File No. 2-28273
File No. 811-1605
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:
[ ] Preliminary proxy statement [ ] Confidential, for Use
of the Commission
Only (as permitted
by Rule 14a-6(e)(2))
[X] 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)
<PAGE>
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
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.
1196-3804
<PAGE>
[BLANK]
<PAGE>
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
26,748,650.443 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.
1
<PAGE>
[BLANK}
<PAGE>
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 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 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
3
<PAGE>
assets in each of (1) common stocks, preferred stocks and other securities
with common stock characteristics and (2) bonds.
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 temporary 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
Baa by 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 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% of total assets to
10% and the Fund's ability to write covered call options will be eliminated.
ADDITIONAL INVESTMENT PRACTICES
Real Estate Investment Trusts ("REITs"). If the proposed change in objectives
is approved by shareholders, the Fund will adopt a policy permitting it to
invest up to 25% of its total assets in REITs. REITs are pooled investment
vehicles which primarily invest in income producing real estate or real estate
related loans or interests. REITs are generally classified as equity REITs,
mortgage REITs or a combination of equity and mortgage REITs.
4
<PAGE>
Equity REITs invest the majority of their assets directly in real property and
derive income primarily from the collection of rents. Equity REITs can also
realize capital gains by selling properties that have appreciated in value.
Mortgage REITs invest the majority of their assets in real estate mortgages and
derive income from the collection of interest payments. REITs are not taxed on
income distributed to shareholders provided they comply with several
requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The
Fund will indirectly bear its proportionate share of any expenses paid by REITs
in which it invests in addition to the expenses paid by the Fund.
Investing in REITs involves certain unique risks. Equity REITs may be
affected by changes in the value of the underlying property owned by the REITs,
while mortgage REITs may be affected by the quality of any credit extended.
REITs are dependent upon management skills, are not diversified, and are subject
to the risks of financing projects. REITs (especially mortgage REITs) are also
subject to interest rate risks. When interest rates decline, the value of a
REIT's investment in fixed rate obligations can be expected to rise. Conversely,
when interest rates rise, the value of a REIT's investment in fixed rate
obligations can be expected to decline. Historically, REITs have been more
volatile in price than the larger capitalization stocks included in the Standard
& Poor's Index of 500 Common Stocks.
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, that is, an
interest in pools of residential mortgage loans issued by U.S. Governmental or
private lenders, 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 are mortgage-backed bonds which 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 at a specified price) 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
5
<PAGE>
currencies. Other currency management strategies will allow 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
1991, Mr. Field has been employed by PMC as an investment analyst and has served
as an assistant portfolio manager for certain institutional accounts since
January 1996. 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 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 (greater
than 50% per year) for the year following the change. High portfolio turnover
involves correspondingly
6
<PAGE>
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 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,
7
<PAGE>
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 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
8
<PAGE>
Trustees of the Fund who are not affiliated with or interested persons of PMC,
the Fund (other than as Trustees), PGI, or PFD. The Fund will pay all brokers'
and underwriting commissions chargeable to the Fund in connection with
securities transactions to which the Fund is a party.
The Existing Contract was approved by the shareholders of the Fund on
November 23, 1993, in connection with acquisition of the Fund from another
mutual fund group. The Existing Contract was initially 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 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
9
<PAGE>
below are comparative fee tables showing the amount of fees and expenses 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 based on actual assets and
expenses for the fiscal year ended December 31, 1995. For Class C shares,
operating expenses are based on 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 or that Would
Have Been Paid $1,306,546 $1,751,441
Percentage Difference from Amount
Paid under Existing Contract N/A +0.17%
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%
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% 0.30%
==== ====
Total Fund Operating Expenses 1.78% 1.95%
10
<PAGE>
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 Share
--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.
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.
11
<PAGE>
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.
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
12
<PAGE>
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 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 an investment 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.
13
<PAGE>
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.
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.
