[Pioneer logo]
Pioneer
Balanced
Fund
Prospectus
Class A, Class B and Class C Shares
February 3, 1997
Pioneer Balanced Fund (the "Fund") seeks capital growth and current income
by actively managing investments in a diversified portfolio of equity
securities and bonds. The Fund's equity investments may include common
stocks, including shares of real estate investment trusts ("REITs"), and
securities with common stock characteristics, such as convertible bonds and
preferred stocks. The Fund's bond investments may include debt securities,
commercial paper, United States ("U.S.") Government securities and
collateralized mortgage obligations ("CMOs").
FUND RETURNS AND SHARE PRICES FLUCTUATE AND THE VALUE OF YOUR ACCOUNT UPON
REDEMPTION MAY BE MORE OR LESS THAN YOUR PURCHASE PRICE. SHARES IN THE FUND
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR
OTHER DEPOSITORY INSTITUTION, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
This Prospectus provides the information about the Fund that you should
consider before investing. Please read and retain it for future reference.
More information about the Fund is included in the Statement of Additional
Information, dated February 3, 1997, which is incorporated by reference into
this Prospectus. A copy of the Statement of Additional Information may be
obtained free of charge by calling Shareholder Services at 1-800-225-6292 or
by written request to the Fund at 60 State Street, Boston, Massachusetts
02109. Other information about the Fund has been filed with the Securities
and Exchange Commission (the "SEC") and is available upon request and without
charge.
TABLE OF CONTENTS PAGE
--------- ------------------------------------------------------ -------
I. EXPENSE INFORMATION 2
II. FINANCIAL HIGHLIGHTS 3
III. INVESTMENT OBJECTIVE, POLICIES AND RISKS 6
IV. MANAGEMENT OF THE FUND 6
V. FUND SHARE ALTERNATIVES 7
VI. SHARE PRICE 8
VII. HOW TO BUY FUND SHARES 8
VIII. HOW TO SELL FUND SHARES 11
IX. HOW TO EXCHANGE FUND SHARES 13
X. DISTRIBUTION PLANS 13
XI. DIVIDENDS, DISTRIBUTIONS AND TAXATION 14
XII. SHAREHOLDER SERVICES 15
Account and Confirmation Statements 15
Additional Investments 15
Automatic Investment Plans 15
Financial Reports and Tax Information 15
Distribution Options 15
Directed Dividends 15
Direct Deposit 15
Voluntary Tax Withholding 15
Telephone Transactions and Related Liabilities 15
FactFone(SM) 16
Retirement Plans 16
Telecommunications Device for the Deaf (TDD) 16
Systematic Withdrawal Plans 16
Reinstatement Privilege (Class A Shares only) 16
XIII. THE FUND 16
XIV. INVESTMENT RESULTS 17
APPENDIX 17
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
I. EXPENSE INFORMATION
This table is designed to help you understand the charges and expenses
that you, as a shareholder, will bear directly or indirectly when you invest
in the Fund. The table reflects annual operating expenses based on actual
expenses for the fiscal year ended December 31, 1995. Management fees have
been restated to reflect the fee payable to Pioneering Management Corporation
("PMC") under the most recently approved management contract. For the fiscal
year ended December 31, 1995, actual management fees were 0.48% for each
Class of shares and total operating expenses were 1.11% for Class A shares
and 1.78% for Class B and Class C shares. For Class C shares, operating
expenses are based on expenses that would have been incurred if Class C
shares had been outstanding for the fiscal year ended December 31, 1995.
Shareholder Transaction
Expenses: Class A Class B Class C+
Maximum Initial Sales Charge
on Purchases (as a
percentage of offering
price) 4.50%(1) None None
Maximum Sales Charge on
Reinvestment of Dividends None None None
Maximum Deferred Sales Charge None1 4.00% 1.00%
Redemption Fee(2) None None None
Exchange Fee None None None
Annual Operating Expenses
(as a percentage of average
net assets):
Management Fee 0.65% 0.65% 0.65%
12b-1 Fees 0.25% 1.00% 1.00%
Other Expenses
(including accounting and
transfer agent fees,
custodian fees and printing
expenses) 0.38% 0.30% 0.30%
---------- ---------- ------------
Total Operating Expenses: 1.28% 1.95% 1.95%
========== ========== ============
+ Class C shares were first offered on January 31, 1996.
(1) Purchases of $1 million or more and purchases by participants in certain
group plans are not subject to an initial sales charge but may be
subject to a contingent deferred sales charge ("CDSC") as further
described under "How to Sell Fund Shares."
(2) Separate fees (currently $10 and $20, respectively) apply to domestic
and international wire transfers of redemption proceeds.
Example:
You would pay the following expenses on a $1,000 investment in the Fund,
assuming 5% annual return with or without redemption at the end of each time
period:
1 Year 3 Years 5 Years 10 Years
Class A Shares $57 $84 $112 $193
Class B Shares
--Assuming complete redemption
at end of period $60 $91 $125 $210
- --Assuming no redemption $20 $61 $105 $210
Class C Shares**
--Assuming complete redemption
at end of period $30 $61 $105 $227
- --Assuming no redemption $20 $61 $105 $227
*Class B shares convert to Class A shares eight years after purchase;
therefore, Class A expenses are used after year eight.
**Class C shares redeemed during the first year after purchase are subject to
a 1% CDSC.
THE EXAMPLE ABOVE ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS
AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER "ANNUAL OPERATING EXPENSES"
REMAIN THE SAME EACH YEAR.
The example is designed for information purposes only, and should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return will vary from year to year and may be higher or lower
than those shown.
For further information regarding management fees, 12b-1 fees and other
expenses of the Fund, including information regarding the basis upon which
management fees and 12b-1 fees are paid, see "Management of the Fund,"
"Distribution Plans" and "How To Buy Fund Shares" in this Prospectus and
"Management of the Fund" and "Underwriting Agreement and Distribution Plans"
in the Statement of Additional Information. The Fund's payment of a Rule
12b-1 fee may result in long-term shareholders indirectly paying more than
the economic equivalent of the maximum sales charge permitted under the
Conduct Rules of the National Association of Securities Dealers, Inc.
("NASD").
The maximum initial sales charge is reduced on purchases of specified
larger amounts of Class A shares and the value of shares owned in other
Pioneer mutual funds is taken into account in determining the applicable
initial sales charge. See "How to Buy Fund Shares." No sales charge is
applied to exchanges of shares of the Fund for shares of other publicly
available Pioneer mutual funds. See "How to Exchange Fund Shares."
2
<PAGE>
II. FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP,
independent public accountants. Arthur Andersen LLP's report on the Fund's
financial statements appears in the Fund's Annual Report and Semi-Annual
Report which are incorporated by reference into the Statement of Additional
Information. The information for the years from 1986 through 1993 has been
derived from financial statements which were audited by the Fund's then
independent public accountants, Coopers & Lybrand. The Annual Report includes
more information about the Fund's performance and is available free of charge
by calling Shareholder Services at 1-800-225-6292.
PIONEER BALANCED FUND
Selected Data For a Class A Share Outstanding For The Periods Presented:
<TABLE>
<CAPTION>
Six Months
Ended
June 30, For the Year Ended December 31,+
-----------------------------------
1996 1995 1994 1993 1992
---------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of the
period $ 10.30 $ 9.11 $ 10.21 $ 10.13 $ 10.14
---------- ------- ------- ------- --------
Increase (decrease)
from investment
operations--
Net investment income $ 0.32 $ 0.66 $ 0.66 $ 0.65 $ 0.65
Net realized and
unrealized
gain (loss) on
investments (0.21) 1.29 (1.09) 0.37 0.09
---------- ------- ------- ------- --------
Net increase
(decrease) from
investment
operations $ 0.11 $ 1.95 $ (0.43) $ 1.02 $ 0.74
Distribution to
shareholders from--
Net investment income (0.32) (0.65) (0.67) (0.64) (0.66)
Net realized capital
gains -- (0.11) 0.00 (0.30) (0.09)
---------- ------- ------- ------- --------
Net increase (decrease)
in net asset value $ (0.21) $ 1.19 $ (1.10) $ 0.08 $ (0.01)
---------- ------- ------- ------- --------
Net asset value, end of
the period $ 10.09 $ 10.30 $ 9.11 $ 10.21 $ 10.13
========== ======= ======= ======= ========
Total return(1) 1.11% 22.00% (4.31%) 10.24% 7.59%
Ratio of net operating
expenses to average
net assets 1.12%*+++ 1.13%+++ 1.11% 1.06% 0.99%
Ratio of net investment
income to average net
assets 6.12%*+++ 6.58%+++ 7.07% 6.52% 6.47%
Portfolio turnover rate 35% 25% 50% 69% 54%
Average commission rate
paid per exchange
listed transaction $ 0.0579
Net assets end of year
(in thousands) $270,399 $281,639 $259,970 $296,699 $250,033
Ratios assuming a
reduction for fees
paid indirectly:
Net operating
expenses 1.10%* 1.11%
Net investment income 6.14%* 6.60%
</TABLE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987 1986
------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of the
period $ 9.14 $ 9.53 $ 8.92 $ 8.67 $ 8.94 $ 9.17
------- ------- ------- -------- ------- --------
Increase (decrease)
from investment
operations--
Net investment
income $ 0.65 $ 0.70 $ 0.74 $ 0.77 $ 0.76 $ 0.80
Net realized and
unrealized
gain (loss) on
investments 1.00 (0.38) 0.63 0.27 (0.14) 0.04
------- ------- ------- ------- ------- --------
Net increase
(decrease) from
investment
operations $ 1.65 $ 0.32 $ 1.37 $ 1.04 $ 0.62 $ 0.84
Distribution to
shareholders
from--
Net investment
income (0.65) (0.71) (0.75) (0.76) (0.76) (0.80)
Net realized
capital gains 0.00 0.00 (0.01) (0.03) (0.13) (0.27)
------- ------- ------- ------- ------- --------
Net increase
(decrease) in net
asset value $ 1.00 $ (0.39) $ 0.61 $ 0.25 $ (0.27) $ (0.23)
------- ------- ------- ------- ------- --------
Net asset value,
end of the period $ 10.14 $ 9.14 $ 9.53 $ 8.92 $ 8.67 $ 8.94
======== ======= ======= ======= ======= ========
Total return(1) 18.62% 3.59% 15.89% 12.29% 6.82% 9.29%
Ratio of net
operating
expenses to
average net
assets 1.04% 0.94% 0.78% 0.80% 0.79% 0.77%
Ratio of net
investment income
to average net
assets 6.73% 7.67% 7.98% 8.55% 8.29% 8.46%
Portfolio turnover
rate 43% 44% 69% 87% 115% 76%
Average commission
rate paid per
exchange listed
transaction
Net assets end of
year
(in thousands) $197,184 $166,205 $169,607 $159,212 $149,659 $118,760
Ratios assuming a
reduction for
fees paid
indirectly:
Net operating
expenses
Net investment
income
</TABLE>
+ Prior to December 1, 1993, Mutual of Omaha Fund Management Company ("FMC")
acted as the investment adviser to the Fund.
+++ Ratios include fees paid indirectly.
1Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
*Annualized
3
<PAGE>
II. FINANCIAL HIGHLIGHTS (continued)
PIONEER BALANCED FUND
Selected Data For a Class B Share Outstanding For The Periods Presented:
Six Months
Ended April 28, 1995
Class B*** June 30, 1996 to December 31, 1995
------------- ---------------------
Net asset value, beginning of
period $ 10.27 $ 9.55
------------- ---------------------
Increase from investment
operations:
Net investment income $ 0.25 $ 0.39
Net realized and unrealized gain
on investments (0.18) 0.90
------------- ---------------------
Total increase from investment
operations $ 0.07 $ 1.29
Distributions to shareholders from:
Net investment income (0.25) (0.46)
Net realized gain (0.03) (0.11)
------------- ---------------------
Net increase in net asset value $ (0.21) $ 0.72
------------- ---------------------
Net asset value, end of period $ 10.06 $10.27
============= =====================
Total return* 0.71% 13.74%
Ratio of net operating expenses to
average net assets 1.85%**+ 1.88%**+
Ratio of net investment income to
average net assets 5.48%**+ 5.83%**+
Portfolio turnover rate 35%** 25%
Average commission rate paid per
exchange listed transaction $0.0579
Net assets, end of period (in
thousands) $ 4,520 $1,800
Ratios assuming reduction for fees
paid indirectly:
Net operating expenses 1.81%** 1.78%**
Net investment income 5.52%** 5.93%**
+ Ratios assuming no reduction for fees paid indirectly.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized
*** Class B shares were first offered on April 28, 1995.
4
<PAGE>
II. FINANCIAL HIGHLIGHTS (continued)
PIONEER BALANCED FUND
Selected Data For a Class C Share Outstanding For The Periods Presented:
January 31,
1996
to
Class C*** June 30, 1996
--------------
Net asset value, beginning of period $ 10.39
Income from investment operations:
Net investment income $ 0.20
Net realized and unrealized gain (loss) on investments (0.23)
--------------
Total decrease from investment operations $ (0.03)
Distribution to shareholders from--
Net investment income (0.20)
In excess of net investment income (0.07)
--------------
Net increase (decrease) in net asset value $ (0.30)
--------------
Net asset value, end of period $ 10.09
==============
Total return* (0.26)%
Ratio of net expenses to average net assets 1.86%**+
Ratio of net investment income to average net assets 5.64%**+
Portfolio turnover rate 35%**
Average commission rate paid per exchange listed
transaction $0.0579
Net assets end of period (in thousands) $ 517
Ratios assuming reduction for fees paid indirectly:
Net expenses 1.80%**
Net investment income 5.70%**
+ Ratios assuming no reduction for fees paid indirectly.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized
*** Class C shares were first offered on January 31, 1996.
5
<PAGE>
III. INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund's investment objective is to seek capital growth and current
income by actively managing investments in a diversified portfolio of equity
securities and bonds. The Fund's equity investments may include common
stocks, including shares of real estate investment trusts ("REITs"), and
securities with common stock characteristics, such as convertible bonds and
preferred stocks. The Fund's bond investments may include debt securities,
commercial paper, United States ("U.S.") Government securities and
collateralized mortgage obligations ("CMOs"). The Fund's investment objective
and certain investment restrictions designated as fundamental in the
Statement of Additional Information may be changed by the Board of Trustees
only with shareholder approval. Certain other investment policies, strategies
and restrictions on investments are noted throughout the Prospectus and are
set forth in the Statement of Additional Information. These non-fundamental
investment policies, strategies and restrictions may be changed at any time
by a vote of the Board of Trustees.
