File No. 2-79140
File No. 811-3564
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for Use
of the Commission
Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Pioneer Income Fund
(Name of Registrant as Specified in Its Charter
Pioneer Income Fund
(Name of Person(s) Filing Proxy Statement)
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PIONEER INCOME FUND
60 State Street
Boston, Massachusetts 02109
1-[800-225-6292]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, JANUARY 14, 1997
A Special Meeting of Shareholders of Pioneer Income Fund, a Delaware
business trust (the "Fund") will be held at the offices of Hale and Dorr, 60
State Street, 26th Floor, Boston, Massachusetts 02109, at 2:00 p.m., Boston
time, on Tuesday, January 14, 1997 to consider and act upon the following
Proposals:
(1) To approve amendments to the Fund's investment objective;
(2) To approve a new Management Contract between the Fund and
Pioneering Management Corporation, the Fund's investment
adviser ("PMC"), increasing the management fee payable to PMC;
(3) To elect the eight (8) Trustees named in the attached Proxy
Statement to serve on the Board of Trustees until their
successors have been duly elected and qualified;
(4) To ratify the selection of Arthur Andersen LLP as the Fund's
independent public accountants for the fiscal year ending
December 31, 1997;
(5) To approve amendments to the Fund's fundamental investment
policies, as described in the proxy statement; and
(6) To transact such other business as may properly come before
the meeting or any adjournments thereof.
Shareholders of record as of the close of business on November 7, 1996
are entitled to vote at the meeting or any adjournments thereof. The Proxy
Statement and proxy card are being mailed to shareholders on or about November
22, 1996.
By Order Of The Board of Trustees
Joseph P. Barri, Secretary
Boston, Massachusetts
November 22, 1996
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WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE AND
RETURN THE ENCLOSED PROXY CARD. YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE
MEETING.
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PIONEER INCOME FUND
60 State Street
Boston, Massachusetts 02109
1-800-225-6292
SPECIAL MEETING OF SHAREHOLDERS
JANUARY 14, 1997
PROXY STATEMENT
This Proxy Statement is furnished to shareholders of Pioneer Income
Fund, a Delaware business trust (the "Fund"), in connection with the
solicitation of proxies by the Board of Trustees for use at the Special Meeting
of Shareholders of the Fund, to be held at the offices of Hale and Dorr, 60
State Street, 26th Floor, Boston, Massachusetts 02109, at 2:00 p.m., Boston
time, on Tuesday, January 14, 1997, and at any adjournments thereof (the
"Meeting"). This Proxy Statement and enclosed proxy are being mailed to
shareholders on or about November 22, 1996. The Fund's annual report for its
fiscal period ended December 31, 1995 and semiannual report for its fiscal
period ended June 30, 1996 may be obtained free of charge by writing to the Fund
at its executive offices, 60 State Street, Boston, Massachusetts 02109 or by
calling [1-800-225-6292].
Shareholders of record as of the close of business on November 7, 1996
(the "Record Date") are entitled to vote on all business of the Meeting or any
adjournments thereof. As of the Record Date, there were outstanding ____________
shares of beneficial interest of the Fund. To the knowledge of the management of
the Fund, no person beneficially owned more than 5% of the outstanding shares of
the Fund as of the Record Date.
PROPOSAL 1
APPROVAL OF AMENDMENT TO THE FUND'S INVESTMENT OBJECTIVE
At a Meeting held on July 16, 1996, the Trustees of the Fund
unanimously approved and voted to recommend that the shareholders of the Fund
approve a change in the Fund's investment objective from current income
consistent with the preservation and conservation of capital to capital growth
and current income by actively
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managing investments in a diversified portfolio of equity securities and bonds.
Current Objective and Related Policies
In pursuing its objective of current income consistent with the
preservation and conservation of capital, the Fund invests in dividend paying
common stocks, preferred stocks, bonds and debentures, which may or may not be
convertible into common stocks. Capital growth is a secondary consideration in
the management of the Fund's portfolio. At September 30, 1996, 37% of the Fund's
net assets were invested in equity securities, 1% were invested in cash and cash
equivalents and 62% were invested in debt securities.
Reasons for Change
Pioneering Management Corporation, the Fund's investment adviser
("PMC"), 60 State Street, Boston, Massachusetts 02109, is proposing the change
to enable the Fund to invest more extensively in equity securities that do not
pay current income. At present, unlike many income funds, the Fund invests
extensively in income producing equity securities that also provide growth
opportunities.
In PMC's view, the Fund is already managed in a style with significant
similarities to many balanced funds. PMC believes that the proposed change will
enable PMC more fully to realize this approach. Pioneer Funds Distributor, Inc.,
the Fund's principal underwriter, has also advised the Trustees that it believes
it may be able more effectively to market the Fund as a balanced Fund than as an
income Fund because of the Fund's atypical equity oriented approach to achieving
current income. The potential for significant expansion of the Fund's assets
through increased investment in the Fund could, over the longer-term, result in
increased economies of scale reducing the costs and expenses of operating the
Fund.
Changes in Related Investment Policies
Subject to shareholder approval of the proposed change in investment
objectives, the Fund's name will be changed to "Pioneer Balanced Fund" and the
Fund's current policy of investing only in dividend-paying common stocks,
preferred stocks, bonds and debentures (which may or may not be convertible into
common stocks) will be eliminated. Although linked to the Fund's change in
objective, the change in name and the elimination of the foregoing
"non-fundamental" policy do not require shareholder approval
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and hence do not appear as proposals in this proxy statement. In lieu of the
eliminated investment policy, the Trustees have approved a non-fundamental
investment policy that would require the Fund under normal circumstances to
invest between 35% and 65% of its total assets in each of (1) common stocks,
preferred stocks and other securities with common stock characteristics and (2)
bonds. Such a policy is required under applicable SEC guidelines in order to use
the word "balanced" in the Fund's name.
The allocation of the Fund's assets between stocks and bonds will vary
in response to conclusions drawn from PMC's continual assessment of business,
economic and market conditions. The mix of equity securities, bonds, short-term
investments and cash may be held in whatever proportions PMC determines are
necessary for defensive purposes.
If the proposed changes in objectives and related policies are adopted,
the Fund will have similar investment objectives and policies to Balanced
Portfolio of Pioneer Variable Contracts Trust, which is available only to
certain annuity holders, and will be managed in a similar style.
Other Changes in Investment Policies and Practices
Quality limitations. The quality limitations set forth in the Fund's
prospectus concerning the Fund's investment in debt securities will change as a
result of the change in the Fund's objectives and related policies. The Fund
currently may invest up to 35% of its total assets in debt securities rated
below investment grade. If the proposed changes in investment objectives are
approved, the Fund will adopt quality restrictions that require it to invest
primarily in "investment grade" securities. Investment grade debt securities are
debt securities rated at least BBB by Standard & Poor's Ratings Group ("S&P") or
Moody's Investors Service, Inc. ("Moody's") or, if unrated determined by PMC to
be of comparable quality and commercial paper of comparable quality.
Under the Fund's revised quality limitations, the Fund's portfolio
assets allocated to bonds normally will be invested in (1) investment grade debt
securities as rated by S&P or Moody's or, if unrated, determined by PMC to be of
comparable quality, (2) commercial paper of comparable quality and (3) U.S.
government securities, mortgage participation certificates guaranteed by the
Government National Mortgage Association ("GNMA Certificates") and
collateralized mortgage obligations ("CMOs")(described below). The Fund will,
however, be able to invest up to 10% of its total assets in debt securities that
are rated below investment grade
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or, if unrated, judged by PMC to be of comparable quality, and in commercial
paper that is of comparable quality.
Foreign securities and covered call options. In addition, if the
proposed change in objectives is approved by shareholders, the Fund's limitation
on investment in foreign securities, will be reduced from 30% to 10% and the
Fund's ability to write covered call options will be eliminated.
Additional Investment Practices
GNMA Certificates and CMOs. As indicated above, if the proposed change
in objectives is approved, the Fund would adopt policies permitting it to invest
a portion of its assets allocated to debt securities in GNMA Certificates and
CMOs. A GNMA Certificate is a mortgage participation certificate which may be of
varying maturity guaranteed by the Government National Mortgage Association.