14
<PAGE>
<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 on
and Address and Trusteeships (1) Trustee September 30, 1996 (2)
----------------------- --------------------------------- -------- -----------------------
<S> <C> <C> <C>
John F. Cogan, Jr.* President, Chief Executive 1993 -0-
(70) Officer and a Chairman of the
President and Board, Director of Pioneer Group,
Trustee Inc. ("PGI"); Chairman and a
60 State Street Director of PMC, PFD, Pioneer
Boston, MA 02109 Goldfields Limited ("PGL") and
Teberebie Goldfields 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)
Richard H. Egdahl, M.D. Alexander Graham Bell Professor 1993 -0-
(69) of Health Care Entrepreneurship,
Health Policy Institute Boston University; Professor of
53 Bay State Road Management, Public Health and
Boston, MA 02115 Surgery, Boston University;
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
15
<PAGE>
Margaret B.W. Graham Founding Director, Winthrop 1993 -0-
(49) Group, Inc., a consulting firm,
Trustee since 1982; Manager of Research
The Keep Operations Xerox Palo Alto
P.O. Box 110 Research Center, between 1991 and
Little Deer Isle, 1994; and Professor of Operations
ME 04650 Management and Management of
Technology, Boston University
School of Management, between
1989 and 1993
John W. Kendrick Professor Emeritus of Economics, 1993 -0-
(79) George Washington University; and
Trustee Economic Consultant and Director,
6363 Waterway Dr., American Productivity and Quality
Falls Church, Center
VA 22044
Marguerite A. Piret President, Newbury, 1993 100.406
(48) Piret & Company, Inc., a merchant 0.00%
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 of PMC; Director of PFD, PCC,
and Trustee Pioneer SBIC Corp., P. Intl. and
60 State Street PIC; and Member of the
Boston, MA 02109 Supervisory Board of PFPT
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., a 1993 -0-
(60) private investment firm; Director
Trustee of NUI Corp.
One North Adgers Wharf
Charleston, SC 29401
</TABLE>
- --------------
* 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
16
<PAGE>
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
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.
<TABLE>
<CAPTION>
Name, Age and Position with The Fund Principal Occupation(s)
- ------------------------------------------ --------------------------------------------------------------
<S> <C>
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).
</TABLE>
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
17
<PAGE>
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
Aggregate Pension or Fund and other
Compensation Retirement funds in the
From the Benefits Pioneer Family
Director 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>
+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.
18
<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 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:
19
<PAGE>
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. An option is a right to buy or
sell a security at some future date for an agreed upon price in consideration of
the payment or receipt of a premium. Financial futures and options on financial
futures are typically used for hedging purposes and involve certain risks,
including imperfect correlations between 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 may be changed by the Trustees without shareholder approval)
that would provide that the Fund may not:
20
<PAGE>
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 such as unit investment trusts) 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 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 or 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. PMC is
currently reviewing this restriction in the context of the recent enactment of
"The National Securities Market Act of 1996" which gives federal regulators
exclusive jurisdiction over the registration of mutual funds. As a result of
this review, PMC may advise the Trustees that this restriction should be further
amended or eliminated.
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
21
<PAGE>
by merger, where the operating companies have had at least three years of
continuous operation.
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 limited the ability of the Fund to invest in the
securities of unseasoned issuers. PMC is currently reviewing this restriction in
the context of the recent enactment of "The National Securities Market Act of
1996" which gives federal regulators exclusive jurisdiction over the
registration of mutual funds. As a result of this review, PMC may advise the
Trustees that the restriction should be further amended or eliminated.
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:
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
22
<PAGE>
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 amended accordingly, including the addition of appropriate
risk disclosure. The Fund will not purchase securities while outstanding
borrowings exceed 5% of the Fund's total assets.
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 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
23
<PAGE>
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.
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
24
<PAGE>
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 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
25
<PAGE>
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 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
26
<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:
Name, Age and Address Principal Occupation(s)
-------------------------- ---------------------------------------------
Robert L. Butler, 55 Executive Vice President and a Director of
60 State Street PGI; President and a Director of PFD;
Boston, MA 02109 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, 1996. 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 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:
27
<PAGE>
Annual Name of Fund
Management Fee Rate (Net Assets as of 9/30/96)
- -------------------------------------------- -------------------------------
0.60% on average net assets (subject to an Pioneer II
adjustment of up to plus/minus .20 to ($5,432,875,000)
reflect each Fund's performance) Pioneer Fund
($2,711,796,000)
From July 1, 1996 to January 30, 1997: Pioneer Mid-Cap Fund
0.625% on average net assets (subject to a ($1,013,495,000)
negative adjustment of up to 0.20%);
From February 1, 1997: 0.625% on average net
assets, adjusted by up to plus/minus .20%
to reflect Pioneer Mid-Cap Fund's performance
0.65% on average net assets Pioneer Variable
Contracts Trust--
Balanced Portfolio
($12,125,000)
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 in average Pioneer Equity-Income Fund
net assets; ($459,802,000)
0.45% on net average assets 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
28
<PAGE>
to such broker in an amount greater than the amount 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.