Normally, equity securities and bonds will each represent 35% to 65% of
the Fund's total assets. The assets of the Fund allocated to equity
securities will be invested in common stocks and in securities with common
stock characteristics, such as convertible bonds and preferred stocks.
Normally, Fund assets allocated to bonds will be invested in (1) investment
grade debt securities as rated by Standard & Poor's Ratings Group ("S&P") or
Moody's Investors Service, Inc. ("Moody's") or, if unrated, judged by
Pioneering Management Corporation ("PMC"), the Fund's investment adviser, to
be of comparable quality, (2) commercial paper of comparable quality and (3)
U.S. Government Securities, GNMA Certificates and CMOs. Investment grade
securities are debt securities rated at least BBB by S&P or Baa by Moody's
or, if unrated, determined by PMC to be of comparable quality. The Fund may,
however, invest up to 10% of its total assets in below investment grade debt
securities as rated by S&P or by Moody's, or, if unrated, judged by PMC to be
of comparable quality, and in commercial paper that is of comparable quality.
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. See "GNMA Certificates and CMOs" and "Risks
of Lower Rated Debt Securities" in the Appendix.
The Fund may invest up to 25% of its total assets in REITs and up to 10%
of its total assets in foreign securities. See the Appendix to this
Prospectus. The Fund may invest, to a limited extent, in restricted and
illiquid securities. See the Statement of Additional Information.
Investment Management Techniques
The Fund may enter into repurchase agreements, not to exceed seven days,
with broker-dealers and any member bank of the Federal Reserve System. The
Board of Trustees of the Fund will review and monitor the creditworthiness of
any institution which enters into a repurchase agreement with the Fund. Such
repurchase agreements will be fully collateralized with U.S. Treasury and/or
agency obligations with a market value of not less than 100% of the
obligations under the repurchase agreement, valued daily. Collateral will be
held by the Fund's custodian in a segregated, safekeeping account for the
benefit of the Fund. In the event that a repurchase agreement is not
fulfilled, the Fund could suffer a loss to the extent that the value of the
collateral falls below the repurchase price.
The Fund may lend portfolio securities to member firms of the New York
Stock Exchange (the "Exchange"). As with other extensions of credit, there
are risks of delay in recovery or even loss of rights in the collateral
should the borrower of the securities fail financially. The Fund will lend
portfolio securities only to firms which have been approved in advance by the
Board of Trustees, which will monitor the creditworthiness of any such firms.
At no time will the value of securities loaned exceed 30% of the value of the
Fund's total assets. These investment strategies are also described in the
Statement of Additional Information.
In pursuit of its objective, the Fund may employ certain active investment
management techniques including forward foreign currency exchange contacts
and options and futures contracts relating to foreign currencies. The Fund
will use forward foreign currency contracts in the normal course of business
to lock in an exchange rate in connection with purchases and sales of
securities denominated in foreign currencies. Other currency management
strategies may be employed in an attempt to hedge currency and other risks
associated with the Fund's portfolio securities. See the Appendix to this
Prospectus and the Statement of Additional Information for a description of
these investment practices and associated risks.
Portfolio Turnover
The Fund is substantially fully invested at all times. It is the policy of
the Fund not to engage in trading for short-term profits. Nevertheless,
changes in the portfolio will be made promptly when determined to be
advisable by reason of developments not foreseen at the time of the initial
investment decision and usually without reference to the length of time a
security has been held. Accordingly, portfolio turnover rate is not
considered a limiting factor in the execution of investment decisions. See
"Financial Highlights" for the Fund's actual turnover rate.
The Fund's investment objective was changed effective February 1, 1997.
Portfolio turnover may be greater than 50% per year for the year following
the change. High portfolio turnover (over 100%) involves correspondingly
higher brokerage commissions and other transaction costs, which will be borne
directly by the Fund, and could involve realization of taxable gains that
would be taxable when distributed to shareholders.
For temporary defensive purposes, the Fund may invest up to 100% of its
total assets in short-term investments. The Fund will assume a temporary
defensive posture when economic and other factors are such that PMC believes
there to be extraordinary risks in being substantially invested in the
securities in which the Fund normally concentrates its investments.
6
<PAGE>
IV. MANAGEMENT OF THE FUND
The Board of Trustees of the Fund has overall responsibility for
management and supervision of the Fund. There are currently eight Trustees,
six of whom are not "interested persons" of the Fund as defined in the
Investment Company Act of 1940 (the "1940 Act"). The Board meets at least
quarterly. By virtue of the functions performed by PMC as investment adviser,
the Fund requires no employees other than its executive officers, all of whom
receive their compensation from PMC or other sources. The Statement of
Additional Information contains the names of and general background
information regarding each Trustee and executive officer of the Fund.
The Fund is managed under a contract with PMC. PMC serves as investment
adviser to the Fund and is responsible for the overall management of the
Fund's business affairs, subject only to the authority of the Fund's Board of
Trustees. PMC is a wholly owned subsidiary of The Pioneer Group, Inc.
("PGI"), a Delaware corporation. Pioneer Funds Distributor, Inc. ("PFD"), an
indirect wholly-owned subsidiary of PGI, is the principal underwriter of
shares of the Fund.
Each equity portfolio managed by PMC is overseen by an Equity Investment
Committee. Each fixed income portfolio managed by PMC is overseen by a Fixed
Income Investment Committee. Both Committees consist of PMC's most senior
investment professionals and are chaired by David D. Tripple, PMC's President
and Chief Investment Officer. Mr. Tripple joined Pioneer in 1974 and has had
general responsibility for PMC's investment operations and specific portfolio
assignments for more than five years. Fixed income investments made by PMC
are under the general supervision of Sherman B. Russ, Senior Vice President
of Pioneer. Mr. Russ joined Pioneer in 1983.
Day-to-day management of the Fund's investments has been the
responsibility of William C. Field, Vice President of PMC, since January 2,
1997. Mr. Field joined PMC in 1991.
In addition to the Fund, PMC also manages and serves as the investment
adviser for other mutual funds and is an investment adviser to certain other
institutional accounts. PMC's and PFD's executive offices are located at 60
State Street, Boston, Massachusetts 02109. In an effort to avoid conflicts of
interest with the Fund, the Fund, and PMC have adopted a Code of Ethics that
is designed to maintain a high standard of personal conduct by directing that
all personnel defer to the interests of the Fund and its shareholders in
making personal securities transactions.
Under the terms of its contract with the Fund, PMC provides the Fund with
an investment program consistent with its investment objective and policies.
PMC furnishes the Fund with office space, equipment and personnel for
managing the affairs of the Fund. PMC also pays all expenses in connection
with the management of the affairs of the Fund except (a) 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; (b) the charges and expenses of
auditors; (c) the charges and expenses of any custodian, transfer agent, plan
agent, dividend disbursing agent and registrar appointed by the Fund; (d)
issue and transfer taxes, chargeable to the Fund in connection with
securities transactions to which the Fund is a party; (e) 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; (f) fees and expenses involved in registering and
maintaining registrations of the Fund and/or its shares with the regulatory
agencies, state or blue sky securities agencies and foreign countries,
including the preparation of Prospectuses and Statements of Additional
Information for filing with regulatory agencies; (g) 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; (h) charges and expenses of legal
counsel to the Fund and the Trustees; (i) distribution fees paid by the Fund
in accordance with Rule 12b-1 promulgated by the SEC pursuant to the 1940
Act; (j) compensation of those Trustees of the Fund who are not affiliated
with or interested persons of PMC, the Fund (other than as Trustees), PGI or
PFD; (k) the cost of preparing and printing share certificates; and (l)
interest on borrowed money, if any. In addition to the expenses described
above, the Fund shall pay all brokers' and underwriting commissions
chargeable to the Fund in connection with securities transactions to which
the Fund is a party.
Orders for the Fund's portfolio securities transactions are placed by PMC,
which strives to obtain the best price and execution for each transaction. In
circumstances where two or more broker-dealers are in a position to offer
comparable prices and execution, consideration may be given to whether the
broker-dealer provides investment research or brokerage services or sells
shares of any Pioneer mutual fund. See the Statement of Additional
Information for a further description of PMC's brokerage allocation
practices.
Effective February 1, 1997 as compensation for its management services for
the Fund and certain expenses which PMC incurs, PMC is entitled to a
management fee equal to 0.65% per annum 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.
Prior to February 1, 1997, as compensation for its management services for
the Fund and certain expenses which PMC incurred, PMC was entitled to a
management fee 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.
John F. Cogan, Jr., Chairman and President of the Fund, Chairman of PFD,
President and a Director of PGI and Chairman and a Director of PMC, owned
approximately 14% of the outstanding capital stock of PGI as of the date of
this Prospectus.
V. FUND SHARE ALTERNATIVES
The Fund continuously offers three Classes of shares designated as Class
A, Class B and Class C shares, as described more fully in "How to Buy Fund
Shares." If you do not specify in your instructions to the Fund which Class
of
7
<PAGE>
shares you wish to purchase, exchange or redeem, the Fund will assume that
your instructions apply to Class A shares.
Class A Shares. If you invest less than $1 million in Class A shares, you will
pay an initial sales charge. Certain purchases may qualify for reduced initial
sales charges. If you invest $1 million or more in Class A shares, no sales
charge will be imposed at the time of purchase, however, shares redeemed within
12 months of purchase may be subject to a CDSC. Class A shares are subject to
distribution and service fees at a combined annual rate of up to 0.25% of the
Fund's average daily net assets attributable to Class A shares.
Class B Shares. If you plan to invest up to $250,000, Class B shares are
available to you. Class B shares are sold without an initial sales charge, but
are subject to a CDSC of up to 4% if redeemed within six years. Class B shares
are subject to distribution and service fees at a combined annual rate of 1% of
the Fund's average daily net assets attributable to Class B shares. Your entire
investment in Class B shares is available to work for you from the time you make
your investment, but the higher distribution fee paid by Class B shares will
cause your Class B shares (until conversion) to have a higher expense ratio and
to pay lower dividends, to the extent dividends are paid, than Class A shares.
Class B shares will automatically convert to Class A shares, based on relative
net asset value, eight years after the initial purchase.
Class C Shares. Class C shares are sold without an initial sales charge, but are
subject to a 1% CDSC if they are redeemed within the first year after purchase.
Class C shares are subject to distribution and service fees at a combined annual
rate of up to 1% of the Fund's average daily net assets attributable to Class C
shares. Your entire investment in Class C shares is available to work for you
from the time you make your investment, but the higher distribution fee paid by
Class C shares will cause your Class C shares to have a higher expense ratio and
to pay lower dividends, to the extent dividends are paid, than Class A shares.
Class C shares have no conversion feature.
Selecting a Class of Shares. The decision as to which Class to purchase depends
on the amount you invest, the intended length of the investment and your
personal situation. If you are making an investment that qualifies for reduced
sales charges, you might consider Class A shares. If you prefer not to pay an
initial sales charge on an investment of $250,000 or less and you plan to hold
the investment for at least six years, you might consider Class B shares. If you
prefer not to pay an initial sales charge and you plan to hold your investment
for one to eight years, you may prefer Class C shares.
