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PIONEER BOND FUND
60 State Street
Boston, Massachusetts 02109
STATEMENT OF ADDITIONAL INFORMATION
Class A, Class B and Class C Shares
October 28, 1998
(As Revised November 10, 1998)
This Statement of Additional Information is not a prospectus, but
should be read in conjunction with the prospectus dated October 28, 1998, as
supplemented or revised from time to time (the "Prospectus") of Pioneer Bond
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 in this Statement of Additional Information by reference.
Effective November 2, 1998, Pioneering Management Corporation, the Fund's
investment adviser, will change its name to Pioneer Investment Management, Inc.
("Pioneer Investments").
TABLE OF CONTENTS
Page
1. Investment Policies and Restrictions....................................2
2. Management of the Fund..................................................6
3. Investment Adviser.....................................................10
4. Underwriting Agreement and Distribution Plans..........................10
5. Shareholder Servicing/Transfer Agent...................................14
6. Custodian..............................................................15
7. Principal Underwriter..................................................15
8. Independent Public Accountants.........................................15
9. Portfolio Transactions.................................................15
10. Tax Status............................................................17
11. Description of Shares.................................................20
12. Certain Liabilities...................................................20
13. Determination of Net Asset Value......................................21
14. Systematic Withdrawal Plan............................................22
15. Letter of Intent......................................................22
16. Investment Results....................................................22
17. Financial Statements..................................................26
Appendix A -- Description of Short-Term Debt and Corporate Bond Ratings...27
Appendix B - Performance Statistics.......................................32
Appendix C - Other Pioneer Information....................................47
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.
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1. INVESTMENT POLICIES AND RESTRICTIONS
The Fund's Prospectus presents the investment objectives and the
principal investment policies of the Fund. Additional investment policies and a
further description of some of the policies described in the Prospectus appear
below. Capitalized terms not otherwise defined herein have the meaning given to
them in the Prospectus.
The following policies and restrictions set forth under "Investment
Restrictions" supplement those discussed in the Prospectus. Except with respect
to the policy on borrowing described below, whenever an investment policy or
restriction states a maximum percentage of the Fund's assets that may be
invested in any security or presents a policy regarding quality standards, this
standard or other restrictions shall be determined immediately after and as a
result of the Fund's investment. Accordingly, any later increase or decrease
resulting from a change in values, net assets or other circumstances will not be
considered in determining whether the investment complies with the Fund's
investment objectives and policies, other than the policy on borrowing.
Lending of Portfolio Securities
The Fund may lend portfolio securities to member firms of the Exchange,
under agreements which would require that the loans be secured continuously by
collateral in cash, cash equivalents or U.S. Treasury bills maintained on a
current basis at an amount at least equal to the market value of the securities
loaned. The Fund would continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities loaned and would also receive
compensation based on investment of the collateral. The Fund would not, however,
have the right to vote any securities having voting rights during the existence
of the loan, but would call the loan in anticipation of an important vote to be
taken among holders of the securities or of the giving or withholding of their
consent on a material matter affecting the investment.
As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. The Fund will lend portfolio securities only to
firms which have been approved in advance by the Fund's Board of Trustees, which
will monitor the creditworthiness of any such firms. At no time would the value
of the securities loaned exceed 30% of the value of the Fund's total assets. The
Fund did not lend portfolio securities during the last fiscal year and has no
present intention to engage in any material securities lending in the future.
When Issued Securities
The Fund may also purchase and sell securities on a "when issued" and
"delayed delivery" basis. These transactions arise when securities are purchased
or sold by the Fund with payment and delivery taking place in the future. These
transactions are subject to market fluctuation and 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 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
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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.
Mortgage-Backed Securities
Multiple-Class Pass-through Securities and Collateralized Mortgage Obligations
The Fund may invest in collateralized mortgage obligations ("CMOs") and
real estate mortgage investment conduit ("REMIC") pass-through or participation
certificates, which may be issued by, among others, U.S. Government agencies and
instrumentalities as well as private lenders. CMOs and REMIC certificates are
issued in multiple classes and the principal of and interest on the mortgage
assets may be allocated among the several classes of CMOs or REMIC certificates
in various ways. Each class of CMOs or REMIC certificates, often referred to as
a "tranche," is issued at a specific adjustable or fixed interest rate and must
be fully retired no later than its final distribution date. Generally, interest
is paid or accrues on all classes of CMOs or REMIC certificates on a monthly
basis. Typically, CMOs are collateralized by certificates of the Government
National Mortgage Association, the Federal National Mortgage Association, or the
Federal Home Loan Mortgage Corporation but also may be collateralized by other
mortgage assets such as whole loans or private mortgage pass-through securities.
Debt service on CMOs is provided from payments of principal and interest on
collateral of mortgaged assets and any reinvestment income thereon.
Risk Factors Associated with Mortgaged-Backed Securities
The value of an investment in fixed rate obligations can be expected to
rise as interest rates decline and decline as interest rates rise. In contrast,
as interest rates on adjustable rate mortgage loans are reset periodically,
yields on investments in such loans will gradually align themselves to reflect
changes in market interest rates, causing the value of such investments to
fluctuate less dramatically in response to interest rate fluctuations than would
investments in fixed rate obligations.
The yield characteristics of Mortgage-Backed Securities, such as those
in which the Fund may invest, differ from those of traditional fixed income
securities. The major differences typically include more frequent interest and
principal payments (usually monthly), the adjustability of interest rates, and
the possibility that prepayments of principal may be made substantially earlier
than their final distribution dates. Prepayment rates are influenced by changes
in current interest rates and a variety of economic, geographic, social and
other factors and cannot be predicted with certainty. Both adjustable rate
mortgage loans and fixed rate mortgage loans may be subject to a greater rate of
principal prepayment in a declining interest rate environment and to a lesser
rate of principal prepayments in an increasing interest rate environment. Under
certain interest rate and prepayment rate scenarios, the Fund may fail to recoup
fully its investment in Mortgage-Backed Securities notwithstanding any direct or
indirect governmental or agency guarantee. When the Fund reinvests amounts
representing payments and unscheduled prepayments of principal, it may receive a
rate of interest that is lower than the rate on existing adjustable rate
mortgage pass-through securities. Thus, Mortgage-Backed Securities, and
adjustable rate mortgage pass-through securities in particular, may be less
effective than other types of U.S. Government securities as a means of "locking
in" interest rates.
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Investment Restrictions
Fundamental Investment Restrictions. The Fund has adopted certain
fundamental investment restrictions which may not be changed without the
affirmative vote of the holders of a majority of the Fund's outstanding voting
securities. As used in the Prospectus and this Statement of Additional
Information, such approval means the approval of the lesser of (i) the holders
of 67% or more of the shares represented at a meeting if the holders of more
than 50% of the outstanding shares are present in person or by proxy, or (ii)
the holders of more than 50% of the outstanding shares.
The Fund may not:
(1) purchase any security (other than securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities) if,
immediately after and as a result of such investment, (a) more than 5% of the
value of the Fund's total assets would be invested in securities of the issuer;
(b) the Fund would hold more than 10% of the voting securities of the issuer; or
(c) more than 25% of the value of the Fund's assets would be invested in a
single industry (each of the electric utility, natural gas utility, and
telephone industries shall be considered as a separate industry for this
purpose);
(2) buy or sell real estate in the ordinary course of its
business; provided, however, the Fund may invest in readily marketable debt
securities secured by real estate or interests therein or issued by companies,
including real estate investment trusts, which invest in real estate or
interests therein;
(3) buy or sell commodities or commodity contracts except
interest rate futures contracts, options on securities, securities indices,
currency and other financial instruments, futures contracts on securities,
securities indices, currency and other financial instruments and options on such
futures contracts, forward foreign currency exchange contracts, forward
commitments, securities index put or call warrants, interest rate swaps, caps
and floors and repurchase agreements entered into in accordance with the Fund's
investment policies;
(4) underwrite any issue of securities;
(5) make loans in an aggregate amount in excess of 10% of the
value of the Fund's total assets, taken at the time any loan is made, provided
that (i) the purchase of debt securities pursuant to the Fund's investment
objectives shall not be deemed loans for the purposes of this restriction, (ii)
loans of portfolio securities as described, from time to time, under "Lending of
Portfolio Securities" shall be made only in accordance with the terms and
conditions therein set forth and (iii) in seeking a return on temporarily
available cash, the Fund may engage in repurchase transactions maturing in one
week or less and involving obligations of the U.S. Government, its agencies or
instrumentalities;
(6) sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(7) purchase securities on margin;
(8) borrow money, except that, as a temporary measure for
extraordinary or emergency purposes and not for investment purposes, the Fund
may borrow up to 5% of the value of its total assets at the time of the
borrowing; or
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(9) mortgage, pledge, or hypothecate any of its assets.
Non-fundamental Investment Restrictions. The following restriction has
been designated as non-fundamental and may be changed by a vote of the Fund's
Board of Trustees without approval of shareholders.
The Fund may not:
invest in companies for the purpose of exercising control or
management.
It is the policy of the Fund not to concentrate its investments in
securities of companies in any particular industry or group of industries. In
the opinion of the staff of SEC, investments are concentrated in a particular
industry if such investments aggregate 25% or more of the Fund's total assets.
The Fund has agreed to abide by the foregoing non- fundamental policy which it
will not change without the affirmative vote of a majority of the Fund's
outstanding shares of beneficial interest.
Other Policies and Risks
The Fund may invest up to 15% of its assets in foreign securities and
up to 5% of its assets in foreign securities which are not listed on a
recognized foreign or domestic exchange, provided that purchases of Canadian
securities are not subject to the limitations in this paragraph. Investing in
securities of foreign companies and countries involves certain considerations
and risks which are not typically associated with investing in U.S. government
securities and those of domestic companies. Foreign companies are not generally
subject to uniform accounting, auditing and financial standards and requirements
comparable to those applicable to U.S. companies. There may also be less
government supervision and regulation of foreign securities exchanges, brokers
and listed companies than exists in the United States.
The Fund's interest income and, in some cases, capital gains from
foreign securities may be subject to withholding and other foreign taxes which
may decrease the net return on such investments as compared to the Fund's return
from investments in obligations issued by the U.S. government or by domestic
companies. In addition, there may be the possibility of expropriations,
confiscatory taxation, political, economic or social instability or diplomatic
developments which could affect assets of the Fund held in foreign countries.
The value of foreign securities may be adversely affected by fluctuations in the
relative rates of exchange between the currencies of different nations and by
exchange control regulations. There may be less publicly available information
about foreign companies and governments compared to reports and ratings
published about U.S. companies. Foreign securities markets have substantially
less volume than domestic markets and securities of some foreign companies are
less liquid and more volatile than securities of comparable U.S. companies.
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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 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 Pioneer Investments and Pioneer Funds
Distributor, Inc. ("PFD"); Director of Pioneering Services Corporation ("PSC"),
Pioneer Capital Corporation ("PCC"), Pioneer Real Estate Advisors, Inc., Pioneer
Forest, Inc., Pioneer Explorer, Inc., Pioneer Management (Ireland) Ltd. ("PMIL")
and Closed Joint Stock Company "Forest-Starma"; President and Director of
Pioneer Metals and Technology, Inc. ("PMT"), Pioneer International Corp.
("PIntl"), Pioneer First Russia, Inc. ("First Russia") and Pioneer Omega, Inc.
("Omega"); Chairman of the Board and Director of Pioneer Goldfields Limited
("PGL") and Teberebie Goldfields Limited; Chairman of the Supervisory Board of
Pioneer Fonds Marketing, GmbH, Pioneer First Polish Investment Fund Joint Stock
Company, S.A. and Pioneer Czech Investment Company, A.S.; Chairman, President
and Trustee of all of the Pioneer mutual funds; Director of Pioneer Global
Equity Fund Plc, Pioneer Global Bond Fund Plc, Pioneer DM Cashfonds Plc, Pioneer
European Equity Fund Plc, Pioneer Central & Eastern Europe Fund Plc and Pioneer
US Real Estate Fund Plc; and Partner, Hale and Dorr LLP (counsel to PGI and the
Fund).
