As filed with the Securities and Exchange Commission on April 26, 1996
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. 35 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /_X_/
Amendment No. 27 /_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 (check appropriate box):
X immediately upon filing pursuant to paragraph (b)
on [date] pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on [date] 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, 1995 on or about February 28, 1996.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Title of Amount of Proposed Proposed
Securities Shares Maximum Maximum Amount of
Being Being Offering Aggregate Registration
Registered Registered Price Per Unit Offering Price Fee
Shares of
Beneficial 1,576,716 $12.09 $17,563,945.48 $100*
Interest
*This calculation has been made pursuant to Rule 24e-2 under the Investment
Company Act of 1940. During its fiscal year ended December 31, 1995, the
Registrant redeemed or repurchased 5,661,942 shares of beneficial interest, of
which 4,109,212 were utilized by the Registrant on its Rule 24f-2 Notice filed
on or about February 28, 1996 and 1,552,730 are being used herein for purposes
of reducing the filing fee payable herewith under Rule 24e-2. No fee is required
for the registration of such 1,552,730 shares. An additional 23,986 shares being
registered hereby are valued at the public offering price of $12.09 as of April
18, 1996.
<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
Information Prospectus - Financial
Highlights
4. General Description of
Registrant Prospectus - Investment
Objective and Policies;
Management of the Fund
5. Management of the Fund Prospectus - Management of
the Fund
6. Capital Stock and Other
Securities Prospectus - Investment
Objective and Policies;
Fund Share Alternatives;
Share Price; Dividends,
Distributions and Taxation
7. Purchase of Securities
Being Offered Prospectus - Distribution
Plans; How to Buy Fund
Shares
8. Redemption or Repurchase Prospectus - How to Sell
Fund Shares; Shareholder
Services
9. Pending Legal 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
<PAGE>
Location in Prospectus
Form N-1A Item Number or Statement of
and Caption Additional Information
13. Investment Objectives
and Policy Statement of Additional
Information - Investment
Objective and Policies;
Investment Restrictions
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, Class B and Class C Shares
April 29, 1996
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 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, dated April 29, 1996, 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 4
IV. MANAGEMENT OF THE FUND 6
V. FUND SHARE ALTERNATIVES 7
VI. SHARE PRICE 7
VII. HOW TO BUY FUND SHARES 8
VIII. HOW TO SELL FUND SHARES 11
IX. HOW TO EXCHANGE FUND SHARES 12
X. DISTRIBUTION PLANS 12
XI. DIVIDENDS, DISTRIBUTIONS AND TAXATION 13
XII. SHAREHOLDER SERVICES 14
Account and Confirmation Statements 14
Additional Investments 14
Automatic Investment Plans 14
Financial Reports and Tax Information 15
Distribution Options 15
Directed Dividends 15
Direct Deposit 15
Voluntary Tax Withholding 15
Telephone Transactions and Related Liabilities 15
FactFone(SM) 15
Telecommunications Device for the Deaf (TDD) 15
Systematic Withdrawal Plans 15
Reinstatement Privilege (Class A Shares only) 16
XIII. THE FUND 16
XIV. INVESTMENT RESULTS 16
XV. APPENDIX 18
Taxable Equivalent Yields 18
</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 annual operating expenses based on actual
expenses for Class A and Class B shares for the fiscal year ended December
31, 1995. For Class C shares, operating expenses are based on estimated
expenses that would have been incurred if Class C shares had been outstanding
for the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
Class A Class B Class C+
-------- -------- -----------
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Initial Sales Charge on
Purchases (as a percentage of offering
price) 4.50%(1) None None
Maximum Sales Charge on Reinvestment of
Dividends None None None
Maximum Deferred Sales Charge None(1) 4.00% 1.00%
Redemption Fee(2) None None None
Exchange Fee None None None
Annual Operating Expenses
(as a percentage of average net
assets):(3)
Management Fees 0.46% 0.46% 0.46%
12b-1 Fees 0.25% 1.00% 1.00%
Other Expenses (including accounting
fees, transfer agent fees, custodian
fees and printing expenses) 0.18% 0.19% 0.19%
----- ----- -----
Total Operating Expenses: 0.89% 1.65% 1.65%
===== ===== =====
</TABLE>
+Class C shares were first offered on January 31, 1996.
(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 ("CDSC") 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.
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 3 5
Year Years Years 10 Years
---- ----- ----- --------
<S> <C> <C> <C> <C>
Class A Shares $54 $72 $ 92 $150
Class B Shares
--Assuming complete
redemption at end of period $57 $82 $110 $175*
--Assuming no redemption $17 $52 $ 90 $175*
Class C Shares**
--Assuming complete
redemption at end of period $27 $52 $ 90 $195
--Assuming no redemption $17 $52 $ 90 $195
</TABLE>
*Class B shares convert to Class A shares eight years after purchase;
therefore, Class A expenses are used after year eight.
**Class C shares redeemed during the first year after purchase are subject to
a 1% CDSC.
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, Rule 12b-1 fees and other
expenses of the Fund, including information regarding the basis upon which
management fees and Rule 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, 1995 has been
derived from financial statements of the Fund which have been audited by
Arthur Andersen LLP, independent public accountants. Arthur Andersen LLP's
report on the Fund's financial statements as of December 31, 1995 appears in
the Fund's Annual Report which is incorporated by reference into the
Statement of Additional Information. The information for the years from 1986
through 1993 has been derived from financial statements which were audited by
the Fund's then independent public accountants, Coopers & Lybrand. Class C
shares is a new class of shares; no financial highlights exist for Class C
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,+
-----------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $11.24 $12.68 $12.08 $11.99 $11.52
------ ------ ------ ------ ------
Increase from investment
operations--
Net investment income $ 0.64 $ 0.64 $ 0.67 $ 0.71 $0.74
Net realized and unrealized
gain (loss) on investments 1.21 (1.44) 0.87 0.31 0.65
------ ------ ----- ------ -----
Total income (loss) from
investment operations $1.85 $(0.80) $1.54 $1.02 $1.39
Distribution to shareholders
from--
Net investment income (0.64) (0.64) (0.67) (0.71) (0.74)
Net realized capital gains (0.09) (0.00) (0.27) (0.22) (0.18)
------ ----- ------ ------ ------
Net increase (decrease) in
net asset value $1.12 $(1.44) $0.60 $0.09 $0.47
----- ------ ----- ----- ------
Net asset value, end of
period $12.36 $11.24 $12.68 $12.08 $11.99
====== ====== ====== ====== =======
Total return* 16.84% (6.38%) 12.98% 8.73% 12.49%
Net assets end of period
(in thousands) $476,584 $452,661 $532,491 $466,586 $408,990
Ratio of net operating
expenses to average net
assets 0.91%++ 0.91% 0.86% 0.87% 0.87%
Ratio of net investment
income to average net
assets 5.37%++ 5.37% 5.37% 5.80% 6.26%
Portfolio turnover rate 35.06% 55% 58% 62% 56%
Ratios assuming reduction
for fees paid indirectly:
Net operating expenses 0.89%
Net investment income 5.39%
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31,+
-----------------------------------------------------
1990 1989 1988 1987 1986
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $11.47 $11.17 $10.70 $11.69 $10.81
----- ----- ----- ----- -------
Increase from investment
operations--
Net investment income $0.76 $0.79 $0.80 $0.80 $0.86
Net realized and unrealized
gain (loss) on investments 0.06 0.31 0.47 (0.98) 1.52
----- ----- ----- ----- -------
Total income (loss) from
investment operations $0.82 $1.10 $1.27 $(0.18) $2.38
Distribution to shareholders
from--
Net investment income (0.76) (0.80) (0.80) (0.81) (0.86)
Net realized capital gains (0.01) 0.00 0.00 0.00 (0.64)
----- ----- ----- ----- -------
Net increase (decrease) in
net asset value $0.05 $0.30 $0.47 $(0.99) $0.88
----- ----- ----- ----- -------
Net asset value, end of
period $11.52 $11.47 $11.17 $10.70 $11.69
===== ====== ====== ====== =======
Total return* 7.40% 10.12% 12.25% (1.56%) 22.67%
Net assets end of period
(in thousands) $362,887 $357,388 $324,116 $307,266 $307,266
Ratio of net operating
expenses to average net
assets 0.78% 0.63% 0.64% 0.63% 0.61%
Ratio of net investment
income to average net
assets 6.69% 6.96% 7.26% 7.24% 7.30%
Portfolio turnover rate 40% 54% 73% 89% 153%
Ratios assuming reduction
for fees paid indirectly:
Net operating expenses
Net investment income
</TABLE>
Financial Highlights for Each Class B Share Outstanding Throughout Each
<TABLE>
<CAPTION>
Period***: April 28, 1995
to
December 31,
1995
<S> <C>
Net asset value, beginning of period $ 11.81
Increase from investment operations:
Net investment income $ 0.35
Net realized and unrealized gain on investments 0.58
---------
Total increase from investment operations $ 0.93
Distributions to shareholders from:
Net investment income (0.34)
Net realized gain (0.09)
---------
Net increase in net asset value $ 0.50
---------
Net asset value, end of period $ 12.31
=========
Total return* 7.94%
Net assets, end of period (in thousands) $2,069
Ratio of net operating expenses to average net assets 1.72%**+++
Ratio of net investment income to average net assets 4.38%**+++
Portfolio turnover rate 35.06%
Ratios assuming reduction for fees paid indirectly:
Net operating expenses 1.65%**
Net investment income 4.45%**
</TABLE>
+Prior to December 1, 1993, Mutual of Omaha Fund Management Company
("FMC") acted as the investment adviser to the Fund.
+++Ratios assuming no reduction for fees paid indirectly.
*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.
**Annualized.
***Class B shares were first publicly offered on April 28, 1995.
3
<PAGE>
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 ("U.S.") and their
authorities and political subdivisions ("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.
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 investments
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 transactions 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
4
<PAGE>
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 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. See "Financial Highlights" for actual rates.
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
mar-
5
<PAGE>
ket 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 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
Fund, 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
March 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. Pioneer Funds Distributor, Inc. ("PFD"), an
indirect wholly-owned subsidiary of PGI, 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
6
<PAGE>
the SEC, state or blue sky securities agencies and foreign countries,
including the preparation of Prospectuses and Statements of Additional
Information for filing with regulatory agencies; (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>
For the fiscal year ended December 31, 1995, the Fund paid a management fee
of $2,153,083 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 14% of the outstanding capital stock of PGI as of February 29,
1996.
V. FUND SHARE ALTERNATIVES
The Fund continuously offers three Classes of shares designated as Class A,
Class B and Class C 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 purchases 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 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.
Class C Shares. Class C shares are sold without an initial sales charge, but
are subject to a 1% CDSC if they are redeemed within the first year after
purchase. Class C shares are subject to distribution and service fees at a
combined annual rate of up to 1.00% of the Fund's average daily net assets
attributable to Class C shares. Your entire investment in Class C shares is
available to work for you from the time you make your investment, but the
higher distribution fee paid by Class C shares will cause your Class C shares
to have a higher expense ratio and to pay lower dividends, to the extent
dividends are paid, than Class A shares. Class C shares have no conversion
feature.
Selecting a Class of 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. If you prefer not to pay an initial sales charge and you plan to hold
your investment for one to eight years, you may prefer Class C 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 mutual fund
and shares acquired in the exchange will continue to be subject to any CDSC
applicable to the shares of the Pioneer mutual 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.
7
<PAGE>
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 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. Shares will be purchased at the public offering price,
that is, the net asset value per share plus any applicable sales charge, next
computed after receipt of a purchase order, except as set forth below.
The minimum initial investment is $1,000 for Class A, Class B and Class C
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 and Class C shares except that the subsequent minimum
investment amount for Class B and Class C share accounts may be as little as
$50 if an automatic investment plan is established (see "Automatic Investment
Plans").
Telephone Purchases. Your account is automatically authorized to have the
telephone purchase privilege unless you indicated otherwise on your Account
Application or by writing to Pioneering Services Corporation ("PSC"). The
telephone purchase option may be used to purchase additional shares for an
existing mutual fund account; it may not be used to establish a new account.
Proper account identification will be required for each telephone purchase. A
maximum of $25,000 per account may be purchased by telephone each day. The
telephone purchase privilege is available to Individual Retirement Accounts
("IRAs") but may not be available to other types of retirement plan accounts.
Call PSC for more information.
You are strongly urged to consult with your financial representative prior
to requesting a telephone purchase. To purchase shares by telephone, you must
establish your bank account of record by completing the appropriate section
of your Account Application or an Account Options Form. PSC will
electronically debit the amount of each purchase from this predesignated bank
account. Telephone purchases may not be made for 30 days after the
establishment of your bank of record or any change to your bank information.
Telephone purchases will be priced at the net asset value plus any
applicable sales charge next determined after PSC's receipt of a telephone
purchase instruction and receipt of good funds (usually three days after the
purchase instruction). You may always elect to deliver purchases to PSC by
mail. See "Telephone Transactions and Related Liabilities" for additional
information.
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 $5 million invested; 0.50% on the next $45 million; and 0.25% on the
excess over $50 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 may pay
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, (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
8
<PAGE>
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 the Fund may be sold at
net asset value per share without a sales charge to 401(k) retirement plans
with 100 or more participants or at least $500,000 in plan assets.
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 be sold
at net asset value without a sales charge to Optional Retirement Program (the
"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. 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 mutual funds.
Further details may be obtained from PFD.
Class B Shares
You may buy Class B shares at net asset value per share next computed after
receipt of a purchase order 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 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 distribu-
9
<PAGE>
tions 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 has obtained 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 is
not available and, therefore, Class B shares would continue to be subject to
higher expenses than Class A shares for an indeterminate period.
Class C Shares
You may buy Class C shares at net asset value per share without the
imposition of an initial sales charge; however, Class C shares redeemed
within one year of purchase will be subject to a CDSC of 1.00%. 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. Class C shares do not convert to any other Class of Fund
shares.
For the purpose of determining 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 C shares, the Fund will
first redeem shares not subject to any CDSC, and then shares held for the
shortest period of time during the one-year period. As a result, you will pay
the lowest possible CDSC.
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 C shares, including the payment
of compensation to broker-dealers.
Waiver or Reduction of Contingent Deferred Sales Charge. The CDSC on Class B
shares 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 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 C shares and on any Class A shares subject to a CDSC may
be waived or reduced as follows: (a) for automatic redemptions as described
in "Systematic Withdrawal Plans" (limited to 10% of the value of the
account); (b) if 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 shareowner or participant in
an employer-sponsored retirement plan; (c) if the distribution 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 (d) if the distribution is to a participant in an
employer-sponsored retirement plan and is (i) a return of excess employee
deferrals or contributions, (ii) a qualifying hardship distribution as
defined by the Code, (iii) from a termination of employment, (iv) in the form
of a loan to a participant in a plan which permits loans, or (v) 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 and Class C 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 connec-
10
<PAGE>
tion 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 any 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:
(bullet) If you are selling shares from a retirement account, you must make
your request in writing (except for exchanges to other Pioneer
mutual funds which can be requested by phone or in writing). Call
1-800-622-0176 for more information.
(bullet) 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 in good order less any applicable CDSC. Sale proceeds generally
will be sent to you in cash, normally within seven days after your order is
received in good order. The Fund reserves the right to withhold payment of
the sale proceeds until checks received by the Fund in payment for the shares
being sold have cleared, which may take up to 15 calendar days from the
purchase date.