-------------------
29
<PAGE>
EXHIBIT A
MANAGEMENT CONTRACT
THIS AGREEMENT dated this day of February, 1997 between Pioneer Balanced
Fund, a Delaware business trust (the "Fund"), and Pioneering Management
Corporation, a Delaware corporation (the "Manager").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (the "Registration Statement") for the
purpose of registering its shares for public offering under the Securities Act
of 1933, as amended,
WHEREAS, the parties hereto deem it mutually advantageous that the Manager
should be engaged, subject to the supervision of the Fund's Board of Trustees
and officers, to manage the Fund,
NOW, THEREFORE, in consideration of the mutual covenants and benefits set
forth herein, the Fund and the Manager do hereby agree as follows:
1. (a) The Manager will regularly provide the Fund with investment research,
advice and supervision and will furnish continuously an investment program for
the Fund consistent with the investment objectives and policies of the Fund. The
Manager will determine from time to time what securities shall be purchased for
the Fund, what securities shall be held or sold by the Fund and what portion of
the Fund's assets shall be held uninvested as cash, subject always to the
provisions of the Fund's Agreement and Declaration of Trust, By-Laws and its
registration statements under the 1940 Act and under the Securities Act of 1933
covering the Fund's shares, as filed with the Securities and Exchange
Commission, and to the investment objectives, policies and restrictions of the
Fund, as each of the same shall be from time to time in effect, and subject,
further, to such policies and instructions as the Board of Trustees of the Fund
may from time to time establish. To carry out such determinations, the Manager
will exercise full discretion and act for the Fund in the same manner and with
the same force and effect as the Fund itself might or could do with respect to
purchases, sales or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct of such purchases,
sales or other transactions.
(b) The Manager will, to the extent reasonably required in the conduct of the
business of the Fund and upon the Fund's request, furnish to the Fund research,
statistical and advisory reports upon the industries, businesses, corporations
or securities as to which such requests shall be made, whether or not the Fund
shall at the time have any investment in such industries, businesses,
corporations or securities. The Manager will use its best efforts in the
preparation of such reports and will endeavor to consult the persons and sources
believed by it to have information available with respect to such industries,
businesses, corporations or entities.
A-1
<PAGE>
(c) The Manager will maintain all books and records with respect to the
Fund's securities transactions required by sub-paragraphs (b)(5),(6),(9) and
(10) and paragraph (f) of Rule 31a-1 under the 1940 Act (other than those
records being maintained by the custodian or transfer agent appointed by the
Fund) and preserve such records for the periods prescribed therefor by Rule
31a-2 of the 1940 Act. The Manager will also provide to the Board of Trustees
such periodic and special reports as the Board may reasonably request. >
2. (a) Except as otherwise provided herein, the Manager, at its own expense,
shall furnish to the Fund office space in the offices of the Manager or in such
other place as may be agreed upon from time to time, and all necessary office
facilities, equipment and personnel for managing the Fund's affairs and
investments, and shall arrange, if desired by the Fund, for members of the
Manager's organization to serve as officers or agents of the Fund.
(b) The Manager shall pay directly or reimburse the Fund for: (i) the
compensation (if any) of the Trustees who are affiliated with, or interested
persons of, the Manager and all officers of the Fund as such; and (ii) all
expenses not hereinafter specifically assumed by the Fund where such expenses
are incurred by the Manager or by the Fund in connection with the management of
the affairs of, and the investment and reinvestment of the assets of, the Fund.
(c) The Fund shall assume and shall pay: (i) charges and expenses for fund
accounting, pricing and appraisal services and related overhead, including, to
the extent such services are performed by personnel of the Manager or its
affiliates, office space and facilities and personnel compensation, training and
benefits; (ii) the charges and expenses of auditors; (iii) the charges and
expenses of any custodian, transfer agent, plan agent, dividend disbursing agent
and registrar appointed by the Fund with respect to the Fund; (iv) issue and
transfer taxes, chargeable to the Fund in connection with securities
transactions to which the Fund is a party; (v) insurance premiums, interest
charges, dues and fees for membership in trade associations and all taxes and
corporate fees payable by the Fund to federal, state or other governmental
agencies; (vi) fees and expenses involved in registering and maintaining
registrations of the Fund and/or its shares with the Commission, state or blue
sky securities agencies and foreign countries, including the preparation of
Prospectuses and Statements of Additional Information for filing with regulatory
agencies; (vii) all expenses of shareholders' and Trustees' meetings and of
preparing, printing and distributing prospectuses, notices, proxy statements and
all reports to shareholders and to governmental agencies; (viii) charges and
expenses of legal counsel to the Fund and the Trustees; (ix) distribution fees
paid by the Fund in accordance with Rule 12b-1 promulgated by the Commission
pursuant to the 1940 Act; (x) compensation of those Trustees of the Fund who are
not affiliated with or interested persons of the Manager, the Fund (other than
as Trustees), The Pioneer Group, Inc. or Pioneer Funds Distributor, Inc.; (xi)
the cost of preparing and printing share certificates; and (xii) interest on
borrowed money, if any.
(d) In addition to the expenses described in Section 2(c) above, the Fund
shall pay all brokers' and underwriting commissions chargeable to the Fund in
connection with securities transactions to which the Fund is a party.