MARY K. BUSH, Trustee, DOB: April 1948
4201 Cathedral Avenue, NW, Washington, DC 20016
President, Bush & Co., an international financial advisory firm;
Director and/or Trustee of Mortgage Guaranty Insurance Corporation, Novecon
Management Company, Hoover Institution, Folger Shakespeare Library, March of
Dimes, Project 2000, Inc. (not-for-profit educational organization), Small
Enterprise Assistance Fund and Wilberforce University; Advisory Board Member,
Washington Mutual Investors Fund, a registered investment company; and Trustee
of all the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
RICHARD H. EGDAHL, M.D., Trustee, DOB: December 1926
Boston University Health Policy Institute, 53 Bay State Road, Boston, MA 02215
Alexander Graham Bell Professor of Health Care Entrepreneurship, Boston
University; 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; University Professor, Boston
University; Director, Boston University Health Policy Institute and Boston
University Program for Health Care Entrepreneurship; Director, CORE (management
of workers' compensation and disability costs - Nasdaq National Market);
Director, WellSpace (provider of complementary health care); Trustee, Boston
Medical Center; Honorary Trustee, Franciscan Children's Hospital; and Trustee of
all of the Pioneer mutual funds.
MARGARET B.W. GRAHAM, Trustee, DOB: May 1947
The Keep, P.O. Box 110, Little Deer Isle, ME 04650
Founding Director, The Winthrop Group, Inc. (consulting firm); Manager
of Research Operations, Xerox Palo Alto Research Center, from 1991 to 1994;
Professor of Operations Management
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and Management of Technology and Associate Dean, Boston University School of
Management, from 1989 to 1993; and Trustee of all the Pioneer mutual funds,
except Pioneer Variable Contracts Trust.
JOHN W. KENDRICK, Trustee, DOB: July 1917
6363 Waterway Drive, Falls Church, VA 22044
Professor Emeritus, George Washington University; Director, American
Productivity and Quality Center; Adjunct Scholar, American Enterprise Institute;
and Trustee of all of the Pioneer mutual funds, except Pioneer Variable
Contracts Trust.
MARGUERITE A. PIRET, Trustee, DOB: May 1948
One Boston Place, Suite 2635, Boston, MA 02108
President, Newbury, Piret & Company, Inc. (merchant banking firm);
Trustee of Boston Medical Center; Member of the Board of Governors of the
Investment Company Institute; and Trustee of all of the Pioneer mutual funds.
DAVID D. TRIPPLE*, Trustee and Executive Vice President, DOB: February 1944
Executive Vice President and a Director of PGI; President and a
Director of Pioneer Investments; Director of PFD, PCC, PIntl, First Russia,
Omega, Pioneer SBIC Corporation ("Pioneer SBIC"), PMIL, Pioneer Global Equity
Fund Plc, Pioneer Global Bond Fund Plc, Pioneer DM Cashfonds Plc, Pioneer
European Equity Fund Plc, Pioneer Central & Eastern Europe Fund Plc and Pioneer
US Real Estate Fund Plc; and Executive Vice President and Trustee of all of the
Pioneer mutual funds.
STEPHEN K. WEST, Trustee, DOB: September 1928
125 Broad Street, New York, NY 10004
Of Counsel to Sullivan & Cromwell (law firm); Trustee, The Winthrop
Focus Funds (mutual funds); and Trustee of all of the Pioneer mutual funds.
JOHN WINTHROP, Trustee, DOB: June 1936
One North Adgers Wharf, Charleston, SC 29401
President, John Winthrop & Co., Inc. (private investment firm);
Director of NUI Corp. (energy sales, services and distribution); 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, Pioneer Investments, PSC, PCC, PIntl, PMT, PGL, First Russia,
Omega and Pioneer SBIC; and Treasurer of all of the Pioneer mutual funds.
JOSEPH P. BARRI, Secretary, DOB: August 1946
Corporate Secretary of PGI and most of its subsidiaries; Secretary of
all of the Pioneer mutual funds; and Partner, Hale and Dorr LLP.
ERIC W. RECKARD, Assistant Treasurer, DOB: June 1956
Manager of Business Planning and Internal Audit of Pioneer Investments
since September 1996; Manager of Fund Accounting of Pioneer Investments 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.
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ROBERT P. NAULT, Assistant Secretary, DOB: March 1964
General Counsel and Assistant Secretary of PGI since 1995; Assistant
Secretary of Pioneer Investments, PIntl, PGL, First Russia, Omega and all of the
Pioneer mutual funds; Assistant Clerk of PFD and PSC; and junior partner of Hale
and Dorr LLP prior to 1995.
SHERMAN B. RUSS, Vice President, DOB: July 1937
Senior Vice President of Pioneer Investments; Vice President of Pioneer
Money Market Trust, Pioneer America Income Trust and Pioneer Interest Shares.
The Fund's 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, Pioneer Investments and
PSC is owned, directly or indirectly, by PGI, a publicly-owned Delaware
corporation. Pioneer Investments, 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 Pioneer Investments PFD
Pioneer Europe Fund Pioneer Investments PFD
Pioneer World Equity Fund Pioneer Investments PFD
Pioneer Emerging Markets Fund Pioneer Investments PFD
Pioneer Indo-Asia Fund Pioneer Investments PFD
Pioneer Capital Growth Fund Pioneer Investments PFD
Pioneer Mid-Cap Fund Pioneer Investments PFD
Pioneer Growth Shares Pioneer Investments PFD
Pioneer Small Company Fund Pioneer Investments PFD
Pioneer Independence Fund Pioneer Investments Note 1
Pioneer Gold Shares Pioneer Investments PFD
Pioneer Equity-Income Fund Pioneer Investments PFD
Pioneer Fund Pioneer Investments PFD
Pioneer II Pioneer Investments PFD
Pioneer Micro-Cap Fund Pioneer Investments PFD
Pioneer Real Estate Shares Pioneer Investments PFD
Pioneer Short-Term Income Trust Pioneer Investments PFD
Pioneer America Income Trust Pioneer Investments PFD
Pioneer Bond Fund Pioneer Investments PFD
Pioneer Balanced Fund Pioneer Investments PFD
Pioneer Intermediate Tax-Free Fund Pioneer Investments PFD
Pioneer Tax-Free Income Fund Pioneer Investments PFD
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Pioneer Cash Reserves Fund Pioneer Investments PFD
Pioneer Interest Shares Pioneer Investments Note 2
Pioneer Variable Contracts Trust Pioneer Investments Note 3
Note 1 This fund is available to the general public only through Pioneer
Independence Plans, a systematic investment plan sponsored by PFD.
Note 2 This fund is a closed-end fund.
Note 3 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.
To the knowledge of the Fund, as of September 30, 1998, 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
September 30, 1998, the Trustees and officers of the Fund owned, in the
aggregate, less than 1% of the outstanding securities of the Fund. As of
September 30, 1998, Merrill Lynch Pierce Fenner & Smith For the Sole Benefit of
its Customers, Mutual Fund Administration, 4800 Deer Lake Drive East 3rd FL,
Jacksonville, FL 32246-6484 owned of record 11.5% (549,807.356 shares) of the
outstanding Class B shares of the Fund and 8.82% (118,851.207 shares) of the
outstanding Class C shares of the Fund.
Compensation of Officers and Trustees
The Fund pays no salaries or compensation to any of its officers. The
Fund pays an annual trustee's fee to each Trustee who is not affiliated with
Pioneer Investments, PGI, PFD or PSC consisting of two components: (a) a base
fee of $750 and (b) a variable fee, calculated on the basis of average net
assets of the Fund. In addition, the Fund pays a per meeting fee of $150 to each
Trustee who is not affiliated with Pioneer Investments, PGI, PFD or PSC and pays
an annual trustee's fee of $750 plus expenses to each Trustee affiliated with
Pioneer Investments, PGI, PFD or PSC. The Fund also pays an annual committee
participation fee to Trustees who serve as members of committees established to
act on behalf of one or more of the Pioneer mutual funds. Committee fees are
allocated to the Fund on the basis of the Fund's average net assets. Each
Trustee who is a member of the Audit Committee for the Pioneer mutual funds will
receive an annual fee equal to 10% of the aggregate annual trustee's fee, except
the Committee Chairperson who receives an annual fee equal to 20% of the
aggregate annual trustee's fee. Members of the Pricing Committee for the Pioneer
mutual funds, as well as any other committee which renders material functional
services to the Boards of Trustees for the Pioneer mutual funds, such as the
Year 2000 Committee, International Transfer Agent Issues Committee and
Disinterested Trustees Committee), receive an annual fee equal to 5% of the
aggregate annual trustee's fee, except the Committee Chairperson who receives an
annual fee equal to 10% of the aggregate annual trustee's fee. Any such fees
paid to Trustees affiliated with Pioneer Investments. PGI, PFD or PSC are
reimbursed to the Fund under its management contract.
The following table sets forth certain information with respect to the
compensation of each Trustee of the Fund:
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Pension or
Retirement Total
Benefits Compensation
Aggregate Accrued as from Fund and
Compensation Part of Pioneer Family
Name of Trustee from Fund * Fund Expenses of Funds**
John F. Cogan, Jr. $ 500 $0 $12,000
Mary K.Bush + $1852 $0 $30,000
Richard H. Egdahl, M.D. $1,851 $0 $62,000
Margaret B.W. Graham $1,859 $0 $60,000
John W. Kendrick $1,752 $0 $55,800
Margeurite A. Piret $2,140 $0 $80,000
David D. Tripple $ 500 $0 $12,000
Stephen K. West $1,949 $0 $63,800
John Winthrop $2,079 $0 $69,000
Total $14,482 $0 $444,600
======= == ========
* For the fiscal year ended June 30, 1998
** For the calendar year ended December 31, 1997
3. INVESTMENT ADVISER
The Fund has contracted with Pioneer Investments, 60 State Street,
Boston, Massachusetts, to act as its investment adviser. The term of the
contract is one year, but it is renewable annually after such date by the vote
of a majority of the Board of Trustees of the Fund (including a majority of the
Board of Trustees who are not parties to the contract or interested persons of
any such parties) cast in person at a meeting called for the purpose of voting
on such renewal. This contract terminates if assigned and may be terminated
without penalty by either party by vote of its Board of Directors or Trustees or
by vote of a majority of outstanding voting securities and the giving of sixty
days' written notice. Pursuant to the management contract, Pioneer Investments
will not be liable for any error of judgment or mistake of law or for any loss
sustained by reason of the adoption of any investment policy or the purchase,
sale or retention of any securities on the recommendation of Pioneer
Investments. Pioneer Investments, however, is not protected against liability by
reason of wilful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its obligations and
duties under the respective management contract.
As compensation for its management services and expenses incurred, Pioneer
Investments is entitled to a management fee at the rate of 0.50% per annum of
the Fund's average daily net assets. The fee is normally computed daily and paid
monthly. During its 1998, 1997, and 1996 fiscal years, the Fund paid or owed
total management fees to Pioneer Investments of approximately $696,789,
$596,770, and $588,432 respectively.
4. UNDERWRITING AGREEMENT AND DISTRIBUTION PLANS
The Fund has entered into an underwriting agreement with PFD. The
underwriting agreement will continue from year to year if annually approved by
the Trustees. The underwriting agreement provides that PFD will bear expenses
for the distribution of the Fund's shares, except for expenses
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incurred by PFD for which it is reimbursed or compensated by the Fund under the
distribution plans discussed below.
PFD bears all expenses it incurs in providing services under the
underwriting agreement. Such expenses include compensation to its employees and
representatives and to securities dealers for distribution related services
performed for the Fund. PFD also pays certain expenses in connection with the
distribution of the Fund's shares, including the cost of preparing, printing and
distributing advertising or promotional materials, and the cost of printing and
distributing prospectuses and supplements to prospective shareholders. The Fund
bears the cost of registering its shares under federal and state securities
laws. The Fund and PFD have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
Under the underwriting agreement, PFD will use its best efforts in rendering
services to the Fund.