Investment dealers or their representatives may receive different
compensation depending on which Class of shares they sell. Shares may be
exchanged only for shares of the same Class of another Pioneer mutual fund
and shares acquired in the exchange will continue to be subject to any CDSC
applicable to the shares of the Pioneer mutual fund originally purchased.
Shares sold outside the U.S. to persons who are not U.S. citizens may be
subject to different sales charges, CDSCs and dealer compensation
arrangements in accordance with local laws and business practices.
VI. SHARE PRICE
Shares of the Fund are sold at the public offering price, which is the net
asset value per share, plus the applicable sales charge. Net asset value per
share of a Class of the Fund is determined by dividing the value of its
assets, less liabilities attributable to that Class, by the number of shares
of that Class outstanding. The net asset value is computed once daily, on
each day the New York Stock Exchange (the "Exchange") is open, as of the
close of regular trading on the Exchange.
Securities are valued at the last sale price on the principal exchange or
market where they are traded. Securities which have not traded on the date of
valuation or securities for which sales prices are not generally reported are
valued at the mean between the current bid and asked prices. Securities
quoted in foreign currencies are converted to U.S. dollars utilizing foreign
exchange rates employed by the Fund's independent pricing services.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the Exchange. Occasionally, events
which affect the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the Exchange
and will therefore not be reflected in the computation of the Fund's net
asset value. If events materially affecting the value of such securities
occur during such period, then these securities are valued at their fair
value as determined in good faith by the Trustees. All assets of the Fund for
which there is no other readily available valuation method are valued at
their fair value as determined in good faith by the Trustees.
VII. HOW TO BUY FUND SHARES
You may buy Fund shares from any securities broker-dealer which has a
sales agreement with PFD. If you do not have a securities broker-dealer,
please call 1-800-225-6292. Shares will be purchased at the public offering
price, that is, the net asset value per share plus any applicable sales
charge, next computed after receipt of a purchase order, except as set forth
below.
The minimum initial investment is $1,000 for Class A, Class B and Class C
shares except as specified below. The minimum initial investment is $50 for
Class A accounts being established to utilize monthly bank drafts, government
allotments, payroll deduction and other similar automatic investment plans.
Separate minimum investment requirements apply to retirement plans and to
telephone and wire orders placed by broker-dealers; no sales charges or
minimum requirements apply to the reinvestment of dividends or capital gains
distributions. The minimum subsequent investment is $50 for Class A shares
and $500 for Class B and Class C shares except that the subsequent minimum
investment amount for Class B and Class C share accounts may be as little as
$50 if an automatic investment plan is established (see "Automatic Investment
Plans").
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Telephone Purchases. Your account is automatically authorized to have the
telephone purchase privilege unless you indicate otherwise on your Account
Application or by writing to Pioneering Services Corporation ("PSC"). The
telephone purchase option may be used to purchase additional shares for an
existing mutual fund account; it may not be used to establish a new account.
Proper account identification will be required for each telephone purchase. A
maximum of $25,000 per account may be purchased by telephone each day. The
telephone purchase privilege is available to Individual Retirement Plan Accounts
("IRAs") but may not be available to other types of retirement plan accounts.
Call PSC for more information.
You are strongly urged to consult with your financial representative prior to
requesting a telephone purchase. To purchase shares by telephone, you must
establish your bank account of record by completing the appropriate section of
your Account Application or an Account Options Form. PSC will electronically
debit the amount of each purchase from this pre-designated bank account.
Telephone purchases may not be made for 30 days after the establishment of your
bank of record or any change to your bank information.
Telephone purchases will be priced at the net asset value plus any
applicable sales charge next determined after PSC's receipt of a telephone
purchase instruction and receipt of good funds (usually three days after the
purchase instruction). You may always elect to deliver purchases to PSC by
mail. See "Telephone Transactions and Related Liabilities" for additional
information.
Class A Shares
You may buy Class A shares at the public offering price including a sales
charge as follows:
Sales Charge as a %
of Dealer
-------------------- Allowance
Net as a % of
Offering Amount Offering
Amount of Purchase Price Invested Price
- -------------------------------- -------- --------- ----------
Less than $100,000 4.50% 4.71% 4.00%
$100,000 but less than $250,000 3.50% 3.63% 3.00%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than
$1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more -0- -0- See below
The schedule of sales charges above is applicable to purchases of Class A
shares of the Fund by (i) an individual, (ii) an individual and his or her
spouse and children under the age of 21 and (iii) a trustee or other
fiduciary of a trust estate or fiduciary account or related trusts or
accounts including pension, profit-sharing and other employee benefit trusts
qualified under Section 401 or 408 of the Code, although more than one
beneficiary is involved. The sales charges applicable to a current purchase
of Class A shares of the Fund by a person listed above is determined by
adding the value of shares to be purchased to the aggregate value (at the
then current offering price) of shares of any of the other Pioneer mutual
funds previously purchased and then owned, provided PFD is notified by such
person or his or her broker-dealer each time a purchase is made which would
qualify. Pioneer mutual funds include all mutual funds for which PFD serves
as principal underwriter. At the sole discretion of PFD, holdings of funds
domiciled outside the U.S., but which are managed by affiliates of PMC, may
be included for this purpose.
No sales charge is payable at the time of purchase on investments of $1
million or more or for participants in certain group plans (described below)
subject to a CDSC of 1% which may be imposed in the event of a redemption of
Class A shares within 12 months of purchase. See "How to Sell Fund Shares."
PFD may, in its discretion, pay a commission to broker-dealers who initiate
and are responsible for such purchases as follows: 1% on the first $5 million
invested; 0.50% on the next $45 million; and 0.25% on the excess over $50
million. These commissions will not be paid if the purchaser is affiliated
with the broker-dealer or if the purchase represents the reinvestment of a
redemption made during the previous 12 calendar months. Broker-dealers who
receive a commission in connection with Class A share purchases at net asset
value by 401(a) or 401(k) retirement plans with 1,000 or more eligible
participants or with at least $10 million in plan assets will be required to
return any commission paid or a pro rata portion thereof if the retirement
plan redeems its shares within 12 months of purchase. See also "How to Sell
Fund Shares." In connection with PGI's acquisition of FMC and contingent upon
the achievement of certain sales objectives, PFD may pay to Mutual of Omaha
Investor Services, Inc. 50% of PFD's retention of any sales commission on
sales of the Fund's Class A shares through such dealer. From time to time,
PFD may elect to reallow the entire initial sales charge to participating
dealers for all Class A shares with respect to which orders are placed during
a particular period. Dealers to whom substantially the entire sales charge is
reallowed may be deemed to be underwriters under the federal securities laws.
Qualifying for a Reduced Sales Charge. Class A shares of the Fund may be sold at
a reduced or eliminated sales charge to certain group plans ("Group Plans")
under which a sponsoring organization makes recommendations to, permits group
solicitation of, or otherwise facilitates purchases by, its employees, members
or participants. Class A shares of the Fund may be sold at net asset value
without a sales charge to 401(k) retirement plans with 100 or more participants
or at least $500,000 in plan assets. Information about such arrangements is
available from PFD.
Class A shares of the Fund may also be sold at net asset value per share
without a sales charge to: (a) current or former Trustees and officers of the
Fund and partners and employees of its legal counsel; (b) current or former
directors, officers, employees or sales representatives of PGI or its
subsidiaries; (c) current or former directors, officers, employees or sales
representatives of any subadviser or predecessor investment adviser to any
investment company for which PMC serves as investment adviser, and the
subsidiaries or affiliates of such persons; (d) current or former officers,
partners, employees or registered representatives of broker-dealers which
have entered into sales agreements with PFD; (e) members of the immediate
families of any of the persons above; (f) any trust, custodian, pension,
profit-sharing or other benefit plan of the foregoing persons; (g) insurance
company separate accounts; (h) certain "wrap accounts" for the benefit of
clients of financial planners adhering to standards established by PFD; (i)
other funds and accounts for
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<PAGE>
which PMC or any of its affiliates serves as investment adviser or manager;
and (j) certain unit investment trusts. Shares so purchased are purchased for
investment purposes and may not be resold except through redemption or
repurchase by or on behalf of the Fund. The availability of this privilege is
conditioned upon the receipt by PFD of written notification of eligibility.
Class A shares of the Fund may be sold at net asset value per share without a
sales charge to Optional Retirement Program (the "Program") participants if
(i) the employer has authorized a limited number of investment company
providers for the Program, (ii) all authorized investment company providers
offer their shares to Program participants at net asset value, (iii) the
employer has agreed in writing to actively promote the authorized investment
providers to Program participants and (iv) the Program provides for a
matching contribution for each participant contribution. Class A shares of
the Fund may also be sold at net asset value without a sales charge in
connection with certain reorganization, liquidation or acquisition
transactions involving other investment companies or personal holding
companies.
Reduced sales charges are available for purchases of $50,000 or more of
Class A shares (excluding any reinvestments of dividends and capital gains
distributions) made within a 13-month period pursuant to a Letter of Intent
("LOI") which may be established by completing the Letter of Intent section
of the Account Application. The reduced sales charge will be the charge that
would be applicable to the purchase of the specified amount of Class A shares
as if the shares had all been purchased at the same time. A purchase not made
pursuant to an LOI may be included if the LOI is submitted to PSC within 90
days of such purchase. You may also obtain the reduced sales charge by
including the value (at current offering price) of all your Class A shares in
the Fund and all other Pioneer mutual funds held of record as of the date of
your LOI in the amount used to determine the applicable sales charge for the
Class A shares to be purchased under the LOI. Five percent of your total
intended purchase amount will be held in escrow by PSC, registered in your
name, until the terms of the LOI are fulfilled.
You are not obligated to purchase the amount specified in your LOI. If,
however, the amount actually purchased during the 13-month period is more or
less than that indicated in your LOI, an adjustment in the sales charge will
be made. If a payment to cover actual sales charges is due, it must be paid
to PFD within 20 days after PFD or your dealer sends you a written request or
PFD will direct PSC to liquidate sufficient shares from your escrow account
to cover the amount due. See the Statement of Additional Information for more
information.
Investors who are clients of a broker-dealer with a current sales
agreement with PFD may purchase Class A shares of the Fund at net asset
value, without a sales charge, to the extent that the purchase price is paid
out of proceeds from one or more redemptions by the investor of shares of
certain other mutual funds. In order for a purchase to qualify for this
privilege, the investor must document to the broker-dealer that the
redemption occurred within the 60 days immediately preceding the purchase of
Class A shares; that the client paid a sales charge on the original purchase
of the shares redeemed; and that the mutual fund whose shares were redeemed
also offers net asset value purchases to redeeming shareholders of any of the
Pioneer mutual funds. Further details may be obtained from PFD.
Class B Shares
You may buy Class B shares at net asset value without the imposition of an
initial sales charge; however, Class B shares redeemed within six years of
purchase will be subject to a CDSC at the rates shown in the table below. The
charge will be assessed on the amount equal to the lesser of the current
market value or the original purchase cost of the shares being redeemed. No
CDSC will be imposed on increases in account value above the initial purchase
price, including shares derived from the reinvestment of dividends or capital
gains distributions.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of purchase until the time of redemption of Class B shares. For
the purpose of determining the number of years from the time of any purchase,
all payments during a quarter will be aggregated and deemed to have been made
on the first day of that quarter. In processing redemptions of Class B
shares, the Fund will first redeem shares not subject to any CDSC, and then
shares held longest during the six-year period. As a result, you will pay the
lowest possible CDSC.
The CDSC for Class B shares subject to a CDSC upon redemption will be
determined as follows:
Year Since CDSC as a Percentage of Dollar
Purchase Amount Subject to CDSC
--------------------------- -----------------------------------
First 4.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter none
Proceeds from the CDSC are paid to PFD and are used in whole or in part to
defray PFD's expenses related to providing distribution-related services to
the Fund in connection with the sale of Class B shares, including the payment
of compensation to broker-dealers.
Class B shares will automatically convert into Class A shares at the end
of the calendar quarter that is eight years after the purchase date, except
as noted below. Class B shares acquired by exchange from Class B shares of
another Pioneer mutual fund will convert into Class A shares based on the
date of the initial purchase and the applicable CDSC. Class B shares acquired
through reinvestment of distributions will convert into Class A shares based
on the date of the initial purchase to which such shares relate. For this
purpose, Class B shares acquired through reinvestment of distributions will
be attributed to particular purchases of Class B shares in accordance with
such procedures as the Trustees may determine from time to time. The
conversion of Class B shares to Class A shares is subject to the continuing
availability of a ruling from the Internal
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<PAGE>
Revenue Service ("IRS"), for which the Fund is applying, or an opinion of
counsel that such conversions will not constitute taxable events for federal
tax purposes. There can be no assurance that such ruling or opinion will be
available at the time any particular conversion would normally occur. The
conversion of Class B shares to Class A shares will not occur if such ruling
or opinion is not available and, therefore, Class B shares would continue to
be subject to higher expenses than Class A shares for an indeterminate
period.