A-2
<PAGE>
3. (a) The Fund shall pay to the Manager, as compensation for the Manager's
services hereunder, a fee at the rates per annum of the Fund's average daily net
assets as follows: 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 management fee payable hereunder shall be computed daily and paid monthly in
arrears. In the event of termination of this Agreement, the fee provided in this
Section shall be computed on the basis of the period ending on the last business
day on which this Agreement is in effect subject to a pro rata adjustment based
on the number of days elapsed in the current month as a percentage of the total
number of days in such month.
(b) If the operating expenses of the Fund in any year exceed the limits set
by state securities laws or regulations in states in which shares of the Fund
are sold, the amount payable to the Manager under subsection (a) above will be
reduced (but not below $0), and the Manager shall make other arrangements
concerning expenses but, in each instance, only as and to the extent required by
such laws or regulation. If amounts have already been advanced to the Manager
under this Agreement, the Manager will return such amounts to the Fund to the
extent required by the preceding sentence.
(c) In addition to the foregoing, the Manager may from time to time agree not
to impose all or a portion of its fee otherwise payable hereunder (in advance of
the time such fee or a portion thereof would otherwise accrue) and/or undertake
to pay or reimburse the Fund for all or a portion of its expenses not otherwise
required to be borne or reimbursed by the Manager. Any such fee reduction or
undertaking may be discontinued or modified by the Manager at any time.
4. The Manager will not be liable for any error of judgment or mistake of law
or for any loss sustained by reason of the adoption of any investment policy or
the purchase, sale, or retention of any security on the recommendation of the
Manager, whether or not such recommendation shall have been based upon its own
investigation and research or upon investigation and research made by any other
individual, firm or corporation, but nothing contained herein will be construed
to protect the Manager against any liability to the Fund or its shareholders by
reason of willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its obligations and
duties under this Agreement.
5. (a) Nothing in this Agreement will in any way limit or restrict the
Manager or any of its officers, directors, or employees from buying, selling or
trading in any securities for its or their own accounts or other accounts. The
Manager may act as an investment advisor to any other person, firm or
corporation, and may perform management and any other services for any other
person, association, corporation, firm or other entity pursuant to any contract
or otherwise, and take any action or do any thing in connection therewith or
related thereto; and no such performance of management or other services or
taking of any such action or doing of any such thing shall be in any manner
restricted or otherwise affected by any aspect of any relationship of the
Manager to or with the Fund or deemed to violate or give rise to any duty or
obligation of the Manager to the Fund except as otherwise imposed by law. The
Fund recognizes that Manager, in effecting transactions for its various
accounts, may not always be able to take or liquidate investment positions in
the same security at the same time and at the same price.
A-3
<PAGE>
(b) In connection with purchases or sales of fund securities for the account
of the Fund, neither the Manager nor any of its Trustees, officers or employees
will act as a principal or agent or receive any commission except as permitted
by the 1940 Act. The Manager shall arrange for the placing of all orders for the
purchase and sale of fund securities for the Fund's account with brokers or
dealers selected by the Manager. In the selection of such brokers or dealers and
the placing of such orders, the Manager is directed at all times to seek for the
Fund the most favorable execution and net price available except as described
herein. It is also understood that it is desirable for the Fund that the Manager
have access to supplemental investment and market research and security and
economic analyses provided by brokers who may execute brokerage transactions at
a higher cost to the Fund than may result when allocating brokerage to other
brokers on the basis of seeking the most favorable price and efficient
execution. Therefore, the Manager is authorized to place orders for the purchase
and sale of securities for the Fund with such brokers, subject to review by the
Fund's Trustees from time to time with respect to the extent and continuation of
this practice. It is understood that the services provided by such brokers may
be useful to the Manager in connection with its or its affiliates services to
other clients.
(c) On occasions when the Manager deems the purchase or sale of a security to
be in the best interest of the Fund as well as other clients, the Manager, to
the extent permitted by applicable laws and regulations, may aggregate the
securities to be sold or purchased in order to obtain the best execution and
lower brokerage commissions, if any. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Manager in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such clients.
6. This Agreement shall become effective on the date hereof and shall remain
in force until May 31, 1998 and from year to year thereafter, but only so long
as its continuance is approved annually by a vote of the Trustees of the Fund
voting in person, including a majority of its Trustees who are not parties to
this Agreement or interested persons (as the term "interested persons" is
defined in the 1940 Act) of any such parties, at a meeting of Trustees called
for the purpose of voting on such approval or by a vote of a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of the Fund, subject
to the right of the Fund and the Manager to terminate this contract as provided
in Section 7 hereof.