The Fund has adopted a plan of distribution pursuant to Rule 12b-1
under the 1940 Act with respect to Class A, Class B and Class C shares (the
"Class A Plan," the "Class B Plan" and the "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 the Fund's Class A shares. Certain categories of such expenditures have been
approved by the Board of Trustees and are set forth in the Prospectus. See
"Distribution Plans" in the Prospectus. 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 Class A shares, the annual rate of 0.25% of the Fund's average annual net
assets attributable to Class A.
Class B Plan
The Class B Plan provides that the Fund shall pay PFD, as the Fund's
distributor for its Class B shares, a distribution fee equal on an annual basis
to 0.75% of the Fund's average daily net assets attributable to Class B shares
and will pay PFD a service fee equal to 0.25% of the Fund's average daily net
assets attributable to Class B shares (which PFD will in turn pay to securities
dealers which enter into a sales agreement with PFD at a rate of up to 0.25% of
the Fund's average daily net assets attributable to Class B shares owned by
investors for whom that securities dealer is the holder or dealer of record).
This service fee is intended to be in consideration of personal services and/or
account maintenance services rendered by the dealer with respect to Class B
shares. PFD will advance to dealers the first-year service fee at a rate equal
to 0.25% of the amount invested. As compensation therefor, PFD may retain the
service fee paid by the Fund with respect to such shares for the first year
after purchase. Dealers will become eligible for additional service fees with
respect to such shares commencing in the thirteenth month following purchase.
Dealers may from time to time be required to meet certain other criteria in
order to receive service fees. PFD or its affiliates are entitled to retain all
service fees payable under the Class B Plan for which there is no dealer of
record or for which qualification standards have not been met as partial
consideration for personal services and/or account maintenance services
performed by PFD or its affiliates for shareholder accounts.
The purpose of distribution payments to PFD under the Class B Plan is
to compensate PFD for its distribution services to the Fund. PFD pays
commissions to dealers as well as expenses of printing prospectuses and reports
used for sales purposes, expenses with respect to the preparation and printing
of
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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 CDSC's attributable to Class B shares. (See
"Distribution Plans" in the Prospectus.) When a broker-dealer sells Class B
shares and elects, with PFD's approval, to waive its right to receive the
commission normally paid at the time of the sale, PFD may cause all or a portion
of the distribution fees described above to be paid to the broker-dealer.
The Class B Plan and underwriting agreement have been amended effective
September 30, 1998 to permit PFD to sell its right to receive distribution fees
under the Plan and CDSCs to third parties. PFD enters into such transactions to
finance the payment of commissions to brokers at the time of sale and other
distribution-related expenses. In connection with such amendments, the Fund has
agreed that the distribution fee will not be terminated or modified (including a
modification by change in the rules relating to the conversion of Class B shares
into Class A shares) with respect to Class B shares (a) issued prior to the date
of any termination or modification or (b) attributable to Class B shares issued
through one or a series of exchanges of shares of another investment company for
which PFD acts as principal underwriter which were initially issued prior to the
date of such termination or modification or (c) issued as a dividend or
distribution upon Class B shares initially issued or attributable to Class B
shares issued prior to the date of any such termination or modification except:
(i) to the extent required by a change in the 1940
Act, the rules or regulations under the Act, the
Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), or an order of
any court or governmental agency, in each case
enacted, issued or promulgated after September 30,
1998;
(ii) in connection with a Complete Termination (as
defined in the Plan); or
(iii) on a basis, determined by the Board of Trustees
acting in good faith, so long as from and after the
effective date of such modification or termination:
neither the Fund, the adviser nor certain affiliates
pay, directly or indirectly, a fee to any person for
the provision of personal and account maintenance
services (as such terms are used in the Conduct Rules
of the NASD) to the holders of Class B shares of the
Fund and the termination or modification of the
distribution fee applies with equal effect to all
Class B shares outstanding from time to time.
The Class B Plan also provides that PFD shall be deemed to have
performed all services required to be performed in order to be entitled to
receive the distribution fee, if any, payable with respect to Class B shares
sold through PFD upon the settlement date of the sale of such Class B share or
in the case of Class B shares issued through one or a series of exchanges of
shares of another investment company for which PFD acts as principal underwriter
or issued as a dividend or distribution upon Class B shares, on the settlement
date of the first sale on a commission basis of a Class B share from which such
Class B share was derived.
In the amendments to the Underwriting Agreement, the Fund agreed that
subsequent to the issuance of a Class B Share, it would not take any action to
waive or change any CDSC (including a change in the rules applicable to
conversion of Class B shares into another class) in respect of such Class B
shares, except (i) as provided in the Fund's Prospectus or Statement of
Additional Information in effect on September 30, 1998, or (ii) as required by a
change in the 1940 Act and the rules and regulations
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thereunder, the Conduct Rules of the NASD or any order of any court or
governmental agency enacted, issued or promulgated after September 30, 1998.
Class C Plan
The Class C Plan provides that a 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 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 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% of the current value of the amount invested and
additional compensation at a rate of up to 0.75% of the average net asset value
with respect to 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.
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.)
When a broker-dealer sells Class C shares and elects, with PFD's approval, to
waive its right to receive the commission normally paid at the time of the sale,
PFD may cause all or a portion of the distribution fees described above to be
paid to the broker-dealer.
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.
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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 of the Fund, as defined in the 1940 Act (none of whom had or
have any direct or indirect financial interest in the operation of the Plans),
cast in person at a meeting called for the purpose of voting on the 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 class affected thereby, and material amendments of 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 (as defined in the 1940
Act) of the respective class of the Fund. A Plan will automatically terminate in
the event of its assignment (as defined in the 1940 Act).
During the fiscal year ended June 30,1998, the Fund incurred total
distribution fees pursuant to the Fund's Class A Plan, Class B Plan, and Class C
Plan respectively, as follows: $267,315, $248,383 and $75,697. 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.
Upon redemption, certain Class A shares may be subject to a 1% CDSC,
Class B shares are subject to a CDSC at a rate declining from a maximum of 4% of
the lower of the cost or market value of the shares and Class C shares are
subject to a 1% CDSC. During the fiscal year ended June 30, 1998, CDSCs, in the
amount of $81,811 were paid to PFD.
5. SHAREHOLDER SERVICING/TRANSFER AGENT
The Fund has contracted with PSC, 60 State Street, Boston,
Massachusetts 02109, to act as shareholder servicing agent and transfer agent
for the Fund. This contract may be terminated without penalty by either party
upon 90 days' written notice.
Under the terms of its contract with the Fund, PSC services shareholder
accounts, and its duties include: (i) processing sales, redemptions and
exchanges of Fund shares; (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 $30.00 for each Class A, Class B and
Class C shareholder account from the Fund as compensation for the services
described above. PSC is also reimbursed by the Fund for its out-of-pocket
expenditures. The annual fee is set at an amount determined by vote of a
majority of the Fund's Trustees (including a majority of the Trustees who are
not parties to the contract with PSC or interested persons of any such parties)
to be comparable to fees for such services being paid by other investment
companies. The Fund may compensate entities which have agreed to provide certain
sub-accounting services, such as specific transaction processing and
recordkeeping services. Any such payments by the Fund would be in lieu of the
per account fee which would otherwise be paid by the Fund to PSC.
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6. CUSTODIAN
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts
02109, is the custodian (the "Custodian") of the Fund's assets. The Custodian's
responsibilities include safekeeping and controlling the Fund's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Fund's investments.
The Custodian does not determine the investment policies of the Fund or
decide which securities the Fund will buy or sell. The Fund may invest in
securities, including repurchase agreements, issued by the Custodian and may
deal with the Custodian as principal in securities transactions. Portfolio
securities may be deposited into the Federal Reserve-Treasury Department Book
Entry System or the Depository Trust Company.
7. PRINCIPAL UNDERWRITER
PFD, 60 State Street, Boston, Massachusetts 02109, serves as the
principal underwriter for the Fund. During the Fund's 1998, 1997 and 1996 fiscal
years, net underwriting commissions earned by PFD in connection with its
offering of Fund shares were approximately $38,000, $33,000 and $39,000,
respectively. Commissions reallowed to dealers by PFD in those three years were
approximately $305,000, $219,000 and $281,000, respectively. See "Underwriting
Agreement and Distribution Plan" above for a description of the terms of the
Underwriting Agreement with PFD.
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 an acquisition of portfolio
securities.
8. INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, 225 Franklin Street, Boston, Massachusetts 02110,
are the Fund's independent public accountants, providing audit services, tax
return review, and assistance and consultation with respect to the preparation
of filings with the SEC.
9. PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of the Fund by Pioneer Investments pursuant to authority contained in
the management contract. Securities purchased and sold on behalf of the Fund
normally will be traded in the over-the counter market on a net basis (i.e.
without commission) through dealers acting for their own account and not as
brokers or otherwise through transactions directly with the issuer of the
instrument. Some securities are purchased and sold on an exchange or in
over-the-counter transactions conducted on an agency basis involving a
commission. The primary consideration in placing portfolio security transactions
is execution at the most favorable prices. Additionally, in selecting brokers or
dealers, Pioneer Investments will consider various relevant factors, including,
but not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the execution
efficiency, settlement capability, and financial condition of the dealer; the
dealer's execution services rendered on a continuing basis; the reasonableness
of any dealer spreads; and the dealer's sale of shares of the Fund or other
Pioneer mutual funds.
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<PAGE>
Pioneer Investments may select dealers which provide brokerage and/or
research services to the Fund and/or other investment companies or accounts
managed by Pioneer Investments. Consistent with Section 28(e) of the Securities
Exchange Act of 1934, as amended, the Fund may pay commissions to such
broker-dealers in an amount greater than the amount another firm might charge as
compensation for such services if Pioneer Investments determines in good faith
that the amount of the commissions charged by a broker-dealer is reasonable in
relation to the services provided by such broker-dealer. Such services may
include advice concerning the value of securities; the advisability of investing
in, purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; providing stock quotation services;
furnishing analyses, electronic information services, manuals and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, performance of accounts, comparative fund statistics and
credit rating service information; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement).
Pioneer Investments 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
Pioneer Investments 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. Management believes
that no exact dollar value can be calculated for such services.
The research received from dealers may be useful to Pioneer Investments
in rendering investment management services to the Fund and to other investment
companies or accounts managed by Pioneer Investments, although not all of such
research may be useful to the Fund and conversely, such information provided by
brokers or dealers who have executed transaction orders on behalf of such other
Pioneer Investments clients may be useful to Pioneer Investments in carrying out
its obligations to the Fund. The receipt of such research has not reduced
Pioneer Investments' normal independent research activities; however, it enables
Pioneer Investments to avoid the additional expenses which might otherwise be
incurred if it were to attempt to develop comparable information through its own
staff.
In circumstances where two or more broker-dealers offer comparable
prices and executions, preference may be given to a broker-dealer which has sold
shares of the Fund as well as shares of other investment companies or accounts
managed by Pioneer Investments. 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, Pioneer Investments acts as investment adviser
to other Pioneer mutual funds and certain private accounts with investment
objectives similar to the Fund's. As such, securities frequently meet the
investment objectives of the Fund, such other mutual funds and such private
accounts. In such cases, the decision to recommend a purchase for one fund or
account rather than another is based on a number of factors. The determining
factors in most cases are the amount of securities of the issuer then
outstanding, the value of those securities and the market for them. Other
factors considered in the investment recommendations include other investments
which each fund or account presently has in a particular industry or country and
the availability of investment funds in each fund or account.