Although the payment when due of interest and principal on GNMA Certificates is
backed by the full faith and credit of the United States, this guarantee does
not extend to the market value of these securities. CMOs may be issued by U.S.
government agencies and instrumentalities as well as private lenders. CMOs are
issued in multiple classes and the principal of and interest on the underlying
mortgage assets may be allocated among the several classes in various ways. Each
class of CMOs, 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. Because of principal prepayments and foreclosures with
respect to mortgages underlying GNMA Certificates and CMOs, such investments may
be less effective than other types of securities as a means of "locking in"
attractive long-term interest rates. Prepayments generally can be invested only
at lower interest rates.
Currency transactions. If the proposed change in objectives is
approved, the Fund will also adopt policies permitting it to manage its exposure
to foreign currencies to take advantage of different yield, risk and return
characteristics that different currencies can provide for U.S. investors. To
manage exposure to foreign currency fluctuations, the Fund will be permitted to
enter into forward foreign currency exchange contracts (agreements to exchange
one currency for another at a future date) and buy and sell options and futures
contracts relating to foreign currencies. The Fund will use forward foreign
currency exchange contracts in the normal course of business to lock in an
exchange rate in connection with purchases and sales of securities denominated
in foreign currencies. Other currency management strategies will allow
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the Fund to hedge portfolio securities, to shift investment exposure from one
currency to another, or to attempt to profit from anticipated declines in the
value of a foreign currency relative to the U.S. dollar. The Fund will only
invest in currency management strategies to the extent that it invests in
foreign securities.
Although PMC may attempt to manage currency exchange rate risks, there
is no assurance that it will do so at an appropriate time or that it will be
able to predict exchange rates accurately. For example, to the extent that PMC
increases the Fund's exposure to a foreign currency, and that currency's value
subsequently falls, PMC's currency management may have the effect of lowering
the Fund's net asset value. Similarly, if PMC hedges the Fund's exposure to a
foreign currency, and the currency's value rises, the Fund will lose the
opportunity to participate in the currency's appreciation.
Unaffected Investment Policies and Practices
The Fund's ability to use the following investment practices and invest
in the following types of securities as described in the prospectus will remain
substantially unchanged if the change in objectives is approved: restricted and
illiquid securities, when issued securities, loans of portfolio securities and
repurchase agreements.
Change in Portfolio Manager
Following the proposed change in investment objectives and policies,
Mr. William Field will be responsible for the implementation of the Fund's
investment strategy and the day-to-day management of the Fund's portfolio. Since
before 1991, Mr. Field has been employed by PMC as an investment analyst. He has
expertise in investing in both equity and fixed income securities.
Risks and Other Special Considerations
Dividend rate. As indicated above, under the Fund's proposed new
investment objectives and policies, capital growth will be a coequal objective
along with current income and not merely a secondary consideration as under the
existing investment objective and policies. Because the Fund will no longer
pursue the sole objective of current income or be required to invest only in
income producing securities, it is likely that the Fund's dividend rate will be
reduced over time. Accordingly, shareholders primarily seeking current income
are advised to reevaluate whether the
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Fund continues to be a suitable investment vehicle for their particular
investment needs. The reduction of the Fund's ability to invest in below
investment grade debt securities, which typically pay higher yields than
investment grade debt securities, may also contribute to a reduction in the
Fund's dividend rate over time. Of course, shareholders can achieve
approximately the same mix of bond and stock investments as the Fund's current
portfolio by investing in a combination of the Fund's restructured portfolio and
other income producing Pioneer mutual funds.
Portfolio turnover. The transition to the Fund's new investment
objectives and related policies may involve higher than normal portfolio
turnover for a period following the change. High portfolio turnover involves
correspondingly higher brokerage commissions and other transaction costs, which
will be borne directly by the Fund, and could involve realization of taxable
gains that would be taxable when distributed to shareholders.
Equity investments. To the extent that the Fund invests more
extensively in certain types of equity securities in pursuing its new investment
objectives it may incur greater investment risk. There are two primary areas in
which the Fund may incur greater risk than under its current objective and
policies. First, in pursuing capital growth, the Fund may invest in non-dividend
paying common stocks. Although such stocks often offer the most attractive
growth opportunities, they also at times may represent investments in companies
that are less stable or secure than companies paying regular dividends on their
common stocks. Second, the Fund may but need not place an even greater emphasis
on equity securities in pursuing current income than under its current policies.
For instance, if the Fund attempts to earn income primarily through investments
in dividend paying common stocks, depending upon interest rate movements it may
incur greater investment risk than if it seeks income primarily through
investments in preferred stocks and bonds. Similarly, to the extent the Fund
de-emphasizes bonds in favor of preferred stocks it will also incur greater
investment risk. Both in terms of protection of capital and continuity of income
payments, common stocks are the lowest ranking and least protected type of
security, followed by preferred stocks and then by bonds and other debt
securities which are afforded the greatest degree of protection.
Required Vote
Adoption of Proposal 1 requires the approval of a majority of the
outstanding voting securities of the Fund, which under the Investment Company
Act of 1940, as amended (the "1940 Act"), is defined to mean the affirmative
vote of the lesser of (i) 67% or
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more of the shares of the Fund represented at the Meeting, if at least 50% of
all outstanding shares of the Fund are represented at the Meeting, or (ii) 50%
or more of the outstanding shares of the Fund entitled to vote at the Meeting (a
"1940 Act Majority Vote").
If this Proposal 1 is not approved by the shareholders of the Fund, the
Fund will continue to adhere to its current investment objective and policies
and will not change its name.
FOR THE REASONS SET FORTH ABOVE, THE TRUSTEES UNANIMOUSLY RECOMMEND
THAT THE SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THE APPROVAL OF THE PROPOSAL
TO AMEND THE FUND'S INVESTMENT OBJECTIVES.
PROPOSAL 2
APPROVAL OF NEW MANAGEMENT CONTRACT
Summary
Pioneering Management Corporation has served as the Fund's investment
adviser since December 1, 1993. PMC serves as the investment adviser for the
Pioneer family of mutual funds, Pioneer Interest Shares and for certain other
institutional accounts. PMC, a registered investment adviser under the
Investment Advisers Act of 1940, as amended, is a wholly owned subsidiary of
PGI, a Delaware corporation with publicly traded shares. PGI is located at 60
State Street, Boston, Massachusetts 02109.
At the Meeting held on July 16, 1996, the Trustees, including all of
the Trustees who are not "interested persons" of the Fund or PMC, unanimously
approved and voted to recommend that the shareholders of the Fund approve a
proposal to terminate the Fund's existing Management Contract between PMC and
the Fund (the "Existing Contract") and to adopt a new Management Contract (the
"Proposed Contract"). The Existing Contract and the Proposed Contract are also
each referred to below as a "Contract." Under the Proposed Contract, the form of
which is attached to this Proxy Statement as Exhibit A, there will be an
increase in the rate of management fees paid by the Fund to PMC. The management
fee rate increase is more fully described below.
Terms of Existing and Proposed Management Contracts
Except for the different fee rates, effective dates and renewal dates,
the terms of the Existing and Proposed Management Contracts are substantially
identical. Pursuant to the terms of each Contract, PMC serves as investment
adviser to the Fund and is
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responsible for the overall management of the Fund's business affairs subject
only to the authority of the Board of Trustees. PMC is authorized to buy and
sell securities for the account of the Fund and to designate brokers to carry
out such transactions, subject to the right of the Trustees to disapprove any
such purchase or sale. PMC may not make any purchase the cost of which exceeds
funds currently available for the Fund and may not make any purchase which would
violate any fundamental policy or restriction with respect to the Fund in the
Fund's Prospectus or Statement of Additional Information as in effect from time
to time.