Class C Shares
You may buy Class C shares at net asset value without the imposition of an
initial sales charge; however, Class C shares redeemed within one year of
purchase will be subject to a CDSC of 1%. The charge will be assessed on the
amount equal to the lesser of the current market value or the original
purchase cost of the shares being redeemed. No CDSC will be imposed on
increases in account value above the initial purchase price, including shares
derived from the reinvestment of dividends or capital gains distributions.
Class C shares do not convert to any other Class of Fund shares.
For the purpose of determining the time of any purchase, all payments
during a quarter will be aggregated and deemed to have been made on the first
day of that quarter. In processing redemptions of Class C shares, the Fund
will first redeem shares not subject to any CDSC, and then shares held for
the shortest period of time during the one-year period. As a result, you will
pay the lowest possible CDSC.
Proceeds from the CDSC are paid to PFD and are used in whole or in part to
defray PFD's expenses related to providing distribution-related services to
the Fund in connection with the sale of Class C shares, including the payment
of compensation to broker-dealers.
Waiver or Reduction of Contingent Deferred Sales Charge.
The CDSC on Class B shares may be waived or reduced for non-retirement
accounts if: (a) the redemption results from the death of all registered
owners of an account (in the case of UGMAs, UTMAs and trust accounts, the
waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Code) of all registered
owners occurring after the purchase of the shares being redeemed or (b) the
redemption is made in connection with limited automatic redemptions as set
forth in "Systematic Withdrawal Plans" (limited in any year to 10% of the
value of the account in the Fund at the time the withdrawal plan is
established).
The CDSC on Class B shares may be waived or reduced for retirement plan
accounts if: (a) the redemption results from the death or a total and
permanent disability (as defined in Section 72 of the Code) occurring after
the purchase of the shares being redeemed of a shareholder or participant in
an employer-sponsored retirement plan; (b) the distribution is to a partici-
pant in an IRA, 403(b) or employer-sponsored retirement plan, is part of a
series of substantially equal payments made over the life expectancy of the
participant or the joint life expectancy of the participant and his or her
beneficiary or as scheduled periodic payments to a participant (limited in
any year to 10% of the value of the participant's account at the time the
distribution amount is established; a required minimum distribution due to
the participant's attainment of age 70-1/2 may exceed the 10% limit only if
the distribution amount is based on plan assets held by Pioneer); (c) the
distribution is from a 401(a) or 401(k) retirement plan and is a return of
excess employee deferrals or employee contributions or a qualifying hardship
distribution as defined by the Code or results from a termination of
employment (limited with respect to a termination to 10% per year of the
value of the plan's assets in the Fund as of the later of the prior December
31 or the date the account was established unless the plan's assets are being
rolled over to or reinvested in the same class of shares of a Pioneer mutual
fund subject to the CDSC of the shares originally held); (d) the distribution
is from an IRA, 403(b) or employer-sponsored retirement plan and is to be
rolled over to or reinvested in the same class of shares in a Pioneer mutual
fund and which will be subject to the applicable CDSC upon redemption; (e)
the distribution is in the form of a loan to a participant in a plan which
permits loans (each repayment of the loan will constitute a new sale which
will be subject to the applicable CDSC upon redemption); or (f) the
distribution is from a qualified defined contribution plan and represents a
participant's directed transfer (provided that this privilege has been
pre-authorized through a prior agreement with PFD regarding participant
directed transfers).
The CDSC on Class C shares and on any Class A shares subject to a CDSC may
be waived or reduced as follows: (a) for automatic redemptions as described
in "Systematic Withdrawal Plans" (limited to 10% of the value of the
account); (b) if the redemption results from the death or a total and
permanent disability (as defined in Section 72 of the Code) occurring after
the purchase of the shares being redeemed of a shareowner or participant in
an employer-sponsored retirement plan; (c) if the distribution is part of a
series of substantially equal payments made over the life expectancy of the
participant or the joint life expectancy of the participant and his or her
beneficiary; or (d) if the distribution is to a participant in an
employer-sponsored retirement plan and is (i) a return of excess employee
deferrals or contributions, (ii) a qualifying hardship distribution as
defined by the Code, (iii) from a termination of employment, (iv) in the form
of a loan to a participant in a plan which permits loans, or (v) from a
qualified defined contribution plan and represents a participant's directed
transfer (provided that this privilege has been pre-authorized through a
prior agreement with PFD regarding participant directed transfers).
The CDSC on Class B and Class C shares and on any Class A shares subject
to a CDSC may be waived or reduced for either non-retirement or retirement
plan accounts if: (a) the redemption is made by any state, county, or city,
or any instrumentality, department, authority, or agency thereof, which is
prohibited by applicable laws from paying a CDSC in connection with the
acquisition of shares of any registered investment management company; or (b)
the redemption is made pursuant to the Fund's right to liquidate or
involuntarily redeem shares in a shareholder's account. The CDSC on any
shares subject to a CDSC will not be applicable if the selling broker-dealer
elects, with PFD's approval, to waive receipt of the commission normally paid
at the time of the sale.
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<PAGE>
Broker-Dealers. An order for any Class of Fund shares received by PFD from a
broker-dealer prior to the close of regular trading on the Exchange is confirmed
at the price appropriate for that Class as determined at the close of regular
trading on the Exchange on the day the order is received, provided the order is
received by PFD prior to PFD's close of business (usually, 5:30 p.m. Eastern
Time). It is the responsibility of broker-dealers to transmit orders so that
they will be received by PFD prior to its close of business. PFD or its
affiliates may provide additional compensation to certain dealers or such
dealers' affiliates based on certain objective criteria established from time to
time by PFD. All such payments are made out of PFD's or the affiliate's own
assets. These payments will not change the price an investor will pay for shares
or the amount that the Fund will receive from such sale.
General. The Fund reserves the right in its sole discretion to withdraw all or
any part of the offering of shares when, in the judgment of the Fund's
management, such withdrawal is in the best interest of the Fund. An order to
purchase shares is not binding on, and may be rejected by, PFD until it has been
confirmed in writing by PFD and payment has been received.
VIII. HOW TO SELL FUND SHARES
You can arrange to sell (redeem) fund shares on any day the Exchange is
open by selling either some or all of your shares to the Fund.
You may sell your shares either through your broker-dealer or directly to
the Fund. Please note the following:
(bullet) If you are selling shares from a retirement account, other than an
IRA, you must make your request in writing (except for exchanges to
other Pioneer mutual funds which can be requested by phone or in
writing). Call 1-800-622-0176 for more information.
(bullet) If you are selling shares from a non-retirement account or an IRA,
you may use any of the methods described below.
Your shares will be sold at the share price next calculated after your
order is received in good order less any applicable CDSC. Sale proceeds
generally will be sent to you in cash, normally within seven days after your
order is received in good order. The Fund reserves the right to withhold
payment of the sale proceeds until checks received by the Fund in payment for
the shares being sold have cleared, which may take up to 15 calendar days
from the purchase date.
In Writing. You may sell your shares by delivering a written request, signed by
all registered owners, in good order to PSC, however, you must use a written
request, including a signature guarantee, to sell your shares if any of the
following applies:
(bullet) you wish to sell over $50,000 worth of shares,
(bullet) your account registration or address has changed within the last 30
days,
(bullet) the check is not being mailed to the address on your account
(address of record),
(bullet) the check is not being made out to the account owners, or
(bullet) the sale proceeds are being transferred to a Pioneer mutual fund
account with a different registration.
Your request should include your name, the Fund's name, your fund account
number, the Class of shares to be redeemed, the dollar amount or number of
shares to be redeemed, and any other applicable requirements as described
below. Unless instructed otherwise, Pioneer will send the proceeds of the
sale to the address of record. Fiduciaries or corporations are required to
submit additional documents. For more information, contact PSC at
1-800-225-6292.
Written requests will not be processed until they are received in good
order by PSC. Good order means that there are no outstanding claims or
requests to hold redemptions on the account, certificates are endorsed by the
record owner(s) exactly as the shares are registered and the signature(s) are
guaranteed by an eligible guarantor. You should be able to obtain a signature
guarantee from a bank, broker, dealer, credit union (if authorized under
state law), securities exchange or association, clearing agency or savings
association. A notary public cannot provide a signature guarantee. Signature
guarantees are not accepted by facsimile ("fax"). For additional information
about the necessary documentation for redemption by mail, please contact PSC
at 1-800-225-6292.
By Telephone or by Fax. Your account is automatically authorized to have the
telephone redemption privilege unless you indicate otherwise on your Account
Application or by writing to PSC. You may redeem up to $50,000 per account per
day of your shares by telephone or fax and receive the proceeds by check or by
bank wire or electronic funds transfer. The redemption proceeds must be made
payable exactly as the account is registered. To receive the proceeds by check:
the check must be sent to the address of record which must not have changed in
the last 30 days. To receive the proceeds by bank wire or by electronic funds
transfer: the proceeds must be sent to your bank address of record which must
have been properly predesignated either on your Account Application or on an
Account Options Form and which must not have changed in the last 30 days. To
redeem by fax send your redemption request to 1-800-225-4240. The telephone
redemption option is not available to retirement plan accounts except IRA's. You
may always elect to deliver redemption instructions to PSC by mail. See
"Telephone Transactions and Related Liabilities" below. Telephone and fax
redemptions will be priced as described above. You are strongly urged to consult
with your financial representative prior to requesting a telephone redemption.
Selling Shares Through Your Broker-Dealer. The Fund authorized PFD to act as its
agent in the repurchase of shares of the Fund from qualified broker-dealers and
reserves the right to terminate this procedure at any time. Your broker-dealer
must receive your request before the close of business on the Exchange and
transmit it to PFD before PFD's close of business to receive that day's
redemption price. Your broker-dealer is responsible for providing all necessary
documentation to PFD and may charge you for its services.
Small Accounts. The minimum account value is $500. If you hold shares of the
Fund in an account with a net asset value of less than the minimum required
amount due to redemptions or exchanges, the Fund may redeem the shares
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held in this account at net asset value if you have not increased the net
asset value of the account to at least the minimum required amount within six
months of notice by the Fund to you of the Fund's intention to redeem the
shares.
CDSC on Class A Shares. Purchases of Class A shares of $1 million or more, or by
participants in a Group Plan which were not subject to an initial sales charge,
may be subject to a CDSC upon redemption. A CDSC is payable to PFD on these
investments in the event of a share redemption within 12 months following the
share purchase, at the rate of 1% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividend and capital gain distributions) or
the total cost of such shares. Shares subject to the CDSC which are exchanged
into another Pioneer mutual fund will continue to be subject to the CDSC until
the original 12-month period expires. However, no CDSC is payable upon
redemption with respect to Class A shares purchased by 401(a) or 401(k)
retirement plans with 1,000 or more eligible participants or with at least $10
million in plan assets.
General. Redemptions may be suspended or payment postponed during any period in
which any of the following conditions exist: the Exchange is closed or trading
on the Exchange is restricted; an emergency exists as a result of which disposal
by the Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund to fairly determine the value of the net
assets of its portfolio; or the SEC, by order, so permits.
Redemptions and repurchases are taxable transactions to shareholders. The
net asset value per share received upon redemption or repurchase may be more
or less than the cost of shares to an investor, depending on the market value
of the portfolio at the time of redemption or repurchase.
IX. HOW TO EXCHANGE FUND SHARES
Written Exchanges. You may exchange your shares by sending a letter of
instruction to PSC. Your letter should include your name, the name of the
Pioneer mutual fund out of which you wish to exchange and the name of the
Pioneer mutual fund into which you wish to exchange, your fund account
number(s), the Class of shares to be exchanged and the dollar amount or
number of shares to be exchanged. Written exchange requests must be signed by
all record owner(s) exactly as the shares are registered.
Telephone Exchanges. Your account is automatically authorized to have the
telephone exchange privilege unless you indicate otherwise on your Account
Application or by writing to PSC. Proper account identification will be
required for each telephone exchange. Telephone exchanges may not exceed
$500,000 per account per day. Each telephone exchange request, whether by
voice or by FactFone(SM), will be recorded. You are strongly urged to consult
with your financial representative prior to requesting a telephone exchange.
See "Telephone Transactions and Related Liabilities" below.
Automatic Exchanges. You may automatically exchange shares from one
Pioneer mutual fund account for shares of the same Class in another Pioneer
mutual fund account on a monthly or quarterly basis. The accounts must have
identical registrations and the originating account must have a minimum
balance of $5,000. The exchange will be effective on the 18th day of the
month.
General. Exchanges must be at least $1,000. You may exchange your investment
from one Class of Fund shares at net asset value, without a sales charge, for
shares of the same Class of any other Pioneer mutual fund. Not all Pioneer
mutual funds offer more than one Class of shares. A new Pioneer account opened
through an exchange must have a registration identical to that on the original
account.