It is possible that, at times, identical securities will be held by
more than one fund and/or account. However, positions in the same issue may vary
and the length of time that any fund or account may choose to hold its
investment in the same issue may likewise vary. To the extent that the Fund,
another mutual fund in the Pioneer group or a private account managed by Pioneer
Investments seeks to acquire the same security at about the same time, the Fund
may not be able to acquire as large a position in such security as it desires or
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
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<PAGE>
Pioneer Investments 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 account, the resulting
participation in volume transactions could produce better executions for the
Fund or other account. In the event that 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 Trustees periodically review Pioneer Investments' performance of
its responsibilities in connection with the placement of portfolio transactions
on behalf of the Fund.
10. TAX STATUS
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 the Fund's 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 order to qualify as a regulated investment company under Subchapter
M, the Fund must, among other things, derive at least 90% of its annual gross
income from interest, payments with respect to securities loans, gains from the
sale or other disposition of securities or foreign currencies, or other income
derived with respect to its business of investing in such securities or
currencies (the "90% income test").and satisfy certain annual distribution and
quarterly diversification requirements. For purposes of the 90% income test,
income the Fund earns from equity interests in certain entities that are not
treated as corporations (e.g., are treated as partnerships or trusts) for U.S.
tax purposes will generally have the same character for the Fund as in the hands
of such entities; consequently, the Fund may be required to limit its equity
investments in such entities that earn fee income, rental income, or other
nonqualifying income.
Dividends from investment company taxable income, which includes net
investment income, net short-term capital gain in excess of net long-term
capital loss, and certain net foreign exchange gains, are taxable as ordinary
income, whether received in cash or reinvested in additional shares. Dividends
from net long-term capital gain in excess of net short-term capital loss ("net
capital gain"), if any, whether received in cash or reinvested in additional
shares, are taxable to the Fund's shareholders as long-term capital gains for
federal income tax purposes without regard to the length of time shares of the
Fund have been held.
Any dividend declared by the Fund in October, November or December as
of a record date in such a month and paid during the following January will be
treated for federal income tax purposes as received by shareholders on December
31 of the calendar year in which it is declared.
Foreign exchange gains and losses realized by the Fund in connection
with certain transactions involving foreign currency-denominated debt
securities, foreign currencies, or payables or receivables denominated in a
foreign currency are subject to Section 988 of the Code, which generally causes
such gains and losses to be treated as ordinary income and losses and may affect
the amount, timing and character of distributions to shareholders. Under future
regulations, any transactions in foreign currency that are not directly related
to the Fund's investment in securities may need to be limited in order to
17
<PAGE>
enable the Fund to satisfy the 90% income test. If the net foreign exchange loss
for a year were to exceed the Fund's investment company taxable income (computed
without regard to such loss), the resulting overall ordinary loss for such year
would not be deductible by the Fund or its shareholders in future years.
If the Fund invests in certain pay-in-kind securities ("PIKs"), zero
coupon securities, deferred interest securities or, in general, any other
securities with original issue discount (or with market discount if the Fund
elects to include market discount in income currently), the Fund must accrue
income on such investments for each taxable year, which generally will be prior
to the receipt of the corresponding cash payments. However, the Fund must
distribute, at least annually, all or substantially all of its net income,
including such accrued income, to shareholders to qualify as a regulated
investment company under the Code and avoid Federal income and excise taxes.
Therefore, the Fund may have to dispose of its portfolio securities under
disadvantageous circumstances to generate cash, or may have to leverage itself
by borrowing the cash, to satisfy distribution requirements.
For federal income tax purposes, the Fund is permitted to carry forward
a net capital loss for any year to offset its 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 therefore are not expected to be distributed as such
to shareholders. At June 30, 1998, the Fund had aggregate capital loss
carryforwards of approximately $4,559,000, which will expire between 1999 and
2006 if not utilized.
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 economically represent a
return of a portion of the investment.
Redemptions and exchanges are taxable events for shareholders that are
subject to tax. Shareholders should consult their own tax advisers with
reference to their individual circumstances to determine whether any particular
transaction in Fund shares is properly treated as a sale for tax purposes, as
the following discussion assumes, and the tax treatment of any gains or losses
recognized in such transactions. Any loss realized by a shareholder upon the
redemption, exchange or other disposition of shares with a tax holding period of
six months or less will be treated as a long-term capital loss to the extent of
any amounts treated as distributions of long-term capital gain with respect to
such shares.
In addition, if Class A shares redeemed or exchanged have been held for
less than 91 days, (1) in the case of a reinvestment in the Fund or another
mutual fund 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 dispositions of shares may be
disallowed under "wash sale" rules in the event of other investments in the Fund
(including those made pursuant to reinvestment of dividends and/or capital gain
distributions) within a period of 61 days beginning 30 days before and ending 30
days after a redemption or other
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<PAGE>
disposition of shares. In such a case, the disallowed portion of any loss would
be included in the federal tax basis of the shares acquired in the other
investments.
The Fund's dividends and distributions will not qualify for any
dividends-received deduction that might otherwise be available for certain
dividends received by shareholders that are corporations.
The Fund may be subject to withholding and other taxes imposed by
foreign countries, including taxes on interest and capital gains, with respect
to its investments in those countries. Tax conventions between certain countries
and the U.S. may reduce or eliminate such taxes in some cases. The Fund does not
expect to satisfy the requirements for passing through to its shareholders their
pro rata shares of qualified foreign taxes paid by the Fund, with the result
that shareholders will not include such taxes in their gross incomes and will
not be entitled to a tax deduction or credit for such taxes on their own tax
returns.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions, and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their tax
advisers for more information.
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 intangible property taxes, the
value of its assets is attributable to) certain U.S. Government obligations,
provided in some states that certain thresholds for holdings of such obligations
and/or reporting requirements are satisfied. The Fund will not seek to satisfy
any threshold or reporting requirements that may apply in particular taxing
jurisdictions, although the Fund may in its sole discretion provide relevant
information to shareholders.
Federal law requires that the Fund withhold (as "backup withholding")
31% of reportable payments, including dividends, capital gain dividends and the
proceeds of redemptions (including exchanges) and repurchases to shareholders
who have not complied with IRS regulations. In order to avoid this withholding
requirement, shareholders must certify on their Account Applications, or on
separate IRS Forms W-9, 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 underreporting of interest or
dividend income.
If, as anticipated, the Fund continues to qualify as a regulated
investment company under the Code, it will not be required to pay any
Massachusetts income, corporate excise or franchise taxes.
The description of certain federal tax provisions above relates only to
U.S. federal income tax consequences for shareholders who are U.S. persons,
i.e., U.S. citizens or residents or U.S. corporations, partnerships, trusts or
estates, and who are subject to U.S. federal income tax. This description does
not address the special tax rules that may be applicable to particular types of
investors, such as financial institutions, insurance companies, securities
dealers, or tax-exempt or tax-deferred plans, accounts or entities. Investors
other than U.S. persons may be subject to different U.S. tax treatment,
including a possible 30% non-resident alien U.S. withholding tax (or
non-resident alien withholding tax at a lower treaty rate) on amounts treated as
ordinary dividends from the Fund and, unless an effective IRS Form
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W-8 or authorized substitute for Form W-8 is on file, to 31% backup withholding
on certain other payments from the Fund. Shareholders should consult their own
tax advisers on these matters and on state, local and other applicable tax laws.
11. DESCRIPTION OF SHARES
The Declaration of Trust permits its Board of Trustees to authorize the
issuance of an unlimited number of full and fractional shares of beneficial
interest (without par value) which may be divided into such separate series as
the Trustees may establish. Currently, the Fund consists of only one series. The
Trustees may, however, establish additional series of shares, and may divide or
combine the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interests in the Fund. The Declaration of
Trust further authorizes the Trustees to classify or reclassify any series of
the shares into one or more classes. Pursuant thereto, the Trustees have
authorized the issuance of three classes of shares of the Fund, Class A shares,
Class B shares and Class C shares. Each share of a class of the Fund represents
an equal proportionate interest in the assets of the Fund allocable to that
class. Upon liquidation of the Fund, shareholders of each class are entitled to
share pro rata in the Fund's net assets allocable to such class available for
distribution to shareholders. The Fund reserves the right to create and issue
additional series or classes of shares, in which case the shares of each class
of a series would participate equally in the earnings, dividends and assets
allocable to that class of the particular series.
Shareholders are entitled to one vote for each share held and may vote
in the election of Trustees and on other matters submitted to a meeting of
shareholders. Although Trustees are not elected annually by the shareholders,
shareholders have under certain circumstances the right to remove one or more
Trustees. The shares of the Fund are entitled to vote separately to approve
investment advisory agreements or changes in investment restrictions, but
shareholders of all series vote together in the election and selection of
Trustees and accountants. Shares of all series of the Fund vote together as a
class on matters that affect the Fund in substantially the same manner. As to
matters affecting a single class, shares of such class will vote separately. No
amendment that adversely affects the rights of shareholders may be made to the
Fund's Declaration of Trust without the affirmative vote of a majority of the
Fund's shares. Shares have no preemptive or conversion rights except that under
certain circumstances Class B shares may convert to Class A shares. Shares are
fully paid and non-assessable by the Fund, except as set forth below. See
"Certain Liabilities."
12. CERTAIN LIABILITIES
As a Massachusetts business trust, the Fund's operations are governed
by its Declaration of Trust dated December 7, 1993, a copy of which is on file
with the office of the Secretary of State of The Commonwealth of Massachusetts.
Shareholders of a Massachusetts business trust may, under certain circumstances,
be held personally liable for the obligations of the trust. However, the
Declaration of Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Fund or any series of the Fund and provides that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Fund or its Trustees. Moreover, the Declaration
of Trust provides for the indemnification out of Fund property of any
shareholders held personally liable for any obligations of the Fund or any
series of the Fund. 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. Thus, the
risk of a shareholder incurring financial loss beyond his or her investment
because of shareholder liability would be limited to circumstances in which the
Fund itself will be unable to meet its obligations. In light of the nature of
the
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<PAGE>
Fund's business and the nature and amount of its assets, the possibility of the
Fund's liabilities exceeding its assets, and therefore a shareholder's risk of
personal liability, is remote.
The Declaration of Trust further provides that the Fund shall indemnify
each of its Trustees and officers against liabilities and expenses reasonably
incurred by them, in connection with, or arising out of, any action, suit or
proceeding, threatened against or otherwise involving such Trustee or officer,
directly or indirectly, by reason of being or having been a Trustee or officer
of the Fund. The Declaration of Trust does not authorize the Fund to indemnify
any Trustee or officer against any liability to which he or she would otherwise
be subject by reason of or for willful misfeasance, bad faith, gross negligence
or reckless disregard of such person's duties.
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 (currently 4:00 p.m., Eastern time) on each
day on which the Exchange is open for trading. As of the date of this Statement
of Additional Information, the Exchange is open for trading every weekday except
for the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The net asset value per share of each class
of the Fund is also determined on any other day in which the level of trading in
its portfolio securities is sufficiently high so that the current net asset
value per share might be materially affected by changes in the value of its
portfolio securities. The net asset value per share of the Fund is not
determined on any day in which no purchase orders in good order for the shares
of the Fund are received and no shares are tendered for redemption.
The net asset value per share of each class of the Fund is computed by
taking the value of all of the Fund's assets attributable to a class, less the
Fund's liabilities attributable to that class, and dividing the result by the
number of outstanding shares of the class. The Board of Trustees has directed
that the fair market value of the Fund's assets should be determined as follows.
Ordinarily, investments in debt securities are valued on the basis of
information furnished by a pricing service which utilizes primarily a matrix
system (which reflects such factors as security prices, yields, maturities and
ratings), supplemented by dealer and exchange quotations, to recommend
valuations for normal institutional-sized trading units of debt securities. In
addition, the Board has instructed advisory personnel not to rely exclusively on
this pricing service if the fair market value of certain securities may be more
accurately determined on the basis of information available from other sources.
Temporary cash investments are valued at cost, which approximates market value.
The maximum offering price per Class A share is determined by adding
the maximum sales charge to the net asset value per Class A share. Class B and
Class C shares are offered at net asset value without the imposition of an
initial sales charge.