Under each Contract, PMC pays all expenses, including executive
salaries and the rental of office space, related to its services for the Fund
with the exception of the following which are paid by the Fund: (i) charges and
expenses for determining from time to time the value of the net assets of the
Fund and the keeping of its books and records, (ii) the charges and expenses of
auditors, (iii) the charges and expenses of any custodian, transfer agent, plan
agent, dividend disbursing agent and registrar appointed by the Fund, (iv) issue
and transfer taxes, chargeable to the Fund in connection with securities
transactions to which the Fund is a party, (v) insurance premiums, interest
charges, dues and fees for membership in trade associations and all taxes and
corporate fees payable by the Fund to federal, state or other governmental
agencies, (vi) fees and expenses involved in registering and maintaining
registrations of the Fund and of its shares with the SEC, state securities
agencies and foreign jurisdictions, including the preparation of prospectuses
and statements of additional information for filing with such agencies, (vii)
all expenses of shareholders' and Trustees' meetings and of preparing, printing
and distributing prospectuses, notices, proxy statements and all reports to
shareholders and to governmental agencies, (viii) charges and expenses of legal
counsel to the Fund, (ix) if applicable, distribution expenses of the Fund
pursuant to a Plan of Distribution in accordance with Rule 12b-1 promulgated by
the SEC pursuant to the 1940 Act, and (x) compensation of those Trustees of the
Fund who are not affiliated with or interested persons of PMC, the Fund (other
than as Trustees), PGI, or PFD.
The Existing Contract was approved by the shareholders of the Fund
November 23, 1993 in connection with acquisition of the Fund from another mutual
fund group. The Existing Contract was intitially approved by the Fund's Board
shortly thereafter and its renewal was most recently approved by the Board at a
meeting held in April, 1996. Each Contract is renewable annually by the vote of
PMC's Board and by vote of a majority of the Fund's Board, including a majority
of the Trustees who are not "interested persons" of the Fund, PMC or PFD, cast
in person at a meeting called
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for the purpose of voting on such renewal. Each Contract terminates if assigned
(as defined in the 1940 Act) and may be terminated without penalty by either
party by vote of its Board or a majority of its outstanding voting securities
and upon 60 days' written notice.
Proposed Management Fee Increase
As compensation for its management services and certain expenses which
PMC incurs on behalf of the Fund, the Fund pays PMC an annual management fee
under the Existing Contract equal to 0.50% of the Fund's average daily net
assets up to $250 million, 0.48% of the next $50 million, and 0.45% of the
excess over $300 million. This fee is computed daily and paid monthly.
As compensation for its management services and certain expenses which
PMC incurs on behalf of the Fund, the Fund would pay PMC an annual management
fee under the Proposed Contract (the "Proposed Fee") equal to 0.65% of the
Fund's average daily net assets up to $1 billion, 0.60% of the next $4 billion
and 0.55% of the excess over $5 billion. The Proposed Fee would be computed
daily and paid monthly.
The Proposed Fee represents an increase in the management fee rate
payable to PMC over the rates under the Existing Contract. The Board determined
that the Proposed Fee is fair and reasonable. The effective date of the Proposed
Contract is expected to be February 1, 1997. Accordingly, the Proposed Fee will
take effect on February 1, 1997 if the Proposed Contract is adopted at the
Meeting.
Effect of the New Management Fee Structure
Under the Existing Contract, the Fund pays management fees at an
effective annual rate of 0.498% based on net assets of $274 million at September
30, 1996. Under the Proposed Contract, the Fund would pay management fees at an
effective annual rate of 0.65% at such net asset level.
Set forth below is a chart showing the dollar amount of management fees
paid during the Fund's past fiscal year under the Existing Contract and the
amount of fees that would have been paid under the Proposed Contract at the
Proposed Fee rate. The chart also shows the percentage differences these amounts
that would have been paid under the Proposed Contract represent from the amount
paid under the Existing Contract. Also set forth below are comparative fee
tables showing the amount of fees and expenses
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paid by each class of shares of the Fund under the Existing Contract as a
percentage of average net assets and the amount of fees and expenses each class
of shareholders would have paid if the Proposed Fee under the Proposed Contract
had been in effect. The information in the table is an estimate based on actual
assets and expenses for the fiscal year ended December 31, 1995. For Class C
shares, operating expenses are based on estimated amounts that would have been
incurred if Class C shares had been outstanding for the fiscal year ended
December 31, 1995. Class C shares were first offered on January 31, 1996.
DOLLAR AMOUNT OF MANAGEMENT FEES PAID
(fiscal year ended December 31, 1995)
Existing Proposed
Contract Contract
-------- --------
Amount of Fees Paid $1,306,546 $1,751,441
or that Would Have Been Paid
Percentage Difference N/A +0.17%
from Amount Paid
under Existing
Contract
COMPARATIVE FEE TABLE
CLASS A SHARES
Annual Fund Operating Expenses
(as a percentage of average net assets)
Existing Proposed
Fee Fee
--- ---
Management Fee ...... 0.48% 0.65%
12b-1 Fees .......... 0.25% 0.25%
Other Expenses ...... 0.38% 0.38%
Total Fund Operating Expenses 1.11% 1.28%
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CLASS B AND CLASS C SHARES
Annual Fund Operating Expenses
(as a percentage of average net assets)
Existing Proposed
Fee Fee
--- ---
Management Fee ...... 0.48% 0.65%
12b-1 Fees .......... 1.00% 1.00%
Other Expenses ...... 0.30% 0.38%
Total Fund Operating Expenses 1.78% 2.03%
Examples
The following illustrates the expenses on a $1,000 investment under the
existing fee and the Proposed Fee stated above, assuming a 5% annual return,
constant expenses, and redemption at the end of each time period:
1 year 3 years 5 years 10 years
--------------------------------------
Class A Shares
Existing Fee $56 $79 $103 $174
Proposed Fee $57 $84 $112 $193
Class B Shares
- --Assuming complete redemption at end of period
Existing Fee $58 $86 $116 $192*
Proposed Fee $61 $94 $129 $217*
- --Assuming no redemption
Existing Fee $18 $56 $96 $192*
Proposed Fee $21 $64 $109 $217*
Class C Shares**
- --Assuming complete redemption at end of period
Existing Fee $28 $56 $96 $209
Proposed Fee $31 $64 $109 $236
- --Assuming no redemption
Existing Fee $18 $56 $96 $209
Proposed Fee $21 $64 $109 $236
* Class B shares convert to Class A shares eight years after purchase;
therefore, Class A expenses are used after year eight.
** Class C shares redeemed during the first year after purchase are
subject to a 1% contingent deferred sales charge.
The purpose of these examples and tables is to assist investors in
understanding the various costs and expenses of investing in shares of the Fund.
The examples above should not be considered a representation of past or future
expenses of the Fund. Actual expenses may be higher or lower than those shown
above.
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Other Provisions under the Existing and Proposed Contracts
Standard of Care. Under each Contract, PMC "will not be liable for any
error of judgment or mistake of law or for any loss sustained by reason of the
adoption of any investment policy or the purchase, sale or retention of any
security on the recommendation of [PMC] . . ." PMC, however, shall not be
protected against liability by reason of its ". . . willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement." This
"standard of care" is consistent with the 1940 Act, PMC's most recent management
contracts and common practice in the mutual fund industry.
PMC's Authority. Each Contract provides that PMC shall have full
discretion to act for the Fund in connection with purchase and sale transactions
subject only to the Declaration of Trust, Bylaws, currently effective
registrations under the 1940 Act and the Securities Act of 1933, as amended (the
"1933 Act"), investment objectives, policies and restrictions of the Fund in
effect from time to time, and specific policies and instructions established
from time to time by the Trustees.
Portfolio Trading. Consistent with common practice in the mutual fund
industry and with PMC's most recent management contracts, each Contract
expressly permits PMC to engage in such activity. For a more detailed
description of the Fund's current portfolio brokerage practices, see the
Appendix.
Expense Limitation. Each Contract provides that if the operating
expenses of the Fund exceed the limits established by state "blue sky"
administrators, PMC's fee will be reduced (but not below $0) to the extent
required by such limits. Each Contract also provides that PMC may from time to
time agree not to impose all or a portion of its fee or otherwise take action to
reduce expenses of the Fund. Any such fee limitation or expense reduction is
voluntary and may be discontinued or modified by PMC at any time.
Expenses. Each Contract provides that the Fund shall pay ". . . charges
and expenses for fund accounting, pricing and appraisal services and related
overhead, including, to the extent such services are performed by personnel of
[PMC] or its affiliates, office space and facilities and personnel compensation,
training and benefits . . .." PMC has estimated that, at current direct labor
costs, aggregate annualized fund accounting overhead charges allocated to the
Fund will be approximately $6,500.
