Class B Plan, and each agreement
related hereto and each report referred to in Paragraph 7 hereof (collectively,
the "Records"), for a period of not less than six (6) years from the end of the
fiscal year in which such Records were made and for a period of two (2) years,
each of such Records shall be kept in an easily accessible place.
11. This Class B Plan shall be construed in accordance with the laws of The
State of Delaware and the applicable provisions of the 1940 Act.
12. If any provision of this Class B Plan shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Class B Plan
shall not be affected thereby.
5
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000202679
<NAME> Pioneer Tax-Free Income Fund
<SERIES>
<NUMBER> 0
<NAME> NONE
<MULTIPLIER> 1
<CURRENCY> U. S .Dollars
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 453,174,550
<INVESTMENTS-AT-VALUE> 451,112,495
<RECEIVABLES> 0
<ASSETS-OTHER> 45,465
<OTHER-ITEMS-ASSETS> 8,843,110
<TOTAL-ASSETS> 460,001,070
<PAYABLE-FOR-SECURITIES> 5,933,244
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,406,559
<TOTAL-LIABILITIES> 7,339,803
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 455,484,573
<SHARES-COMMON-STOCK> 40,280,376
<SHARES-COMMON-PRIOR> 42,004,857
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (46,964)
<ACCUMULATED-NET-GAINS> (714,287)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,062,055)
<NET-ASSETS> 452,708,231
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30,825,650
<OTHER-INCOME> 0
<EXPENSES-NET> (4,444,475)
<NET-INVESTMENT-INCOME> 26,381,175
<REALIZED-GAINS-CURRENT> (714,287)
<APPREC-INCREASE-CURRENT> (59,207,615)
<NET-CHANGE-FROM-OPS> (33,540,727)
<EQUALIZATION> 11,837
<DISTRIBUTIONS-OF-INCOME> (26,474,942)
<DISTRIBUTIONS-OF-GAINS> (131,360)
<DISTRIBUTIONS-OTHER> (46,964)
<NUMBER-OF-SHARES-SOLD> 3,231,068
<NUMBER-OF-SHARES-REDEEMED> 6,630,251
<SHARES-REINVESTED> 1,674,702
<NET-CHANGE-IN-ASSETS> (79,829,355)
<ACCUMULATED-NII-PRIOR> 93,767
<ACCUMULATED-GAINS-PRIOR> 131,360
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (2,266,099)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (4,444,475)
<AVERAGE-NET-ASSETS> 496,826,817
<PER-SHARE-NAV-BEGIN> 12.680
<PER-SHARE-NII> 0.640
<PER-SHARE-GAIN-APPREC> (1.440)
<PER-SHARE-DIVIDEND> (0.640)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.240
<EXPENSE-RATIO> 0.910
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