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. Class B accounts must meet the minimum initial
investment requirement prior to establishing a SWP. Withdrawals from Class B and
Class C share accounts are limited to 10% of the value of the account at the
time the SWP is implemented. Periodic payments of $50 or more will
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<PAGE>
deposited periodically directly into a bank account designated by the applicant,
or will be sent to the applicant, or any person designated by the applicant.
Designation of a third party to receive payments subsequent to opening an
account must be accompanied by a signature guarantee.
Any income dividends or capital gains distributions on shares under the
SWP will be credited to the SWP account on the payment date in full and
fractional shares at the net asset value per share in effect on the record date.
SWP payments are made from the proceeds of the redemption of shares
deposited under the SWP in a SWP account. To the extent that such redemptions
for periodic withdrawals exceed dividend income reinvested in the SWP account,
such redemptions will reduce and may ultimately exhaust the number of shares
deposited in the Plan account. Share redemptions are taxable transactions, and
in addition the amounts received by a shareholder cannot be considered as an
actual yield or income on his or her investment because part of such payments
may be a return of his or her investment.
The SWP may be terminated at any time (1) by written notice to PSC or
from PSC to the shareholder; (2) upon receipt by PSC of appropriate evidence of
the shareholder's death; or (3) when all shares under the Plan have been
redeemed.
15. LETTER OF INTENT (Class A only)
A Letter of Intent ("LOI") may be established by completing the LOI
section of the Account Application. When you sign the Account Application, you
agree to irrevocably appoint PSC your attorney-in-fact to surrender for
redemption any or all shares held in escrow with full power of substitution. An
LOI is not a binding obligation upon the investor to purchase, or the Fund to
sell, the full amount indicated.
If the total purchases, less redemptions, exceed the amount specified
under the LOI and are in an amount which would qualify for a further quantity
discount, all transactions will be recomputed on the expiration date of the LOI
to effect the lower sales charge. Any difference in the sales charge resulting
from such recomputation will be either delivered to you in cash or invested in
additional shares at the lower sales charge. The dealer, by signing the Account
Application, agrees to return to PFD, as part of such retroactive adjustment,
the excess of the commission previously reallowed or paid to the dealer over
that which is applicable to the actual amount of the total purchases under the
LOI.
If the total purchases, less redemptions, are less than the amount
specified under the LOI, you must remit to PFD any difference between the sales
charge on the amount actually purchased and the amount originally specified in
the LOI section of the Account Application. When the difference is paid, the
shares held in escrow will be deposited to your account. If you do not pay the
difference in sales charge within 20 days after written request from PFD or your
dealer, PSC, after receiving instructions from PFD, will redeem the appropriate
number of shares held in escrow to realize the difference and release any
excess. See "How to Buy Fund Shares - Letter of Intent" in the Prospectus for
more information.
16. INVESTMENT RESULTS
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 and sales literature are calculated by standard methods
prescribed by the SEC.
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<PAGE>
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 a
class's yield and/or total return to the Shearson Lehman Hutton Government
Index, U.S. Government bond rates, or other comparable indices or investment
vehicles.
In addition, the performance of the classes of the Fund may be compared
to alternative investment or savings vehicles and/or to indices or indicators of
economic activity, e.g., inflation or interest rates. Performance rankings and
listings reported in newspapers or national business and financial publications,
such as Barron's, Business Week, Consumers Digest, Consumer Reports, Financial
World, Forbes, Fortune, Investors Business Daily, Kiplinger's Personal Finance
Magazine, Money Magazine, New York Times, 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 such publications) or used for comparison, as
well as performance listings and rankings from various other sources including
CDA/Weisenberger Investment Companies Service, Donoghue's Mutual Fund Almanac,
Investment Company Data, Inc., Ibbotson Associates, Johnson's Charts, Kanon
Bloch Carre & Co., Lipper Analytical Services, 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 Fund shareholders.
One of the primary methods used to measure the performance of a class
of the Fund is "total return." Total return will normally represent the
percentage change in value of an account, or of a hypothetical investment in a
class of the Fund, over any period up to the lifetime of that class. 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 may 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.
In representing investment results of a class, the Fund may also
include references to certain financial planning concepts, including (a) an
investor's need to evaluate his or her financial assets and obligations to
determine how much to invest; (b) the need to analyze the objectives of various
investments to determine where to invest; and (c) the need to analyze his or her
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.
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
23
<PAGE>
maximum offering price per share of the class on the last day of such base
period in accordance with the following formula:
a-b 6
YIELD = 2[ ( ----- +1) -1]
cd
Where: a = interest earned during the period
b = net expenses accrued for the period
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends
d = the maximum offering price per share on the
last day of the period
For purposes of calculating interest earned on debt obligations as provided in
item "a" above:
(i) The yield to maturity of each obligation held by the Fund is
computed based on the market value of the obligation (including actual accrued
interest, if any) at the close of business each day during the 30-day base
period, or, with respect to obligations purchased during the month, the purchase
price (plus actual accrued interest, if any) on settlement date, and with
respect to obligations sold during the month the sale price (plus actual accrued
interest, if any) between the trade and settlement dates.
(ii) The yield to maturity of each obligation is then divided by 360
and the resulting quotient is multiplied by the market value of the obligation
(including actual accrued interest, if any) to determine the interest income on
the obligation for each day. The yield to maturity calculation has been made on
each obligation during the 30 day base period.
(iii) Interest earned on all debt obligations during the 30-day or one
month period is then totaled.
(iv) The maturity of an obligation with a call provision(s) is the next
call date on which the obligation reasonably may be expected to be called or, if
none, the maturity date.
With respect to the treatment of discount and premium on mortgage or
other receivables-backed obligations which are expected to be subject to monthly
payments of principal and interest ("pay downs"), the Fund accounts for gain or
loss attributable to actual monthly pay downs as an increase or decrease to
interest income during the period. In addition, the Fund may elect (i) to
amortize the discount or premium on a remaining security, based on the cost of
the security, to the weighted average maturity date, if such information is
available, or to the remaining term of the security, if the weighted average
maturity date is not available, or (ii) not to amortize the discount or premium
on a remaining security.
For purposes of computing yield, interest income is recognized by
accruing 1/360 of the stated interest rate of each obligation in the Fund's
portfolio each day that the obligation is in the portfolio. Expenses of a class
accrued during any base period, if any, pursuant to the respective Distribution
Plan are included among the expenses accrued during the base period.
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<PAGE>
The Fund's yield for the 30 days ended June 30, 1998, computed in
accordance with the above formula, was 4.96% for Class A shares, 4.38% for Class
B shares and 4.49% for Class C shares.
Standardized Average Annual Total Return Quotations
The average annual total return quotations for a class of shares is
computed by finding the average annual compounded rate of return that would
cause a hypothetical investment in the class made on the first day of a
designated period (assuming all dividends and distributions are reinvested) to
equal the ending redeemable value of such hypothetical investment on the last
day of the designated period in accordance with the following formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1000,
less the maximum sales load of $45 for
Class A shares or the deduction of the
CDSC on Class B or Class C shares at the
end of the period
T = average annual total return
n = number of years
ERV = ending redeemable value
of the hypothetical $1000
initial payment made at the
beginning of the designated
period (or fractional
portion thereof)
For purposes of the above computation, it is assumed that all dividends
and distributions made by the Fund are reinvested at net asset value during the
designated period. The average annual total return quotation is determined to
the nearest 1/100 of 1%.
In determining the average annual total return (calculated as provided
above), recurring fees, if any, that are charged to all shareholder accounts of
a particular class of shares 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 total returns for each Class of shares of the Fund as of June 30, 1998, are
as follows:
Average Annual Total Return (%)
One Year Five Years Ten Years Since Inception*
Class A Shares 5.06 5.21 7.87 8.86
Class B Shares 5.21 N/A N/A 6.26
Class C Shares 9.12 N/A N/A 4.94
* Inception was October 31, 1978 for Class A shares and April 4, 1994 for Class
B shares. Class C Shares were first offered January 31, 1996.
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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 fixed income funds;
o annualized 7-day yields and 7-day effective (compound) yields
for Pioneer's money market fund; and
o dividends and capital gains distributions on all Pioneer
mutual funds.
Yields are calculated in accordance with SEC mandated standard formulas
outlined earlier in this section.
In addition, by using a personal identification number ("PIN"),
shareholders may enter purchases, exchanges and redemptions, 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 and 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 Cash Reserves
Fund , which seeks to maintain a stable $1.00 share price) will also vary, and
may be worth more or less at redemption than their original cost.
17. FINANCIAL STATEMENTS
The Fund's Annual Report, filed with the SEC on August 25, 1998
(Accession No. 0000276776-98-000006), is incorporated by reference into this
Statement of Additional Information. The financial statements in the Fund's
Annual Report, including the financial highlights, for the period ended June 30,
1998, included or incorporated by reference into the Prospectus and this
Statement of Additional Information, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect to the
financial statements, and are included in reliance upon the authority of Arthur
Andersen LLP as experts in accounting and auditing in giving their report.
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<PAGE>
APPENDIX A
DESCRIPTION OF SHORT-TERM DEBT AND CORPORATE BOND RATINGS1
MOODY'S INVESTORS SERVICE ("MOODY'S") SHORT-TERM PRIME RATING SYSTEM
- - TAXABLE DEBT AND DEPOSITS GLOBALLY
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
Prime-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
Leading market positions in well-established industries. High rates of
return on funds employed.
Conservative capitalization structure with moderate reliance on debt
and ample asset protection. Broad margins in earnings coverage of fixed
financial charges and high internal cash generation. Well-established
access to a range of financial markets and assured sources of alternate
liquidity.
Prime-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
Not Prime: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Obligations of a branch of a bank are considered to be domiciled in the country
in which the branch is located. Unless noted as an exception, Moody's rating on
a bank's ability to repay senior obligations extends only to branches located in
countries which carry a Moody's Sovereign Rating for Bank Deposits. Such branch
obligations are rated at the lower of the bank's rating or Moody's Sovereign
Rating for Bank Deposits for the country in which the branch is located.
- -----------------
1 The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such ratings,
they undertake no obligation to do so, and the ratings indicated do not
necessarily represent ratings which will be given to these securities on the
date of the Fund's fiscal year-end.
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<PAGE>
When the currency in which an obligation is denominated is not the same as the
currency of the country in which the obligation is domiciled, Moody's ratings do
not incorporate an opinion as to whether payment of the obligation will be
affected by actions of the government controlling the currency of denomination.
In addition, risks associated with bilateral conflicts between an investor's
home country and either the issuer's home country or the country where an
issuer's branch is located are not incorporated into Moody's short-term debt
ratings.
If an issuer represents to Moody's that its short-term debt obligations are
supported by the credit of another entity or entities, then the name or names of
such supporting entity or entities are listed within the parenthesis beneath the
name of the issuer, or there is a footnote referring the reader to another page
for the name or names of the supporting entity or entities. In assigning ratings
to such issuers, Moody's evaluates the financial strength of the affiliated
corporations, commercial banks, insurance companies, foreign governments or
other entities, but only as one factor in the total rating assessment.
MOODY'S CORPORATE BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
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<PAGE>
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicated that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicated
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
STANDARD & POOR'S RATINGS GROUP ("STANDARD & POOR'S") SHORT-TERM ISSUE CREDIT
RATINGS
A-1: A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B: A short-term obligation rated B is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C: A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
29
<PAGE>
STANDARD & POOR'S CORPORATE BOND RATINGS
AAA: An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA: An obligation rated AA differs from the highest-rated obligations only in a
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to the
obligor's capacity to meet its financial commitment on the obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial or economic conditions, the obligor is not likely to
have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.
D: An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments are jeopardized.