Shares which would normally be subject to a CDSC upon redemption will not
be charged the applicable CDSC at the time of an exchange. Shares acquired in
an exchange will be subject to the CDSC of the shares originally held. For
purposes of determining the amount of any applicable CDSC, the length of time
you have owned shares acquired by exchange will be measured from the date you
acquired the original shares and will not be affected by any subsequent
exchange.
Exchange requests received by PSC before 4:00 p.m. Eastern Time will be
effective on that day if the requirements above have been met, otherwise,
they will be effective on the next business day. PSC will process exchanges
only after receiving an exchange request in good order. There are currently
no fees or sales charges imposed at the time of an exchange. An exchange of
shares may be made only in states where legally permitted. For federal and
(generally) state income tax purposes, an exchange is considered to be a sale
of the shares of the Fund exchanged and a purchase of shares in another
Pioneer mutual fund. Therefore, an exchange could result in a gain or loss on
the shares sold, depending on the tax basis of these shares and the timing of
the transaction, and special tax rules may apply.
You should consider the differences in objectives and policies of the
Pioneer mutual funds, as described in each fund's current prospectus, before
making any exchange. For the protection of the Fund's performance and
shareholders, the Fund and PFD reserve the right to refuse any exchange
request or restrict, at any time without notice, the number and/or frequency
of exchanges to prevent abuses of the exchange privilege. Such abuses may
arise from frequent trading in response to short-term market fluctuations, a
pattern of trading by an individual or group that appears to be an attempt to
"time the market," or any other exchange request which, in the view of
management, will have a detrimental effect on the Fund's portfolio management
strategy or its operations. In addition, the Fund and PFD reserve the right
to charge a fee for exchanges or to modify, limit, suspend or discontinue the
exchange privilege with notice to shareholders as required by law.
X. DISTRIBUTION PLANS
The Fund has adopted a Plan of Distribution for each Class of shares (the
"Class A Plan," "Class B Plan," and "Class C Plan") in accordance with Rule
12b-1 under the 1940 Act pursuant to which certain distribution and service
fees are paid.
Pursuant to the Class A Plan, the Fund reimburses PFD for its actual
expenditures to finance any activity primarily intended to result in the sale
of Class A shares or to provide services to
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holders of Class A shares, provided the categories of expenses for which
reimbursement is made are approved by the Fund's Board of Trustees. As of the
date of this Prospectus, the Board of Trustees has approved the following
categories of expenses for Class A shares of the Fund: (i) a service fee to
be paid to qualified broker-dealers in an amount not to exceed 0.25% per
annum of the Fund's daily net assets attributable to Class A shares; (ii)
reimbursement to PFD for its expenditures for broker-dealer commissions and
employee compensation on certain sales of the Fund's Class A shares with no
initial sales charge (See "How to Buy Fund Shares"); and (iii) reimbursement
to PFD for expenses incurred in providing services to Class A shareholders
and supporting broker-dealers and other organizations (such as banks and
trust companies) in their efforts to provide such services. Banks are
currently prohibited under the Glass-Steagall Act from providing certain
underwriting or distribution services. If a bank was prohibited from acting
in any capacity or providing any of the described services, management would
consider what action, if any, would be appropriate.
Expenditures of the Fund pursuant to the Class A Plan are accrued daily
and may not exceed 0.25% of the Fund's average daily net assets attributable
to Class A shares. Distribution expenses of PFD are expected to substantially
exceed the distribution fees paid by the Fund in a given year. The Class A
Plan may not be amended to increase materially the annual percentage
limitation of average net assets which may be spent for the services
described therein without approval of the shareholders of the Fund.
Both the Class B Plan and the Class C Plan provide that the Fund will pay
a distribution fee at the annual rate of 0.75% of the Fund's average daily
net assets attributable to the applicable Class of shares and will pay PFD a
service fee at the annual rate of 0.25% of the Fund's average daily net
assets attributable to that Class of shares. The distribution fee is intended
to compensate PFD for its distribution services to the Fund. The service fee
is intended to be additional compensation for personal services and/or
account maintenance services with respect to Class B and Class C shares. PFD
also receives the proceeds of any CDSC imposed on the redemption of Class B
and Class C shares.
Commissions of 4%, equal to 3.75% of the amount invested and a first
year's service fee equal to 0.25% of the amount invested in Class B shares,
are paid to broker-dealers who have selling agreements with PFD. PFD may
advance to dealers the first year service fee at a rate up to 0.25% of the
purchase price of such shares and, as compensation therefore, PFD may retain
the service fee paid by the Fund with respect to such shares for the first
year after purchase. Dealers will become eligible for additional service fees
with respect to such shares commencing in the 13th month following the
purchase.
Commissions of up to 1% of the amount invested in Class C shares,
consisting of 0.75% of the amount invested and a first year's service fee of
0.25% of the amount invested, are paid to broker-dealers who have selling
agreements with PFD. PFD may advance to dealers the first year service fee at
a rate up to 0.25% of the purchase price of such shares and, as compensation
therefore, PFD may retain the service fee paid by the Fund with respect to
such shares for the first year after purchase. Commencing in the 13th month
following the purchase of Class C shares, dealers will become eligible for
additional annual distribution fees and service fees of up to 0.75% and
0.25%, respectively, of the net asset value of such shares. When a
broker-dealer sells Class B or Class C shares and elects, with PFD's
approval, to waive its right to receive the commission normally paid at the
time of the sale, PFD may cause all or a portion of the distribution fees
described above to be paid to the broker-dealer.
Dealers may from time to time be required to meet certain criteria in
order to receive service fees. PFD or its affiliates are entitled to retain
all service fees payable under the Class B Plan or the Class C Plan for which
there is no dealer of record or for which qualification standards have not
been met as partial consideration for personal services and/or account
maintenance services performed by PFD or its affiliates for shareholder
accounts.
XI. DIVIDENDS, DISTRIBUTIONS AND TAXATION
The Fund has elected to be treated, has qualified, and intends to qualify
each year as a "regulated investment company" under Subchapter M of the Code,
so that it will not pay federal income tax on income and capital gains
distributed to shareholders as required under the Code.
Under the Code, the Fund will be subject to a nondeductible 4% excise tax
on a portion of its undistributed ordinary income and capital gains if it
fails to meet certain distribution requirements with respect to each calendar
year. The Fund intends to make distributions in a timely manner and
accordingly does not expect to be subject to the excise tax.
The Fund's policy is to pay to shareholders dividends from net investment
income, if any, quarterly in March, June, September and December and to make
distributions from net long-term capital gains, if any, usually in December.
Distributions from net short-term capital gains, if any, may be paid with
such dividends; dividends from income and/or capital gains may also be paid
at such other times as may be necessary for the Fund to avoid federal income
or excise tax. Generally, dividends from the Fund's net investment income,
market discount income, certain net foreign exchange gains and net short-term
capital gains realized by the Fund are taxable under the Code as ordinary
income, and dividends from the Fund's net long-term capital gains are taxable
as long-term capital gains.
UNLESS SHAREHOLDERS SPECIFY OTHERWISE, ALL DISTRIBUTIONS WILL BE
AUTOMATICALLY REINVESTED IN ADDITIONAL FULL AND FRACTIONAL SHARES OF THE
FUND. FOR FEDERAL INCOME TAX PURPOSES, ALL DIVIDENDS ARE TAXABLE AS DESCRIBED
ABOVE WHETHER A SHAREHOLDER TAKES THEM IN CASH OR REINVESTS THEM IN
ADDITIONAL SHARES OF THE FUND. Information as to the federal tax status of
dividends and distributions will be provided to shareholders annually. For
further information on the distribution options available to shareholders,
see "Distribution Options" and "Directed Dividends" below.
Distributions by the Fund of the dividend income it receives from U.S.
domestic corporations, may qualify for the dividends-received deduction for
corporate shareholders, subject to
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holding-period requirements and debt-financing restrictions under the Code.
The Fund may be subject to foreign withholding taxes or other foreign
taxes on income (possibly including, in some cases, capital gains) from
certain of its foreign investments, which will reduce the yield or return
from those investments. If, as anticipated the Fund does not qualify to pass
such taxes through to its shareholders, they will neither treat such taxes as
additional income nor be entitled to any associated foreign tax credits or
deductions.
Dividends and other distributions and the proceeds of redemptions,
exchanges or repurchases of Fund shares paid to individuals and other
non-exempt payees will be subject to 31% backup withholding of federal income
tax if the Fund is not provided with the shareholder's correct taxpayer
identification number and certification that the number is correct and the
shareholder is not subject to backup withholding or the Fund receives notice
from the Internal Revenue Service ("IRS") or a broker that such withholding
applies.
The description above relates only to U.S. federal income tax consequences
for shareholders who are U.S. persons, i.e., U.S. citizens or residents or
U.S. corporations, partnerships, trusts or estates, and who are subject to
U.S. federal income tax. Non-U.S. shareholders and tax-exempt shareholders
are subject to different tax treatment that is not described above.
Shareholders should consult their own tax advisors regarding state, local and
other applicable tax laws.
XII. SHAREHOLDER SERVICES
PSC is the shareholder services and transfer agent for shares of the Fund.
PSC, a Massachusetts corporation, is a wholly-owned subsidiary of PGI. PSC's
offices are located at 60 State Street, Boston, Massachusetts 02109, and
inquiries to PSC should be mailed to Pioneering Services Corporation, P.O.
Box 9014, Boston, Massachusetts 02205-9014. Brown Brothers Harriman & Co.
(the "Custodian") serves as custodian of the Fund's portfolio securities and
other assets. The principal business address of the mutual fund division of
the Custodian is 40 Water Street, Boston, Massachusetts 02109.
Account and Confirmation Statements
PSC maintains an account for each shareholder and all transactions of the
shareholder are recorded in this account. Confirmation statements showing
details of transactions are sent to shareholders as transactions occur,
except Automatic Investment Plan transactions which are confirmed quarterly.
The Pioneer Combined Account Statement, mailed quarterly, is available to
shareholders who have more than one Pioneer mutual fund account.
Shareholders whose shares are held in the name of an investment
broker-dealer or other party will not normally have an account with the Fund
and might not be able to utilize some of the services available to
shareholders of record. Examples of services which might not be available are
purchases, exchanges or redemptions by mail or telephone, automatic
reinvestment of dividends and capital gains distributions, withdrawal plans,
Letters of Intention, Rights of Accumulation and newsletters.
Additional Investments
You may add to your account by sending a check (minimum of $50 for Class A
shares and $500 for Class B and Class C shares) to PSC (account number and
Class of shares should be clearly indicated). The bottom portion of a
confirmation statement may be used as a remittance slip to make additional
investments. Additions to your account, whether by check or through a Pioneer
Investomatic Plan, are invested in full and fractional shares of the Fund at
the applicable offering price in effect as of the close of regular trading on
the Exchange on the day of receipt.
Automatic Investment Plans
You may arrange for regular automatic investments of $50 or more through
government/military allotments, payroll deduction or through a Pioneer
Investomatic Plan. A Pioneer Investomatic Plan provides for a monthly or
quarterly investment by means of a pre-authorized electronic funds transfer
draft drawn on a checking account. Pioneer Investomatic Plan investments are
voluntary, and you may discontinue the Plan at any time without penalty upon
30 days' written notice to PSC. PSC acts as agent for the purchaser, the
broker-dealer and PFD in maintaining these plans.
Financial Reports and Tax Information
As a shareholder, you will receive financial reports at least
semiannually. In January of each year, the Fund will mail you information
about the tax status of dividends and distributions.
Distribution Options
Dividends and capital gains distributions, if any, will automatically be
invested in additional shares of the same class of the Fund, at the
applicable net asset value per share, unless you indicate another option on
the Account Application. Two other options available are (a) dividends in
cash and capital gains distributions in additional shares; and (b) all
dividends and capital gains distributions in cash. These two options are not
available, however, for retirement plans or for an account with a net asset
value of less than $500. Changes in your distribution options may be made by
written request to PSC. If you elect to receive either dividends or capital
gains or both in cash and a distribution check issued to you is returned by
the United States Postal Service as not deliverable or a distribution check
remains uncashed for six months or more, the amount of the check may be
reinvested in your account. Such additional shares will be purchased at the
then current net asset value. Furthermore, the distribution option on the
account will automatically be changed to the reinvestment option until such
time as you request a different option by writing to PSC.
Directed Dividends
You may elect (in writing) to have the dividends paid by one Pioneer
mutual fund account invested in a second Pioneer fund account. The value of
this second account must be at least $1,000 ($500 for Pioneer Fund or Pioneer
II). Invested dividends may be in any amount, and there are no fees or
charges for this service. Retirement plan shareholders may only direct
dividends to accounts with identical registrations, i.e., PGI IRA Cust for
John Smith may only go into another account registered PGI IRA Cust for John
Smith.