In Writing. You may sell your shares by delivering a written request, signed
by all registered owners, in good order to PSC, however, you must use a
written request, including a signature guarantee, to sell your shares if any
of the following situations applies:
(bullet) you wish to sell over $50,000 worth of shares,
(bullet) your account registration or address has changed within the last 30
days,
(bullet) the check is not being mailed to the address on your account
(address of record),
(bullet) the check is not being made out to the account owners, or
(bullet) 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, PSC 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 PSC. You may redeem up to $50,000 per day of
your shares by telephone or fax and receive the proceeds by check or bank
wire or electronic funds transfer. 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 or by
electronic funds transfer: the proceeds must be sent to your bank 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. You are strongly urged to consult with your financial representative
prior to requesting a telephone redemption.
Selling Shares Through Your Broker-Dealer. The Fund authorized PFD to act as
its agent in the repurchase of shares of the Fund from qualified
broker-dealers and reserves the right to terminate this procedure at any
time. Your broker-dealer must receive your request before the close of
business on the Exchange and transmit it to PFD before PFD's close of
business to receive that day's redemption price. Your broker-dealer is
responsible for providing all necessary documentation to PFD and may charge
you for its services.
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
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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 mutual fund will continue to be
subject to the CDSC until the original 12-month period expires. However, no
CDSC is payable upon redemption with respect to Class A shares purchased 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. Written exchange requests must be signed by
all record owner(s) exactly as the shares are registered.
Telephone Exchanges. Your account is automatically authorized to have the
telephone exchange privilege unless you indicated otherwise on your Account
Application or by writing to the PSC. Proper account identification will be
required for each telephone exchange. Telephone exchanges may not exceed
$500,000 per account per day. Each telephone exchange request, whether by
voice or FactFone(SM), will be recorded. You are strongly urged to consult with
your financial representative prior to requesting a telephone exchange. See
"Telephone Transactions and Related Liabilities" below.
Automatic Exchanges. You may automatically exchange shares from one Pioneer
mutual fund account for shares of the same Class in another Pioneer mutual
fund account on a monthly or quarterly basis. The accounts must have
identical registrations and the originating account must have a minimum
balance of $5,000. The exchange will be effective on the 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 mutual fund
account opened through an exchange must have a registration identical to that
on the original account.
Shares which would normally be subject to a CDSC upon redemption will not be
charged the applicable CDSC at the time of an exchange. Shares acquired in an
exchange will be subject to the CDSC of the shares originally held. For
purposes of determining the amount of any applicable CDSC, the length of time
you have owned shares acquired by exchange will be measured from the date you
acquired the original shares and will not be affected by any subsequent
exchange.
Exchange requests received by PSC before 4:00 p.m. Eastern Time will be
effective on that day if the requirements above have been met, otherwise,
they will be effective on the next business day. PSC will process exchanges
only after receiving an exchange request in good order. There are currently
no fees or sales charges imposed at the time of an exchange. An exchange of
shares may be made only in states where legally permitted. For federal and
(generally) state income tax purposes, an exchange is considered to be a sale
of the shares of the Fund exchanged and a purchase of shares in another
Pioneer mutual fund. Therefore, an exchange could result in a gain or loss on
the shares sold, depending on the tax basis of these shares and the timing of
the transaction, and special tax rules may apply.
You should consider the differences in objectives and policies of the
Pioneer mutual funds, as described in each fund's current prospectus, before
making any exchange. For the protection of the Fund's performance and
shareholders, the Fund and PFD reserve the right to refuse any exchange
request or restrict, at any time without notice, the number and/or frequency
of exchanges to prevent abuses of the exchange privilege. Such abuses may
arise from frequent trading in response to short-term market fluctuations, a
pattern of trading by an individual or group that appears to be an attempt to
"time the market," or any other exchange request which, in the view of
management, will have a detrimental effect on the Fund's portfolio management
strategy or its operations. In addition, the Fund and PFD reserve the right
to charge a fee for exchanges or to modify, limit, suspend or discontinue the
exchange privilege with notice to shareholders as required by law.
X. DISTRIBUTION PLANS
The Fund has adopted a Plan of Distribution for each Class of shares (the
"Class A Plan," "Class B Plan," and "Class C 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 catego-
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ries 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.
Both the Class B and the Class C Plan provide 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 the applicable Class of 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 that Class of 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 or Class C shares. PFD
also receives the proceeds of any CDSC imposed on the redemption of Class B
or Class C 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 fees with
respect to such shares commencing in the 13th month following the purchase.
Commissions of up to 1% of the amount invested in Class C shares, consisting
of 0.75% of the amount invested and a first year's service fee of 0.25% of
the amount invested, 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. Commencing in the 13th month following the
purchase of Class C shares, dealers will become eligible for additional
annual distribution fees and services fees of up to 0.75% and 0.25%,
respectively, of the net asset value of such shares.
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 or the Class C 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 Subchapter M of 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
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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.
Distributions from net short-term capital gains, if any, may be paid with
such dividends, and other distributions from income and/or capital gains may
also be made at such other 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 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. Non-U.S. shareholders
and tax-exempt shareholders are subject to different tax treatment that is
not described above. You should consult your own tax adviser regarding 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.
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 and Class C 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.
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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 mutual
fund account invested in a second Pioneer mutual 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 PSC. You may purchase, sell or exchange Fund shares by telephone.
See "Share Price" for more information. For personal assistance, call
1-800-225-6292 between 8:00 a.m. and 9:00 p.m. Eastern time on weekdays.
Computer-assisted transactions are available to shareholders who have
pre-recorded certain bank information (see "FactFone(SM)"). You are strongly
urged to consult with your financial representative prior to requesting any
telephone transaction. To confirm that each transaction instruction received
by telephone is genuine, the Fund will record each telephone transaction,
require the caller to provide the personal identification number ("PIN") for
the account and send you a written confirmation of each telephone
transaction. Different procedures may apply to accounts that are registered
to non-U.S. citizens or that are held in the name of an institution or in the
name of an investment broker-dealer or other third-party. If reasonable
procedures, such as those described above, are not followed, the Fund may be
liable for any loss due to unauthorized or fraudulent instructions. The Fund
may implement other procedures from time to time. In all other cases, neither
the Fund, PSC or PFD will be responsible for the authenticity of instructions
received by telephone, therefore, you bear the risk of loss for unauthorized
or fraudulent telephone transactions.
During times of economic turmoil or market volatility or as a result of
severe weather or a natural disaster, it may be difficult to contact the Fund
by telephone to institute a redemption or exchange. You should communicate
with the Fund in writing if you are unable to reach the Fund by telephone.
FactFone(SM)
FactFone(SM) is an automated inquiry and telephone transaction system
available to Pioneer mutual fund shareholders by dialing 1-800-225-4321.
FactFone(SM) allows you to obtain current information on your Pioneer mutual
fund accounts and to inquire about the prices and yields of all publicly
available Pioneer mutual funds. In addition, you may use FactFone(SM) to make
computer-assisted telephone purchases, exchanges and redemptions from your
Pioneer mutual fund accounts if you have activated your PIN. Telephone
purchases and redemptions require the establishment of a bank account of
record. You are strongly urged to consult with your financial representative
prior to requesting any telephone transaction. Shareholders whose accounts
are registered in the name of a broker-dealer or other third party may not be
able to use FactFone(SM). See "How to Buy Fund Shares," "How to Exchange Fund
Shares," "How to Sell Fund Shares" and "Telephone Transactions and Related
Liabilities." Call PSC for assistance.
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 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 will be limited to 10% of the value of the account at
the time the SWP is implemented. See "Waiver or Reduction of Contingent
Deferred Sales Charge" for more information. Periodic payments 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. Payments can
be made either by check or electronic transfer to a bank account designated
by 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 SWP in effect
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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 three classes of shares, designated as Class A,
Class B and Class C. 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, Class B and Class C
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 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
16
<PAGE>
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 and Class C shares the calculation reflects the
deduction of any applicable CDSC. 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 indices,
indicators of economic activity or averages of mutual funds results may be
cited or compared with the investment results of the Fund. Rankings or
listings by magazines, newspapers or independent statistical or rating
services, such as Lipper Analytical Services, Inc., may also be referenced.
The Fund's 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.
17
<PAGE>
XV. APPENDIX:
Taxable Equivalent Yields*
The tables below show 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 1996.
<TABLE>
<CAPTION>
Taxable Yield Required To Equal A Tax Free
Single Return Joint Return Yield Of:
- ---------------- --------------------
Tax
(Taxable Income)* Rate 5% 6% 7% 8% 9%
- ---------------------------------------- -------- ------ ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Up to $24,000 Up to $40,100 15.0% 5.88 7.06 8.24 9.41 10.59
$24,001-$58,150 $40,101-$96,900 28.0% 6.94 8.33 9.72 11.11 12.50
$58,151-$121,300 $96,901-$147,700 31.0% 7.25 8.70 10.14 11.59 13.04
$121,301-$263,750 $147,701-$263,750 36.0% 7.81 9.38 10.94 12.50 14.06
Over $263,750 Over $263,750 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 $117,950 ($58,975 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
$176,950 for joint filers ($117,950 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 orfederal 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.
18
<PAGE>
THE PIONEER FAMILY OF MUTUAL FUNDS
International Growth Funds
Pioneer International Growth Fund
Pioneer Europe Fund
Pioneer Emerging Markets Fund
Pioneer India Fund
Growth Funds
Pioneer Capital Growth Fund
Pioneer Mid-Cap Fund
Pioneer Growth Shares
Pioneer Small Company Fund
Pioneer Gold Shares
Growth and Income Funds
Pioneer Equity-Income Fund
Pioneer Fund
Pioneer II
Pioneer Real Estate Shares
Income Funds
Pioneer Short-Term Income Trust
Pioneer America Income Trust
Pioneer Bond Fund
Pioneer Income Fund
Tax-Free Income Funds
Pioneer Intermediate Tax-Free Fund*
Pioneer Tax-Free Income Fund*
Money Market Fund
Pioneer Cash Reserves Fund
*Not suitable for retirement accounts
19
<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
0496-3265
(C)Pioneer Funds Distributor, Inc.
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
FactFone (SM)
Automated fund yields, automated 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
STATEMENT OF ADDITIONAL INFORMATION
PIONEER TAX-FREE INCOME FUND
60 State Street
Boston, Massachusetts 02109
Class A, Class B and Class C Shares
April 29, 1996
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 29, 1996 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. The most recent Annual Report to Shareholders is attached
to this Statement of Additional Information and is hereby incorporated by
reference.
TABLE OF CONTENTS
Page
1. Investment Objective and Policies.................................... 2
2. Investment Restrictions.............................................. 9
3. Management of the Fund...............................................11
4. Investment Adviser...................................................15
5. Underwriting Agreement and Distribution Plans........................17
6. Shareholder Servicing/Transfer Agent.................................20
7. Custodian............................................................20
8. Principal Underwriter................................................21
9. Independent Public Accountant........................................21
10. Portfolio Transactions...............................................21
11. Tax Status and Dividends.............................................23
12. Shares of the Fund...................................................27
13. Determination of Net Asset Value.....................................28
14. Systematic Withdrawal Plan...........................................29
15. Letter of Intention..................................................29
16. Investment Results...................................................30
17. General Information..................................................34
18. Financial Statements.................................................34
Appendix A...........................................................35
Index Descriptions...................................................39
Performanace Statistics..............................................43
Other Pioneer Information............................................49
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 ("U.S.") and their authorities and
political subdivisions ("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 to 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 set forth 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 obligation to make lease or installment purchase
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.
-2-
<PAGE>
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 and Deferred Interest 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
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
-3-
<PAGE>
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.
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.
-4-
<PAGE>
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.
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
-5-
<PAGE>
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.
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 (if the option is exercised) 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 (if the option is exercised) 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.
-6-
<PAGE>
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 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
-7-
<PAGE>
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
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
-8-
<PAGE>
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 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 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
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.
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<PAGE>
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;
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
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<PAGE>
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 adviser 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.
2. MANAGEMENT OF THE FUND
The Fund's Board of Trustees provides broad supervision over the
affairs of the Fund. The officers of the Fund are responsible for the Fund's
operations. The Trustees and executive officers of the Fund are listed below,
together with their principal occupations during the past five years. An
asterisk indicates those Trustees who are interested persons of the Fund within
the meaning of the 1940 Act.
JOHN F. COGAN, JR.*, Chairman of the Board, President and Trustee, DOB: June
1926
President, Chief Executive Officer and a Director of The Pioneer Group,
Inc. ("PGI"); Chairman and a Director of Pioneering Management Corporation
("PMC") and Pioneer Funds Distributor, Inc. ("PFD"); Director of Pioneering
Services Corporation ("PSC"), Pioneer Capital Corporation ("PCC") and
Forest-Starma (Russian timber joint venture); President and Director of Pioneer
Plans Corporation ("PPC"), Pioneer Investment Corp. ("PIC"), Pioneer Metals and
Technology, Inc. ("PMT"), Pioneer International Corp. ("PIntl"), Pioneer First
Russia, Inc. ("First Russia") and Pioneer Omega, Inc. ("Omega"); Chairman of the
Board and Director of Pioneer Goldfields Limited ("PGL") and Teberebie
Goldfields Limited; Chairman of the Supervisory Board of Pioneer Fonds
Marketing, GmbH ("Pioneer GmbH"); Member of the Supervisory Board of Pioneer
First Polish Trust Fund Joint Stock Company ("PFPT"); Chairman, President and
Trustee of all of the Pioneer mutual funds and Partner, Hale and Dorr (counsel
to the Fund).
RICHARD H. EGDAHL, M.D., Trustee, DOB: December 1926
Boston University Health Policy Institute, 53 Bay State Rd., Boston, MA 02115
Professor of Management, Boston University School of Management;
Professor of Public Health, Boston University School of Public Health; Professor
of Surgery, Boston University School of Medicine; Director, Boston University
Health Policy Institute and Boston University Medical Center; Executive Vice
President and Vice Chairman of the Board, University Hospital; Academic Vice
President for Health Affairs, Boston University; Director, Essex Investment
Management Company, Inc. (investment adviser), Health Payment Review, Inc.
(health care containment software firm), Mediplex Group, Inc. (nursing care
facilities firm), Peer Review Analysis, Inc. (health care facilities firm) and
Springer-Verlag New York, Inc. (publisher); Honorary Trustee, Franciscan
Children's Hospital and Trustee of all of the Pioneer mutual funds.
-11-
<PAGE>
MARGARET B.W. GRAHAM, Trustee, DOB: May 1947
The Keep, P.O. Box 110. Little Deer Isle, ME 04650
Founding Director, Winthrop Group, Inc. (consulting firm) since 1982;
Manager of Research Operations, Xerox Palo Alto Research Center, from 1991 to
1994; Professor of Operations Management and Management of Technology, Boston
University School of Management ("BUSM"), from 1989 to 1993 and Trustee of all
of the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
JOHN W. KENDRICK, Trustee, DOB: July 1917
6363 Waterway Drive, Falls Church, VA 22044
Professor Emeritus and Adjunct Scholar, George Washington University;
Economic Consultant and Director, American Productivity and Quality Center;
American Enterprise Institute and Trustee of all of the Pioneer mutual funds,
except Pioneer Variable Contracts Trust.
MARGUERITE A. PIRET, Trustee, DOB: May 1948
One Boston Place, Suite 2635, Boston, MA 02108
President, Newbury, Piret & Company, Inc. (merchant banking firm) and
Trustee of all of the Pioneer mutual funds.
DAVID D. TRIPPLE*, Trustee and Executive Vice President, DOB: February 1944
Executive Vice President and a Director of PGI; President, Chief
Investment Officer and a Director of PMC; Director of PFD, PCC, PIC, PIntl ,
First Russia, Omega and Pioneer SBIC Corporation; Executive Vice President and
Trustee of all of the Pioneer mutual funds.