7. Either party hereto may, without penalty, terminate this Agreement by
vote of its Board of Trustees or by vote of a "majority of its outstanding
voting securities" (as defined in the 1940 Act) of the Fund and the giving of 60
days' written notice to the other party.
8. This Agreement shall automatically terminate in the event of its
assignment. For purposes of this Agreement, the term "assignment" shall have
the meaning given it by Section 2(a)(4) of the 1940 Act.
9. The Fund agrees that in the event that neither the Manager nor any of its
affiliates acts as an investment adviser to the Fund, the name of the Fund, and
any fund thereof, will be changed to one that does not contain the name
"Pioneer" or otherwise suggest an affiliation with the Manager.
10. The Manager is an independent contractor and not an employee of the
Fund for any purpose. If any occasion should arise in which the Manager gives
any advice to
A-4
<PAGE>
its clients concerning the shares of the Fund, the Manager will act solely as
investment counsel for such clients and not in any way on behalf of the Fund
or Fund.
11. This Agreement states the entire agreement of the parties hereto, and is
intended to be the complete and exclusive statement of the terms hereof. It may
not be added to or changed orally, and may not be modified or rescinded except
by a writing signed by the parties hereto and in accordance with the 1940 Act,
when applicable.
12. This Agreement and all performance hereunder shall be governed by the
laws of The Commonwealth of Massachusetts, which apply to contracts made and
to be performed in The Commonwealth of Massachusetts.
13. Any term or provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall, as to such jurisdiction be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms or provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction.
14. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers and their seal to be hereto affixed
as of the day and year first above written.
ATTEST: PIONEER BALANCED FUND
- ----------------------------- ----------------------------------
Joseph P. Barri John F. Cogan, Jr.
Secretary President
PIONEERING MANAGEMENT
ATTEST: CORPORATION
- ----------------------------- ----------------------------------
Joseph P. Barri Robert L. Butler
Secretary President
A-5
<PAGE>
Pioneer Income Fund
60 State Street
Boston, MA 02109-1820
November 1996
Dear Shareowner,
I am writing to advise you that a special meeting will be held January 14, 1997,
for shareowners of Pioneer Income Fund to vote on a number of important
Proposals. As a shareowner in the Fund, you have the opportunity to voice your
opinion on these matters.
This package contains information about the proposals, along with the yellow
proxy card for you to use when voting by mail. Please take a moment to read the
enclosed materials and cast your vote on the yellow proxy card. Your prompt vote
will be appreciated. If a majority of the Fund's shareowners have not voted
prior to the meeting, we must try to obtain their votes with additional mailings
or phone solicitation.
(callout in margin) Voting your shares by mail is quick and easy. Everything you
need is enclosed.
Each of the proposals up for approval has been reviewed by Pioneer Income Fund's
Board of Trustees, whose primary role is to protect your interests as a
shareowner. The Trustees recommend that you vote FOR each proposal.
(callout in margin) The Fund's Board of Trustees recommends that you vote FOR
each proposal.
Here is what a FOR vote means for each of the proposals being considered.
Proposal 1:
Approve changing the Fund's investment objective to capital growth and current
income by actively managing a diversified portfolio of equity securities and
bonds. The Fund's name will change to Pioneer Balanced Fund if this Proposal is
approved. The Fund's objective now is current income consistent with the
preservation and conservation of capital; capital growth is a secondary
consideration. The enclosed Proxy Statement provides more details on the
proposed change.
Proposal 2:
Approve a new management contract with Pioneering Management Corporation (PMC),
including an increase in management fees. Under the current contract, as of
September 30, 1996, the effective annual rate of the Fund's management fees was
0.498%, based on net asset of $274 million. Under the proposed contract, the
Fund would pay an effective annual rate of 0.65% at the same asset level.
Proposal 3:
Elect eight Trustees to the Board. The Trustees supervise the Fund's activities
and review contractual arrangements with companies that provide services to the
Fund. All of the nominees currently serve as Trustees.
Proposal 4:
Ratify the selection of Arthur Andersen LLP as the Fund's independent public
accountants for the fiscal year ending December 31, 1997. Arthur Andersen LLP
currently serves as the Fund's independent public accountants.
<PAGE>
Proposal 5:
Modernize the Fund's investment policies to conform to current standards in the
mutual fund industry. The Fund's Trustees believe the proposed changes are
appropriate and necessary to update the Fund. For details on each component of
this Proposal, we encourage you to read the enclosed Proxy Statement.
Cast your vote by completing and signing the yellow proxy card enclosed in this
package. Please mail your completed and signed proxy card as quickly as
possible, using the postage-paid envelope provided.
(callout in margin) Please vote! Your vote is extremely important, no matter how
many shares you own.