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Other Provisions. Each Contract includes provisions that provide that: (i)
the law of The Commonwealth of Massachusetts shall be the governing law of the
contract; (ii) PMC is an independent contractor and not an employee of the Fund;
(iii) the contract is the entire agreement between the parties with respect to
the matters described therein; (iv) the contract may be executed using
counterpart signature pages; (v) invalid or unenforceable provisions of the
contract are severable and do not render the entire agreement invalid or
unenforceable; (vi) the Fund may pay for charges and expenses of counsel to the
"non-interested" Trustees as well as counsel to the Fund; and (vii) subject to
obtaining best execution, PMC may consider sales of other funds in the Pioneer
Family of Mutual Funds when selecting brokers and dealers to execute the Fund's
securities transactions.
Miscellaneous
If approved, the Proposed Contract will become effective on February 1,
1997 (or on the date of approval if approved after that date) and will continue
in effect until May 31, 1998, and thereafter will continue from year to year
subject to annual approval by the Board of Trustees in the same manner as the
Existing Contract. The Proposed Contract terminates if assigned (as defined in
the 1940 Act) and may terminate without penalty, upon sixty (60) days' written
notice, by either party by vote of its Board or by a vote of a majority of the
outstanding voting securities of the Fund. The description of the Existing
Contract and the Proposed Contract set forth above and the other information
with respect to the Proposed Contract are qualified in their entirety by
reference to the form of Proposed Contract, attached hereto as Exhibit A.
Additional Information Pertaining to PMC
For additional information concerning the management, ownership
structure, affiliations, brokerage policies and certain other matters pertaining
to PMC, see the Appendix.
Factors Considered by the Trustees
The Trustees determined that the terms of the Proposed Contract are
fair and reasonable and that approval of the Proposed Contract on behalf of the
Fund is in the best interests of the Fund. The Trustees considered a number of
factors in deciding to recommend an increase in the management fee. At all times
during the Trustees' deliberations, they were advised by the Fund counsel and
their own independent counsel. When the Trustees were presented with the
Proposed Fee, they requested and were furnished
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with substantial information to assist in their evaluation. In considering
whether to adopt the Proposed Fee, the Trustees considered, among other things,
PMC's intended use of a significant portion of the fee increase to benefit the
Fund, as well as information relating to the overall reasonableness of the
Proposed Fee.
The Trustees considered and placed heavy emphasis on PMC's indications
that it would use a significant portion of the increased fee to enhance its
management and accounting systems and research capabilities with respect to the
Fund's portfolio, including significant additional investment in human resources
and technology, with the purpose of helping to make the Fund more competitive.
Among other matters, PMC has appointed William Field to serve as the Fund's new
portfolio manager. Mr. Field joined PMC in 1991 as a research analyst and has
served as an assistant portfolio manager for certain institutional accounts
since January 1996. The Trustees also considered that the management fees paid
by the Fund to PMC under the Existing Contract are below those paid by many
other equity oriented income funds and balanced funds and that the Proposed Fee
is consistent with management fees paid by many other such similar funds.
Based upon all of the above considerations, the Trustees determined
that the Proposed Fee would be equitable and fair to the shareholders of the
Fund.
Trustees' Recommendation
Based on its evaluation of the materials presented and assisted by the
advice of independent counsel, the Board of Trustees, including all of the
Trustees who are not "interested persons" of the Fund or PMC, concluded that the
Proposed Contract was fair and reasonable and in the best interests of the
Fund's shareholders and by a vote cast at a meeting held on July 16, 1996,
unanimously approved and voted to recommend to the shareholders of the Fund that
they approve the Proposal to terminate the Existing Contract and to adopt the
Proposed Contract.
Required Vote
Adoption of Proposal 2 requires the approval of a 1940 Act Majority
Vote. If the Proposed Contract is not approved by the shareholders of the Fund,
the Existing Contract will continue in effect.
FOR THE REASONS SET FORTH ABOVE, THE TRUSTEES UNANIMOUSLY RECOMMEND
THAT THE SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THE APPROVAL OF THE PROPOSED
MANAGEMENT CONTRACT.
-14-
<PAGE>
PROPOSAL 3
ELECTION OF TRUSTEES
The persons named on the accompanying proxy card intend to vote at the
Meeting (unless otherwise directed) FOR the election of the eight (8) nominees
named below as Trustees of the Fund. All of the nominees currently serve as
Trustees and have been recommended by the Nominating Committee of the Trustees
which consists solely of Trustees who are not "interested persons" of the Fund,
PMC or PFD within the meaning of the 1940 Act.
Each Trustee will be elected to hold office until the next meeting of
shareholders or until his or her successor is elected and qualified. Each
nominee has consented to being named herein and indicated his or her willingness
to serve if elected. If any such nominee should be unable to serve, an event not
now anticipated, the persons named as proxies may vote for such other person as
shall be designated by the Board of Trustees.
The following table sets forth each nominee's position(s) with the
Fund, age, address, principal occupation or employment during the past five
years and directorships, and indicates the date on which he or she first became
a Trustee of the Fund. The table also shows the number of shares of beneficial
interest of the Fund beneficially owned by each nominee, directly or indirectly,
on September 30, 1996.
<TABLE>
<CAPTION>
Shares of Beneficial
Interest of the Fund
Name, Age, Beneficially Owned
Position(s) with Principal Occupation First and Percentage of Total
the Fund or Employment Became a Shares Outstanding
and Address and Trusteeships(1) Trustee on September 30, 1996(2)
- ---------------- ------------------- --------- -------------------------
<S> <C> <C> <C>
John F. Cogan, Jr.* President, Chief 1993 -0-
(70) Executive Officer and a
Chairman of the Board,
Director of Pioneer Group,
President and Inc. ("PGI"); Chairman and a Director
Trustee of PMC, PFD, Pioneer Goldfields Limited
60 State Street ("PGL") and Teberebie Goldfields
Boston, MA 02109 Limited; Director of Pioneer Services
Corporation ("PSC") and Pioneer Capital
Corporation ("PCC"); President and Director of
Pioneer Plans Corporation ("PPC"), Pioneer
Investment Corporation ("PIC"), Pioneer Metals
and Technology, Inc. ("PMT") and Pioneer
International Corporation ("P.Intl.");
Chairman of the Supervisory Board of Pioneer
Fonds Marketing GmbH ("Pioneer GmbH"); Member
of the Supervisory Board of Pioneer First
Polish Trust Fund Joint Stock Company
("PFPT"); and Partner, Hale and Dorr (Counsel
to the Fund)
-15-
<PAGE>
Richard H. Egdahl, M.D. Alexander Graham Bell 1993 -0-
(69) Professor of Health Care
Entrepreneurship, Boston
Health Policy University; Professor of
Institute Management, Public Health
53 Bay State Road and Surgery, Boston University;
Boston, MA 02115 University Professor, Boston
University; Director, Boston University Health
Policy Institute; Director, Essex Investment
Management Company, Inc., an investment
adviser; Vice Chair of the Board of Directors,
HPR, Inc., a health cost containment software
firm; Director, CORE, a worker's compensation
management firm
Margaret B.W. Graham Founding Director, Winthrop 1993 -0-
(49) Group, Inc., a consulting firm, since
Trustee 1982; Manager of Research
The Keep Operations Xerox Palo Alto
P.O. Box 110, Research Center, between 1991
Little Deer Isle, and 1994; and Professor of
ME 04650 Operations Management and
Management of Technology,
Boston University School of
Management, between 1989 and 1993
John W. Kendrick, Professor Emeritus of 1993 -0-
(79) Economics, George Washington
Trustee University; and Economic
6363 Waterway Dr., Consultant and Director,
Falls Church, American Productivity and
VA 22044 Quality Center
Marguerite A. Piret President, Newbury, Piret & 1993 100.406
(48) Company, Inc., a merchant
Trustee banking firm
One Boston Place
Suite 2635
Boston, MA 02108
David D. Tripple,* Director and Executive Vice 1993 -0-
(52) President of PGI; President Chief
Executive Vice Investment Officer and a director
President and of PMC; Director of PFD, PCC,
Trustee Pioneer SBIC Corp., P. Intl. and
60 State Street PIC; and Member of the Supervisory
Boston, MA 02109 Board of PFPT
-16-
<PAGE>
Stephen K. West Partner, Sullivan & Cromwell, a 1993 -0-
(68) law firm
Trustee
125 Broad Street
New York, NY 10004
John Winthrop President, John Winthrop & Co., 1993 -0-
(60) a private investment firm;
Trustee Director of NUI Corp.