STEPHEN K. WEST, Trustee, DOB: September 1928
125 Broad Street, New York, NY 10004
Partner, Sullivan & Cromwell (law firm); Trustee, The Winthrop Focus
Funds (mutual funds) and Trustee of all of the Pioneer mutual funds.
JOHN WINTHROP, Trustee, DOB: June 1936
One North Adgers Wharf, Charleston, SC 29401
President, John Winthrop & Co., Inc. (private investment firm);
Director of NUI Corp.; Trustee of Alliance Capital Reserves, Alliance Government
Reserves and Alliance Tax Exempt Reserves and Trustee of all of the Pioneer
mutual funds, except Pioneer Variable Contracts Trust.
WILLIAM H. KEOUGH, Treasurer, DOB: April 1937
Senior Vice President, Chief Financial Officer and Treasurer of PGI;
Treasurer of PFD, PMC, PSC, PCC, PIC, PIntl, PMT, PGL, First Russia, Omega and
Pioneer SBIC Corporation; Treasurer and Director of PPC and Treasurer of all of
the Pioneer mutual funds.
JOSEPH P. BARRI, Secretary, DOB: August 1946
Secretary of PGI, PMC, PPC, PIC, PIntl, PMT, First Russia, Omega and
PCC; Clerk of PFD and PSC; Partner, Hale and Dorr (counsel to the Fund) and
Secretary of all of the Pioneer mutual funds.
-12-
<PAGE>
ERIC W. RECKARD, Assistant Treasurer, DOB: June 1956
Manager of Fund Accounting of PMC since May 1994, Manager of Auditing,
Compliance and Business Analysis for PGI prior to May 1994 and Assistant
Treasurer of all of the Pioneer mutual funds.
ROBERT P. NAULT, Assistant Secretary, DOB: March 1964
General Counsel and Assistant Secretary of PGI since 1995; Assistant
Secretary of PMC, PIntl, PGL, First Russia, Omega and all of the Pioneer mutual
funds; Assistant Clerk of PFD and PSC and formerly of Hale and Dorr (counsel to
the Fund) where he most recently served as junior partner.
MARK L. WINTER, Vice President, DOB: May 1951
Vice President of the Fund since 1993; formerly Portfolio Manager,
Mutual of Omaha Fund Management Company (until 1993).
The Fund's Agreement and Declaration of Trust (the "Declaration of
Trust") provides that the holders of two-thirds of its outstanding shares may
vote to remove a Trustee of the Fund at any meeting of shareholders. See
"Description of Shares" below. The business address of all officers is 60 State
Street, Boston, Massachusetts 02109.
All of the outstanding capital stock of PFD, PMC and PSC is owned,
directly or indirectly, by PGI, a publicly-owned Delaware corporation. PMC, the
Fund's investment adviser, serves as the investment adviser for the Pioneer
mutual funds listed below and manages the investments of certain institutional
accounts.
The table below lists all the Pioneer mutual funds currently offered to
the public and the investment adviser and principal underwriter for each fund.
Investment Principal
Fund Name Adviser Underwriter
Pioneer International Growth Fund PMC PFD
Pioneer Europe Fund PMC PFD
Pioneer Emerging Markets Fund PMC PFD
Pioneer India Fund PMC PFD
Pioneer Capital Growth Fund PMC PFD
Pioneer Mid-Cap Fund PMC PFD
Pioneer Growth Shares PMC PFD
Pioneer Small Company Fund PMC PFD
Pioneer Gold Shares PMC PFD
Pioneer Equity-Income Fund PMC PFD
Pioneer Fund PMC PFD
Pioneer II PMC PFD
Pioneer Real Estate Shares PMC PFD
Pioneer Short-Term Income Trust PMC PFD
Pioneer America Income Trust PMC PFD
Pioneer Bond Fund PMC PFD
Pioneer Income Fund PMC PFD
Pioneer Intermediate Tax-Free Fund PMC PFD
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<PAGE>
Pioneer Tax-Free Income Fund PMC PFD
Pioneer U.S. Government Money Fund PMC PFD
Pioneer Cash Reserves Fund PMC PFD
Pioneer Interest Shares, Inc. PMC *
Pioneer Variable Contracts Trust PMC **
* This fund is a closed-end fund.
** This is a series of eight separate portfolios designed to provide
investment vehicles for the variable annuity and variable life insurance
contracts of various insurance companies or for certain qualified pension
plans.
As of March 31, 1996, 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, except Mr. Cogan who then owned approximately 14% of such shares. As of
March 31, 1996, the officers and Trustees held in aggregate less than 1% of the
outstanding shares of the Fund. As of March 31, 1996, 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. Commencing on January 1, 1996,
the Fund will pay an annual trustees' fee to each Trustee who is not affiliated
with PGI, PMC, PFD or PSC consisting of two components: (a) a base fee of $500
and (b) a variable fee, calculated on the basis of the average net assets of the
Fund, which fee is estimated to be approximately $486 for 1996. In addition, the
Fund will pay a per meeting fee of $120 to each Trustee who is not affiliated
with PGI, PMC, PFD or PSC. The Fund also will pay an annual committee
participation fee to Trustees who serve as members of committees established to
act on behalf of one or more of the of Pioneer mutual funds. Committee fees will
be allocated to the Fund on the basis of the Fund's average net assets. Each
Trustee who is a member of the Audit Committee for the Pioneer mutual funds will
receive an annual fee equal to 10% of the aggregate annual trustees' fee, except
the Committee Chair who will receive an annual trustees' fee equal to 20% of the
aggregate annual trustees' fee. The 1996 fees for Audit Committee members and
the Audit Committee Chair are expected to be approximately $6,000 and $12,000,
respectively. Members of the Pricing Committee for the Pioneer mutual funds, as
well as any other committee which renders material functional services to the
Board of Trustees for the Pioneer mutual funds, will receive an annual fee equal
to 5% of the annual trustees' fee, except the Committee Chair who will receive
an annual trustees' fee equal to 10% of the annual trustees' fee. The 1996 fees
for Pricing Committee members and the Pricing Committee Chair are expected to be
approximately $3,000 and $6,000, respectively. Any such fees paid to affiliates
or interested persons of PGI, PMC, PFD or PSC are reimbursed to the Fund under
its Management Contract.
-14-
<PAGE>
For the fiscal year ended December 31, 1995, the Fund paid no salaries
or compensation to any of its officers. The Fund paid 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 paid the Chairman of the Audit Committee an additional annual fee of
$250 and paid each member of the Audit Committee an additional annual fee of
$200. All Trustees were reimbursed for expenses incurred in attending Trustee
and committee meetings. The Fund also paid 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 were
reimbursed to the Fund under its Management Contract.
The following table provides information regarding the compensation
paid by the Fund and other Pioneer mutual funds to the Trustees for their
services.
<TABLE>
<CAPTION>
Pension or Retirement
Benefits Accrued Total Compensation
Aggregate as Part of from the Fund and all
Compensation the Fund's other Pioneer Mutual
Name of Trustee from the Fund* Expenses Funds**
<S> <C> <C> <C>
John F. Cogan, Jr. $ 500 $0 $13,000
Richard H. Egdahl M.D. $3,742 $0 $62,000
Margaret B.W. Graham $3,742 $0 $60,000
John W. Kendrick $3,742 $0 $62,398
Margeurite A. Piret $4,176 $0 $76,704
David D. Tripple $ 500 $0 $13,000
Stephen K. West $3,753 $0 $68,180
John Winthrop $3,994 $0 $71,199
Stephen G. Kasnet $0 $0 $0
Total $24,149 $0 $426,694
------- == ========
</TABLE>
* As of the Fund's fiscal year end.
** As of December 31, 1995 (calendar year end for all 22 Pioneer mutual
funds).
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 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)
-15-
<PAGE>
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 agreed that until December 1, 1995, its fee would not exceed the
fee that would have been payable under the previous management contract 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, were made.
PMC has agreed that 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.
-16-
<PAGE>
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. During the fiscal years ended
December 31, 1994 and December 31, 1995, the Fund incurred management fees of
$2,226,099 and $2,153,083, respectively.
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 each Class of shares (the "Class A Plan",
"Class B Plan" and "Class C Plan") (together, the "Plans").
Class A Plan
Pursuant to the Class A Plan, the Fund may reimburse PFD for its
expenditures in financing any activity primarily intended to result in the sale
of Fund shares. Certain categories of such expenditures have been approved by
the Board of Trustees and are set forth in the Prospectus 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 0.25% of the Fund's average daily net assets
attributable to Class A shares.
Class B Plan
The Class B Plan provides that the Fund shall pay PFD, as the Fund's
distributor for its Class B shares, a daily distribution fee equal on an annual
basis to 0.75% of the Fund's average daily net assets attributable to Class B
shares and will pay PFD a service fee equal to 0.25% of the Fund's average daily
net assets attributable to Class B shares (which PFD will in turn pay to
securities dealers which enter into a sales agreement with PFD at a rate of up
to 0.25% of the Fund's average daily net assets attributable to Class B shares
owned by investors for whom that securities dealer is the holder or dealer of
-17-
<PAGE>
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 contingent deferred sales charges ("CDSCs")
attributable to Class B shares. See "Distribution Plans" in the Prospectus.
Class C Plan
The Class C Plan provides that the Fund will pay PFD, as the Fund's
distributor for its Class C shares, a distribution fee accrued daily and paid
quarterly, equal on an annual basis to 0.75% of the Fund's average daily net
assets attributable to Class C shares and will pay PFD a service fee equal to
0.25% of the Fund's average daily net assets attributable to Class C shares. PFD
will in turn pay to securities dealers which enter into a sales agreement with
PFD a distribution fee and a service fee at rates of up to 0.75% and 0.25%,
respectively, of the Fund's average daily net assets attributable to Class C
shares owned by investors for whom that securities dealer is the holder or
dealer of record. The service fee is intended to be in consideration of personal
services and/or account maintenance services rendered by the dealer with respect
to Class C 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. Commencing in the thirteenth month following a
purchase of Class C shares, dealers will become eligible for additional service
fees at a rate of up to 0.25% and additional compensation at a rate of up to
0.75% of the net asset value of such shares. 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 C
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.
-18-
<PAGE>
The purpose of distribution payments to PFD under the Class C Plan is
to compensate PFD for its distribution services with respect to the Class C
shares of 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 C Plan also provides that PFD will receive all CDSCs
attributable to Class C shares. (See "Distribution Plans" in the Prospectus.)
General
In accordance with the terms of the Plans, PFD provides to the Fund for
review by the Trustees a quarterly written report of the amounts expended under
the respective Plan and the purpose for which such expenditures were made. In
the Trustees' quarterly review of the Plans, they will consider the continued
appropriateness and the level of reimbursement or compensation the Plans
provide.
No interested person of the Fund, nor any Trustee of the Fund who is
not an interested person of the Fund, has any direct or indirect financial
interest in the operation of the Plans except to the extent that PFD and certain
of its employees may be deemed to have such an interest as a result of receiving
a portion of the amounts expended under the Plans by the Fund and except to the
extent certain officers may have an interest in PFD's ultimate parent, PGI.
The Plans were adopted by a majority vote of the Board of Trustees,
including all of the Trustees who are not, and were not at the time they voted,
interested persons, 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.
-19-
<PAGE>
During the fiscal year ended December 31, 1995, the Fund incurred total
distribution fees pursuant to the Fund's Class A Plan and Class B Plan of
$1,164,136 and $6,465, respectively. The distribution fees were paid by the Fund
to PFD in reimbursement of expenses related to servicing of shareholder accounts
and to compensating dealers and sales personnel. The Fund had not incurred any
distribution fees pursuant to the Class C Plan. Class C shares were first
offered January 31, 1996.
During the fiscal year ended December 31, 1995, CDSCs, at a rate
declining from a maximum of 4.0% of the lower of the cost or market value of the
shares being redeemed, of $275 were charged to redemptions of Class B shares
made within 6 years of purchase (as described in "How to Buy Fund Shares" in the
Prospectus). Such CDSCs are paid to PFD in reimbursement of expenses related to
servicing of shareholder accounts and compensation paid to dealers and sales
personnel.
6. SHAREHOLDER SERVICING/TRANSFER AGENT
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, Class B and Class C
shareholder 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
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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, Class B and Class C shares of the Fund. For the fiscal year ended December
31, 1992 and for the period from January 1, 1993 to November 30, 1993, under the
Fund's previous underwriting agreement with FMC, commissions retained were
$338,384 and $387,593, respectively.
Under the Fund's current underwriting agreement with PFD, for (i) the
period from December 1, 1993 to December 31, 1993, for the fiscal years ended
December 31, 1994 and December 31, 1995, PFD received $150,000, $1,145,352 and
$677,682.59 for Class A shares, respectively, and (ii) the fiscal year ended
December 31, 1995, PFD received $76,632.70 for Class B shares, in aggregate
underwriting income commissions. Of the foregoing amounts for Class A shares,
$19,058, $135,694 and $99,407, respectively, was retained and for Class B shares
$0 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 Andersen'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
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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 mutual 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
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 mutual 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
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purchase to one fund or account rather than another is based on a number of
factors. The determining factors in most cases are the amount of securities of
the issuer then outstanding, the value of those securities and the market for
them. Other factors considered in the investment recommendations include other
investments which each mutual fund or account presently has in a particular
industry and the availability of investment funds in each mutual fund or
account.
It is possible that at times identical securities will be held by more
than one mutual fund and/or account. However, positions in the same issue may
vary and the length of time that any mutual fund or account may choose to hold
its investment in the same issue may likewise vary. To the extent that the Fund,
another Pioneer mutual 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 mutual 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, 1994 and 1995.
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
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 earns, 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
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
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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 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 Fund's total assets at the close of each quarter of its
taxable year consists of tax-exempt obligations, i.e., obligations described in
Section 103(a) of the Code. 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 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
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
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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 of 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.
Redemptions, including exchanges, are taxable transactions. 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 reinvestment or exchange. Losses on
redemptions or other sales of shares may be disallowed under "wash sale" rules
in the event of other investments in the Fund (including by the reinvestment of
distributions) within a period of 61 days beginning 30 days before and ending 30
days after a redemption or other sale of shares. In such a case, the disallowed
amount would be included in the federal tax basis of the newly-acquired 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. Consequently, subsequent distributions on these shares from
such appreciation 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.
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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 Internal Revenue Service ("IRS") regulations. In
order to avoid this withholding requirement, shareholders must certify on their
Account Applications, or on separate W-9 Forms, that the Social Security Number
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 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. 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.
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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 three classes of shares,
Class A, Class B and Class C.
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
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
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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.
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
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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.
14. SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan ("SWP") is designed to provide a
convenient method of receiving fixed payments at regular intervals from shares
of the Fund deposited by the applicant under this SWP. The applicant must
deposit or purchase for deposit with PSC shares of the Fund having a total value
of not less than $10,000. Periodic payments of $50 or more will be sent to the
applicant, or any person designated by him, monthly or quarterly. A designation
of a third party to receive payments requires an acceptable signature guarantee.
SWPs for Class B and C share accounts will be limited to 10% of the value of the
account at the time the SWP is implemented as described in the Prospectus.
Any income dividends or capital gains distributions on shares under the
SWP will be credited to the SWP account on the payment date in full and
fractional shares at the net asset value per share in effect on the record date.
SWP payments are made from the proceeds of the redemption of shares
deposited under the SWP in a SWP account. 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 SWP 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
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13-month period be more 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 mutual 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.
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.