Please feel free to call Pioneer at 1-800-225-6292 from 8:00 a.m. to 9:00 p.m.
Eastern time on any business day. We'll be happy to answer your questions about
the Proposals or the process for voting your shares. Thank you for your prompt
response.
Sincerely,
John F. Cogan, Jr.
Chairman and President
1196-3505
<PAGE>
PIONEER INCOME FUND
60 State Street
Boston, MA 02109-1820
URGENT!
PLEASE VOTE
YOUR SHARES TODAY
Dear Shareowner,
Not too long ago we sent you a proxy card and materials explaining the proposals
up for a vote at the January 14, 1997, shareowner meeting for Pioneer Income
Fund. WE NEED YOU TO CAST YOUR VOTE!
If you have not already completed and returned the proxy card included in our
earlier package, PLEASE TAKE A MOMENT NOW TO COMPLETE THE ENCLOSED YELLOW PROXY
CARD AND MAIL IT TO US IN THE POSTAGE-PAID ENVELOPE PROVIDED.
The proposals up for approval have been reviewed by Pioneer Income Fund's Board
of Trustees, whose primary role is to protect your interests as a shareowner.
THE TRUSTEES RECOMMEND THAT YOU VOTE FOR EACH PROPOSAL. For your easy reference,
on the back of this page is a summary of what a FOR vote would mean for each
proposal.
PLEASE VOTE! YOUR VOTE IS EXTREMELY IMPORTANT, NO MATTER HOW MANY SHARES YOU
OWN.
Please feel free to call Pioneer at 1-800-225-6292 from 8:00 a.m. to 9:00 p.m.
Eastern time if you have any questions about the proposals or the process for
voting your shares. Thank you for your prompt response.
Sincerely,
John F. Cogan, Jr.
Chairman and President
<PAGE>
HERE IS WHAT A FOR VOTE MEANS FOR EACH OF THE PROPOSALS BEING CONSIDERED.
PROPOSAL 1:
APPROVE CHANGING THE FUND'S INVESTMENT OBJECTIVE TO CAPITAL GROWTH AND CURRENT
INCOME BY ACTIVELY MANAGING A DIVERSIFIED PORTFOLIO OF EQUITY SECURITIES AND
BONDS. The Fund's name will change to Pioneer Balanced Fund if this Proposal is
approved. The Fund's objective now is current income consistent with the
preservation and conservation of capital; capital growth is a secondary
consideration. The Proxy Statement, sent to you previously, provides more
details on the proposed change.
PROPOSAL 2:
APPROVE A NEW MANAGEMENT CONTRACT WITH PIONEERING MANAGEMENT CORPORATION (PMC),
including an increase in management fees. Under the current contract, as of
September 30, 1996, the effective annual rate of the Fund's management fees was
0.498%, based on net asset of $274 million. Under the proposed contract, the
Fund would pay an effective annual rate of 0.65% at the same asset level.
PROPOSAL 3:
ELECT EIGHT TRUSTEES TO THE BOARD. The Trustees supervise the Fund's activities
and review contractual arrangements with companies that provide services to the
Fund. All of the nominees currently serve as Trustees.
PROPOSAL 4:
RATIFY THE SELECTION OF ARTHUR ANDERSEN LLP AS THE FUND'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997. Arthur Andersen LLP
currently serves as the Fund's independent public accountants.
PROPOSAL 5:
MODERNIZE THE FUND'S INVESTMENT POLICIES to conform to current standards in the
mutual fund industry. The Fund's Trustees believe the proposed changes are
appropriate and necessary to update the Fund. For details on each component of
this Proposal, we encourage you to read the Proxy Statement.
PLEASE VOTE! YOUR VOTE IS EXTREMELY IMPORTANT, NO MATTER HOW MANY SHARES YOU
OWN.
1196-3506
<PAGE>
PIONEER INCOME FUND
60 State Street
Boston, MA 02109-1820
URGENT!
PLEASE VOTE YOUR
SHARES TODAY
Dear Shareowner,
TIME IS RUNNING OUT. You have not yet returned the proxy cards we sent for you
to use in voting on the proposals up for consideration at Pioneer Income Fund's
January 14, 1997, shareowner meeting. WE NEED YOU TO CAST YOUR VOTE TODAY!
Please vote now. If a majority of the Fund's shareowners have not voted before
January 14, we must delay the meeting and extend the proposal and voting
process.
If you have not already completed and returned the proxy cards included in our
earlier packages, PLEASE TAKE A MOMENT NOW TO COMPLETE THE ENCLOSED YELLOW PROXY
CARD AND MAIL IT TO US TODAY IN THE POSTAGE-PAID ENVELOPE PROVIDED.
The proposals up for approval have been reviewed by Pioneer Income Fund's Board
of Trustees, whose primary role is to protect your interests as a shareowner.