One North Adgers Wharf
Charleston, SC 29401
</TABLE>
<PAGE>
- ---------------
* Messrs. Cogan and Tripple are "interested persons" of the Fund, PMC and
PFD within the meaning of the 1940 Act.
(1) Each nominee also serves as a trustee for each of the open-end
investment companies (mutual funds) in the Pioneer family of mutual
funds and for each portfolio of Pioneer Variable Contracts Trust
(except for Messrs. Kendrick and Winthrop and Ms. Graham who do not
serve as trustees for Pioneer Variable Contracts Trust) and as a
Director of Pioneer Interest Shares, a closed-end investment company
("Interest Shares"). Each Trustee was elected by the shareholders of
the Fund in 1994.
(2) As of September 30, 1996, the Trustees and officers of the Fund
beneficially owned, directly or indirectly, in the aggregate less than
1% of the Fund's outstanding shares.
Ms. Piret, Mr. West and Mr. Winthrop serve on the Audit Committee of
the Board of Trustees. The functions of the Audit Committee include recommending
independent auditors to the Trustees, monitoring the independent auditors'
performance, reviewing the results of audits and responding to certain other
matters deemed appropriate by the Trustees. Ms. Graham, Ms. Piret and Mr.
Winthrop serve on the Nominating Committee of the Board of Trustees. The primary
responsibility of the Nominating Committee is the selection and nomination of
candidates to serve as independent directors. The Nominating Committee will also
consider nominees recommended by shareholders to serve as Trustees provided that
shareholders submitting such recommendations comply with all relevant provisions
of Rule 14a- 8 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
During the fiscal year ended December 31, 1995, the Board of Trustees
held twelve meetings, the Audit Committee held eight meetings and the Nominating
Committee did not meet. All of the current Trustees and Committee Members then
-17-
<PAGE>
serving attended at least 75% of the meetings of the Board of Trustees or
applicable committee, if any, held during the fiscal year ended December 31,
1995.
Other Executive Officers
In addition to Messrs. Cogan and Tripple, who serve as executive
officers of the Fund, the following table provides information with respect to
the other executive officers of the Fund. Each executive officer is elected by
the Board of Trustees and serves until his successor is chosen and qualified or
until his resignation or removal by the Board. The business address of all
officers of the Fund is 60 State Street, Boston, Massachusetts 02109.
Name, Age and Position with The Fund Principal Occupation(s)
William H. Keough, 59, Treasurer Senior Vice
President, Chief Financial
Officer and Treasurer of PGI
and Treasurer of PFD, PMC,
PSC, PPC, Pioneer SBIC Corp.,
PIC, PMT, P. Intl. and of each
fund in the Pioneer family of
mutual funds.
Joseph P. Barri, 50, Secretary Secretary of PGI,
PMC and PCC, and of each fund
in the Pioneer family of
mutual funds; Clerk of PFD and
PSC and Partner, Hale and Dorr
(counsel to the Fund).
Remuneration of Trustees and Officers
The following table provides information regarding the compensation
paid by the Fund and the other investment companies in the Pioneer family of
mutual funds to the Trustees for their services for the Fund's most recently
completed fiscal year. The Fund pays no salary or other compensation to its
officers.
<TABLE>
<CAPTION>
Total Compensa-
tion from the
Pension or Fund and other
Aggregate Retirement funds in the
Compensation Benefits Pioneer Family
Director From the Fund* Accrued of Mutual Funds**
- -------- -------------- ------- -----------------
<S> <C> <C> <C>
John F. Cogan, Jr. $500 $0 $11,000
Richard H. Egdahl, M.D.3,674 0 63,315
Margaret B.W. Graham 3,674 0 62,398
John W. Kendrick 3,674 0 62,398
Marguerite A. Piret 4,038 0 76,704
David D. Tripple 500 0 11,000
Stephen K. West 3,666 0 68,180
John Winthrop 3,964 0 71,199
</TABLE>
-18-
<PAGE>
- --------
+ PMC fully reimbursed the Fund and the other funds in the Pioneer family
of mutual funds for compensation paid to Messrs. Cogan and Tripple.
* For the fiscal year ended December 31, 1995.
** For the calendar year ended December 31, 1995.
Required Vote
In accordance with the Fund's Declaration of Trust, the vote of a
plurality of all of the shares of the Fund voted at the Meeting is sufficient to
elect the nominees.
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP has served as the Fund's independent
public accountant since the Fund's 1994 fiscal year. Audit services during the
fiscal year ended December 31, 1995 consisted of examinations of the Fund's
financial statements for this period and reviews of the Fund's filings with the
SEC.
The Trustees who were present at the November 4, 1996 meeting,
including a majority of the Trustees who are not "interested persons" of the
Fund or PMC, unanimously selected Arthur Andersen LLP as the Fund's independent
public accountants for the fiscal year ending December 31, 1997, subject to
shareholder ratification at the Meeting. A representative of Arthur Andersen LLP
is expected to be available at the Meeting to make a statement if he or she
desires to do so and to respond to appropriate questions.
Required Vote
The ratification of the selection of Arthur Andersen LLP as the Fund's
independent public accountants for the fiscal year ending December 31, 1997
requires the affirmative vote of a majority of the shares present and entitled
to vote at the meeting.
-19-
<PAGE>
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS OF THE FUND VOTE IN FAVOR
OF THE RATIFICATION OF ARTHUR ANDERSEN LLP AS THE FUND'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
PROPOSALS 5(a) THROUGH 5(g)
ELIMINATION, AMENDMENT OR ADDITION
OF VARIOUS INVESTMENT RESTRICTIONS
General
The Trustees of the Fund recommend that shareholders approve the
elimination of, amendment to or addition of various investment restrictions, as
described in detail below. All of the current restrictions proposed to be
eliminated or amended are set forth in the Fund's Statement of Additional
Information.
Each Proposal requires the separate approval of the shareholders of the
Fund. Each of these restrictions is a "fundamental" investment policy that may
only be changed by an affirmative 1940 Act Majority Vote. See "Required Vote"
below.
5(a). Amendment to Fundamental Investment Policy Regarding Underwriting
The Fund's current investment policy regarding underwriting states that
the Fund may not:
ACT AS A SECURITIES UNDERWRITER
If amended as proposed, the new policy will state that the Fund may
not:
ACT AS AN UNDERWRITER, EXCEPT AS IT MAY
BE DEEMED TO BE AN UNDERWRITER IN A
SALE OF RESTRICTED SECURITIES HELD IN
ITS PORTFOLIO.
The 1940 Act requires that a fund state a formal fundamental policy
regarding underwriting. The amendment is being proposed to clarify that the sale
by the Fund of portfolio securities restricted as to transfer by the federal
securities laws will not be subject to this restriction to the extent such a
sale may be deemed to be underwriting activity. PMC believes it may be
advantageous for a fund with investment policies such as the Fund's to
-20-
<PAGE>
have the flexibility to invest in restricted securities. The proposed amendment
would eliminate any doubt created by the current underwriting restriction as to
the Fund's ability to dispose of any restricted securities it may acquire.
5(b). Amendment of Fundamental Investment Restriction Regarding Commodities
The Fund's existing fundamental investment restriction regarding
commodities states that the Fund may not:
INVEST IN REAL ESTATE, COMMODITIES OR
COMMODITY CONTRACTS.
If amended as proposed, the restriction would provide that the Fund may
not:
INVEST IN REAL ESTATE, COMMODITIES OR
COMMODITY CONTRACTS, EXCEPT THAT THE FUND MAY
INVEST IN FINANCIAL FUTURES CONTRACTS AND
RELATED OPTIONS AND IN ANY OTHER FINANCIAL
INSTRUMENTS WHICH MAY BE DEEMED TO BE
COMMODITIES OR COMMODITY CONTRACTS IN WHICH THE
FUND IS NOT PROHIBITED FROM INVESTING BY THE
COMMODITY EXCHANGE ACT AND THE RULES AND
REGULATIONS THEREUNDER.