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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 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
Yield quotations for Class A, Class B and Class C shares are computed
by dividing the net investment income per share attributable to a class during a
base period of 30 days, or one month, by the maximum offering price per share of
that class 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
-31-
<PAGE>
Where: a = interest earned during the period
b = net expenses accrued for the period
c = the average daily number of shares of the class
outstanding during the period that were entitled to
receive dividends
d = the maximum offering price per share of the class 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;
(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
-32-
<PAGE>
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, 1995 was 7.0% and 6.13% for
Class A shares and Class B shares, respectively. 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. Class C shares
were first offered on January 31, 1996, therefore, no yield for Class C shares
exists at this time.
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 and C Shares at the end of the period.
T = average annual total return
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 Class A shares for the one- , five-,
ten-year and commencement-of-fund periods ended December 31, 1995 were 11.57%,
7.62%, 8.75% and 6.68%, respectively. The Fund's average annual total return for
Class B shares for the one-year period ended December 31, 1995 was 7.94%. The
Fund's SEC yield for the 30-day period ended December 31, 1995 for Class A and B
shares was 4.23% and 3.70%, respectively.
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<PAGE>
Automated Information Line
FactFonesm, Pioneer's 24-hour automated information line, allows
shareholders to dial toll-free 1-800-225-4321 and hear recorded fund
information, including:
o net asset value prices for all Pioneer mutual funds;
o annualized 30-day yields on Pioneer's 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 Pioneer
mutual 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. See "FactFonesm" in the Prospectus for more
information.
All performance numbers communicated through FactFonesm represent past
performance; 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, Class B and Class C 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 SEC of the management or policies of the Fund. For further information 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 Fund's financial statements for the year ended December 31, 1995
are included in the Fund's Annual Report to Shareholders, which report is
incorporated by reference into and is attached to this Statement of Additional
Information. The Fund's Annual Report to Shareholders is so incorporated and
attached in reliance upon the report of Arthur Andersen LLP, independent public
accountants, as experts in accounting and auditing.
-34-
<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.
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.
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<PAGE>
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.
-36-
<PAGE>
Pioneer Tax-Free Income Fund A
<TABLE>
<CAPTION>
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>
1/18/77 $10,000 $15.7900 4.50% 633.312 $15.08 $9550
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>
12/31/86 $7,403 $887 $8,951 $17,241
12/31/87 $6,776 $812 $9,384 $16,972
12/31/88 $7,074 $848 $11,129 $19,051
12/31/89 $7,263 $871 $12,845 $20,979
12/31/90 $7,296 $884 $14,352 $22,532
12/31/91 $7,593 $1,302 $16,451 $25,346
12/31/92 $7,650 $1,800 $18,108 $27,558
12/31/93 $8,031 $2,534 $20,571 $31,136
12/31/94 $7,119 $2,254 $19,778 $29,151
12/31/95 $7,828 $2,719 $23,511 $34,058
</TABLE>
-37-
<PAGE>
Pioneer Tax-Free Income B
<TABLE>
<CAPTION>
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>
4/28/95 $10,000 $11.8100 4.00% 846.740 $11.8100 $10,000
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>
12/31/95 $10,423 $77 $294 $10,394
</TABLE>
-38-
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
The following securities indices are well-known, unmanaged measures of market
performance. Advertisements and sales literature for the Fund may refer to these
indices or may present comparisons between the performance of the Fund and one
or more of the indices. Other indices may be used, if appropriate. The indices
are not available for direct investment. The data presented is not meant to be
indicative of the performance of the Fund, reflects past performance and does
not guarantee future results.
S&P 500
This index is a readily available, carefully constructed, market value weighted
benchmark of common stock performance. Currently, the S&P Composite Index
includes 500 of the largest stocks (in terms of stock market value) in the
United States; prior to March 1957 it consisted of 90 of the largest stocks.
DOW JONES INDUSTRIAL AVERAGE
This is a total return index based on the performance of 30 blue chip stocks.
U.S. SMALL STOCK INDEX
This index is a market value weighted index of the ninth and tenth deciles of
the New York Stock Exchange (NYSE), plus stocks listed on the American Stock
Exchange (AMEX) and over-the-counter (OTC) with the same or less capitalization
as the upper bound of the NYSE ninth decile.
U.S. INFLATION
The Consumer Price Index for All Urban Consumers (CPI-U), not seasonally
adjusted, is used to measure inflation, which is the rate of change of consumer
goods prices. Unfortunately, the inflation rate as derived by the CPI is not
measured over the same period as the other asset returns. All of the security
returns are measured from one month-end to the next month-end. CPI commodity
prices are collected during the month. Thus, measured inflation rates lag the
other series by about one-half month. Prior to January 1978, the CPI (as
compared with CPI-U) was used. Both inflation measures are constructed by the
U.S. Department of Labor, Bureau of Labor Statistics, Washington, DC.
S&P/BARRA INDEXES
The S&P/BARRA Growth and Value Indexes are constructed by dividing the stocks in
the S&P 500 Index according to price-to-book ratios. The Growth Index contains
stocks with higher price-to-book ratios, and the Value Index contains stocks
with lower price-to-book ratios. Both indexes are market capitalization
weighted.
LONG-TERM U.S. GOVERNMENT BONDS
The total returns on long-term government bonds from 1977 to 1991 are
constructed with data from The Wall Street Journal. Over 1926-1976, data are
obtained from the Government bond file at the Center for Research in Security
Prices (CRSP), Graduate School of Business, University of Chicago. Each year, a
one-bond portfolio with a term of approximately 20 years and a reasonably
current coupon was used, and whose returns did not reflect potential tax
benefits, impaired negotiability, or special redemption or call privileges.
Where callable bonds had to be used, the term of the bond was assumed to be a
simple average of the maturity and first call dates
-39-
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
minus the current date. The bond was "held" for the calendar year and returns
were computed. Total returns for 1977-1991 are calculated as the change in the
flat price or and-interest price.
INTERMEDIATE-TERM U.S. GOVERNMENT BONDS
Total returns of the intermediate-term government bonds for 1977-1991 are
calculated from The Wall Street Journal prices, using the change in flat price.
Returns from 1934-1986 are obtained from the CRSP Government Bond File.
Each year, one-bond portfolios are formed, the bond chosen is the shortest
noncallable bond with a maturity not less than 5 years, and this bond is "held"
for the calendar year. Monthly returns are computed. (Bonds with impaired
negotiability or special redemption privileges are omitted, as are partially or
fully tax-exempt bonds starting with 1943.) From 1934-1942, almost all bonds
with maturities near 5 years were partially or full tax-exempt and were selected
using the rules described above. Personal tax rates were generally low in that
period, so that yields on tax-exempt bonds were similar to yields on taxable
bonds. From 1926-1933, there are few bonds suitable for construction of a series
with a 5-year maturity. For this period, five year bond yield estimates are
used.
MSCI
Morgan Stanley Capital International Indices, developed by the Capital
International S.A., are based on share prices of some 1470 companies listed on
the stock exchanges around the world.
Countries in the MSCI EAFE Portfolio are:
Australia; Austria; Belgium; Denmark; Finland; France; Germany; Hong Kong;
Italy; Japan; Netherlands; N. Zealand; Norway; Singapore/Malaysia; Spain;
Sweden; Switzerland; United Kingdom.
6 MONTH CDs
Data sources include the Federal Reserve Bulletin and The Wall Street Journal.
LONG-TERM U.S. CORPORATE BONDS
For 1969-1991, corporate bond total returns are represented by the Salomon
Brothers Long-Term High-Grade Corporate Bond Index. Since most large corporate
bond transactions take place over the counter, a major dealer is the natural
source of these data. The index includes nearly all Aaa- and Aa-rated bonds. If
a bond is downgraded during a particular month, its return for the month is
included in the index before removing the bond from future portfolios.
Over 1926-1968 the total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946-1968, Ibbotson
and Sinquefield backdated the Salomon Brothers' index, using Salomon Brothers'
monthly yield data with a methodology similar to that used by Salomon for
1969-1991. Capital appreciation returns were calculated from yields assuming (at
the beginning of each monthly holding period) a 20-year maturity, a bond price
equal to par, and a coupon equal to the beginning-of-period yield. For the
period 1926-1945, the Standard and Poor's monthly High-Grade Corporate Composite
yield data were used, assuming a 4 percent coupon and a 20-year maturity. The
conventional present-value formula for bond price for the beginning and
end-of-month prices was used. (This formula is presented in Ross, Stephen A.,
and Randolph W. Westerfield, Corporate Finance, Times
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<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
Mirror/Mosby, St. Louis, 1990, p. 97 ["Level-Coupon Bonds"].) The monthly income
return was assumed to be one-twelfth the coupon.
U.S. (30 DAY) TREASURY BILLS
For the U.S. Treasury bill index, data from The Wall Street Journal are used for
1977-1991; the CRSP U.S. Government Bond File is the source until 1976. Each
month a one-bill portfolio containing the shortest-term bill having not less
than one month to maturity is constructed. (The bill's original term to maturity
is not relevant.) To measure holding period returns for the one-bill portfolio,
the bill is priced as of the last trading day of the previous month-end and as
of the last trading day of the current month.
NAREIT-EQUITY INDEX
All of the data is based upon the last closing price of the month for all
tax-qualified REITs listed on the NYSE, AMSE and the NASDAQ. The data is
market-value-weighted. Prior to 1987 REITs were added to the index the January
following their listing. Since 1987 Newly formed or listed REITs are added to
the total shares outstanding figure in the month that the shares are issued.
Only common shares issued by the REIT are included in the index. The total
return calculation is based upon the weighing at the beginning of the period.
Only those REITs listed for the entire period are used in the total return
calculation. Dividends are included in the month based upon their payment date.
There is no smoothing of income. Liquidating dividends, whether full or partial,
are treated as income.
RUSSELL 2000 SMALL STOCK INDEX
Index of the 2,000 smallest stocks in the Russell 3000 Index (TM); the smallest
company has a market capitalization of approximately $13 million.
The Russell 30000 is comprised of the 3,000 largest US companies as determined
by market capitalization representing approximately 98% of the US equity market.
The largest company in the index has a market capitalization of $67 billion. The
Russell Indexes (TM) are reconstituted annually as of June 1st, based on May 31
market capitalization rankings.
WILSHIRE REAL ESTATE SECURITIES INDEX
The Wilshire Real Estate Securities Index is a market capitalization-weighted
index which measures the performance of more than 85 securities.
The index contains performance data on five major categories of property;
office, retail, industrial, apartment and miscellaneous. Additionally, the Index
has real estate portfolio encumbered by 16% third party mortgages. The companies
in the WRESEC are 79% equity and hybrid REIT's and 21% real estate operating
companies. The capitalization is 47% NYSE, 33% AMEX and 20% OTC."
STANDARD & POOR'S MIDCAP 400 INDEX
The Standard and Poor's MidCap 400 Index is a market-value-weighted index. The
performance data for the MidCap 400 Index were calculated by taking the stocks
presently in the MidCap 400 Index and tracking them backwards in time as long as
there were prices reported. No attempt was made to determine what stocks "might
have been" in the MidCap 400 Index five or ten years ago had it existed.
Dividends are reinvested on a monthly basis prior to June 30, 1991, and are
reinvested daily thereafter.
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<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
The S&P MidCap 400 Index and the S&P 500 together represent approximately 85% of
the total market capitalization of stocks traded in the United States.
BANK SAVINGS ACCOUNT
Data sources include the U.S. League of Savings Institutions Sourcebook; average
annual yield on savings deposits in FSLIC [FDIC] insured savings institutions
for the years 1963-1987 and The Wall Street Journal for the years 1988-1994.
Source: Ibbotson Associates
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<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
S&P 500 Dow U.S. Small S&P/ S&P/
Jones Stock U.S. BARRA BARRA
Industrials Index Inflation Growth Value
Dec 1928 43.61 55.38 39.69 -0.97 N/A N/A
Dec 1929 -8.42 -13.64 -51.36 0.20 N/A N/A
Dec 1930 -24.90 -30.22 -38.15 -6.03 N/A N/A
Dec 1931 -43.34 -49.03 -49.75 -9.52 N/A N/A
Dec 1932 -8.19 -16.88 -5.39 -10.30 N/A N/A
Dec 1933 53.99 73.71 142.87 0.51 N/A N/A
Dec 1934 -1.44 8.07 24.22 2.03 N/A N/A
Dec 1935 47.67 43.77 40.19 2.99 N/A N/A
Dec 1936 33.92 30.23 64.80 1.21 N/A N/A
Dec 1937 -35.03 -28.88 -58.01 3.10 N/A N/A
Dec 1938 31.12 33.16 32.80 -2.78 N/A N/A
Dec 1939 -0.41 1.31 0.35 -0.48 N/A N/A
Dec 1940 -9.78 -7.96 -5.16 0.96 N/A N/A
Dec 1941 -11.59 -9.88 -9.00 9.72 N/A N/A
Dec 1942 20.34 14.12 44.51 9.29 N/A N/A
Dec 1943 25.90 19.06 88.37 3.16 N/A N/A
Dec 1944 19.75 17.19 53.72 2.11 N/A N/A
Dec 1945 36.44 31.60 73.61 2.25 N/A N/A
Dec 1946 -8.07 -4.40 -11.63 18.16 N/A N/A
Dec 1947 5.71 7.61 0.92 9.01 N/A N/A
Dec 1948 5.50 4.27 -2.11 2.71 N/A N/A
Dec 1949 18.79 20.92 19.75 -1.80 N/A N/A
Dec 1950 31.71 26.40 38.75 5.79 N/A N/A
Dec 1951 24.02 21.77 7.80 5.87 N/A N/A
Dec 1952 18.37 14.58 3.03 0.88 N/A N/A
Dec 1953 -0.99 2.02 -6.49 0.62 N/A N/A
Dec 1954 52.62 51.25 60.58 -0.50 N/A N/A
Dec 1955 31.56 26.58 20.44 0.37 N/A N/A
Dec 1956 6.56 7.10 4.28 2.86 N/A N/A
Dec 1957 -10.78 -8.63 -14.57 3.02 N/A N/A
Dec 1958 43.36 39.31 64.89 1.76 N/A N/A
Dec 1959 11.96 20.21 16.40 1.50 N/A N/A
Dec 1960 0.47 -6.14 -3.29 1.48 N/A N/A
Dec 1961 26.89 22.60 32.09 0.67 N/A N/A
Dec 1962 -8.73 -7.43 -11.90 1.22 N/A N/A
Dec 1963 22.80 20.83 23.57 1.65 N/A N/A
Dec 1964 16.48 18.85 23.52 1.19 N/A N/A
Dec 1965 12.45 14.39 41.75 1.92 N/A N/A
Dec 1966 -10.06 -15.78 -7.01 3.35 N/A N/A
Dec 1967 23.98 19.16 83.57 3.04 N/A N/A
Dec 1968 11.06 7.93 35.97 4.72 N/A N/A
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<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
S&P 500 Dow U.S. Small S&P/ S&P/
Jones Stock U.S. BARRA BARRA
Industrials Index Inflation Growth Value
Dec 1969 -8.50 -11.78 -25.05 6.11 N/A N/A
Dec 1970 4.01 9.21 -17.43 5.49 N/A N/A
Dec 1971 14.31 9.83 16.50 3.36 N/A N/A
Dec 1972 18.98 18.48 4.43 3.41 N/A N/A
Dec 1973 -14.66 -13.28 -30.90 8.80 N/A N/A
Dec 1974 -26.47 -23.58 -19.95 12.20 N/A N/A
Dec 1975 37.20 44.75 52.82 7.01 31.72 43.38
Dec 1976 23.84 22.82 57.38 4.81 13.84 34.93
Dec 1977 -7.18 -12.84 25.38 6.77 -11.82 -2.57
Dec 1978 6.56 2.79 23.46 9.03 6.78 6.16
Dec 1979 18.44 10.55 43.46 13.31 15.72 21.16
Dec 1980 32.42 22.17 39.88 12.40 39.40 23.59
Dec 1981 -4.91 -3.57 13.88 8.94 -9.81 0.02
Dec 1982 21.41 27.11 28.01 3.87 22.03 21.04
Dec 1983 22.51 25.97 39.67 3.80 16.24 28.89
Dec 1984 6.27 1.31 -6.67 3.95 2.33 10.52
Dec 1985 32.16 33.55 24.66 3.77 33.31 29.68
Dec 1986 18.47 27.10 6.85 1.13 14.50 21.67
Dec 1987 5.23 5.48 -9.30 4.41 6.50 3.68
Dec 1988 16.81 16.14 22.87 4.42 11.95 21.67
Dec 1989 31.49 32.19 10.18 4.65 36.40 26.13
Dec 1990 -3.17 -0.56 -21.56 6.11 0.20 -6.85
Dec 1991 30.55 24.19 44.63 3.06 38.37 22.56
Dec 1992 7.67 7.41 23.35 2.90 5.07 10.53
Dec 1993 9.99 16.94 20.98 2.75 1.68 18.60
Dec 1994 1.31 5.06 3.11 2.78 3.13 -0.64
Dec 1995 37.43 36.84 34.46 2.74 38.13 36.99
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<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
Intermediate MSCI Long-
Long-Term -Term U.S. EAFE 6 Term U.S. U.S.