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<PAGE>
PLUS (+) OR MINUS (-): The rating from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major categories.
r: This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk, such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
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<PAGE>
APPENDIX B
PERFORMANCE STATISTICS
Pioneer Bond Fund A
<TABLE>
<S> <C> <C> <C> <C> <C>
Initial Sales Charge Shares Purchased Net Asset Value Initial Net
Date Investment Offering Price Included Per Share Asset Value
6/30/87 $10,000 $9.65 4.50% 1036.269 $9.22 $9,550
</TABLE>
Dividends and Capital Gains Reinvested
Value of Shares
From Cap. Gains From Dividends
Date From Investment Reinvested Reinvested Total Value
6/30/88 $9,368 $0 $871 $10,239
6/30/89 $9,513 $0 $1,869 $11,382
6/30/90 $9,243 $0 $2,848 $12,091
6/30/91 $9,316 $0 $4,000 $13,316
6/30/92 $9,710 $0 $5,341 $15,051
6/30/93 $10,166 $0 $6,792 $16,958
6/30/94 $9,368 $0 $7,376 $16,744
6/30/95 $9,690 $0 $8,978 $18,668
6/30/96 $9,409 $0 $10,008 $19,417
6/30/97 $9,399 $0 $11,395 $20,794
6/30/98 $9,710 $0 $13,172 $22,882
32
<PAGE>
Pioneer Bond Fund B
<TABLE>
<S> <C> <C> <C> <C> <C>
Initial Sales Charge Shares Purchased Net Asset Value Initial Net
Date Investment Offering Price Included Per Share Asset Value
4/30/94 $10,000 $9.21 0.00% 1085.776 $9.21 $10,000
</TABLE>
Dividends and Capital Gains Reinvested
Value of Shares
From Cap. Gains From Dividends
Date From Investment Reinvested Reinvested Total Value
6/30/94 $9,794 $0 $102 $9,896
6/30/95 $10,109 $0 $833 $10,942
6/30/96 $9,794 $0 $1,492 $11,286
6/30/97 $9,804 $0 $2,186 $11,990
6/30/98 $10,130 $0 $2,965 $13,095
Value of shares if redeemed $12,895
33
<PAGE>
Pioneer Bond Fund C
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Initial Sales Charge Shares Purchased Net Asset Value Initial Net
Date Investment Offering Price Included Per Share Asset Value
1/31/96 $10,000 $9.54 0.00% 1048.218 $9.54 $10,000
</TABLE>
Dividends and Capital Gains Reinvested
Value of Shares
From Cap. Gains From Dividends
Date From Investment Reinvested Reinvested Total Value
6/30/96 $9,455 $0 $245 $9,700
6/30/97 $9,455 $0 $839 $10,294
6/30/98 $9,759 $0 $1,474 $11,233
Value of shares if redeemed $11,233
34
<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 also be used, if appropriate. The
indices are not available for direct investment. The data presented are not
meant to be indicative of the performance of the Fund, do not reflect past
performance and do not guarantee future results.
S&P 500
This index is a readily available, carefully constructed, market value weighted
benchmark of common stock performance. Currently, the S&P 500 includes 500 of
the largest stocks (in terms of stock market value) in the U.S.
DOW JONES INDUSTRIAL AVERAGE
This is a total return index based on the performance of stocks of 30 blue chip
companies widely held by individuals and institutional investors. The 30 stocks
represent about a fifth of the $8 trillion-plus market value of all U.S. stocks
and about a fourth of the value of stocks listed on the New York Stock Exchange
(NYSE).
U.S. SMALL STOCK INDEX
This index is a market value weighted index of the ninth and tenth deciles of
the NYSE, plus stocks listed on the American Stock Exchange and over the counter
with the same or less capitalization as the upper bound of the NYSE ninth
decile.
U.S. INFLATION
The Consumer Price Index for All Urban Consumers (CPI-U), not seasonally
adjusted, is used to measure inflation, which is the rate of change of consumer
goods prices. Unfortunately, the inflation rate as derived by the CPI is not
measured over the same period as the other asset returns. All of the security
returns are measured from one month-end to the next month-end. CPI commodity
prices are collected during the month. Thus, measured inflation rates lag the
other series by about one-half month. Prior to January 1978, the CPI (as
compared with CPI-U) was used. Both inflation measures are constructed by the
U.S. Department of Labor, Bureau of Labor Statistics, Washington, DC.
S&P/BARRA INDEXES
The S&P/BARRA Growth and Value Indexes are constructed by dividing the stocks in
the S&P 500 according to price-to-book ratios. The Growth Index contains stocks
with higher price-to-book ratios, and the Value Index contains stocks with lower
price-to-book ratios. Both indexes are market capitalization weighted.
MERRILL LYNCH MICRO-CAP INDEX
The Merrill Lynch Micro-Cap Index represents the performance of 2,036 stocks
ranging in market capitalization from $50 million to $220 million. Index returns
are calculated monthly.
35
<PAGE>
LONG-TERM U.S. GOVERNMENT BONDS
The total returns on long-term government bonds after 1977 are constructed with
data from The Wall Street Journal and are calculated as the change in the flat
price or and-interest price. From 1926 to 1976, data are obtained from the
government bond file at the Center for Research in Security Prices (CRSP),
Graduate School of Business, University of Chicago. Each year, a one-bond
portfolio with a term of approximately 20 years and a reasonably current coupon
was used and whose returns did not reflect potential tax benefits, impaired
negotiability or special redemption or call privileges. Where callable bonds had
to be used, the term of the bond was assumed to be a simple average of the
maturity and first call dates minus the current date. The bond was "held" for
the calendar year and returns were computed.
INTERMEDIATE-TERM U.S. GOVERNMENT BONDS
Total returns of intermediate-term government bonds after 1987 are calculated
from The Wall Street Journal prices, using the change in flat price. Returns
from 1934 to 1986 are obtained from the CRSP government bond file.
Each year, one-bond portfolios are formed, the bond chosen is the shortest
noncallable bond with a maturity not less than five years, and this bond is
"held" for the calendar year. Monthly returns are computed. (Bonds with impaired
negotiability or special redemption privileges are omitted, as are partially or
fully tax-exempt bonds starting with 1943.) From 1934 to 1942, almost all bonds
with maturities near five years were partially or fully tax-exempt and were
selected using the rules described above. Personal tax rates were generally low
in that period, so that yields on tax-exempt bonds were similar to yields on
taxable bonds. From 1926 to 1933, there are few bonds suitable for construction
of a series with a five-year maturity. For this period, five-year bond yield
estimates are used.
MORGAN STANLEY CAPITAL INTERNATIONAL ("MSCI")
These indices are in US dollar terms with gross dividends reinvested. MSCI All
Country indices represent both the developed and the emerging markets for a
particular region. These indices are unmanaged. The free indices exclude shares
which are not readily purchased by non-local investors. MSCI's international
indices are based on the share prices of approximately 1,700 companies listed on
stock exchanges in the 22 countries that make up the MSCI World Index. MSCI's
emerging market indices are comprised of approximately 1000 stocks from 26
countries.
Countries in the MSCI EAFE Index are: Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and
United Kingdom.
Countries in the MSCI Emerging Markets Free Index are: Argentina, Brazil, Chile,
China Free, Czech Republic, Colombia, Greece, Hungary, India, Indonesia Free,
Israel, Jordan, Korea (at 50%), Malaysia Free, Mexico Free, Pakistan, Peru,
Philippines Free, Poland, Portugal, South Africa, Sri Lanka, Taiwan (at 50%),
Thailand Free, Turkey and Venezuela.
MSCI All Country (AC) Asia Free ex Japan: This index is made up of the following
12 countries: China Free, Hong Kong, India, Indonesia Free, Korea @50%, Malaysia
Free, Pakistan, Philippines Free, Singapore Free, Sri Lanka, Taiwan @50%, and
Thailand Free.
MSCI All Country (AC) Asia Pacific Free ex Japan: This index is made up of the
following 14 countries: Australia, China Free, Hong Kong, India, Indonesia Free,
Korea @50%, Malaysia Free,
36
<PAGE>
New Zealand, Pakistan, Philippines Free, Singapore Free, Sri Lanka, Taiwan @50%,
and Thailand Free.
6-MONTH CDs
Data sources include the Federal Reserve Bulletin and The Wall Street Journal.
LONG-TERM U.S. CORPORATE BONDS
Since 1969, corporate bond total returns are represented by the Salomon Brothers
Long-Term High-Grade Corporate Bond Index. As most large corporate bond
transactions take place over the counter, a major dealer is the natural source
of these data. The index includes nearly all Aaa- and Aa-rated bonds with at
least 10 years to maturity. If a bond is downgraded during a particular month,
its return for the month is included in the index before removing the bond from
future portfolios.
From 1926 to 1968 the total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946 to 1968,
Ibbotson and Sinquefield backdated the Salomon Brothers' index, using Salomon
Brothers' monthly yield data with a methodology similar to that used by Salomon
Brothers for 1969 to 1995. Capital appreciation returns were calculated from
yields assuming (at the beginning of each monthly holding period) a 20-year
maturity, a bond price equal to par, and a coupon equal to the
beginning-of-period yield. For the period 1926 to 1945, Standard & Poor's
monthly high-grade corporate composite yield data were used, assuming a 4%
coupon and a 20-year maturity. The conventional present-value formula for bond
price for the beginning and end-of-month prices was used. (This formula is
presented in Ross, Stephen A., and Westerfield, Randolph W., Corporate Finance,
Times Mirror/Mosby, St. Louis, 1990, p. 97 ["Level-Coupon Bonds"].) The monthly
income return was assumed to be one-twelfth the coupon.
U.S. (30-DAY) TREASURY BILLS
For the U.S. Treasury Bill Index, data from The Wall Street Journal are used
after 1977; the CRSP government bond file is the source until 1976. Each month a
one-bill portfolio containing the shortest-term bill having not less than one
month to maturity is constructed. (The bill's original term to maturity is not
relevant.) To measure holding period returns for the one-bill portfolio, the
bill is priced as of the last trading day of the previous month-end and as of
the last trading day of the current month.
NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT TRUSTS ("NAREIT")
EQUITY REIT INDEX
All of the data are based upon the last closing price of the month for all
tax-qualified REITs listed on the NYSE, AMEX and NASDAQ. The data are
market-value-weighted. Prior to 1987 REITs were added to the index the January
following their listing. Since 1987 newly formed or listed REITs are added to
the total shares outstanding figure in the month that the shares are issued.
Only common shares issued by the REIT are included in the index. The total
return calculation is based upon the weighting at the beginning of the period.
Only those REITs listed for the entire period are used in the total return
calculation. Dividends are included in the month based upon their payment date.
There is no smoothing of income. Liquidating dividends, whether full or partial,
are treated as income.
37
<PAGE>
RUSSELL U.S. EQUITY INDEXES
The Russell 3000(R) Index (the "Russell 3000") is comprised of the 3,000 largest
U.S. companies as determined by market capitalization representing approximately
98% of the U.S. equity market. The average market capitalization is
approximately $2.8 billion. The Russell 2500TM Index measures performance of the
2,500 smallest companies in the Russell 3000. The average market capitalization
is approximately $733.4 million, and the largest company in the index has an
approximate market capitalization of $2.9 billion. The Russell 2000(R) Index
measures performance of the 2,000 smallest stocks in the Russell 3000; the
largest company in the index has a market capitalization of approximately $1.1
billion. The Russell 1000(R) Index (the "Russell 1000") measures the performance
of the 1,000 largest companies in the Russell 3000. The average market
capitalization is approximately $7.6 billion. The smallest company in the index
has an approximate market capitalization of $1.1 billion. The Russell MidcapTM
Index measures performance of the 800 smallest companies in the Russell 1000.
The largest company in the index has an approximate market capitalization of
$8.0 billion.
The Russell indexes are reconstituted annually as of July 1, based on May 31
market capitalization rankings.
WILSHIRE REAL ESTATE SECURITIES INDEX
The Wilshire Real Estate Securities Index is a market capitalization weighted
index of 120 publicly traded real estate securities, such as REITs, real estate
operating companies ("REOCs") and partnerships.
The index contains performance data on five major categories of property:
office, retail, industrial, apartment and miscellaneous. The companies in the
index are 91.66% equity and hybrid REITs and 8.33% REOCs.