The 1940 Act requires that a fund state a formal fundamental investment
policy regarding investment in commodities. Any financial futures contract or
related option is considered to be a commodity. Other types of financial
instruments such as when- issued securities and swaps might also be deemed to be
commodities. The amendment is being proposed to enable the Fund to invest in
financial futures contracts and related options for hedging and other
permissible purposes and to clarify that certain practices in which the Fund
engages (such as when-issued securities) or might in the future engage (such as
foreign currency futures contracts and related options) are not subject to this
restriction.
A financial futures contract is a contract to buy or sell units of a
particular securities index or foreign currency at an agreed price on a
specified future date. Depending on the change in value of the index or currency
between the time when a fund enters into and terminates a financial futures
transaction, the fund realizes a gain or loss. Financial futures and options on
financial futures are typically used for hedging purposes and involve certain
risks, including imperfect correlations between
-21-
<PAGE>
movements in the prices of financial futures and options and movements in the
price of the underlying securities index or currency or the portfolio securities
that are the subject of a hedge, potentially illiquid secondary markets at
certain times and inability of the adviser to correctly predict market or
currency movements.
Except for the proposed use of foreign currency futures contracts and
related options as described in Proposal 1 under "Additional Investment
Practices," the Fund does not currently intend to engage in financial futures
and related options transactions in the coming year. In the event that the
Trustees decide in the future it is desirable for the Fund to engage in any such
additional practices, the Fund's Prospectus will be revised accordingly,
including the addition of appropriate risk disclosure.
5(c). Elimination of Fundamental Investment Restriction Regarding Investment
Companies
The Fund's existing fundamental investment restriction regarding
investment companies states that the Fund may not:
PURCHASE THE SECURITIES OF ANY OTHER
INVESTMENT COMPANY, EXCEPT IT MAY MAKE SUCH A
PURCHASE AS A PART OF A MERGER, CONSOLIDATION
OR ACQUISITION OF ASSETS.
If eliminated as proposed, the Trustees would adopt a new
non-fundamental restriction that would provide that the Fund may not:
INVEST IN SECURITIES OF OTHER
registered investment companies, except by purchases in the
open market including only customary brokers' commissions, and
except as they may be acquired as part of a merger, a
consolidation or an acquisition of assets.
This change is being proposed to provide the Fund with additional
investment flexibility. The change would permit investment in investment
vehicles (except other mutual funds) that would be attractive investments for
the Fund but may technically be (or be deemed to be ) investment companies (as
defined in the 1940 Act) and therefore prohibited by the Fund's investment
restriction. Even though securities of such issuers may involve the duplication
of some fees and expenses, PMC believes that they can
-22-
<PAGE>
provide attractive investment opportunities that, except for the restriction
stated above, would be consistent with the Fund's investment objectives and
policies. PMC does not currently expect to significantly invest the Fund's
assets in such vehicles but would like the flexibility to do so to the extent
permitted by the 1940 Act should appropriate opportunities arise.
5(d). Elimination of Fundamental Investment Restriction Regarding Affiliates of
Affiliates
The Fund's existing fundamental investment restriction regarding
securities of affiliates of affiliates of the Fund states that the Fund may not:
PURCHASE OR RETAIN THE SECURITIES OF ANY
ISSUER IF THE OFFICERS AND TRUSTEES OF THE FUND
OF ITS INVESTMENT ADVISER WHO OWN INDIVIDUALLY
OR BENEFICIALLY MORE THAN ONE-HALF OF 1% OF THE
SECURITIES OF SUCH ISSUER TOGETHER OWN MORE
THAN 5% OF THE SECURITIES OF SUCH ISSUER.
If the elimination of this restriction is approved by shareholders, the
Trustees will adopt the identical restriction as a non-fundamental policy. The
restriction is required by the blue sky laws of states in which the Fund offers
its shares but is not required to be stated as a matter of fundamental policy.
The change is being proposed to give the Trustees the flexibility to
amend the restriction if desired without the need for shareholder approval in
the event of a change in the applicable blue sky laws or if the Fund ceases to
offer shares in such states. There is no current expectation that either of
these developments is likely to occur. In the event of such an occurrence, PMC
will advise the Trustees whether it might be desirable to consider changing the
restriction.
5(e). Elimination of Fundamental Investment Restrictions regarding "Unseasoned"
Issuers
The Fund's existing fundamental investment restriction regarding
securities of "unseasoned" issuers states that the Fund may not:
PURCHASE SECURITIES OF ANY COMPANY WITH A
RECORD OF LESS THAN THREE YEARS CONTINUOUS
OPERATION (INCLUDING THAT OF PREDECESSORS) IF
SUCH PURCHASE WOULD CAUSE THE FUND'S
INVESTMENTS IN SUCH COMPANIES TAKEN AT COST TO
EXCEED 5% OF THE VALUE OF THE FUND'S ASSETS,
EXCEPT HOLDING COMPANIES OR COMPANIES FORMED BY
MERGER, WHERE THE OPERATING COMPANIES HAVE HAD
AT LEAST THREE YEARS OF CONTINUOUS OPERATION.
<PAGE>
The 1940 Act does not impose any limitation upon investment in
securities of issuers with a limited operating history. The change is being
proposed to permit the Fund to invest in such securities to the extent that PMC
believes that such investment would be beneficial to the Fund and would not
involve undue risk. In general, PMC believes that it would be advantageous in
connection with the expansion of the Fund's ability to invest in non-dividend
paying stocks to have the flexibility to invest in recently formed companies
which often offer significant potential for growth of capital. Although the Fund
will not formally adopt a percentage limitation on such investments, it is not
expected that PMC will invest more than 5% of the Fund's assets in such
securities.
Certain state blue sky laws may limit the ability of the Fund to invest
in securities of unseasoned issuers either alone or in combination with certain
other types of securities such as restricted securities. To the extent required
by a state securities administrator, the Fund may undertake to limit its
investment to a specified percentage.
5(f). Amendment of Fundamental Investment Restriction Regarding Borrowing
The Fund's existing fundamental investment restriction regarding
borrowing states that the Fund may not:
BORROW MONEY EXCEPT FOR TEMPORARY OR
EMERGENCY PURPOSES IN AN AMOUNT UP TO 5% OF THE
VALUE OF THE FUND'S ASSETS.
If amended as proposed, the restriction will provide that the Fund may
not:
-23-
<PAGE>
BORROW MONEY, EXCEPT FROM BANKS AS A
TEMPORARY MEASURE TO FACILITATE THE MEETING OF
REDEMPTION REQUESTS OR FOR EXTRAORDINARY OR
EMERGENCY PURPOSES AND EXCEPT PURSUANT TO
REVERSE REPURCHASE AGREEMENTS OR DOLLAR ROLLS,
IN ALL CASES IN AMOUNTS NOT EXCEEDING 10% OF
THE FUND'S TOTAL ASSETS (INCLUDING THE AMOUNT
BORROWED) TAKEN AT MARKET VALUE.
The 1940 Act requires that a fund state a fundamental policy regarding
borrowing. The amendment is being proposed (1) to clarify that the Fund may
borrow from banks both for extraordinary or emergency purposes and to meet
redemptions, (2) to increase the permitted percentage of permitted borrowings to
10% of the Fund's total assets and (3) to give the Fund the future ability to
engage in reverse repurchase agreements and dollar rolls without the need for
shareholder approval.
Reverse repurchase agreements involve sales by a fund of portfolio
assets concurrently with an agreement by the fund to repurchase the same assets
at a later date at a fixed price. During the reverse repurchase agreement
period, the fund continues to receive principal and interest on these securities
and also has the opportunity to earn a return on the collateral furnished by the
counterparty to secure its obligation to redeliver the securities. Dollar rolls
are transactions in which a fund sells securities for delivery in the current
month and simultaneously contracts to repurchase similar securities on a
specified future date. During the roll period, the fund forgoes principal and
interest paid on the securities. The fund is compensated by the difference
between the current sales price and the forward price for the future purchase
(often referred to as the "drop") as well as by the interest earned on the cash
proceeds of the initial sale.