U.S. Gov't Government - Net of MONTH Corporate (30 Day)
Bonds Bonds Taxes CDs Bonds T- Bill
Dec 1925 N/A N/A N/A N/A N/A N/A
Dec 1926 7.77 5.38 N/A N/A 7.37 3.27
Dec 1927 8.93 4.52 N/A N/A 7.44 3.12
Dec 1928 0.1 0.92 N/A N/A 2.84 3.56
Dec 1929 3.42 6.01 N/A N/A 3.27 4.75
Dec 1930 4.66 6.72 N/A N/A 7.98 2.41
Dec 1931 -5.31 -2.32 N/A N/A -1.85 1.07
Dec 1932 16.84 8.81 N/A N/A 10.82 0.96
Dec 1933 -0.07 1.83 N/A N/A 10.38 0.30
Dec 1934 10.03 9.00 N/A N/A 13.84 0.16
Dec 1935 4.98 7.01 N/A N/A 9.61 0.17
Dec 1936 7.52 3.06 N/A N/A 6.74 0.18
Dec 1937 0.23 1.56 N/A N/A 2.75 0.31
Dec 1938 5.53 6.23 N/A N/A 6.13 -0.02
Dec 1939 5.94 4.52 N/A N/A 3.97 0.02
Dec 1940 6.09 2.96 N/A N/A 3.39 0.00
Dec 1941 0.93 0.50 N/A N/A 2.73 0.06
Dec 1942 3.22 1.94 N/A N/A 2.60 0.27
Dec 1943 2.08 2.81 N/A N/A 2.83 0.35
Dec 1944 2.81 1.80 N/A N/A 4.73 0.33
Dec 1945 10.73 2.22 N/A N/A 4.08 0.33
Dec 1946 -0.10 1.00 N/A N/A 1.72 0.35
Dec 1947 -2.62 0.91 N/A N/A -2.34 0.50
Dec 1948 3.40 1.85 N/A N/A 4.14 0.81
Dec 1949 6.45 2.32 N/A N/A 3.31 1.10
Dec 1950 0.06 0.70 N/A N/A 2.12 1.20
Dec 1951 -3.93 0.36 N/A N/A -2.69 1.49
Dec 1952 1.16 1.63 N/A N/A 3.52 1.66
Dec 1953 3.64 3.23 N/A N/A 3.41 1.82
Dec 1954 7.19 2.68 N/A N/A 5.39 0.86
Dec 1955 -1.29 -0.65 N/A N/A 0.48 1.57
Dec 1956 -5.59 -0.42 N/A N/A -6.81 2.46
Dec 1957 7.46 7.84 N/A N/A 8.71 3.14
Dec 1958 -6.09 -1.29 N/A N/A -2.22 1.54
Dec 1959 -2.26 -0.39 N/A N/A -0.97 2.95
Dec 1960 13.78 11.76 N/A N/A 9.07 2.66
Dec 1961 0.97 1.85 N/A N/A 4.82 2.13
Dec 1962 6.89 5.56 N/A N/A 7.95 2.73
Dec 1963 1.21 1.64 N/A N/A 2.19 3.12
Dec 1964 3.51 4.04 N/A 4.18 4.77 3.54
Dec 1965 0.71 1.02 N/A 4.68 -0.46 3.93
-45-
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
Intermediate MSCI Long-
Long-Term -Term U.S. EAFE 6 Term U.S. U.S.
U.S. Gov't Government - Net of MONTH Corporate (30 Day)
Bonds Bonds Taxes CDs Bonds T- Bill
Dec 1966 3.65 4.69 N/A 5.75 0.20 4.76
Dec 1967 -9.18 1.01 N/A 5.48 -4.95 4.21
Dec 1968 -0.26 4.54 N/A 6.44 2.57 5.21
Dec 1969 -5.07 -0.74 N/A 8.71 -8.09 6.58
Dec 1970 12.11 16.86 -11.66 7.06 18.37 6.52
Dec 1971 13.23 8.72 29.59 5.36 11.01 4.39
Dec 1972 5.69 5.16 36.35 5.38 7.26 3.84
Dec 1973 -1.11 4.61 -14.92 8.60 1.14 6.93
Dec 1974 4.35 5.69 -23.16 10.20 -3.06 8.00
Dec 1975 9.20 7.83 35.39 6.51 14.64 5.80
Dec 1976 16.75 12.87 2.54 5.22 18.65 5.08
Dec 1977 -0.69 1.41 18.06 6.12 1.71 5.12
Dec 1978 -1.18 3.49 32.62 10.21 -0.07 7.18
Dec 1979 -1.23 4.09 4.75 11.90 -4.18 10.38
Dec 1980 -3.95 3.91 22.58 12.33 -2.76 11.24
Dec 1981 1.86 9.45 -2.28 15.50 -1.24 14.71
Dec 1982 40.36 29.1 -1.86 12.18 42.56 10.54
Dec 1983 0.65 7.41 23.69 9.65 6.26 8.80
Dec 1984 15.48 14.02 7.38 10.65 16.86 9.85
Dec 1985 30.97 20.33 56.16 7.82 30.09 7.72
Dec 1986 24.53 15.14 69.44 6.30 19.85 6.16
Dec 1987 -2.71 2.90 24.63 6.58 -0.27 5.47
Dec 1988 9.67 6.10 28.27 8.15 10.70 6.35
Dec 1989 18.11 13.29 10.54 8.27 16.23 8.37
Dec 1990 6.18 9.73 -23.45 7.85 6.78 7.81
Dec 1991 19.3 15.46 12.13 4.95 19.89 5.60
Dec 1992 8.05 7.19 -12.17 3.27 9.39 3.51
Dec 1993 18.24 11.24 32.56 2.88 13.19 2.90
Dec 1994 -7.77 -5.14 7.78 5.40 -5.76 3.90
Dec 1995 31.67 16.8 11.21 5.21 26.39 5.60
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<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
S & P Bank
NAREIT - Russell Wilshire Midcap Savings
Equity 2000 Real Estate 400 Account
Dec 1925 N/A N/A N/A N/A N/A
Dec 1926 N/A N/A N/A N/A N/A
Dec 1927 N/A N/A N/A N/A N/A
Dec 1928 N/A N/A N/A N/A N/A
Dec 1929 N/A N/A N/A N/A N/A
Dec 1930 N/A N/A N/A N/A 5.30
Dec 1931 N/A N/A N/A N/A 5.10
Dec 1932 N/A N/A N/A N/A 4.10
Dec 1933 N/A N/A N/A N/A 3.40
Dec 1934 N/A N/A N/A N/A 3.50
Dec 1935 N/A N/A N/A N/A 3.10
Dec 1936 N/A N/A N/A N/A 3.20
Dec 1937 N/A N/A N/A N/A 3.50
Dec 1938 N/A N/A N/A N/A 3.50
Dec 1939 N/A N/A N/A N/A 3.40
Dec 1940 N/A N/A N/A N/A 3.30
Dec 1941 N/A N/A N/A N/A 3.10
Dec 1942 N/A N/A N/A N/A 3.00
Dec 1943 N/A N/A N/A N/A 2.90
Dec 1944 N/A N/A N/A N/A 2.80
Dec 1945 N/A N/A N/A N/A 2.50
Dec 1946 N/A N/A N/A N/A 2.20
Dec 1947 N/A N/A N/A N/A 2.30
Dec 1948 N/A N/A N/A N/A 2.30
Dec 1949 N/A N/A N/A N/A 2.40
Dec 1950 N/A N/A N/A N/A 2.50
Dec 1951 N/A N/A N/A N/A 2.60
Dec 1952 N/A N/A N/A N/A 2.70
Dec 1953 N/A N/A N/A N/A 2.80
Dec 1954 N/A N/A N/A N/A 2.90
Dec 1955 N/A N/A N/A N/A 2.90
Dec 1956 N/A N/A N/A N/A 3.00
Dec 1957 N/A N/A N/A N/A 3.30
Dec 1958 N/A N/A N/A N/A 3.38
Dec 1959 N/A N/A N/A N/A 3.53
Dec 1960 N/A N/A N/A N/A 3.86
Dec 1961 N/A N/A N/A N/A 3.90
Dec 1962 N/A N/A N/A N/A 4.08
Dec 1963 N/A N/A N/A N/A 4.17
Dec 1964 N/A N/A N/A N/A 4.19
Dec 1965 N/A N/A N/A N/A 4.23
Dec 1966 N/A N/A N/A N/A 4.45
Dec 1967 N/A N/A N/A N/A 4.67
Dec 1968 N/A N/A N/A N/A 4.68
Dec 1969 N/A N/A N/A N/A 4.80
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<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
S & P Bank
NAREIT - Russell Wilshire Midcap Savings
Equity 2000 Real Estate 400 Account
Bank Savings Account
Dec 1970 N/A N/A N/A N/A 5.14
Dec 1971 N/A N/A N/A N/A 5.30
Dec 1972 8.01 N/A N/A N/A 5.37
Dec 1973 -15.52 N/A N/A N/A 5.51
Dec 1974 -21.40 N/A N/A N/A 5.96
Dec 1975 19.30 N/A N/A N/A 6.21
Dec 1976 47.59 N/A N/A N/A 6.23
Dec 1977 22.42 N/A N/A N/A 6.39
Dec 1978 10.34 N/A 13.04 N/A 6.56
Dec 1979 35.86 43.09 70.81 N/A 7.29
Dec 1980 24.37 38.58 22.08 N/A 8.78
Dec 1981 6.00 2.03 7.18 N/A 10.71
Dec 1982 21.60 24.95 24.47 22.68 11.19
Dec 1983 30.64 29.13 27.61 26.10 9.71
Dec 1984 20.93 -7.30 20.64 1.18 9.92
Dec 1985 19.10 31.05 22.20 35.58 9.02
Dec 1986 19.16 5.68 20.30 16.21 7.84
Dec 1987 -3.64 -8.77 -7.86 -2.03 6.92
Dec 1988 13.49 24.89 24.18 20.87 7.20
Dec 1989 8.84 16.24 2.37 35.54 7.91
Dec 1990 -15.35 -19.51 -33.46 -5.12 7.80
Dec 1991 35.7 46.05 20.03 50.1 4.61
Dec 1992 14.59 18.41 7.36 11.91 2.89
Dec 1993 19.65 18.91 15.24 13.96 2.73
Dec 1994 3.17 -1.82 1.64 -3.57 4.96
Dec 1995 15.27 28.44 13.65 30.94 5.24
Source: Ibbotson Associates
-48-
<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 and most experienced money managers
in the United States.
As of December 31, 1995, PMC employed a professional investment staff of 44,
with a combined average of 15 years' experience in the financial services
industry.
Total assets of all Pioneer mutual funds at December 31, 1995, were
approximately $12 billion representing 982,369 shareholder accounts - 637,060
non-retirement accounts and 345,309 retirement accounts.
-49-
<PAGE>
<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 1995 Annual Report to Shareholders which is
attached to and incorporated by reference into Part B, the
Statement of Additional Information (Accession Number
0000202679-96-000002).
(b) Exhibits:
(1)Agreement and Declaration of Trust.*
(1)(a) Establishment and Designation of Class B Shares.*
(1)(b) Establishment and Designation of Class C Shares.+
(2) By-Laws.*
(3) Inapplicable.
(4) Inapplicable.
(5) Management Contract with Pioneering Management
Corporation.*
(6)(a) Underwriting Agreement with Pioneer Funds
Distributor, Inc.*
(6)(b) Form of Dealer Sales Agreement.+
(7) Inapplicable.
(8) Custodian Agreement.*
(9) Investment Company Service Agreement with Pioneering
Services Corporation.*
(10) Opinion of Counsel.+
(11) Consent of Independent Public Accountants (Arthur
Andersen LLP).+
C-1
<PAGE>
(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.*
(c) Class C Plan of Distribution.+
(16) None.
(17) Financial Data Schedules.+
(18)(a) Multiple Class Plan for Class A and Class B Shares+
(18)(b) Multiple Class Plan for Class A, Class B and Class C
Shares+
- --------------
+ Filed electronically herewith.
* Incorporated by reference from the Registrant's Post-Effective Amendment
No. 34 to the Registration Statement as filed electronically with the
Securities and Exchange Commission on April 26, 1995 (accession number
0000202679-95-000010).
Item 25. Persons Controlled By or Under
Common Control With Registrant.
Percent State/Country
of of
Company Owned By Shares Incorporation
Pioneering Management Corp. (PMC) PGI 100% DE
Pioneering Services Corp. (PSC) PGI 100% MA
Pioneer Capital Corp. (PCC) PGI 100% MA
Pioneer Fonds Marketing GmbH (GmbH) PGI 100% MA
Pioneer SBIC Corp. (SBIC) PGI 100% MA
Pioneer Associates, Inc. (PAI) PGI 100% MA
Pioneer International Corp. (PInt) PGI 100% MA
Pioneer Plans Corp. (PPC) PGI 100% MA
Pioneer Goldfields Ltd (PGL) PGI 100% MA
Pioneer Investments Corp. (PIC) PGI 100% MA
Pioneer Metals and Technology,
Inc. (PMT) PGI 100% DE
C-2
<PAGE>
Pioneer First Polish Trust Fund
Joint Stock Co. (First Polish) PGI 100% Poland
Teberebie Goldfields Ltd. (TGL) PGI 90% Ghana
Pioneer Funds Distributor, Inc.
(PFD) PMC 100% MA
SBIC's outstanding capital stock PCC 100% MA
THE FUNDS: All are parties to management contracts with PMC.