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Direct Deposit
If you have elected to take distributions, whether dividends or dividends
and capital gains, in cash, or have established a Systematic Withdrawal Plan,
you may choose to have those cash payments deposited directly into your
savings, checking or NOW bank account. You may establish this service by
completing the appropriate section on the Account Application when opening a
new account or the Account Options Form for an existing account.
Voluntary Tax Withholding
You may request (in writing) that PSC withhold 28% of the dividends and
capital gains distributions paid from your account (before any reinvestment)
and forward the amount withheld to the IRS as a credit against your federal
income taxes. This option is not available for retirement plan accounts or
for accounts subject to backup withholding.
Telephone Transactions and Related Liabilities
Your account is automatically authorized to have tele-
phone transaction privileges unless you indicated otherwise on your Account
Application or by writing to PSC. You may purchase, sell or exchange Fund
shares by telephone. See "How to Buy Fund Shares," "How to Sell Fund Shares"
and "How to Exchange Fund Shares" for more information. For personal
assistance, call 1-800-225-6292 between 8:00 a.m. and 9:00 p.m. Eastern Time
on weekdays. Computer-assisted transactions may be available to shareholders
who have pre-recorded certain bank information (see "FactFone(SM)"). You are
strongly urged to consult with your financial representative prior to
requesting any telephone transaction. To confirm that each transaction
instruction received by telephone is genuine, PSC will record each telephone
transaction, require the caller to provide the personal identification number
("PIN") for the account and send you a written confirmation of each telephone
transaction. Different procedures may apply to accounts that are registered
to non-U.S. citizens or that are held in the name of an institution or in the
name of an investment broker-dealer or other third-party. If reasonable
procedures, such as those described above, are not followed, the Fund may be
liable for any loss due to unauthorized or fraudulent instructions. The Fund
may implement other procedures from time to time. In all other cases, neither
the Fund, PSC or PFD will be responsible for the authenticity of instructions
received by telephone, therefore, you bear the risk of loss for unauthorized
or fraudulent telephone transactions.
During times of economic turmoil or market volatility or as a result of
severe weather or a natural disaster, it may be difficult to contact the Fund
by telephone to institute a redemption or exchange. You should communicate
with the Fund in writing if you are unable to reach the Fund by telephone.
FactFone(SM)
FactFone(SM) is an automated inquiry and telephone transaction system
available to Pioneer mutual fund shareholders by dialing 1-800-225-4321.
FactFone(SM) allows you to obtain current information on your Pioneer mutual
fund accounts and to inquire about the prices and yields of all publicly
available Pioneer mutual funds. In addition, you may use FactFone(SM) to make
computer-assisted telephone purchases, exchanges and redemptions from your
Pioneer accounts if you have activated your PIN. Telephone purchases and
redemptions require the establishment of a bank account of record. You are
strongly urged to consult with your financial representative prior to
requesting any telephone transaction. Shareholders whose accounts are
registered in the name of a broker-dealer or other third party may not be
able to use FactFone(SM). See "How to Buy Fund Shares," "How to Exchange Fund
Shares," "How to Sell Fund Shares" and "Telephone Transactions and Related
Liabilities." Call PSC for assistance.
Retirement Plans
You should contact the Retirement Plans Department of PSC at
1-800-622-0176 for information relating to retirement plans for businesses,
age-weighted profit sharing plans, Simplified Employee Pension Plans, IRAs,
and Section 403(b) retirement plans for employees of certain non-profit
organizations and public school systems, all of which are available in
conjunction with investments in the Fund. The Pioneer Mutual Funds Account
Application accompanying this Prospectus should not be used to establish any
of these plans. Separate applications are required.
Telecommunications Device for the Deaf (TDD)
If you have a hearing disability and access to TDD keyboard equipment, you
can call our TDD number toll-free at 1-800-225-1997, weekdays from 8:30
a.m. to 5:30 p.m. Eastern Time to contact our telephone representatives with
questions about your account.
Systematic Withdrawal Plans
If your account has a total value of at least $10,000 you may establish a
Systematic Withdrawal Plan ("SWP") providing for fixed payments at regular
intervals. Withdrawals from Class B and Class C share accounts are limited to
10% of the value of the account at the time the SWP is implemented. See
"Waiver or Reduction of Contingent Deferred Sales Charge" for more
information. Periodic checks of $50 or more will be sent to you, or any
person designated by you, monthly or quarterly, and your periodic redemptions
of shares may be taxable to you. Payments can be made either by check or
electronic transfer to a bank account designated by you. If you direct that
withdrawal checks be paid to another person after you have opened your
account, a signature guarantee must accompany your instructions. Purchases of
Class A shares of the Fund at a time when you have a SWP in effect may result
in the payment of unnecessary sales charges and may therefore be
disadvantageous. You may obtain additional information by calling PSC at
1-800-225-6292 or by referring to the Statement of Additional Information.
Reinstatement Privilege (Class A Shares Only)
If you redeem all or part of your Class A shares of the Fund, you may
reinvest all or part of the redemption proceeds without a sales charge in
Class A shares of the Fund if you send a written request to PSC not more than
90 days after your shares were redeemed. Your redemption proceeds will be
reinvested at the next determined net asset value of the Class A shares of
the Fund in effect immediately after receipt
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of the written request for reinstatement. You may realize a gain or loss for
federal income tax purposes as a result of the redemption, and special tax
rules may apply if a reinstatement occurs. In addition, if a redemption
resulted in a loss and an investment is made in shares of the Fund within 30
days before or after the redemption, you may not be able to recognize the
loss for federal income tax purposes. Subject to the provisions outlined
under "How to Exchange Fund Shares" above, you may also reinvest in Class A
shares of other Pioneer mutual funds; in this case you must meet the minimum
investment requirements for each fund you enter.
The 90-day reinstatement period may be extended by PFD for periods of up
to one year for shareholders living in areas that have experienced a natural
disaster, such as a flood, hurricane, tornado, or earthquake.
----------------------------------
The options and services available to shareholders, including the terms of
the Exchange Privilege and the Pioneer Investomatic Plan, may be revised,
suspended or terminated at any time by PFD or by the Fund. You may establish
the services described in this section when you open your account. You may
also establish or revise many of them on an existing account by completing an
Account Options Form, which you may request by calling 1-800-225-6292.
XIII. THE FUND
The Fund, an open-end, diversified management investment company (commonly
referred to as a mutual fund), was established as a Nebraska corporation on
January 19, 1968 and reorganized as a Delaware business trust on June 30,
1994. Prior to February 1, 1997, the Fund was known as Pioneer Income Fund.
The Fund has authorized an unlimited number of shares of beneficial interest.
As an open-end management investment company, the Fund continuously offers
its shares to the public and under normal conditions must redeem its shares
upon the demand of any shareholder at the then current net asset value per
share. See "How to Sell Fund Shares." The Fund is not required, and does not
intend, to hold annual shareholder meetings although special meetings may be
called for the purpose of electing or removing Trustees, changing fundamental
investment restrictions or approving a management contract.
The Fund reserves the right to create and issue additional series of
shares. The Trustees have the authority, without further shareholder
approval, to classify and reclassify the shares of the Fund, or any new
series, into one or more classes. As of the date of this Prospectus, the
Trustees have authorized the issuance of three classes of shares, designated
as Class A, Class B and Class C. The shares of each class represent an
interest in the same portfolio of investments of the Fund. Each class has
equal rights as to voting, redemption, dividends and liquidation, except that
each class bears different distribution and transfer agent fees and may bear
other expenses properly attributable to the particular class. Class A, Class
B and Class C shareholders have exclusive voting rights with respect to the
Rule 12b-1 distribution plans adopted by holders of those shares in
connection with the distribution of shares.
In addition to the requirements under Delaware law, the Declaration of
Trust provides that a shareholder of the Fund may bring a derivative action
on behalf of the Fund only if the following conditions are met: (a)
shareholders eligible to bring such derivative action under Delaware law who
hold at least 10% of the outstanding shares of the Fund, or 10% of the
outstanding shares of the series or class to which such action relates, shall
join in the request for the Trustees to commence such action; and (b) the
Trustees must be afforded a reasonable amount of time to consider such
shareholder request and investigate the basis of such claim. The Trustees
shall be entitled to retain counsel or other advisers in considering the
merits of the request and shall require an undertaking by the shareholders
making such request to reimburse the Fund for the expense of any such
advisers in the event that the Trustees determine not to bring such action.
When issued and paid for in accordance with the terms of the Prospectus
and Statement of Additional Information, shares of the Fund are fully-paid
and non-assessable. Shares will remain on deposit with the Fund's transfer
agent and certificates will not normally be issued. The Fund reserves the
right to charge a fee for the issuance of certificates.
XIV. INVESTMENT RESULTS
The Fund may from time to time include yield information for each Class of
Fund shares in advertisements or in information furnished generally to
existing or proposed shareholders. Whenever yield information is provided, it
includes a standardized yield calculation computed by dividing the Fund's net
investment income per share for each Class of Fund shares during a base
period of 30 days, or one month, by the maximum offering price per share for
each Class of Fund shares on the last day of such base period. (The Fund's
net investment income per share for each Class is determined by dividing the
Fund's net investment income for each Class during the base period by the
Class's average number of shares of the Fund entitled to receive dividends
during the base period). The Class's 30-day yield is then "annualized" by a
computation that assumes that the Class's net investment income is earned and
reinvested for a six-month period at the same rate as during the 30-day base
period and that the resulting six-month income will be generated over an
additional six months.
The average annual total return (for a designated period of time) on an
investment in the Fund may also be included in advertisements, and furnished
to existing or prospective shareholders. The average annual total return for
each Class is computed in accordance with the SEC's standardized formula. The
calculation for all Classes assumes the reinvestment of all dividends and
distributions at net asset value and does not reflect the impact of federal
or state income taxes. In addition, for Class A shares the calculation
assumes the deduction of the maximum sales charge of 4.50%; for Class B and
Class C shares the calculation reflects the deduction of any applicable CDSC.
The periods illustrated would normally include one, five and ten years (or
since the commencement of the public offering of the shares of a Class, if
shorter) through the most recent calendar quarter.
One or more additional measures and assumptions, including but not limited
to historical total returns; distribu-
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tion returns; results of actual or hypothetical investments; changes in
dividends, distributions or share values; or any graphic illustration of such
data may also be used. These data may cover any period of the Fund's
existence and may or may not include the impact of sales charges, taxes or
other factors.
Other investments or savings vehicles and/or unmanaged market indexes,
indicators of economic activity or averages of mutual funds results may be
cited or compared with the investment results of the Fund. Rankings or
listings by magazines, newspapers or independent statistical or rating
services, such as Lipper Analytical Services, Inc., may also be referenced.
The Fund's yield and investment results will be calculated separately for
each class of shares and will vary from time to time depending on market
conditions, the composition of the Fund's portfolio, operating expenses of
the Fund and expenses allocated to a specific class of Fund shares. All
quoted investment results are historical and should not be considered
representative of what an investment in the Fund may earn in any future
period. For further information about the calculation methods and uses of the
Fund's investment results, see the Statement of Additional Information.
APPENDIX
This Appendix provides a brief description of certain securities in which
the Fund may invest and certain transactions it may make. For a more complete
discussion of these and other securities and practices, see "Investment
Objective and Policies" in this Prospectus and "Investment Policies and
Restrictions" in the Statement of Additional Information.
GNMA Certificates and CMOs
The Fund may invest a portion of its assets allocated to debt securities
in GNMA Certificates and CMOs. GNMA Certificates are mortgage participation
certificates, 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 U.S., this guarantee does not extend to
the market value of these securities. The GNMA Certificates which the
Portfolio may purchase are the "modified pass-through" type. Modified
pass-through certificates entitle the holder to receive all principal and
interest owed on the mortgages in the pool, net of fees paid to the issuer
and GNMA, regardless of whether or not the mortgagor actually makes the
payment.
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 CMO, often called 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 rates.
"When-Issued" GNMA Certificates
When-issued or delayed delivery transactions arise when securities are
purchased or sold by the Fund with payment and delivery taking place in the
future in order to secure what is considered to be an advantageous price and
yield which is fixed at the time of entering into the transaction. However,
the yield on a comparable GNMA Certificate when the transaction is
consummated may vary from the yield on the GNMA Certificate at the time that
the when-issued or delayed delivery transaction was made. Also, the market
value of the when-issued or delayed delivery GNMA Certificate may increase
or decrease as a result of changes in general interest rates. When-issued and
delayed delivery transactions involve risk of loss if the value of a GNMA
Certificate declines before the settlement date.
The value of when-issued GNMA Certificate purchase commitments at any time
will not exceed the value of the Fund's assets invested in U.S. Treasury
bills (i.e., U.S. Treasury obligations with maturities of one year or less)
and other debt securities having remaining maturities of less than six
months. In addition, the Fund's aggregate investments in when-issued or
delayed delivery commitments and repurchase agreements may not exceed 25% of
its assets.