In regard to the permitted uses of bank borrowings, clarification is
necessary because the current restriction is not explicit with respect to the
Fund's ability to borrow to meet redemptions. In regard to reverse repurchase
agreements and dollar rolls, the Fund does not currently engage or desire to
engage in either of these investment practices in the coming year. However,
because these common practices may be deemed to constitute borrowings, the
Trustees believe it is best to create the flexibility to introduce such
practices at some future time without the need for shareholder approval if this
becomes desirable. In such event, the Prospectus and Statement of Additional
Information would be
-24-
<PAGE>
amended accordingly, including the addition of appropriate risk
disclosure.
5(g). Addition of Fundamental Investment Restriction Regarding "Senior
Securities"
The Trustees propose adopting a fundamental investment restriction
regarding the issuance of "senior securities" such that the Fund may not:
ISSUE SENIOR SECURITIES, EXCEPT AS PERMITTED BY
THE FUND'S BORROWING, LENDING AND COMMODITY
RESTRICTIONS, AND FOR PURPOSES OF THIS RESTRICTION,
THE ISSUANCE OF SHARES OF BENEFICIAL INTEREST IN
MULTIPLE CLASSES OR SERIES, THE PURCHASE OR SALE OF
OPTIONS, FUTURES CONTRACTS, OPTIONS ON FUTURES
CONTRACTS, FORWARD COMMITMENTS, FORWARD FOREIGN
EXCHANGE CONTRACTS, REPURCHASE AGREEMENTS, REVERSE
REPURCHASE AGREEMENTS, DOLLAR ROLLS, SWAPS AND ANY
OTHER FINANCIAL TRANSACTION ENTERED INTO PURSUANT TO
THE FUND'S INVESTMENT POLICIES AS DESCRIBED IN THE
PROSPECTUS AND THIS STATEMENT OF ADDITIONAL
INFORMATION AND IN ACCORDANCE WITH APPLICABLE SEC
PRONOUNCEMENTS, AS WELL AS THE PLEDGE, MORTGAGE OR
HYPOTHECATION OF THE FUND'S ASSETS WITHIN THE
MEANING OF THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION REGARDING PLEDGING, ARE NOT DEEMED TO BE
SENIOR SECURITIES.
The 1940 Act requires that a fund state a fundamental policy regarding
the issuance of "senior securities" which are any securities that have
preferential rights compared to the Fund's shares of beneficial interest. The
above restriction is being proposed for the purpose of complying with this
technical requirement and to clarify that the issuance of multiple classes or
series of shares by the Fund would be permitted and that the investments
specified therein are not considered to be senior securities.
Except for forward commitments and repurchase agreements in which the
Fund already engages and forward foreign currency contracts and currency futures
and related options in which the Fund
-25-
<PAGE>
will engage if the proposed change in the Fund's investment objectives is
approved, the Fund has no current intention of engaging in the other listed
investment practices in the coming year. However, the Trustees believe it is
appropriate to provide clarification at this time that such practices (and other
unspecified investment practices) are not covered by the restriction in case it
becomes desirable to engage in one or more of these practices at some future
time. In the event that a new practice is implemented, the Prospectus and
Statement of Additional Information will be revised accordingly, including the
addition of appropriate risk disclosure.
Trustees' Recommendations
At a meeting of the Trustees held on July 16, 1996, the Trustees
present unanimously approved, and voted to recommend to the shareholders of the
Fund that they approve the proposed elimination or amendment of certain of the
Fund's investment restrictions. In taking such action and making such
recommendations, the Trustees considered the fact that the proposed changes will
provide clarification relating to certain investment restrictions and
flexibility to adjust to changing regulations and markets and new investment
techniques without continually incurring the significant expense involved in
soliciting proxies and holding shareholder meetings. The Trustees believe that
this increased clarity and flexibility will be beneficial to present
shareholders as well as potential investors.
Except as described in this Proxy Statement, approval of the proposed
changes to the investment restrictions will not result in changes in the
Trustees, officers, investment programs and services or any operations that are
described in the Fund's current Prospectus and Statement of Additional
Information.
Required Vote
Adoption of each of Proposals 5(a) through 5(g) requires the
affirmative 1940 Act Majority Vote of the Fund.
If all or some of the Proposals are not approved by the shareholders of
the Fund, the Fund will continue to adhere to the current investment
restriction(s) as to which no change has been approved.
FOR THE REASONS SET FORTH ABOVE, THE TRUSTEES RECOMMEND THAT THE
SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THE APPROVAL OF THE PROPOSALS TO
ELIMINATE, AMEND OR ADD CERTAIN INVESTMENT RESTRICTIONS.
-26-
<PAGE>
OTHER MATTERS
Shareholder Proposals
The Fund is not required to hold annual meetings of shareholders and
does not currently intend to hold such a meeting of shareholders in 1997.
Shares Held in Retirement Plans
PGI is permitted to vote any shares held in Retirement Plans and will
do so if necessary to obtain a quorum.
Proxies, Quorum and Voting at the Meeting
Any person giving a proxy has the power to revoke it at any time prior
to its exercise by executing a superseding proxy or by submitting a notice of
revocation to the Secretary of the Fund. In addition, although mere attendance
at the Meeting will not revoke a proxy, a shareholder present at the Meeting may
withdraw his or her proxy and vote in person. All properly executed and
unrevoked proxies received in time for the Meeting will be voted in accordance
with the instructions contained in the proxies. If no instruction is given, the
persons named as proxies will vote the shares represented thereby in favor of
the Proposals described above and will use their best judgment in connection
with the transaction of such other business as may properly come before the
Meeting or any adjournment thereof.
A majority of the shares entitled to vote -- present in person or
represented by proxy -- constitutes a quorum for the transaction of business
with respect to any proposal (unless otherwise noted in the Proxy Statement). In
the event that at the time any session of the Meeting is called to order a
quorum is not present in person or by proxy, the persons named as proxies may
vote those proxies which have been received to adjourn the Meeting to a later
date. In the event that a quorum is present but sufficient votes in favor of any
of the Proposals, including the election of the nominees to the Board of
Trustees, have not been received, the persons named as proxies may propose one
or more adjournments of the Meeting to permit further solicitation of proxies
with respect to such Proposal. Any such adjournment will require the affirmative
vote of more than one half of the shares of the Fund present in person or by
proxy at the session of the Meeting to be adjourned. The persons named as
proxies will vote those proxies which they are entitled to vote in favor of any
such Proposal in favor of such an adjournment and will vote those proxies
required
-27-
<PAGE>
to be voted against any such Proposal against any such adjournment. A
shareholder vote may be taken on one or more of the Proposals in the proxy
statement prior to such adjournment if sufficient votes for its approval have
been received and it is otherwise appropriate. Such vote will be considered
final regardless of whether the Meeting is adjourned to permit additional
solicitation with respect to any other Proposal.
Shares of the Fund represented at the Meeting (including, shares which
abstain or do not vote with respect to one or more of the Proposals) will be
counted for purposes of determining whether a quorum is present at the Meeting.
Abstentions will be treated as shares that are present and entitled to vote for
purposes of determining the number of shares that are present and entitled to
vote with respect to any particular Proposal, but will not be counted as a vote
in favor of such Proposal. Accordingly, an abstention from voting on a Proposal
has the same legal effect as a vote against the Proposal.
Adoption by the shareholders of any of Proposals 1, 2 and 5(a) through
5(g) requires the affirmative vote of the lesser of (i) 67% or more of the
voting securities of the Fund present at the Meeting, if the holders of more
than 50% of the shares of the Fund are present or represented by proxy at the
Meeting, or (ii) 50% or more of the outstanding shares of the Fund. If a broker
or nominee holding shares in "street name" indicates on the proxy that it does
not have discretionary authority to vote as to any Proposal, those shares will
not be considered as present and entitled to vote as to that Proposal.