STANDARD & POOR'S MIDCAP 400 INDEX
The S&P 400 is a market-capitalization-weighted index. The performance data for
the index were calculated by taking the stocks presently in the index and
tracking them backwards in time as long as there were prices reported. No
attempt was made to determine what stocks "might have been" in the S&P 400 five
or ten years ago had it existed. Dividends are reinvested on a monthly basis
prior to June 30, 1991, and are reinvested daily thereafter.
LIPPER BALANCED FUNDS INDEX
This index represents equally weighted performance, adjusted for capital gains
distributions and income dividends, of approximately 30 of the largest funds
with a primary objective of conserving principal by maintaining at all times a
balanced portfolio of stocks and bonds. Typically, the stock/bond ratio ranges
around 60%/40%.
BANK SAVINGS ACCOUNT
Data sources include the U.S. League of Savings Institutions Sourcebook; average
annual yield on savings deposits in FSLIC [FDIC] insured savings institutions
for the years 1963 to 1987; and The Wall Street Journal thereafter.
Sources: Ibbotson Associates, Towers Data Systems, Lipper Analytical Services,
Inc. and PGI
38
<PAGE>
<TABLE>
<C>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C> <C> <C> <C> <C> <C>
Dow S&P/ S&P/
S&P Jones U.S. Small BARRA BARRA Merrill Lynch
500 Industrial Stock U.S. 500 500 Micro-Cap
Average Index Inflation Growth Value Index
- ----------------------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 11.62 N/A 0.28 -1.49 N/A N/A N/A
Dec 1927 37.49 N/A 22.10 -2.08 N/A N/A N/A
Dec 1928 43.61 55.38 39.69 -0.97 N/A N/A N/A
Dec 1929 -8.42 -13.64 -51.36 0.20 N/A N/A N/A
Dec 1930 -24.90 -30.22 -38.15 -6.03 N/A N/A N/A
Dec 1931 -43.34 -49.03 -49.75 -9.52 N/A N/A N/A
Dec 1932 -8.19 -16.88 -5.39 -10.30 N/A N/A N/A
Dec 1933 53.99 73.71 142.87 0.51 N/A N/A N/A
Dec 1934 -1.44 8.07 24.22 2.03 N/A N/A N/A
Dec 1935 47.67 43.77 40.19 2.99 N/A N/A N/A
Dec 1936 33.92 30.23 64.80 1.21 N/A N/A N/A
Dec 1937 -35.03 -28.88 -58.01 3.10 N/A N/A N/A
Dec 1938 31.12 33.16 32.80 -2.78 N/A N/A N/A
Dec 1939 -0.41 1.31 0.35 -0.48 N/A N/A N/A
Dec 1940 -9.78 -7.96 -5.16 0.96 N/A N/A N/A
Dec 1941 -11.59 -9.88 -9.00 9.72 N/A N/A N/A
Dec 1942 20.34 14.13 44.51 9.29 N/A N/A N/A
Dec 1943 25.90 19.06 88.37 3.16 N/A N/A N/A
Dec 1944 19.75 17.19 53.72 2.11 N/A N/A N/A
Dec 1945 36.44 31.60 73.61 2.25 N/A N/A N/A
Dec 1946 -8.07 -4.40 -11.63 18.16 N/A N/A N/A
Dec 1947 5.71 7.61 0.92 9.01 N/A N/A N/A
Dec 1948 5.50 4.27 -2.11 2.71 N/A N/A N/A
Dec 1949 18.79 20.92 19.75 -1.80 N/A N/A N/A
Dec 1950 31.71 26.40 38.75 5.79 N/A N/A N/A
Dec 1951 24.02 21.77 7.80 5.87 N/A N/A N/A
Dec 1952 18.37 14.58 3.03 0.88 N/A N/A N/A
Dec 1953 -0.99 2.02 -6.49 0.62 N/A N/A N/A
Dec 1954 52.62 51.25 60.58 -0.50 N/A N/A N/A
Dec 1955 31.56 26.58 20.44 0.37 N/A N/A N/A
Dec 1956 6.56 7.10 4.28 2.86 N/A N/A N/A
Dec 1957 -10.78 -8.63 -14.57 3.02 N/A N/A N/A
Dec 1958 43.36 39.31 64.89 1.76 N/A N/A N/A
Dec 1959 11.96 20.21 16.40 1.50 N/A N/A N/A
Dec 1960 0.47 -6.14 -3.29 1.48 N/A N/A N/A
Dec 1961 26.89 22.60 32.09 0.67 N/A N/A N/A
Dec 1962 -8.73 -7.43 -11.90 1.22 N/A N/A N/A
Dec 1963 22.80 20.83 23.57 1.65 N/A N/A N/A
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C> <C> <C> <C> <C> <C>
Dow S&P/ S&P/
S&P Jones U.S. Small BARRA 500 BARRA Merrill Lynch
500 Industrial Stock U.S. Growth 500 Micro-Cap
Average Index Inflation Value Index
- ----------------------------------------------------------------------------------------------------------------------
Dec 1964 16.48 18.85 23.52 1.19 N/A N/A N/A
Dec 1965 12.45 14.39 41.75 1.92 N/A N/A N/A
Dec 1966 -10.06 -15.78 -7.01 3.35 N/A N/A N/A
Dec 1967 23.98 19.16 83.57 3.04 N/A N/A N/A
Dec 1968 11.06 7.93 35.97 4.72 N/A N/A N/A
Dec 1969 -8.50 -11.78 -25.05 6.11 N/A N/A N/A
Dec 1970 4.01 9.21 -17.43 5.49 N/A N/A N/A
Dec 1971 14.31 9.83 16.50 3.36 N/A N/A N/A
Dec 1972 18.98 18.48 4.43 3.41 N/A N/A N/A
Dec 1973 -14.66 -13.28 -30.90 8.80 N/A N/A N/A
Dec 1974 -26.47 -23.58 -19.95 12.20 N/A N/A N/A
Dec 1975 37.20 44.75 52.82 7.01 31.72 43.38 N/A
Dec 1976 23.84 22.82 57.38 4.81 13.84 34.93 N/A
Dec 1977 -7.18 -12.84 25.38 6.77 -11.82 -2.57 N/A
Dec 1978 6.56 2.79 23.46 9.03 6.78 6.16 27.76
Dec 1979 18.44 10.55 43.46 13.31 15.72 21.16 43.18
Dec 1980 32.42 22.17 39.88 12.40 39.40 23.59 32.32
Dec 1981 -4.91 -3.57 13.88 8.94 -9.81 0.02 9.18
Dec 1982 21.41 27.11 28.01 3.87 22.03 21.04 33.62
Dec 1983 22.51 25.97 39.67 3.80 16.24 28.89 42.44
Dec 1984 6.27 1.31 -6.67 3.95 2.33 10.52 -14.97
Dec 1985 32.16 33.55 24.66 3.77 33.31 29.68 22.89
Dec 1986 18.47 27.10 6.85 1.13 14.50 21.67 3.45
Dec 1987 5.23 5.48 -9.30 4.41 6.50 3.68 -13.84
Dec 1988 16.81 16.14 22.87 4.42 11.95 21.67 22.76
Dec 1989 31.49 32.19 10.18 4.65 36.40 26.13 8.06
Dec 1990 -3.17 -0.56 -21.56 6.11 0.20 -6.85 -29.55
Dec 1991 30.55 24.19 44.63 3.06 38.37 22.56 57.44
Dec 1992 7.67 7.41 23.35 2.90 5.07 10.53 36.62
Dec 1993 9.99 16.94 20.98 2.75 1.68 18.60 31.32
Dec 1994 1.31 5.06 3.11 2.67 3.13 -0.64 1.81
Dec 1995 37.43 36.84 34.46 2.54 38.13 36.99 30.70
Dec 1996 23.07 28.84 17.62 3.32 23.96 21.99 13.88
Dec 1997 33.36 24.88 22.78 1.92 36.52 29.98 24.61
</TABLE>
40
<PAGE>
<TABLE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C> <C> <C> <C> <C>
Long- Intermediate- MSCI Long-
Term Term U.S. EAFE 6- Term U.S. U.S.
U.S. Gov't Government (Net of Month Corporate T-Bill
Bonds Bonds Taxes) CDs Bonds (30-Day)
- ------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A
Dec 1926 7.77 5.38 N/A N/A 7.37 3.27
Dec 1927 8.93 4.52 N/A N/A 7.44 3.12
Dec 1928 0.10 0.92 N/A N/A 2.84 3.56
Dec 1929 3.42 6.01 N/A N/A 3.27 4.75
Dec 1930 4.66 6.72 N/A N/A 7.98 2.41
Dec 1931 -5.31 -2.32 N/A N/A -1.85 1.07
Dec 1932 16.84 8.81 N/A N/A 10.82 0.96
Dec 1933 -0.07 1.83 N/A N/A 10.38 0.30
Dec 1934 10.03 9.00 N/A N/A 13.84 0.16
Dec 1935 4.98 7.01 N/A N/A 9.61 0.17
Dec 1936 7.52 3.06 N/A N/A 6.74 0.18
Dec 1937 0.23 1.56 N/A N/A 2.75 0.31
Dec 1938 5.53 6.23 N/A N/A 6.13 -0.02
Dec 1939 5.94 4.52 N/A N/A 3.97 0.02
Dec 1940 6.09 2.96 N/A N/A 3.39 0.00
Dec 1941 0.93 0.50 N/A N/A 2.73 0.06
Dec 1942 3.22 1.94 N/A N/A 2.60 0.27
Dec 1943 2.08 2.81 N/A N/A 2.83 0.35
Dec 1944 2.81 1.80 N/A N/A 4.73 0.33
Dec 1945 10.73 2.22 N/A N/A 4.08 0.33
Dec 1946 -0.10 1.00 N/A N/A 1.72 0.35
Dec 1947 -2.62 0.91 N/A N/A -2.34 0.50
Dec 1948 3.40 1.85 N/A N/A 4.14 0.81
Dec 1949 6.45 2.32 N/A N/A 3.31 1.10
Dec 1950 0.06 0.70 N/A N/A 2.12 1.20
Dec 1951 -3.93 0.36 N/A N/A -2.69 1.49
Dec 1952 1.16 1.63 N/A N/A 3.52 1.66
Dec 1953 3.64 3.23 N/A N/A 3.41 1.82
Dec 1954 7.19 2.68 N/A N/A 5.39 0.86
Dec 1955 -1.29 -0.65 N/A N/A 0.48 1.57
Dec 1956 -5.59 -0.42 N/A N/A -6.81 2.46
Dec 1957 7.46 7.84 N/A N/A 8.71 3.14
Dec 1958 -6.09 -1.29 N/A N/A -2.22 1.54
Dec 1959 -2.26 -0.39 N/A N/A -0.97 2.95
Dec 1960 13.78 11.76 N/A N/A 9.07 2.66
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C> <C> <C> <C> <C>
Long- Intermediate- MSCI Long-
Term Term U.S. EAFE 6- Term U.S. U.S.