Real Estate Investment Trusts and Associated Risk Factors
The Fund may 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. 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 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 are subject to
heavy cash flow dependency, default by borrowers, self-liquidation, and the
possibilities of failing to qualify for the exemption from tax for
distributed income under the Code and failing to maintain their exemptions
from the 1940 Act. REITs whose underlying assets include long-term health
care properties, such as nursing, retirement and assisted living homes, may
be impacted by federal regulations concerning the health care industry.
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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. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will
gradually align themselves to reflect changes in market interest rates,
causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Investing in REITs involves risks similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be
subject to more abrupt or erratic price movements than larger company
securities. Historically, REITs, like small capitalization stocks, have been
more volatile in price than the larger capitalization stocks included in the
Standard & Poor's Index of 500 Common Stocks.
Foreign Investments and Associated Risk Factors
The Fund may invest up to 10% of its total assets in foreign securities.
Investing in securities of foreign companies involves certain considerations
and risks which are not typically associated with investing in securities of
domestic companies. Foreign companies are not subject to uniform accounting,
auditing and financial standards and requirements comparable to those
applicable to U.S. companies. There may also be less publicly available
information about foreign companies compared to reports and ratings published
about U.S. companies. In addition, foreign securities markets have
substantially less volume than domestic markets and securities of some
foreign companies are less liquid and more volatile than securities of
comparable U.S. companies. There may also be less government supervision and
regulation of foreign securities exchanges, brokers and listed companies than
exists in the United States. Dividends or interest paid by foreign issuers
may be subject to withholding and other foreign taxes which will decrease the
net return on such investments as compared to dividends or interest paid to
the Fund by domestic companies. Finally, there may be the possibility of
expropriations, confiscatory taxation, political, economic or social
instability or diplomatic developments which could adversely affect assets of
the Fund held in foreign countries.
The value of foreign securities may also be adversely affected by
fluctuations in the relative rates of exchange between the currencies of
different nations and by exchange control regulations. For example, the value
of a foreign security held by the Fund as measured in U.S. dollars will
decrease if the foreign currency in which the security is denominated
declines in value against the U.S. dollar. In such event, this will cause an
overall decline in the Fund's net asset value and may also reduce net
investment income and capital gains, if any, to be distributed in U.S.
dollars to shareholders of the Fund.
Currency exchange rates may affect the Fund to the extent that the Fund
invests in non-U.S. securities. Some foreign currency values may be volatile,
and there is the possibility of governmental controls on currency exchange or
governmental intervention in currency markets, which could adversely affect
the Fund. PMC may attempt to manage currency exchange rate risks for the
Fund. However, there is no assurance that PMC will do so at an appropriate
time or that PMC 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 result in increased losses to the Fund. 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.
The performance of the Fund may be affected by the relative performance of
foreign currencies. PMC may manage the Fund's exposure to various currencies
to take advantage of different yield, risk, and return characteristics that
different currencies can provide for U.S. investors. To manage exposure to
currency fluctuations, the Fund may enter into forward foreign currency
exchange contracts (agreements to exchange one currency for another at a
future date) and buy and sell options and futures contracts relating to
foreign currencies.
Forward Foreign Currency Exchange Contacts
The Fund has the ability to hold a portion of its assets in foreign
currencies and to enter into forward foreign currency contracts to facilitate
settlement of foreign securities transactions or to protect against changes
in foreign currency exchange rates. The Fund might sell a foreign currency on
either a spot or forward basis to hedge against an anticipated decline in the
dollar value of securities in its portfolio or securities it intends or has
contracted to sell or to preserve the U.S. dollar value of dividends,
interest or other amounts it expects to receive. Although this strategy could
minimize the risk of loss due to a decline in the value of the hedged foreign
currency, it could also limit any potential gain which might result from an
increase in the value of the currency. Alternatively, the Fund might purchase
a foreign currency or enter into a forward purchase contract for the currency
to preserve the U.S. dollar price of the securities it is authorized to
purchase or has contracted to purchase.
If the Fund enters into a forward contract to buy foreign currency, the
Fund will be required to place cash or high grade liquid securities in a
segregated account of the Fund maintained by the Fund's custodian in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract.
Options and Futures Contracts on Foreign Currencies
The Fund may purchase put and call options on foreign currencies for the
purpose of protecting against declines in the dollar value of foreign
portfolio securities and against increases in the U.S. dollar cost of foreign
securities to be acquired. The purchase of an option on a foreign currency
may constitute an effective hedge against exchange rate fluctuations.
19
<PAGE>
To hedge against changes in currency exchange rates, the Fund may purchase
and sell futures contracts on currency, and purchase and write call and put
options on any of such futures contracts. The Fund may also enter into
closing purchase and sale transactions with respect to any of such contracts
and options. The futures contracts will be based on foreign currencies. The
Fund will engage in futures and related options transactions for bona fide
hedging purposes only. These transactions involve brokerage costs, require
margin deposits and require that the Fund segregate assets to cover such
contacts and options.
Limitations and Risks Associated with Currency Transactions
The Fund may enter into forward foreign currency exchange contracts and
may buy and sell options and futures relating to foreign currencies. Each of
these currency management strategies involves (1) liquidity risk that
contractual positions cannot be easily closed out in the event of market
changes or generally in the absence of a liquid secondary market, (2)
correlation risk that changes in the value of hedging positions may not match
the securities market and foreign currency fluctuations intended to be
hedged, and (3) market risk that an incorrect prediction of securities prices
or exchange rates by PMC may cause the Fund to perform less favorably than if
such positions had not been entered. The ability to terminate
over-the-counter options is more limited than with exchange traded options.
Forward foreign currency exchange contracts and options and futures contracts
relating to foreign currency transactions may involve the risk that the
counter-party to the transaction will not fulfill its obligations. The use of
forward foreign currency exchange contracts and options and futures relating
to foreign currencies are highly specialized activities which involve
investment techniques and risks that are different from those associated with
ordinary portfolio transactions. The Fund may not enter into futures
contracts and options on futures contracts for speculative purposes. The Fund
will only invest in currency management strategies to the extent that it
invests in foreign securities. The loss that may be incurred by the Fund in
entering into futures contracts and written options thereon and forward
foreign currency exchange contracts is potentially unlimited. The Fund may
not invest more than 5% of its total assets in purchased options other than
protective put options.
Risks of Lower Rated Debt Securities
The Fund may invest up to 10% of its total assets in lower rated or
unrated debt securities determined by PMC to be of comparable quality. These
securities involve greater risk of default or price declines due to changes
in the issuer's creditworthiness then investment-grade securities. Because
the market for such securities may be thinner and less active than for higher
rated securities, there may be market price volatility for these securities
and limited liquidity in the resale market. These factors may have the effect
of limiting the ability of the Fund to sell such securities at their fair
market value either in response to changes in the economy or the financial
markets or to meet redemption requests.
20
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Notes
21
<PAGE>
Notes
22
<PAGE>
THE PIONEER FAMILY OF MUTUAL FUNDS
Growth Funds
Global/International
Pioneer Emerging Markets Fund
Pioneer Europe Fund
Pioneer Gold Shares
Pioneer India Fund
Pioneer International Growth Fund
Pioneer World Equity Fund
United States
Pioneer Capital Growth Fund
Pioneer Growth Shares
Pioneer Mid-Cap Fund
Pioner Small Company Fund
Growth and Income Funds
Pioneer Balanced Fund
Pioneer Equity-Income Fund
Pioneer Fund
Pioneer Real Estate Shares
Pioneer II
Income Funds
Taxable
Pioneer America Income Trust
Pioneer Bond Fund
Pioneer Short-Term Income Trust*
Tax-Free Income
Pioneer Intermediate Tax-Free Fund**
Pioneer Tax-Free Income Fund**
Money Market Fund
Pioneer Cash Reserves Fund
*Offers Class A and B Shares only
**Not suitable for retirement accounts
23
<PAGE>
[Pioneer logo]
Pioneer
Balanced
Fund
60 State Street
Boston, Massachusetts 02109
OFFICERS
JOHN F. COGAN, JR., Chairman and President
DAVID D. TRIPPLE, Executive Vice President
WILLIAM H. KEOUGH, Treasurer
JOSEPH P. BARRI, Secretary
INVESTMENT ADVISER
PIONEERING MANAGEMENT CORPORATION
PRINCIPAL UNDERWRITER
PIONEER FUNDS DISTRIBUTOR, INC.
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP
LEGAL COUNSEL
HALE AND DORR LLP
0197-3847
(C)Pioneer Funds Distributor, Inc.
SHAREHOLDER SERVICES AND TRANSFER AGENT
PIONEERING SERVICES CORPORATION
60 State Street
Boston, Massachusetts 02109
Telephone: 1-800-225-6292
SERVICES INFORMATION
If you would like information on the following, please call:
Existing and new accounts, prospectuses,
applications, service forms
and telephone transactions ................................... 1-800-225-6292
FactFone(SM)
Automated fund yields, automated prices and
account information .......................................... 1-800-225-4321
Retirement plans .............................................. 1-800-622-0176
Toll-free fax ................................................. 1-800-225-4240
Telecommunications Device for the Deaf (TDD) .................. 1-800-225-1997
24
<PAGE>
PIONEER BALANCED FUND
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
STATEMENT OF ADDITIONAL INFORMATION
CLASS A, CLASS B AND CLASS C SHARES
FEBRUARY 3, 1997
This Statement of Additional Information is not a Prospectus, but
should be read in conjunction with the Prospectus (the "Prospectus") dated
February 3, 1997 of Pioneer Balanced Fund (the "Fund"). A copy of the Prospectus
can be obtained free of charge by calling Shareholder Services at 1-800-225-6292
or by written request to the Fund at 60 State Street, Boston, Massachusetts
02109. The most recent Annual and Semi-Annual Reports to Shareholders are
attached to this Statement of Additional Information and are hereby incorporated
by reference.
TABLE OF CONTENTS
Page
1. Investment Objective and Policies.......................................2
2. Investment Restrictions.................................................6
3. Management of the Fund..................................................8
4. Investment Adviser......................................................12
5. Underwriting Agreement and Distribution Plans...........................13
6. Shareholder Servicing/Transfer Agent....................................16
7. Custodian...............................................................17
8. Principal Underwriter...................................................17
9. Independent Public Accountant...........................................17
10. Portfolio Transactions..................................................17
11. Tax Status and Dividends................................................19
12. Shares of the Fund......................................................22
13. Determination of Net Asset Value........................................23
14. Systematic Withdrawal Plan..............................................24
15. Letter of Intention.....................................................25
16. Investment Results......................................................25
17. General Information.....................................................29
18. Financial Statements....................................................29
Appendix A..............................................................30
Appendix B..............................................................48
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
1. INVESTMENT OBJECTIVE AND POLICIES
The Fund's current Prospectus presents the investment objective and the
principal investment policies of the Fund. Additional investment policies and a
further description of some of the policies described in the Prospectus appear
below.
The following policies and restrictions supplement those discussed in the
Prospectus. Whenever an investment policy or restriction states a maximum
percentage of the Fund's assets that may be invested in any security or presents
a policy regarding quality standards, this standard or other restrictions shall
be determined immediately after and as a result of the Fund's investment.
Accordingly, any later increase or decrease resulting from a change in values,
net assets or other circumstances will not be considered in determining whether
the investment complies with the Fund's investment objectives and policies.
LENDING OF PORTFOLIO SECURITIES
The Fund may lend portfolio securities to member firms of the New York Stock
Exchange, under agreements which would require that the loans be secured
continuously by collateral in cash, cash equivalents or United States ("U.S.")
Treasury Bills maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned as well as the benefit of an increase in the market value of the
securities loaned and would also receive compensation based on investment of the
collateral. The Fund would not, however, have the right to vote any securities
having voting rights during the existence of the loan, but would call the loan
in anticipation of an important vote to be taken among holders of the securities
or of the giving or withholding of consent on a material matter affecting the
investment.
As with other extensions of credit there are risks of delay in recovery or even
loss of rights in the collateral should the borrower of the securities fail
financially. The Fund will lend portfolio securities only to firms which have
been approved in advance by the Board of Trustees, which will monitor the
creditworthiness of any such firms. At no time would the value of the securities
loaned exceed 30% of the value of the Fund's total assets.
FORWARD FOREIGN CURRENCY TRANSACTIONS
The Fund may engage in forward foreign currency transactions. These transactions
may be conducted on a spot, i.e., cash basis, at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market. The Fund also has
authority to deal in forward foreign currency exchange contracts involving
currencies of the different countries in which the Fund will invest as a hedge
against possible variations in the foreign exchange rate between these
currencies and the U.S. dollar. This is accomplished through contractual
agreements to purchase or sell a specified currency at a specified future date
and price set at the time of the contract. The Fund's dealings in forward
foreign currency contracts will be limited to hedging either specific
transactions or portfolio positions. Transaction hedging is the purchase or sale
of forward foreign currency contracts with respect to specific receivables or
payables of the Fund, accrued in connection with the purchase and sale of their
portfolio securities denominated in foreign currencies. Portfolio hedging is the
use of forward foreign currency contracts to offset portfolio security positions
denominated or quoted in such foreign currencies. There is no
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<PAGE>
guarantee that the Fund will be engaged in hedging activities when adverse
exchange rate movements occur. The Fund will not attempt to hedge all of its
foreign portfolio positions, and will enter into such transactions only to the
extent, if any, deemed appropriate by the investment adviser. The Fund will not
enter into speculative forward foreign currency contracts.