Accordingly, a "broker non-vote" has no effect on the voting in determining
whether a Proposal has been adopted pursuant to item (i) above, provided that
the holders of more than 50% of the outstanding shares (excluding the "broker
non-votes") of the Fund are present or represented by proxy. However, with
respect to determining whether a Proposal has been adopted pursuant to item (ii)
above, because shares represented by a "broker non-vote" are considered
outstanding shares, a "broker non-vote" has the same legal effect as a vote
against such Proposal.
Other Business
While the Meeting has been called to transact any business that may
properly come before it, the only matters that the Trustees intend to present
are those matters stated in the attached Notice of Special Meeting of
Shareholders. However, if any additional matters properly come before the
Meeting, and on all matters incidental to the conduct of the Meeting, it is the
intention of the persons named in the enclosed proxy to vote the proxy in
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accordance with their judgment on such matters unless instructed to the
contrary.
Methods of Solicitation and Expenses
The cost of preparing, assembling and mailing this proxy statement and
the attached Notice of Special Meeting of Shareholders and the accompanying
proxy card will be borne by PMC. In addition to soliciting proxies by mail, PMC
may, at PMC's expense, have one or more Fund officers, representatives or
compensated third-party agents, including PMC, PSC and PFD, aid in the
solicitation of proxies by personal interview or telephone and telegraph and may
request brokerage houses and other custodians, nominees and fiduciaries to
forward proxy soliciting material to the beneficial owners of the shares held of
record by such persons.
The Fund may also arrange to have votes recorded by telephone. The
telephone voting procedure is designed to authenticate shareholders' identities,
to allow shareholders to authorize the voting of their shares in accordance with
their instructions and to confirm that their instructions have been properly
recorded. The Fund has been advised by counsel that these procedures are
consistent with the requirements of applicable law. If these procedures were
subject to a successful legal challenge, such votes would not be counted at the
Meeting. The Fund is unaware of any such challenge at this time. Shareholders
would be called at the phone number PSC has in its records for their accounts,
and would be asked for their Social Security number or other identifying
information. The shareholders would then be given an opportunity to authorize
proxies to vote their shares at the Meeting in accordance with their
instructions. To ensure that the shareholders' instructions have been recorded
correctly, they will also receive a confirmation of their instructions in the
mail. A special toll-free number will be available in case the information
contained in the confirmation is incorrect.
Persons holding shares as nominees will be reimbursed by PMC, upon
request, for the reasonable expenses of mailing soliciting materials to the
principals of the accounts.
November 22, 1996
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<PAGE>
APPENDIX
Additional Information Pertaining to PMC
Directors. Information regarding the affiliations of Mr. Cogan,
Chairman of PMC, and Mr. Tripple, a Director of PMC, is contained in Proposal 2
of this Proxy Statement. The following table provides information with respect
to the other Director of PMC:
<PAGE>
Name, Age and Address Principal Occupation(s)
- --------------------- -----------------------
Robert L. Butler, 55 Executive Vice President and a
60 State Street Director of PGI; President and
Boston, MA 02109 a Director of PFD; Director of
PSC, PIC, and P. Intl.; Vice
Chairman of Pioneer GmbH; and a
Member of the Supervisory Board
of PFPT.
Ownership of PMC. PMC is a wholly-owned subsidiary of PGI. As of
September 30, 1996, Mr. Cogan beneficially owned 3,578,901 shares (14.16%) of
the outstanding Common Stock of PGI. Mr. Cogan's beneficial holdings included
696,391 shares held in trusts with respect to which Mr. Cogan may be deemed to
be a beneficial owner by reason of his interest as a beneficiary and/or position
as a trustee and shares which Mr. Cogan has the right to acquire under
outstanding options within sixty days of September 30, 1995. At such date,
Messrs. Butler and Tripple, PMC's other directors, each owned beneficially less
than 2% of the outstanding Common Stock of PGI. As of September 30, 1996,
officers and directors of PMC and Trustees and officers of the Fund beneficially
owned an aggregate of 4,073,396 shares of Common Stock of PGI, approximately
15.75]% of the outstanding Common Stock of PGI. During PGI's fiscal year ended
December 31, 1995 there were no transactions in PGI Common Stock by any officer,
Trustee of the Fund or Director of PMC in an amount equal to or exceeding 1% of
the outstanding Common Stock of PGI.
Services Provided to the Fund By Affiliates of PMC. PSC serves as the
Fund's transfer agent and shareholder servicing agent. Under the terms of its
contract with the Fund, PSC's duties include: (i) processing sales, redemptions
and exchanges of shares of the Fund; (ii) distributing dividends and capital
gains to shareholder accounts; and (iii) maintaining certain account records and
responding to routine shareholder inquires. For the
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<PAGE>
fiscal year ended December 31, 1995 the Fund paid PSC approximately $773,246 in
fees for these services.
PFD, an indirect wholly owned subsidiary of PGI, serves as the Fund's
principal underwriter. For the fiscal year ended December 31, 1995, the Fund
paid PFD approximately $674,000 in distribution fees pursuant to the Fund's
Class A Distribution Plan and $15,000 in distribution fees pursuant to the
Fund's Class B Distribution Plan. Such fees are paid to PFD in reimbursement of
expenses related to servicing of shareholder accounts and compensating
broker/dealers and sales personnel. For the same period, PFD earned net
underwriting commissions in connection with its offering of shares of the Fund
in the amount of approximately $665,332 of which approximately $581,628 was
reallowed to dealers.
Similar Funds Managed By PMC. PMC serves as the investment manager to
the following funds with investment objectives similar to the Fund's current and
proposed revised objectives:
Name of Fund
Annual (Net Assets as of
Management Fee Rate as of 9/30/96)
- ------------------- --------------
0.60% on average net assets Pioneer II
(subject to an ($5,432,875,000)
adjustment of up +/-.20 Pioneer Fund
to reflect each Fund's ($2,711,796,000)
performance)
Pioneer Mid-Cap Fund
From July 1, 1996 to ($1,013,495,000)
January 30, 1997:
0.625% on average net assets
(subject to a negative
adjustment of up to 0.20%);
From February 1, 1997:
0.625% on average net assets,
adjusted by up to +/-.20%
to reflect Pioneer Mid-Cap
Fund's performance
0.65% on average Pioneer Variable
net assets Contracts Trust --
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<PAGE>
Balanced Portfolio
($112,125,000)
0.65% on the first $300 miles
of average net asset;
0.60% on the next 1200 miles
in average net assets;
0.50% on the next $500 million Pioneer Equity-Income
in average net assets; Fund
0.45% on net average assets ($459,802,000)
exceeding $1 billion
Portfolio Transactions. All orders for the purchase or sale of portfolio
securities are placed on behalf of the Fund by PMC pursuant to authority
contained in the Current and Proposed Management Contracts. In selecting brokers
or dealers, PMC considers factors relating to execution on the best overall
terms available, including, but not limited to, the size and type of the
transaction; the nature and character of the markets of 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; and the reasonableness of any dealer spreads.
PMC may select broker-dealers which provide brokerage and/or research
services to the Fund and/or other investment companies or accounts managed by
PMC. Such research services must be lawful and appropriate assistance to PMC in
the performance of its investment decision making responsibilities and could
include advice concerning the value of securities; the advisability of investing
in, purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analysis and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement).
In circumstances where two or more broker-dealers offer comparable prices
and executions, preference may be given to a broker-dealer which has sold shares
of the Fund as well as shares of other investment companies or accounts managed
by PMC. This policy does not imply a commitment to execute all portfolio
transactions through all broker-dealers that sell shares of the Fund. In
addition, if PMC determines in good faith that the amount of commissions charged
by a broker is reasonable in relation to the value of the brokerage and research
services provided by such broker, the Fund may pay commissions to such broker in
an amount greater than the amount
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another firm may charge. This information might be useful to PMC in providing
services to the Fund as well as to other investment companies or accounts
managed by PMC, although not all of such research may be useful to the Fund.
Conversely, such information provided to PMC by brokers and dealers through whom
other clients of PMC effect securities transactions might be useful to PMC in
providing services to the Fund. The receipt of such research is not expected to
reduce PMC's normal independent research activities; however, it enables PMC to
avoid the additional expense which might otherwise be incurred if it were to
attempt to develop comparable information through its own staff.
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