BUSINESS
FUND TRUST
Pioneer International Growth Fund MA
Pioneer Europe Fund MA
Pioneer Emerging Markets Fund DE
Pioneer India Fund DE
Pioneer Growth Trust MA
Pioneer Mid-Cap Fund DE
Pioneer Growth Shares DE
Pioneer Small Company Fund DE
Pioneer Fund MA
Pioneer II MA
Pioneer Real Estate Shares DE
Pioneer Short-Term Income Fund MA
Pioneer America Income Trust MA
Pioneer Bond Fund MA
Pioneer Income Fund DE
Pioneer Intermediate Tax-Free Fund MA
Pioneer Tax-Free Income Fund DE
Pioneer Tax-Free State Series Trust MA
Pioneer Money Market Trust DE
Pioneer Variable Contracts Trust DE
Pioneer Interest Shares, Inc. NE Corporation
OTHER:
.. SBIC is the sole general partner of Pioneer Ventures Limited Partnership, a
Massachusetts limited partnership.
.. ITI Pioneer AMC Ltd. (ITI Pioneer) (Indian Corp.), is a joint venture
between PMC and Investment Trust of India Ltd. (ITI) (Indian Corp.)
.. ITI and PMC own approximately 54% and 45%, respectively, of the total
equity capital of ITI Pioneer.
C-3
<PAGE>
JOHN F. COGAN, JR.
Owns approximately 14% of the outstanding shares of PGI.
TRUSTEE/
ENTITY CHAIRMAN PRESIDENT DIRECTOR OTHER
Pioneer Family of
Mutual Funds X X X
PGL X X X
PGI X X X
PPC X X
PIC X X
Pintl X X
PMT X X
PCC X
PSC X
PMC X X
PFD X X
TGL X X
First Polish X Member of
Supervisory Board
Hale and Dorr Partner
GmbH Chairman of
Supervisory Board
C-4
<PAGE>
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of January 31, 1996
-------------- -----------------------
Class A Shares 15,527
Class B Shares 94
Class C Shares 4
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.
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;
C-5
<PAGE>
(b) Section IV, Business Background, of
each Schedule D.
Item 29. Principal Underwriter
(a) See Item 25 above.
(b) Trustees and Officers of PFD:
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
John F. Cogan, Jr. Director and Chairman Chairman of the Board,
President and Trustee
Robert L. Butler Director and President None
David D. Tripple Director Executive Vice
President and Trustee
Steven M. Graziano Senior None
Vice President
Stephen W. Long Senior None
Vice President
John W. Drachman Vice President None
Barry G. Knight Vice President None
William A. Misata Vice President None
Anne W. Patenaude Vice President None
Gail A. Smyth Vice President None
Constance D. Spiros Vice President None
Marcy L. Supovitz Vice President None
Mary Kleeman Vice President None
Steven R. Berke Assistant None
Vice President
Mary Sue Hoban Assistant None
Vice President
C-6
<PAGE>
William H. Keough Treasurer Treasurer
Roy P. Rossi Assistant Treasurer None
Joseph P. Barri Clerk Secretary
Robert P. Nault Assistant Clerk Assistant Secretary
(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-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment No. 35 (the
"Amendment") to the Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly 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, 1996.
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, 1996
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* )
<PAGE>
)
/s/John W. Kendrick )
John W. Kendrick, Trustee* )
)
/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, 1996
Joseph P. Barri
Attorney-in-fact
<PAGE>
Exhibit Index
Exhibit Page
Number Document Title Number
(1)(b) Establishment and Designation of Class C Shares.
(6)(b) Form of Dealer Sales Agreement.
(10) Opinion of Counsel.
(11) Consent of Independent Public Accountants (Arthur Andersen LLP).
(15)(c) Class C Plan of Distribution.
(17) Financial Data Schedules.
(18)(a) Multiple Class Plan for Class A and Class B Shares
(18)(b) Multiple Class Plan for Class A, Class B and Class C Shares
PIONEER TAX-FREE INCOME FUND
Establishment and Designation
of
Class A Shares, Class B Shares and Class C 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 the Fund (the "Shares") to create three classes of Shares of the Fund as
follows:
1. The three classes of Shares established and designated hereby are
"Class A Shares," "Class B Shares" and "Class C Shares," respectively.
2. Class A Shares, Class B Shares and Class C 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, Class B Shares and Class C
Shares, the method of determining the net asset value of Class A
Shares, Class B Shares and Class C Shares and the relative dividend
rights of holders of Class A Shares, Class B Shares and Class C Shares
shall be established by the Trustees of the Trust in accordance with
the provisions of the Declaration and shall be set forth in the
Trust'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, Class C
Shares or Shares of any other class of the Fund hereinafter
established and designated by the Trustees.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument this 4th
day of October, 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
PIONEER FUNDS DISTRIBUTOR, INC.
60 State Street
Boston, MA 02109
(617) 742-7825
SALES AGREEMENT
Gentlemen:
Pioneer Funds Distributor, Inc. (PFD), acts as principal underwriter, as
defined in the Investment Company Act of 1940, for the registered investment
companies (the "Funds") listed on Appendix A attached (as amended from time to
time by PFD.) Acting as a principal, PFD offers to sell shares of the Funds
subject to the conditions set forth in this agreement and subsequent amendments
thereto.
1. Shares purchased from PFD for sale to the public shall be offered and
sold at the price or prices, and on the terms and conditions, set forth in the
currently effective prospectus of the Funds, as amended or supplemented from
time to time (the "Prospectus" or "Prospectuses"). In the sale of such shares to
the public you shall act as dealer for your own account or as agent for your
customer and in no transaction shall you have any authority to act or hold
yourself out as agent for PFD, any of the Funds, the Funds' Custodians, the
Funds' Transfer agent, or any other party, and nothing in this agreement shall
constitute you a partner, employee or agent of ours or give you any authority to
act for PFD. Neither PFD nor the funds shall be liable for any of your acts or
obligations as a broker-dealer under this agreement. Nothing herein shall be
construed to prohibit your acting as agent for one or both customers in the sale
of shares by one customer to another and charging such customer(s) a reasonable
commission.
2. Shares purchased from PFD for sale to the public shall be purchased
only to cover orders previously received by you from your customers. Shares
purchased for your own bona fide investment shall not be reoffered or sold
except to the applicable Fund or to PFD. PFD also agrees to purchase shares only
for investment or to cover orders received.
3. If you purchase shares from your customers, you agree to pay such
customers not less than the redemption price in effect on the date of purchase,
as defined in the prospectus of the applicable Fund. Sales of shares at prices
reflecting a discount, concession, commission or other reallowance shall be made
only to registered broker-dealers which are members of the National Association
of Securities Dealers Inc. (NASD) and who also have entered into sales
agreements with PFD.
4. Only unconditional orders for a designated number of shares or dollar
amount of investment shall be accepted. Procedures relating to handling orders
shall be conveyed to you from time to time. All orders are subject to acceptance
or rejection by PFD in our sole discretion.
5. If any shares sold to or through you under the terms of this agreement
are repurchased by PFD or by the issuer or are tendered for redemption within
seven business days after the date of our confirmation of the original purchase
by you, we both agree to pay to the Fund all commissions on such shares.
6. Sales by you to the public shall earn a commission computed as a
percentage of the applicable offering price and which varies with the size and
nature of each such purchase. The terms and conditions affecting the applicable
offering prices on shares sold with a front-end sales charge , including
features such as combined purchase, rights of accumulation, Letters of Intention
and net asset value purchases, are described in the prospectuses. The schedules
of commissions generally payable with respect to sales of the Funds are outlined
on Appendix A to this agreement. Commission checks for less than $1 will not be
issued.
PFD may, from time to time, offer additional commissions or bonuses on
sales by you or your representatives without otherwise revising this agreement.
Any such additional commissions or bonuses shall take effect in accordance with
the terms and conditions contained in written notification to you.
7. Remittance of the net amount due for shares purchased from PFD shall
be made payable to Pioneering Services Corporation (PSC) Agent for the
Underwriter, in New York or Boston funds, within three days of our confirmation
of sale to you, or within such shorter time as specified by the rules of the
NASD or of a registered clearing agent through which the transaction is settled.
Payments made to PSC should be sent to Post Office Box 9014, Boston, MA 02205
(or wired to an account designated by PSC), along with your transfer
instructions on the appropriate copy of our confirmation of sale to you. If such
payment is not received by PSC, we reserve the right to liquidate the shares
purchased for your account and risk. Promptly upon receipt of payment, shares
sold to you shall be deposited by PSC to an account on the books of the Fund(s)
in accordance with your instructions. Certificates will not be issued unless
specifically requested and we reserve the right to levy a charge for issuance of
certificates.
8. You represent that you are and, at the time of purchasing any shares
of the Funds, will be registered as a broker-dealer with the US. Securities and
Exchange Commission (SEC) or are exempt from such registration; if required to
be registered as a broker-dealer you are a member in good standing of the NASD;
you are qualified to act as a broker-dealer in the states or jurisdictions in
which you intend to offer shares of the Funds; you will abide by all applicable
federal and state statutes and the rules of the NASD; and when making sales to
citizens or residents of foreign countries, that you will abide by all
applicable laws and regulations of that country. Expulsion or suspension from
the NASD or revocation or suspension of SEC registration shall act as an
immediate cancellation of this agreement.
9. No person is authorized to make any representations concerning shares
of any of the Funds except those contained in the then current Prospectus or
Statement of Additional Information for such Fund. In purchasing shares from PFD
you shall rely solely on the representations contained in such Prospectuses and
Statements of Additional Information.
10. Additional copies of the current prospectuses, Statements of
Additional Information (SAI), and other literature will be supplied in
reasonable quantities upon request.
<PAGE>
11. We reserve the right in our discretion to suspend sales or withdraw
the offering of shares of any Fund entirely. Either party hereto has the right
to cancel this agreement upon five days' written notice to the other party. We
reserve the right to amend this agreement at any time and you agree that an
order to purchase shares of any one of the Funds placed by you after notice of
such amendment has been sent to you shall constitute your agreement to any such
amendment.
12. All written communications to PFD should be sent to the above address.
All written communications to you will be sent to your address listed below.
13. This agreement shall become effective upon receipt by us of your
acceptance hereof and supersedes any prior agreement between us with respect to
the sales of Shares of any of the Funds.
14. This agreement shall be construed in accordance with the laws of
Massachusetts. The parties hereby agree that all disputes between us of whatever
subject matter, whether existing on the date hereof or arising hereafter, shall
be submitted to arbitration in accordance with the then current Code of
Arbitration Procedure of the NASD, the Uniform Arbitration Act or similar rules.
Arbitration shall take place in the city of Boston, Massachusetts. Any decision
that shall be made in such arbitration shall be final and binding and shall have
the same force and effect as a judgment made in a court of competent
jurisdiction.
15. You appoint the transfer agent for each Fund as your agent to execute
the purchase transactions of Shares of such Fund in accordance with the terms
and provisions of any account, program, plan or service established or used by
your customers and to confirm each purchase to your customers on your behalf,
except as modified in writing by the transfer agent, and you guarantee to us and
the Fund the legal capacity of your customers so purchasing such Shares and any
other person in whose name the Shares are to be registered.
PIONEER FUNDS DISTRIBUTOR, INC.
Date: ,
By:__________________________________
William A. Misata
Vice President
The undersigned hereby accepts the offer set forth in above letter.
By:__________________________________________________
Title:________________________________________________
RETAIN ONE COPY AND RETURN THE OTHER
<PAGE>
APPENDIX A
CLASS A
Schedule 1
<TABLE>
<CAPTION>
<S> <C> <C>
Pioneer Fund Pioneer Mid-Cap Fund* Pioneer Equity-Income Fund
Pioneer II Pioneer Gold Shares Pioneer Growth Shares
Pioneer International Growth Fund Pioneer Europe Fund Pioneer Real Estate Shares
Pioneer Capital Growth Fund Pioneer Emerging Markets Fund Pioneer Small Company Fund
Pioneer India Fund
Sales Charge
as % of Public Broker/Dealer
Purchase Amount Offering Price Commission
Less than $ 50,000.......... 5.75 5.00%
$ 50,000 - 99,999.......... 4.50 4.00
100,000 - 249,999.......... 3.50 3.00
250,000 - 499,999.......... 2.50 2.00
500,000 - 999,999.......... 2.00 1.75
1,000,000 or more .......... none a) see below
Schedule 2
Pioneer Bond Fund Pioneer America Income Trust Pioneer Tax-Free Income Fund
Pioneer Income Fund
Sales Charge
as % of Public Broker/Dealer
Purchase Amount Offering Price Commission
Less than $100,000.......... 4.50 4.00%
$100,000 - 249,999.......... 3.50 3.00
250,000 - 499,000......... 2.50 2.00
500,000 - 999,999......... 2.00 1.75
1,000,000 or more .......... none a) see below
Schedule 3
Pioneer Intermediate Tax-Free Fund
Sales Charge
as % of Public Broker/Dealer
Purchase Amount Offering Price Commission
Less than $ 50,000.......... 3.50 3.00%
$ 50,000 - 99,999......... 3.00 2.50
100,000 - 499,999.......... 2.50 2.00
500,000 - 999,999.......... 2.00 1.75
1,000,000 or more .......... none a) see below
Schedule 4
Pioneer Short-Term Income Trust
Sales Charge
as % of Public Broker/Dealer
Purchase Amount Offering Price Commission
Less than $ 50,000.......... 2.50 2.00%
$ 50,000 - 99,999......... 2.00 1.75
100,000 - 249,999.......... 1.50 1.25
250,000 - 999,999.......... 1.00 1.00
1,000,000 or more .......... none a) see below
</TABLE>
a) Purchases of $1 million or more, and certain group plans, are not subject to
an initial sales charge. PFD may pay a commission to broker-dealers who initiate
and are responsible for such purchases at the following rate: for funds listed
on schedules 1 and 2 above, the rate is as follows: 1% on the first $5 million
invested, .50 of 1% on the next $45 million and .25 of 1% on the excess over 50
million. For funds listed on schedules 3 and 4 : .50 of 1% on purchases of $1
million to $5 million and .10 of 1% on the excess over $5 million. A one-year
prepaid service fee is included in this commission. These commissions shall not
be payable 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. A contingent deferred sales charge will be payable on these
investments in the event of share redemption within 12 months following the
share purchase, at the rate of 1% on funds in schedules 1 and 2 ; and .50 of 1%
on funds in schedules 3 and 4, 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. For additional information about the broker-dealer
commission and contingent deferred sales charge applicable to these
transactions, refer to the Fund's prospectus.
PLEASE RETAIN THIS COPY
<PAGE>
Schedule 5
Pioneer Cash Reserves Fund Pioneer U.S. Government Money Fund
No Load
CLASS B
Schedule 1 Schedule 2 Schedule 3
---------- ---------- ----------
<TABLE>
<CAPTION>
<S> <C> <C>
Pioneer Equity Income Fund Pioneer Intermediate Tax-Free Pioneer Short-Term
Pioneer Bond Fund Fund Income Trust
Pioneer Capital Growth Fund
Pioneer Europe Fund
Pioneer Gold Share
Pioneer America Income Trust
Pioneer Emerging Markets Fund
Pioneer India Fund
Pioneer Cash Reserves Fund
Pioneer Growth Shares
Pioneer Income Fund
Pioneer Tax-Free Income Fund
Pioneer Small Company Fund
Pioneer International Growth Fund
Pioneer Real Estate Shares
Pioneer Mid-Cap Fund*
</TABLE>
Broker/Dealer
Commission 4.00% 3.00% 2.00%
- ----------
Year Since
Purchase CDSC% CDSC% CDSC%
First 4.0 3.0 2.0
Second 4.0 3.0 2.0
Third 3.0 2.0 1.0
Fourth 3.0 1.0 none
Fifth 2.0 none none
Sixth 1.0 none To A Class
Seventh none To A Class
Eigth none
Ninth To A Class
a)Dealer Commission includes a first year service fee equal to 0.25% of the
amount invested in all Class B shares.