U.S. Gov't Government (Net of Month Corporate T-Bill
Bonds Bonds Taxes) CDs Bonds (30-Day)
- ------------------------------------------------------------------------------------------------------
Dec 1961 0.97 1.85 N/A N/A 4.82 2.13
Dec 1962 6.89 5.56 N/A N/A 7.95 2.73
Dec 1963 1.21 1.64 N/A N/A 2.19 3.12
Dec 1964 3.51 4.04 N/A 4.18 4.77 3.54
Dec 1965 0.71 1.02 N/A 4.68 -0.46 3.93
Dec 1966 3.65 4.69 N/A 5.76 0.20 4.76
Dec 1967 -9.18 1.01 N/A 5.48 -4.95 4.21
Dec 1968 -0.26 4.54 N/A 6.44 2.57 5.21
Dec 1969 -5.07 -0.74 N/A 8.71 -8.09 6.58
Dec 1970 12.11 16.86 -11.66 7.06 18.37 6.52
Dec 1971 13.23 8.72 29.59 5.36 11.01 4.39
Dec 1972 5.69 5.16 36.35 5.38 7.26 3.84
Dec 1973 -1.11 4.61 -14.92 8.60 1.14 6.93
Dec 1974 4.35 5.69 -23.16 10.20 -3.06 8.00
Dec 1975 9.20 7.83 35.39 6.51 14.64 5.80
Dec 1976 16.75 12.87 2.54 5.22 18.65 5.08
Dec 1977 -0.69 1.41 18.06 6.12 1.71 5.12
Dec 1978 -1.18 3.49 32.62 10.21 -0.07 7.18
Dec 1979 -1.23 4.09 4.75 11.90 -4.18 10.38
Dec 1980 -3.95 3.91 22.58 12.33 -2.76 11.24
Dec 1981 1.86 9.45 -2.28 15.50 -1.24 14.71
Dec 1982 40.36 29.10 -1.86 12.18 42.56 10.54
Dec 1983 0.65 7.41 23.69 9.65 6.26 8.80
Dec 1984 15.48 14.02 7.38 10.65 16.86 9.85
Dec 1985 30.97 20.33 56.16 7.82 30.09 7.72
Dec 1986 24.53 15.14 69.44 6.30 19.85 6.16
Dec 1987 -2.71 2.90 24.63 6.58 -0.27 5.47
Dec 1988 9.67 6.10 28.27 8.15 10.70 6.35
Dec 1989 18.11 13.29 10.54 8.27 16.23 8.37
Dec 1990 6.18 9.73 -23.45 7.85 6.78 7.81
Dec 1991 19.30 15.46 12.13 4.95 19.89 5.60
Dec 1992 8.05 7.19 -12.17 3.27 9.39 3.51
Dec 1993 18.24 11.24 32.56 2.88 13.19 2.90
Dec 1994 -7.77 -5.14 7.78 5.40 -5.76 3.90
Dec 1995 31.67 16.80 11.21 5.21 27.20 5.60
Dec 1996 -0.93 2.10 6.05 5.21 1.40 5.21
Dec 1997 15.85 8.38 1.78 5.71 12.95 5.26
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C> <C> <C> <C> <C> <C>
NAREIT Lipper MSCI
Equity Russell Wilshire Balanced Emerging Bank
REIT 2000 Real Estate S&P Fund Markets Savings
Index Index Securities 400 Index Free Index Account
- -----------------------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 N/A N/A N/A N/A N/A N/A N/A
Dec 1927 N/A N/A N/A N/A N/A N/A N/A
Dec 1928 N/A N/A N/A N/A N/A N/A N/A
Dec 1929 N/A N/A N/A N/A N/A N/A N/A
Dec 1930 N/A N/A N/A N/A N/A N/A 5.30
Dec 1931 N/A N/A N/A N/A N/A N/A 5.10
Dec 1932 N/A N/A N/A N/A N/A N/A 4.10
Dec 1933 N/A N/A N/A N/A N/A N/A 3.40
Dec 1934 N/A N/A N/A N/A N/A N/A 3.50
Dec 1935 N/A N/A N/A N/A N/A N/A 3.10
Dec 1936 N/A N/A N/A N/A N/A N/A 3.20
Dec 1937 N/A N/A N/A N/A N/A N/A 3.50
Dec 1938 N/A N/A N/A N/A N/A N/A 3.50
Dec 1939 N/A N/A N/A N/A N/A N/A 3.40
Dec 1940 N/A N/A N/A N/A N/A N/A 3.30
Dec 1941 N/A N/A N/A N/A N/A N/A 3.10
Dec 1942 N/A N/A N/A N/A N/A N/A 3.00
Dec 1943 N/A N/A N/A N/A N/A N/A 2.90
Dec 1944 N/A N/A N/A N/A N/A N/A 2.80
Dec 1945 N/A N/A N/A N/A N/A N/A 2.50
Dec 1946 N/A N/A N/A N/A N/A N/A 2.20
Dec 1947 N/A N/A N/A N/A N/A N/A 2.30
Dec 1948 N/A N/A N/A N/A N/A N/A 2.30
Dec 1949 N/A N/A N/A N/A N/A N/A 2.40
Dec 1950 N/A N/A N/A N/A N/A N/A 2.50
Dec 1951 N/A N/A N/A N/A N/A N/A 2.60
Dec 1952 N/A N/A N/A N/A N/A N/A 2.70
Dec 1953 N/A N/A N/A N/A N/A N/A 2.80
Dec 1954 N/A N/A N/A N/A N/A N/A 2.90
Dec 1955 N/A N/A N/A N/A N/A N/A 2.90
Dec 1956 N/A N/A N/A N/A N/A N/A 3.00
Dec 1957 N/A N/A N/A N/A N/A N/A 3.30
Dec 1958 N/A N/A N/A N/A N/A N/A 3.38
Dec 1959 N/A N/A N/A N/A N/A N/A 3.53
Dec 1960 N/A N/A N/A N/A 5.77 N/A 3.86
Dec 1961 N/A N/A N/A N/A 20.59 N/A 3.90
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C> <C> <C> <C> <C> <C>
NAREIT Lipper MSCI
Equity Russell Wilshire Balanced Emerging Bank
REIT 2000 Real Estate S&P Fund Markets Savings
Index Index Securities 400 Index Free Index Account
- -----------------------------------------------------------------------------------------------------------------------
Dec 1962 N/A N/A N/A N/A -6.80 N/A 4.08
Dec 1963 N/A N/A N/A N/A 13.10 N/A 4.17
Dec 1964 N/A N/A N/A N/A 12.36 N/A 4.19
Dec 1965 N/A N/A N/A N/A 9.80 N/A 4.23
Dec 1966 N/A N/A N/A N/A -5.86 N/A 4.45
Dec 1967 N/A N/A N/A N/A 15.09 N/A 4.67
Dec 1968 N/A N/A N/A N/A 13.97 N/A 4.68
Dec 1969 N/A N/A N/A N/A -9.01 N/A 4.80
Dec 1970 N/A N/A N/A N/A 5.62 N/A 5.14
Dec 1971 N/A N/A N/A N/A 13.90 N/A 5.30
Dec 1972 8.01 N/A N/A N/A 11.13 N/A 5.37
Dec 1973 -15.52 N/A N/A N/A -12.24 N/A 5.51
Dec 1974 -21.40 N/A N/A N/A -18.71 N/A 5.96
Dec 1975 19.30 N/A N/A N/A 27.10 N/A 6.21
Dec 1976 47.59 N/A N/A N/A 26.03 N/A 6.23
Dec 1977 22.42 N/A N/A N/A -0.72 N/A 6.39
Dec 1978 10.34 N/A 13.04 N/A 4.80 N/A 6.56
Dec 1979 35.86 43.09 70.81 N/A 14.67 N/A 7.29
Dec 1980 24.37 38.58 22.08 N/A 19.70 N/A 8.78
Dec 1981 6.00 2.03 7.18 N/A 1.86 N/A 10.71
Dec 1982 21.60 24.95 24.47 22.68 30.63 N/A 11.19
Dec 1983 30.64 29.13 27.61 26.10 17.44 N/A 9.71
Dec 1984 20.93 -7.30 20.64 1.18 7.46 N/A 9.92
Dec 1985 19.10 31.05 22.20 35.58 29.83 N/A 9.02
Dec 1986 19.16 5.68 20.30 16.21 18.43 N/A 7.84
Dec 1987 -3.64 -8.77 -7.86 -2.03 4.13 N/A 6.92
Dec 1988 13.49 24.89 24.18 20.87 11.18 40.43 7.20
Dec 1989 8.84 16.24 2.37 35.54 19.70 64.96 7.91
Dec 1990 -15.35 -19.51 -33.46 -5.12 0.66 -10.55 7.80
Dec 1991 35.70 46.05 20.03 50.10 25.83 59.91 4.61
Dec 1992 14.59 18.41 7.36 11.91 7.46 11.40 2.89
Dec 1993 19.65 18.91 15.24 13.96 11.95 74.83 2.73
Dec 1994 3.17 -1.82 1.64 -3.57 -2.05 -7.32 4.96
Dec 1995 15.27 28.44 13.65 30.94 24.89 -5.21 5.24
Dec 1996 35.26 16.49 36.87 19.20 13.01 6.03 4.95
Dec 1997 20.29 22.36 19.80 32.26 20.05 -11.59 5.17
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C>
MSCI All Country (AC) MSCI All Country
Asia Free ex Japan (AC) Asia Pacific
Free ex Japan
- ------------------------------------------------------------
Dec 1925 N/A N/A
Dec 1926 N/A N/A
Dec 1927 N/A N/A
Dec 1928 N/A N/A
Dec 1929 N/A N/A
Dec 1930 N/A N/A
Dec 1931 N/A N/A
Dec 1932 N/A N/A
Dec 1933 N/A N/A
Dec 1934 N/A N/A
Dec 1935 N/A N/A
Dec 1936 N/A N/A
Dec 1937 N/A N/A
Dec 1938 N/A N/A
Dec 1939 N/A N/A
Dec 1940 N/A N/A
Dec 1941 N/A N/A
Dec 1942 N/A N/A
Dec 1943 N/A N/A
Dec 1944 N/A N/A
Dec 1945 N/A N/A
Dec 1946 N/A N/A
Dec 1947 N/A N/A
Dec 1948 N/A N/A
Dec 1949 N/A N/A
Dec 1950 N/A N/A
Dec 1951 N/A N/A
Dec 1952 N/A N/A
Dec 1953 N/A N/A
Dec 1954 N/A N/A
Dec 1955 N/A N/A
Dec 1956 N/A N/A
Dec 1957 N/A N/A
Dec 1958 N/A N/A
Dec 1959 N/A N/A
Dec 1960 N/A N/A
Dec 1961 N/A N/A
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<S> <C> <C>
MSCI All Country (AC) MSCI All Country
Asia Free ex Japan (AC) Asia Pacific
Free ex Japan
- ------------------------------------------------------------
Dec 1962 N/A N/A
Dec 1963 N/A N/A
Dec 1964 N/A N/A
Dec 1965 N/A N/A
Dec 1966 N/A N/A
Dec 1967 N/A N/A
Dec 1968 N/A N/A
Dec 1969 N/A N/A
Dec 1970 N/A N/A
Dec 1971 N/A N/A
Dec 1972 N/A N/A
Dec 1973 N/A N/A
Dec 1974 N/A N/A
Dec 1975 N/A N/A
Dec 1976 N/A N/A
Dec 1977 N/A N/A
Dec 1978 N/A N/A
Dec 1979 N/A N/A
Dec 1980 N/A N/A
Dec 1981 N/A N/A
Dec 1982 N/A N/A
Dec 1983 N/A N/A
Dec 1984 N/A N/A
Dec 1985 N/A N/A
Dec 1986 N/A N/A
Dec 1987 N/A N/A
Dec 1988 30.00 30.45
Dec 1989 32.13 21.43
Dec 1990 -6.54 -11.86
Dec 1991 30.98 32.40
Dec 1992 21.81 9.88
Dec 1993 103.39 84.94
Dec 1994 -16.94 -12.59
Dec 1995 4.00 10.00
Dec 1996 10.05 8.08
Dec 1997 -40.31 -34.20
Source: Lipper Analytical Services. Inc
</TABLE>
46
<PAGE>
APPENDIX C
OTHER PIONEER INFORMATION
The Pioneer group of mutual funds was established in 1928 with the
creation of Pioneer Fund. Pioneer is one of the oldest and most experienced
money managers in the United States.
As of December 31, 1997, PMC employed a professional investment staff
of 58, with a combined average of 12 years' experience in the financial services
industry.
Total assets of all Pioneer mutual funds at December 31, 1997, were
approximately $19.8 billion representing 1,177,148 shareholder accounts, 791,468
non-retirement accounts and 385,680 retirement accounts.
- --------
47