THE TRUSTEES RECOMMEND THAT YOU VOTE FOR EACH PROPOSAL. For your easy reference,
on the back of this page is a summary of what a FOR vote would mean for each
proposal.
VOTE TODAY! YOUR VOTE IS EXTREMELY IMPORTANT, NO MATTER HOW MANY SHARES YOU OWN.
Please feel free to call Pioneer at 1-800-225-6292 from 8:00 a.m. to 9:00 p.m.
Eastern time if you have any questions about the proposals or the process for
voting your shares. Thank you for your prompt response.
Sincerely,
John F. Cogan, Jr.
Chairman and President
<PAGE>
HERE IS WHAT A FOR VOTE MEANS FOR EACH OF THE PROPOSALS BEING CONSIDERED.
PROPOSAL 1:
APPROVE CHANGING THE FUND'S INVESTMENT OBJECTIVE TO CAPITAL GROWTH AND CURRENT
INCOME BY ACTIVELY MANAGING A DIVERSIFIED PORTFOLIO OF EQUITY SECURITIES AND
BONDS. The Fund's name will change to Pioneer Balanced Fund if this Proposal is
approved. The Fund's objective now is current income consistent with the
preservation and conservation of capital; capital growth is a secondary
consideration. The enclosed Proxy Statement, sent to you previously, provides
more details on the proposed change.
PROPOSAL 2:
APPROVE A NEW MANAGEMENT CONTRACT WITH PIONEERING MANAGEMENT CORPORATION (PMC),
including an increase in management fees. Under the current contract, as of
September 30, 1996, the effective annual rate of the Fund's management fees was
0.498%, based on net asset of $274 million. Under the proposed contract, the
Fund would pay an effective annual rate of 0.65% at the same asset level.
PROPOSAL 3:
ELECT EIGHT TRUSTEES TO THE BOARD. The Trustees supervise the Fund's activities
and review contractual arrangements with companies that provide services to the
Fund. All of the nominees currently serve as Trustees.
PROPOSAL 4:
RATIFY THE SELECTION OF ARTHUR ANDERSEN LLP AS THE FUND'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997. Arthur Andersen LLP
currently serves as the Fund's independent public accountants.
PROPOSAL 5:
MODERNIZE THE FUND'S INVESTMENT POLICIES to conform to current standards in the
mutual fund industry. The Fund's Trustees believe the proposed changes are
appropriate and necessary to update the Fund. For details on each component of
this Proposal, we encourage you to read the Proxy Statement.
PLEASE VOTE TODAY! YOUR VOTE IS EXTREMELY IMPORTANT, NO MATTER HOW MANY SHARES
YOU OWN.
1196-3507
<PAGE>
PROXY PROXY
PIONEER INCOME FUND
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 14, 1997
The undersigned, having received notice of the meeting and management's
proxy statement therefor, and revoking all prior proxies, hereby appoint(s) John
F. Cogan, Jr., David D. Tripple, Robert P. Nault and Joseph P. Barri, and each
of them, attorneys or attorney of the undersigned (with full power of
substitution in them and each of them) for and in the name(s) of the undersigned
to attend the Special Meeting of Shareholders of Pioneer Income Fund (the
"Fund") to be held on Tuesday, January 14, 1997 at 2:00 p.m. (Boston time) at
the offices of Hale and Dorr, counsel to the Fund, 60 State Street, 26th Floor,
Boston, Massachusetts 02109 (the "Meeting"), and any adjourned session or
sessions thereof, and there to vote and act upon the following matters (as more
fully described in the accompanying Proxy Statement) in respect of all shares of
the Fund which the undersigned will be entitled to vote or act upon, with all
the powers the undersigned would possess if personally present:
(1) To approve amendments to the Fund's investment objective:
- - -
FOR |_| AGAINST |_| ABSTAIN |_|
(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:
- - -
FOR |_| AGAINST |_| ABSTAIN |_|
(3) To elect the eight (8) Trustees to serve on the Board of
Trustees until their successors have been duly elected and qualified. The
nominees are:
John F. Cogan, Jr., Richard H. Egdahl, M.D., Margaret B.W. Graham,
John.W. Kendrick, Marguerite A. Piret, David D. Tripple, Stephen K. West
and John Winthrop.
/ / FOR electing all the nominees
(EXCEPT AS MARKED TO THE CONTRARY ABOVE)
/ / WITHHOLD authority to vote for all nominees
(NOTE: TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE OF THE NOMINEES,
WRITE THE NOMINEE(S) NAME ON THE LINE BELOW.)