CLASS C
<TABLE>
<CAPTION>
<S> <C> <C>
Pioneer America Income Trust Pioneer Bond Fund Pioneer Capital Growth Fund
Pioneer Cash Reserves Funds Pioneer Emerging Markets Fund Pioneer Equity-Income Fund
Pioneer Europe Fund Pioneer Gold Shares Pioneer Growth Shares
Pioneer Income Fund Pioneer Real Estate Shares Pioneer India Fund
Pioneer Intermediate Tax-Free Fund Pioneer Small Company Fund Pioneer Tax-Free Income Fund
Pioneer International Growth Fund Pioneer Mid-Cap Fund*
</TABLE>
a) 1% Payout to Broker
b) 1% CDSC for One Year
*formerly Pioneer Three Fund
<PAGE>
PIONEER FUNDS DISTRIBUTOR, INC.
60 State Street
Boston, MA 02109
(617) 742-7825
SUPPLEMENTAL SALES AND SERVICE AGREEMENT
You have entered into a Sales Agreement with Pioneer Funds Distributor, Inc.
("PFD") with respect to the Pioneer mutual funds for which PFD serves as
principal underwriter ("the Funds").
This agreement incorporates and supplements that agreement. In consideration of
your sales of shares of the Funds, for providing services to shareholders of the
Funds and of the Pioneer money market funds and assisting PFD and its affiliates
in providing such services, we are authorized to pay you certain service fees as
specified herein. Receipt by you of any such service fees is subject to the
terms and conditions contained in the Funds' prospectuses and/or specified
below, as may be amended from time to time.
1. You agree to cooperate as requested with programs that the Funds, PFD or
their affiliates provide to enhance shareholder service.
2. You agree to take an active role in providing such shareholder services as
processing purchase and redemption transactions and, where applicable, exchanges
and account transfers; establishing and maintaining shareholder accounts;
providing certain information and assistance with respect to the Funds;
responding to shareholder inquiries or advising us of such inquiries where
appropriate.
3., You agree to assign an active registered representative to each shareholder
account on your and our records and to reassign accounts when registered
representatives leave your firm. You also agree, with respect to accounts which
are held in nominee or "street" name, to provide such documentation and
verification that active representatives are assigned to all such accounts as
PFD may require from time to time.
4. You agree to pay to the registered representatives assigned to shareholder
accounts a share of any service fees paid to you pursuant to this agreement. You
also agree to instruct your representatives to regularly contact shareholders
whose accounts are assigned to them.
5. You acknowledge that service fee payments are subject to terms and conditions
set forth herein and in the Funds' prospectuses, Statements of Additional
Information and Plans of Distribution and that this agreement may be terminated
by either party at any time by written notice to the other. Any order to
purchase or sell shares received by PFD from you subsequent to the date of our
notification to you of an amendment of the Agreement shall be deemed to be your
acceptance of such an amendment.
6. You acknowledge that your continued participation in this agreement is
subject to your providing a level of support to PFD's marketing and shareholder
retention efforts that is deemed acceptable by PFD. Factors which may be
considered by PFD in this respect include, but are not limited to, the level of
shareholder redemptions, the level of assistance in disseminating shareholder
communications, reasonable access to your offices and/or representatives by PFD
wholesalers or other employees and whether your compensation system or
"preferential list" unduly discriminates against the sale of shares of the
Funds.
7. Service fees will generally be paid quarterly, at the rates and under the
conditions specified on schedule A hereto.
8. All communications to PFD should be sent to the above address. Any notice to
you shall be duly given if mailed or telegraphed to the address specified by you
below. This agreement, in conjunction with the Sales Agreement, describes the
complete understanding of the parties.
This agreement shall be construed under the laws of the Commonwealth of
Massachusetts.
Accepted: Execute this Agreement in duplicate
and return one ofthe duplicate originals to us.
By:___________________________
By:_________________________________________
Title:________________________ William A. Misata
Vice President
RETAIN ONE COPY AND RETURN THE OTHER
<PAGE>
SUPPLEMENTAL SALES AND SERVICE AGREEMENT
WITH PIONEER FUNDS DISTRIBUTOR, INC.
SCHEDULE A
1. Except as specified in Section 4 below, service fees on the aggregate
net asset value of each account assigned to you in Pioneer Fund, Pioneer II, and
Pioneer Mid-Cap Fund** will be paid at the rate of:
a. 0.15% annually on shares acquired prior to August 19, 1991.
b. 0.25% annually on shares acquired on or after August 19, 1991.
2. Except as specified in Section 4 below, service fees on the aggregate
net asset value of each account assigned to you in:
Pioneer America Income Trust Pioneer International Growth Fund
Pioneer Bond Fund Pioneer Growth Shares
Pioneer Intermediate Tax-Free Fund Pioneer Real Estate Shares
Pioneer Europe Fund Pioneer Income Fund
Pioneer Capital Growth Fund Pioneer Tax-Free Income Fund
Pioneer Equity-Income Fund Pioneer Short-Term Income Trust
Pioneer Gold Shares Pioneer India Fund
Pioneer Emerging Markets Fund Pioneer Small Company Fund*
will be paid at the rate of:
a. 0.15% annually if the shares are acquired on or after August 19, 1991,
as a result of an exchange from Pioneer Fund, Pioneer II, or Pioneer Mid-Cap
Fund** of shares owned prior to August 19, 1991.
b. 0.25% annually on all other shares.
3. Except as specified in Section 4 below, service fees will be paid at an
annual rate of 0.15% of the aggregate net asset value of each account assigned
to you in:
Pioneer Cash Reserves Fund
Pioneer US. Government Money Fund
Pioneer California Double Tax-Free Fund
Pioneer Massachusetts Double Tax-Free Fund
Pioneer New York Triple Tax-Free Fund
4. Exceptions -- Service fees will not be paid on accounts representing:
a. Purchases by you or your affiliates, employees or
representatives.
b Shares which were purchased at net asset value, except for sales
of the money market funds or sales on which you are paid a
commission and which are subject to the contingent deferred sales
charge described in the funds' prospectuses.
c. "House" accounts or any other accounts not assigned to an active
registered representative(s).
d. Accounts established in Pioneer Bond Fund prior to January 1,
1986.
e. Service fees of less than $50 per calendar quarter will not be
paid.
f. Pioneer reserves the right to reduce the service fee paid on
individual accounts of more than $10 million.
g. First year services fees on shares subject to a CDSC are at the
rate of 0.25% and are prepaid as part of the initial sales
commission.
5. Service fees on shares sold with a front-end sales charge normally
begin to be earned as soon as the transaction settles, unless specified
otherwise in the fund prospectus. Since the commission on shares sold with a
CDSC includes a prepaid one year service fee , periodic service fees on such
shares are paid beginning one year following the transaction.
6. Service Fees of 1% on class C shares will begin after first year.
* Service fees begin accruing January 1, 1996
** Formerly Pioneer Three Fund
MORRIS, NICHOLS, ARSHT & TUNNELL
1201 North Market Street
P. O. Box 1347
Wilmington, Delaware 19899-1347
April 25, 1996
Pioneer Tax-Free Income Fund
60 State Street
Boston, Massachusetts 02109
Re: Pioneer Tax-Free Income Fund
Ladies and Gentlemen:
We have acted as special Delaware counsel to Pioneer Tax-Free
Income Fund, a Delaware business trust (the "Trust"), in connection with certain
matters relating to the formation of the Trust and the issuance of Shares of
beneficial interest in the Trust. Capitalized terms used herein and not
otherwise herein defined are used as defined in the Agreement and Declaration of
Trust of the Trust dated June 16, 1994 (the "Governing Instrument").
We understand that you are about to register under the Securities
Act of 1933, as amended, 1,576,716 Shares of beneficial interest in the Trust by
Post-Effective Amendment No. 35 to the Trust's Registration Statement on Form
N-1A (the "Post-Effective Amendment").
In rendering this opinion, we have examined copies of the
following documents, each in the form provided to us: the Certificate of Trust
of the Trust as filed in the Office of the Secretary of State of the State of
Delaware (the "Recording Office") on June 20, 1994 (the "Certificate"); the
Governing Instrument; the By-laws of the Trust; certain resolutions of the
Trustees of the Trust; the Trust's Adoption of and Amendment to Notification of
Registration Filed Pursuant to Section 8(a) of the Investment Company Act of
1940 on Form N-8A filed with the Securities and Exchange Commission on June 24,
1994 by which the Trust adopted the Notification of Registration of Pioneer
Tax-Free Income Fund, Inc.; Post-Effective Amendment No. 32 to Pioneer Tax-Free
Income Fund, Inc.'s Registration Statement on Form N-1A as filed with the
Securities and Exchange Commission on June 24, 1994 by which the Trust adopted
the Registration Statement of Pioneer Tax-Free Income Fund, Inc.; the
Post-effective Amendment; and a certification of good standing of the Trust
obtained as of a
<PAGE>
Pioneer Tax-Free Income Fund
April 25, 1996
Page 2
recent date from the Recording Office. In such examinations, we have assumed the
genuineness of all signatures, the conformity to original documents of all
documents submitted to us as copies or drafts of documents to be executed, and
the legal capacity of natural persons to complete the execution of documents. We
have further assumed for the purpose of this opinion: (i) the due authorization,
execution and delivery by, or on behalf of, each of the parties thereto of the
above-referenced instruments, certificates and other documents, and of all
documents contemplated by the Governing Instrument, the By-laws and applicable
resolutions of the Trustees to be executed by investors desiring to become
Shareholders; (ii) the payment of consideration for Shares, and the application
of such consideration, as provided in the Governing Instrument, and compliance
with the other terms, conditions and restrictions set forth in the Governing
Instrument and all applicable resolutions of the Trustees of the Trust in
connection with the issuance of Shares (including, without limitation, the
taking of all appropriate action by the Trustees to designate Series of Shares
and the rights and preferences attributable thereto as contemplated by the
Governing Instrument); (iii) that appropriate notation of the names and
addresses of, the number of Shares held by, and the consideration paid by,
Shareholders will be maintained in the appropriate registers and other books and
records of the Trust in connection with the issuance, redemption or transfer of
Shares; (iv) that no event has occurred subsequent to the filing of the
Certificate that would cause a termination or reorganization of the Trust under
Section 4 or Section 5 of Article IX of the Governing Instrument; (v) that the
activities of the Trust have been and will be conducted in accordance with the
terms of the Governing Instrument and the Delaware Business Trust Act, 12 Del.
C. ss.ss. 3801 et seq. (the "Delaware Act"); and (vi) that each of the documents
examined by us is in full force and effect and has not been modified,
supplemented or otherwise amended. No opinion is expressed herein with respect
to the requirements of, or compliance with, federal or state securities or blue
sky laws. Further, we express no opinion on the sufficiency or accuracy of any
registration or offering documentation relating to the Trust or the Shares. As
to any facts material to our opinion, other than those assumed, we have relied
without independent investigation on the above-referenced documents and on the
accuracy, as of the date hereof, of the matters therein contained.
<PAGE>
Pioneer Tax-Free Income Fund
April 25, 1996
Page 3
Based on and subject to the foregoing, and limited in all respects
to matters of Delaware law, it is our opinion that:
1. The Trust is a duly organized and validly existing business
trust in good standing under the laws of the State of Delaware.
2. The Shares covered by the Post-Effective Amendment, when issued
to Shareholders in accordance with the terms, conditions, requirements and
procedures set forth in the Governing Instrument, will constitute legally
issued, fully paid and non-assessable Shares of beneficial interest in the
Trust.
3. Under the Delaware Act and the terms of the Governing
Instrument, each Shareholder of the Trust, in such capacity, will be entitled to
the same limitation of personal liability as that extended to stockholders of
private corporations for profit organized under the general corporation law of
the State of Delaware; provided, however, that we express no opinion with
respect to the liability of any Shareholder who is, was or may become a named
Trustee of the Trust. Neither the existence nor exercise of the voting rights
granted to Shareholders under the Governing Instrument will, of itself, cause a
Shareholder to be deemed a trustee of the Trust under the Delaware Act.
Notwithstanding the foregoing or the opinion expressed in paragraph 2 above, we
note that, pursuant to Section 2 of Article VIII of the Governing Instrument,
the Trustees have the power to cause Shareholders, or Shareholders of a
particular Series, to pay certain custodian, transfer, servicing or similar
agent charges by setting off the same against declared but unpaid dividends or
by reducing Share ownership (or by both means).
We hereby consent to the filing of a copy of this opinion with the
Securities and Exchange Commission as part of the Post-Effective Amendment. In
giving this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and
<PAGE>
Pioneer Tax-Free Income Fund
April 25, 1996
Page 4
Exchange Commission thereunder. Except as provided in this paragraph, the
opinion set forth above is expressed solely for the benefit of the addressee
hereof and may not be relied upon by, or filed with, any other person or entity
for any purpose without our prior written consent.
Sincerely,
/s/MORRIS, NICHOLS, ARSHT & TUNNELL
MORRIS, NICHOLS, ARSHT & TUNNELL
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 2, 1996 included in Pioneer Tax-Free Income Fund's 1995 Annual
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. 35 to Registration
Statement File No. 2-57653 and Amendment No. 27 to Registration File No.
811-2704.
/s/ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 25, 1996
CLASS C SHARES DISTRIBUTION PLAN
PIONEER TAX-FREE INCOME FUND
CLASS C SHARES DISTRIBUTION PLAN, dated as of January 31, 1996 of PIONEER
TAX-FREE INCOME FUND, a Delaware business trust (the "Trust").
WITNESSETH
WHEREAS, the Trust 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 Trust intends to distribute shares of beneficial interest (the
"Class C Shares") of the Trust 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 C Shares distribution plan (the "Class C Plan") as a
plan of distribution pursuant to such Rule;
WHEREAS, the Trust desires that Pioneer Funds Distributor, Inc., a
Massachusetts corporation ("PFD"), provide certain distribution services for the
Trust's Class C Shares in connection with the Class C Plan;
WHEREAS, the Trust has entered into an underwriting agreement (in a form
approved by the Trust'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 Trust in connection with the offering and distribution of Class
C Shares (the "Underwriting Agreement");
WHEREAS, the Trust 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 C Shares in connection with the offering of Class C
Shares, (b) PFD may compensate any Dealer that sells Class C 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 C shares, its profits
or any other source available to it;
<PAGE>
WHEREAS, the Trust recognizes and agrees that PFD may impose certain
deferred sales charges in connection with the repurchase of Class C Shares by
the Trust, and PFD may retain (or receive from the Trust, as the case may be)
all such deferred sales charges; and
WHEREAS, the Board of Trustees of the Trust, in considering whether the
Trust should adopt and implement this Class C Plan, has evaluated such
information as it deemed necessary to an informed determination whether this
Class C 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 Trust for such purposes, and has determined that there is a reasonable
likelihood that the adoption and implementation of this Class C Plan will
benefit the Trust and its Class C shareholders;
NOW, THEREFORE, the Board of Trustees of the Trust hereby adopts this Class
C Plan for the Trust as a plan of distribution of Class C Shares in accordance
with Rule 12b-1, on the following terms and conditions:
I. (a) The Trust 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 Trust's Class C
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 with respect to Class C Shares shall be
.75% of the Trust's average daily net assets attributable to Class
C Shares for 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 Trust's Class C 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 during any one year
for personal and account maintenance services and expenses shall
be .25% of the Trust's average daily net assets attributable to
Class C Shares for such year. As partial consideration for
personal services and/or account maintenance services provided by
PFD to the Class C Shares, PFD shall be entitled to be paid any
fees payable under this clause (d) with respect to Class C 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 C Shares or their accounts or who provide
similar services not otherwise provided by or on behalf of the
Trust.
(f) PFD may impose certain deferred sales charges in
connection with the repurchase of Class C Shares by the Trust and
PFD may retain (or receive from the Trust 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 Trust 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.
II. The Trust understands that agreements between PFD and Dealers may
provide for payment of fees to Dealers in connection with the sale of Class C
Shares and the provision of services to shareholders of the Trust. Nothing in
this Class C Plan shall be construed as requiring the Trust to make any payment
to any Dealer or to have any obligations to any Dealer in connection with
services as a dealer of the Class C 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 Trust.
-3-
<PAGE>
III. Nothing herein contained shall be deemed to require the Trust 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 Trust's Board of Trustees of the responsibility for and control of
the conduct of the affairs of the Trust.
IV. This Class C Plan shall become effective upon approval by (i) a
"majority of the outstanding voting securities" of Class C of the Trust, (ii) a
vote of the Board of Trustees, and (iii) a vote of a majority of the Trustees
who are not "interested persons" of the Trust and who have no direct or indirect
financial interest in the operation of the Class C Plan or in any agreements
related to the Class C Plan (the "Qualified Trustees"), such votes with respect
to (ii) and (iii) above to be cast in person at a meeting called for the purpose
of voting on this Class C Plan.
V. This Class C 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 Trust and a majority of the Qualified Trustees.
If such annual approval is not obtained, this Class C Plan shall expire on
January 31, 1997.
VI. This Class C Plan may be amended at any time by the Board of Trustees,
provided that this Class C 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
voting securities" of Class C of the Trust 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 C 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 C of the Trust.
VII. The Trust and PFD shall provide to the Trust's Board of Trustees, and
the Board of Trustees shall review, at least quarterly, a written report of the
amounts expended under this Class C Plan and the purposes for which such
expenditures were made.
VIII. While this Class C 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 Trust.
-4-
<PAGE>
IX. For the purposes of this Class C Plan, the terms "assignment,"
"interested persons," "majority of the outstanding voting securities" and
"specifically approved at least annually" are used as defined in the 1940 Act.
X. The Trust shall preserve copies of this Class C 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.
XI. This Class C Plan shall be construed in accordance with the laws of The
Commonwealth of Massachusetts and the applicable provisions of the 1940 Act.
XII. If any provision of this Class C Plan shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Class C Plan
shall not be affected thereby.
-5-
[ARTICLE] 6
[CIK] 0000202679
[NAME] PIONEER TAX FREE INCOME FUND
[SERIES]
[NUMBER] 001
[NAME] PIONEER TAX FREE INCOME FUND CLASS A
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 437599881
[INVESTMENTS-AT-VALUE] 476525267
[RECEIVABLES] 13610378
[ASSETS-OTHER] 46791
[OTHER-ITEMS-ASSETS] 184241
[TOTAL-ASSETS] 490366677
[PAYABLE-FOR-SECURITIES] 10372599
[SENIOR-LONG-TERM-DEBT] 1341605
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 11714204
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 437309664
[SHARES-COMMON-STOCK] 38559529
[SHARES-COMMON-PRIOR] 40280376
[ACCUMULATED-NII-CURRENT] 81771
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 2346470
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 38914568
[NET-ASSETS] 478652473
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 29364669
[OTHER-INCOME] 0
[EXPENSES-NET] (4175467)
[NET-INVESTMENT-INCOME] 25189202
[REALIZED-GAINS-CURRENT] 6422224
[APPREC-INCREASE-CURRENT] 40976623
[NET-CHANGE-FROM-OPS] 72588049
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (25080462)
[DISTRIBUTIONS-OF-GAINS] (3347799)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2167447
[NUMBER-OF-SHARES-REDEEMED] 5649088
[SHARES-REINVESTED] 1760794
[NET-CHANGE-IN-ASSETS] (28468898)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (714287)
[OVERDISTRIB-NII-PRIOR] (46964)
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2153083
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 4249720
[AVERAGE-NET-ASSETS] 467062277
[PER-SHARE-NAV-BEGIN] 11.24
[PER-SHARE-NII] 0.64
[PER-SHARE-GAIN-APPREC] 1.21
[PER-SHARE-DIVIDEND] (0.64)
[PER-SHARE-DISTRIBUTIONS] (0.09)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.36
[EXPENSE-RATIO] 0.91
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<PAGE>
[ARTICLE] 6
[CIK] 0000202679
[NAME] PIONEER TAX FREE INCOME FUND
[SERIES]
[NUMBER] 002
[NAME] PIONEER TAX FREE INCOME FUND CLASS B
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 437599881
[INVESTMENTS-AT-VALUE] 476525267
[RECEIVABLES] 13610378
[ASSETS-OTHER] 46791
[OTHER-ITEMS-ASSETS] 184241
[TOTAL-ASSETS] 490366677
[PAYABLE-FOR-SECURITIES] 10372599
[SENIOR-LONG-TERM-DEBT] 1341605
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 11714204
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 437309664
[SHARES-COMMON-STOCK] 168117
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 81771
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 2346470
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 38914568
[NET-ASSETS] 478652473
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 29364669
[OTHER-INCOME] 0
[EXPENSES-NET] (4175467)
[NET-INVESTMENT-INCOME] 25189202
[REALIZED-GAINS-CURRENT] 6422224
[APPREC-INCREASE-CURRENT] 40976623
[NET-CHANGE-FROM-OPS] 72588049
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (26969)
[DISTRIBUTIONS-OF-GAINS] (13668)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 178241
[NUMBER-OF-SHARES-REDEEMED] 12854
[SHARES-REINVESTED] 2730
[NET-CHANGE-IN-ASSETS] (28468898)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (714287)
[OVERDISTRIB-NII-PRIOR] (46964)
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2153083
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 4249720
[AVERAGE-NET-ASSETS] 955853
[PER-SHARE-NAV-BEGIN] 11.81
[PER-SHARE-NII] 0.35
[PER-SHARE-GAIN-APPREC] 0.58
[PER-SHARE-DIVIDEND] (0.34)
[PER-SHARE-DISTRIBUTIONS] (0.09)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.31
[EXPENSE-RATIO] 1.72
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
PIONEER TAX-FREE INCOME FUND
Multiple Class Plan Pursuant to Rule 18f-3
Class A Shares and Class B Shares
December 5, 1995
Each class of shares of PIONEER TAX-FREE INCOME FUND (the "Fund"), will
have the same relative rights and privileges and be subject to the same sales
charges, fees and expenses, except as set forth below. The Board of Trustees of
the Fund may determine in the future that other distribution arrangements,
allocations of expenses (whether ordinary or extraordinary) or services to be
provided to a class of shares are appropriate and amend this Plan accordingly
without the approval of shareholders of any class. Except as set forth in the
Fund's prospectus, shares may be exchanged only for shares of the same class of
another Pioneer mutual fund.
Article I. Class A Shares
Class A Shares are sold at net asset value and subject to the initial sales
charge schedule or contingent deferred sales charge ("CDSC") and minimum
purchase requirements as set forth in the Fund's prospectus. Class A Shares
shall be entitled to the shareholder services set forth from time to time in the
Fund's prospectus with respect to Class A Shares. Class A Shares are subject to
fees calculated as a stated percentage of the net assets attributable to Class A
shares under the Fund's Class A Rule 12b-1 Distribution Plan as set forth in
such Distribution Plan. The Class A Shareholders have exclusive voting rights,
if any, with respect to the Class A Rule 12b-1 Distribution Plan. Transfer
agency fees are allocated to Class A Shares on a per account basis except to the
extent, if any, such an allocation would cause the Fund to fail to satisfy any
requirement necessary to obtain or rely on a private letter ruling from the
Internal Revenue Service ("IRS") relating to the issuance of multiple classes of
shares. Class A shares shall bear the costs and expenses associated with
conducting a shareholder meeting for matters relating to Class A shares.
Article II. Class B Shares
Class B Shares are sold at net asset value per share without the imposition
of an initial sales charge. However, Class B shares redeemed within a specified
number of years of purchase will be subject to a CDSC as set forth in the Fund's
prospectus. Class B Shares are sold subject to the minimum purchase requirements
set forth in the Fund's prospectus. Class B Shares shall be entitled to the
shareholder services set forth from time to time in the Fund's prospectus with
respect to Class B Shares.
<PAGE>
Class B Shares are subject to fees calculated as a stated percentage of the net
assets attributable to Class B shares under the Class B Rule 12b-1 Distribution
Plan as set forth in such Distribution Plan. The Class B Shareholders of the
Fund have exclusive voting rights, if any, with respect to the Fund's Class B
Rule 12b-1 Distribution Plan. Transfer agency fees are allocated to Class B
Shares on a per account basis except to the extent, if any, such an allocation
would cause the Fund to fail to satisfy any requirement necessary to obtain or
rely on a private letter ruling from the IRS relating to the issuance of
multiple classes of shares. Class B shares shall bear the costs and expenses
associated with conducting a shareholder meeting for matters relating to Class B
shares.
Class B Shares will automatically convert to Class A Shares of the Fund at
the end of a specified number of years after the initial purchase date of Class
B shares, except as provided in the Fund's prospectus. Such conversion will
occur at the relative net asset value per share of each class without the
imposition of any sales charge, fee or other charge. The conversion of Class B
Shares to Class A Shares may be suspended if it is determined that the
conversion constitutes or is likely to constitute a taxable event under federal
income tax law.
The initial purchase date for Class B shares acquired through (i)
reinvestment of dividends on Class B Shares or (ii) exchange from another
Pioneer mutual fund will be deemed to be the date on which the original Class B
shares were purchased.
Article III. Approval by Board of Trustees
This Plan shall not take effect until it has been approved by the vote of a
majority (or whatever greater percentage may, from time to time, be required
under Rule 18f-3 under the Investment Company Act of 1940, as amended (the
"Act")) of (a) all of the Trustees of the Fund, and (b) those of the Trustees
who are not "interested persons" of the Fund, as such term may be from time to
time defined under the Act.
Article IV. Amendments
No material amendment to the Plan shall be effective unless it is approved
by the Board of Trustees in the same manner as is provided for approval of this
Plan in Article III.
-2-
PIONEER TAX-FREE INCOME FUND
Multiple Class Plan Pursuant to Rule 18f-3
Class A Shares, Class B Shares and Class C Shares
January 31, 1996
Each class of shares of PIONEER TAX-FREE INCOME FUND
(the "Fund"), will have the same relative rights and privileges and be subject
to the same sales charges, fees and expenses, except as set forth below. The
Board of Trustees may determine in the future that other distribution
arrangements, allocations of expenses (whether ordinary or extraordinary) or
services to be provided to a class of shares are appropriate and amend this Plan
accordingly without the approval of shareholders of any class. Except as set
forth in the Fund's prospectus, shares may be exchanged only for shares of the
same class of another Pioneer mutual fund.
Article I. Class A Shares
Class A Shares are sold at net asset value and subject to the initial sales
charge schedule or contingent deferred sales charge ("CDSC") and minimum
purchase requirements as set forth in the Fund's prospectus. Class A Shares
shall be entitled to the shareholder services set forth from time to time in the
Fund's prospectus with respect to Class A Shares. Class A Shares are subject to
fees calculated as a stated percentage of the net assets attributable to Class A
shares under the Fund's Class A Rule 12b-1 Distribution Plan as set forth in
such Distribution Plan. The Class A Shareholders have exclusive voting rights,
if any, with respect to the Class A Rule 12b-1 Distribution Plan. Transfer
agency fees are allocated to Class A Shares on a per account basis except to the
extent, if any, such an allocation would cause the Fund to fail to satisfy any
requirement necessary to obtain or rely on a private letter ruling from the
Internal Revenue Service ("IRS") relating to the issuance of multiple classes of
shares. Class A shares shall bear the costs and expenses associated with
conducting a shareholder meeting for matters relating to Class A shares.
Article II. Class B Shares
Class B Shares are sold at net asset value per share without the imposition
of an initial sales charge. However, Class B
<PAGE>
shares redeemed within a specified number of years of purchase will be subject
to a CDSC as set forth in the Fund's prospectus. Class B Shares are sold subject
to the minimum purchase requirements set forth in the Fund's prospectus. Class B
Shares shall be entitled to the shareholder services set forth from time to time
in the Fund's prospectus with respect to Class B Shares. Class B Shares are
subject to fees calculated as a stated percentage of the net assets attributable
to Class B shares under the Class B Rule 12b-1 Distribution Plan as set forth in
such Distribution Plan. The Class B Shareholders of the Fund have exclusive
voting rights, if any, with respect to the Fund's Class B Rule 12b-1
Distribution Plan. Transfer agency fees are allocated to Class B Shares on a per
account basis except to the extent, if any, such an allocation would cause the
Fund to fail to satisfy any requirement necessary to obtain or rely on a private
letter ruling from the IRS relating to the issuance of multiple classes of
shares. Class B shares shall bear the costs and expenses associated with
conducting a shareholder meeting for matters relating to Class B shares.
Class B Shares will automatically convert to Class A Shares of the Fund at
the end of a specified number of years after the initial purchase date of Class
B shares, except as provided in the Fund's prospectus. Such conversion will
occur at the relative net asset value per share of each class without the
imposition of any sales charge, fee or other charge. The conversion of Class B
Shares to Class A Shares may be suspended if it is determined that the
conversion constitutes or is likely to constitute a taxable event under federal
income tax law.
The initial purchase date for Class B shares acquired through (i)
reinvestment of dividends on Class B Shares or (ii) exchange from another
Pioneer mutual fund will be deemed to be the date on which the original Class B
shares were purchased.
Article III. Class C Shares
Class C Shares are sold at net asset value per share without the imposition
of an initial sales charge. However, Class C shares redeemed within one year of
purchase will be subject to a CDSC as set forth in the Fund's prospectus. Class
C Shares are sold subject to the minimum purchase requirements set forth in the
Fund's prospectus. Class C Shares shall be entitled to the shareholder services
set forth from time to time in the Fund's prospectus with respect to Class C
Shares. Class C Shares are subject to fees calculated as a stated percentage of
the net assets attributable to Class C shares under the Class C Rule 12b-1
Distribution Plan as set forth in such Distribution Plan. The Class C
Shareholders of the Fund have exclusive voting rights, if any, with respect to
the Fund's Class C Rule 12b-1 Distribution Plan. Transfer agency fees are
allocated to Class C Shares on a
-2-
<PAGE>
per account basis except to the extent, if any, such an allocation would cause
the Fund to fail to satisfy any requirement necessary to obtain or rely on a
private letter ruling from the IRS relating to the issuance of multiple classes
of shares. Class C shares shall bear the costs and expenses associated with
conducting a shareholder meeting for matters relating to Class C shares.
The initial purchase date for Class C shares acquired through (i)
reinvestment of dividends on Class C Shares or (ii) exchange from another
Pioneer mutual fund will be deemed to be the date on which the original Class C
shares were purchased.
Article IV. Approval by Board of Trustees
This Plan shall not take effect until it has been approved by the vote of a
majority (or whatever greater percentage may, from time to time, be required
under Rule 18f-3 under the Investment Company Act of 1940, as amended (the
"Act")) of (a) all of the Trustees of the Trust, on behalf of the Fund, and (b)
those of the Trustees who are not "interested persons" of the Trust, as such
term may be from time to time defined under the Act.
Article V. Amendments
No material amendment to the Plan shall be effective unless it is approved
by the Board of Trustees in the same manner as is provided for approval of this
Plan in Article IV.
-3-