--------------------------------------------------------------------
(4) To ratify the selection of Arthur Andersen LLP as the Fund's
independent public accountants for the fiscal year ending December 31,
1997:
- - -
FOR |_| AGAINST |_| ABSTAIN |_|
(5a) To approve an amendment to the Fund's fundamental investment
restriction regarding underwriting:
- - -
FOR |_| AGAINST |_| ABSTAIN |_|
(5b) To approve an amendment to the Fund's fundamental investment
restriction regarding commodities:
- - -
FOR |_| AGAINST |_| ABSTAIN |_|
(5c) To approve the elimination of the Fund's fundamental investment
restriction regarding investment companies:
- - -
FOR |_| AGAINST |_| ABSTAIN |_|
(5d) To approve the elimination of the Fund's fundamental investment
restriction regarding affiliates of affiliates of the Fund:
- - -
FOR |_| AGAINST |_| ABSTAIN |_|
(5e) To approve the elimination of the Fund's fundamental investment
restriction regarding "unseasoned" issuers:
- - -
FOR |_| AGAINST |_| ABSTAIN |_|
(5f) To approve an amendment to the Fund's fundamental investment
restriction regarding borrowing:
- - -
FOR |_| AGAINST |_| ABSTAIN |_|
(5g) To approve the addition of a new fundamental investment
restriction regarding "senior securities":
- - -
FOR |_| AGAINST |_| ABSTAIN |_|
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
<PAGE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE
PROPOSAL.
DATED: ......................, 199_
....................................
....................................
Signature(s)
In signing, please write name(s)
exactly as appearing hereon. When
signing as attorney, executor,
administrator or other fiduciary,
please give your full title as
such. Joint owners should each sign
personally.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE FUND AND
SHOULD BE RETURNED AS SOON AS POSSIBLE IN THE ENVELOPE PROVIDED
<PAGE>
[Pioneer Logo]
IMPORTANT ADVISORY CONCERNING PIONEER INCOME FUND
- -------------------------------------------------------------------------------
FUND'S SHIFT TOWARD EQUITY Since its inception in 1968, Pioneer Income Fund has
INVESTING IS CONSISTENT offered shareowners an investment vehicle for
WITH PIONEER'S LONG-TERM pursuing:
ECONOMIC OUTLOOK
o current income, consistent with preservation of
capital, primarily through high-quality corporate
bonds
o growth of capital through common stocks as a
secondary objective
After evaluating Pioneer Income Fund's policies, the
long-term outlook for its competitive universe, as
well as current economic and market trends, Fund
trustees will submit a proposal for shareowner
approval that would:
o shift the Fund's objective toward a balance
between income and growth
o change the Fund's name to Pioneer Balanced Fund
Fund shareowners will soon receive proxy materials
that will describe these important proposals and
others related to Pioneer Income Fund. All proposals
will be submitted for a shareowner vote on January
14, 1997.
FOR CUMULATIVE TOTAL Keep in mind this change is primarily a shift in
RETURNS, THE LIPPER emphasis: the current portfolio breakdown of Pioneer
BALANCED FUND CATEGORY Income Fund is about 65% bonds and 35% stocks. Upon
OUTPERFORMED THE LIPPER acceptance Income of the proposal, the change would
FUND CATEGORY ON A take effect February 1, 1997, and the mix between
ONE-YEAR, FIVE-YEAR AND the two sectors would begin approaching a balanced
10-YEAR BASIS THROUGH target of approximately 50/50.
9/30/96
For reinvestors, who comprise some 90% of
shareowners, the change in objective should permit
greater opportunity to pursue equity growth than the
current investment mix offers. For the minority of
shareowners who require relatively high current
income Pioneer offers:
o systematic withdrawal programs which would
let your clients receive regular checks
monthly or quarterly from their Fund investment
o exchanges into a number of attractive taxable
and tax-free income alternatives that pursue
monthly dividends
Other proposals touch on:
o approval for a new management contract with
Pioneering Management Corporation (PMC)
including a change in management fee to 0.65%
on net assets of $0.00 million
o re-election of eight current Trustees to the
Board
PLEASE ENCOURAGE YOUR We hope you share our confidence and conviction
CLIENTS TO VOTE "YES" that these proposals are in the best interest of
FOR THE PROPOSED your clients, our shareowners. We will continue
CHANGES TO PIONEER to work hard for your support, and to ensure
INCOME FUND that our standards of service and investment
management remain second to none.
IF YOU HAVE ANY QUESTIONS, PLEASE CALL PIONEER SALES SUPPORT AT 1-800-622-9876.
- -------------------------------------------------------------------------------
PIONEER FUNDS FOR BROKER/DEALER USE ONLY
DISTRIBUTOR, INC. NOT FOR USE WITH THE PUBLIC
60 STATE STREET
BOSTON, MA 02109
(CODE)