If the Fund enters into a forward contract to purchase foreign currency, the
custodian bank will segregate cash or high grade liquid debt securities in a
separate account in an amount equal to the value of the total assets committed
to the consummation of such forward contract. Those assets will be valued at
market daily and if the value of the assets in the separate account declines,
additional cash or securities will be placed in the accounts so that the value
of the account will equal the amount of the Fund's commitment with respect to
such contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also limit the opportunity
for gain if the value of the hedged currency should rise. Moreover, it may not
be possible for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the devaluation level they anticipate.
The cost to the Fund of engaging in foreign currency transactions varies with
such factors as the currency involved, the size of the contract, the length of
the contract period and the market conditions then prevailing. Since
transactions in foreign currency and forward contracts are usually conducted on
a principal basis, no fees or commissions are involved. The Fund may close out a
forward position in a currency by selling the forward contract or by entering
into an offsetting forward contract.
OPTIONS ON FOREIGN CURRENCIES
The Fund may purchase options on foreign currencies for hedging purposes in a
manner similar to that of transactions in forward contracts. For example, a
decline in the dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against such
decreases in the value of portfolio securities, the Fund may purchase put
options on the foreign currency. If the value of the currency declines, the Fund
will have the right to sell such currency for a fixed amount of dollars which
exceeds the market value of such currency. This would result in a gain that may
offset, in whole or in part, the negative effect of currency depreciation on the
value of the Fund's securities denominated in that currency.
Conversely, if a rise in the dollar value of a currency is projected for those
securities to be acquired, thereby increasing the cost of such securities, the
Fund may purchase call options on such currency. If the value of such currency
increased, the purchase of such call options would enable the Fund to purchase
currency for a fixed amount of dollars which is less than the market value of
such currency. Such a purchase would result in a gain that may offset, at least
partially, the effect of any currency related increase in the price of
securities the Fund intends to acquire. As in the case of other types of options
transactions, however, the benefit the Fund derives from purchasing foreign
currency options will be reduced by the amount of the premium and related
transaction costs. In addition, if currency exchange rates do not move in the
direction or to the extent anticipated, the Fund could sustain losses on
transactions in foreign currency options which would deprive it of a portion or
all of the benefits of advantageous changes in such rates.
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<PAGE>
The Fund may close out its position in a currency option by either selling the
option it has purchased or entering into an offsetting option.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with "primary dealers" in U.S.
Government securities and banks which furnish collateral at least equal in value
or market price to the amount of their repurchase obligation. The Fund may also
enter into repurchase agreements involving certain foreign government
securities. The primary risk associated with repurchase agreements is that, if
the seller defaults, the Fund might suffer a loss to the extent that the
proceeds from the sale of the underlying securities and other collateral held by
the Fund in connection with the related repurchase agreement are less than the
repurchase price. Another risk is that, in the event of bankruptcy of the
seller, the Fund could be delayed or prohibited from disposing of the underlying
securities and other collateral held by the Fund in connection with the related
repurchase agreement pending court proceedings. In evaluating whether to enter a
repurchase agreement, PMC will carefully consider the creditworthiness of the
seller pursuant to procedures reviewed and approved by the Trustees. See
"Repurchase Agreements" in the Prospectus.
LOWER QUALITY DEBT OBLIGATIONS
The Fund may invest up to 10% of its total assets in debt securities which are
rated below investment grade by Standard & Poor's Ratings Group ("Standard &
Poor's") or by Moody's Investors Service, Inc. ("Moody's") (i.e., ratings lower
than BBB by Standard & Poor's or Baa by Moody's) or, if unrated by such rating
organizations, determined to be of comparable quality by PMC.
Bonds rated below BBB or Baa or comparable unrated securities are commonly
referred to as "junk bonds" and are considered speculative and may be
questionable as to principal and interest payments. In some cases, such bonds
may be highly speculative, have poor prospects for reaching investment standing
and be in default. As a result, investment in such bonds will entail greater
speculative risks than those associated with investment in investment grade
bonds (i.e., bonds rated BBB or better by Standard & Poor's or Baa or better by
Moody's or, if unrated by such rating organizations, determined to be of
comparable quality by PMC).
The amount of junk bond securities outstanding has proliferated in conjunction
with the increase in merger and acquisition and leveraged buyout activity. An
economic downturn could severely affect the ability of highly leveraged issuers
to service their debt obligations or to repay their obligations upon maturity.
Factors having an adverse impact on the market value of lower quality securities
will have an adverse effect on the Fund's net asset value to the extent that it
invests in such securities. In addition, the Fund may incur additional expenses
to the extent it is required to seek recovery upon a default in payment of
principal or interest on its portfolio holdings.
The secondary market for junk bond securities, which is concentrated in
relatively few market makers, may not be as liquid as the secondary market for
more highly rated securities, a factor which may have an adverse effect on the
Fund's ability to dispose of a particular security when necessary to meet its
liquidity needs. Under adverse market or economic conditions, the secondary
market for junk bond securities could contract further, independent of any
specific adverse changes in the condition of a particular issuer. As a result,
the Fund could find it more difficult to sell these securities or may be able to
sell the securities only at prices lower than if such securities were widely
traded. Prices realized upon the sale of such lower rated or unrated
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<PAGE>
securities, under these circumstances, may be less than the prices used in
calculating the Fund's net asset value.
Certain proposed and recently enacted federal laws including the required
divestiture by federally insured savings and loan associations of their
investments in junk bonds and proposals designed to limit the use, or tax and
other advantages, of junk bond securities could adversely affect the Fund's net
asset value and investment practices. Such proposals could also adversely affect
the secondary market for junk bond securities, the financial condition of
issuers of these securities and the value of outstanding junk bond securities.
The form of such proposed legislation and the possibility of such legislation
being passed are uncertain.
Since investors generally perceive that there are greater risks associated with
lower quality debt securities of the type in which the Fund may invest a portion
of its assets, the yields and prices of such securities may tend to fluctuate
more than those for higher rated securities. In the lower quality segments of
the debt securities market, changes in perceptions of issuers' creditworthiness
tend to occur more frequently and in a more pronounced manner than do changes in
higher quality segments of the debt securities market, resulting in greater
yield and price volatility.
Lower rated and comparable unrated debt securities tend to offer higher yields
than higher rated securities with the same maturities because the historical
financial condition of the issuers of such securities may not have been as
strong as that of other issuers. Since lower rated securities generally involve
greater risks of loss of income and principal than higher rated securities,
investors should consider carefully the relative risks associated with
investment in securities which carry lower ratings and in comparable unrated
securities. In addition to the risk of default, there are the related costs of
recovery on defaulted issues. PMC will attempt to reduce these risks through
portfolio diversification and by analysis of each issuer and its ability to make
timely payments of income and principal, as well as broad economic trends and
corporate developments.
RESTRICTED AND ILLIQUID SECURITIES
With respect to liquidity determinations generally, the Board of Trustees has
the ultimate responsibility for determining whether specific securities,
including Rule 144A securities, are liquid or illiquid. The Board has delegated
the function of making day to day determinations of liquidity to PMC, pursuant
to guidelines reviewed by the Trustees. PMC takes into account a number of
factors in reaching liquidity decisions. These factors may include but are not
limited to: (i) the frequency of trading in the security; (ii) the number of
dealers who make quotes in the securities; (iii) the number of dealers who have
undertaken to make a market in the security; (iv) the number of potential
purchasers; and (v) the nature of the security and how trading is effected
(e.g., the time needed to sell the security, how offers are solicited and the
mechanics of transfer). PMC will monitor the liquidity of securities in the
Fund's portfolio and report periodically on such decisions to the Trustees.
Since it is not possible to predict with assurance exactly how the market for
restricted securities sold and offered under Rule 144A will develop, the Board
will carefully monitor the Fund's investments in these securities, focusing on
such important factors, among others, as valuation, liquidity and availability
of information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that qualified institutional
buyers become for a time uninterested in purchasing these restricted securities.
In the current fiscal year, the Fund will limit investments in each of the
following to 5%: illiquid securities, including certain restricted securities;
and restricted securities determined not to be illiquid.
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<PAGE>
2. INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS. The Fund has adopted certain additional
investment restrictions which may not be changed without the affirmative vote of
the holders of a "majority" (as defined in the Investment Company Act of 1940,
as amended (the "1940 Act")) of the Fund's outstanding voting securities. As
used in the Prospectus and this Statement of Additional Information, such
approval means the approval of the lesser of: (i) the record holders of 67% or
more of the voting securities present at a special or annual meeting if the
record holders of more than 50% of the outstanding voting securities of the Fund
are present or represented by proxy, or (ii) more than 50% of the Fund's
outstanding shares.
The Fund may not:
1. 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.
2. 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.
3. Purchase securities on margin, but it may obtain such short-term credits as
may be necessary for clearance of purchases and sales of securities.
4. Make short sales of securities unless at the time of such sale it owns or has
the right to acquire as a result of the ownership of convertible or exchangeable
securities, and without the payment of further consideration, an equal amount of
such securities which it will retain so long as it is in a short position. At no
time will more than 10% of the value of the Fund's assets be committed to short
sales.
5. Act as an underwriter, except as it may be deemed to be an underwriter in a
sale of restricted securities held in its portfolio.
6. 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.
7. Make loans of its assets, except that the Fund may purchase a portion of an
issue of bonds or other obligations of types commonly distributed publicly to
financial institutions, may purchase repurchase agreements in accordance with
its investment objective, policies and restrictions, and may
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<PAGE>
make both short-term (nine months or less) and long-term loans of its
portfolio securities to the extent of 30% of the value of the Fund's total
assets computed at the time of making such loans.
8. Participate on a joint or joint-and-several basis in any securities trading
account.
9. Purchase any security (other than obligations of the U.S. Government, its
agencies or instrumentalities), if as a result: (a) more than 25% of the value
of the Fund's total assets would then be invested in securities of any single
issuer, or (b) as to 75% of the value of the Fund's total assets: (i) more than
5% of the value of the Fund's total assets would then be invested in securities
of any single issuer, or (ii) the Fund would own more than 10% of the voting
securities of any single issuer.
10. Enter into transactions with officers, trustees or other affiliated persons
of the Fund or its Investment Adviser or Underwriter, or any organization
affiliated with such persons, except securities transactions on an agency basis
at standard commission rates, as limited by the provisions of the 1940 Act.
It is the fundamental policy of the Fund not to concentrate its
investments in securities of companies in any particular industry. In the
opinion of the staff of the Securities and Exchange Commission (the
"Commission"), the Fund's investments are concentrated in a particular industry
if such investments aggregate 25% or more of the Fund's total assets. The Fund's
policy does not apply to investments in U.S. Government Securities.
The Fund does not intend to enter into any reverse repurchase
agreements or dollar rolls, or borrow money as described in fundamental
investment restrictions (1) and (2) above, during the coming year. In addition,
in compliance with an informal position taken by the staff of the Commission
regarding leverage, the Fund will not purchase securities during the coming year
at any time that outstanding borrowings exceed 5% of the Fund's total assets.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The following restrictions have been
designated as non-fundamental and may be changed by a vote of the Fund's Board
of Trustees without approval of shareholders.
The Fund may not:
1. 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.
2. 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 1/2 of 1% of the securities of such issuer together own more than 5%
of the securities of such issuer.
In order to register its shares in certain jurisdictions, the Fund has agreed to
adopt certain additional investment restrictions, which are non-fundamental and
which may be changed by a vote of the Fund's Board of Trustees. Pursuant to
these additional investment restrictions, the Fund may not (i) invest more than
2% of its assets in warrants, valued at the lower of cost or market, provided
that it may invest up to 5% of its total assets, as so valued, in warrants
listed on a nationally recognized U.S. or foreign stock exchange, (ii) invest in
interests in oil, gas or other mineral exploration or development leases or
programs.
-7-
<PAGE>
3. MANAGEMENT OF THE FUND
The Fund's Board of Trustees provides broad supervision over the
affairs of the Fund. The officers of the Fund are responsible for the Fund's
operations. The Trustees and executive officers of the Fund are listed below,
together with their principal occupations during the past five years. An
asterisk indicates those Trustees who are interested persons of the Fund within
the meaning of the 1940 Act.
JOHN F. COGAN, JR.*, Chairman of the Board, President and Trustee, DOB: June
1926
President, Chief Executive Officer and a Director of The Pioneer Group,
Inc. ("PGI"); Chairman and a Director of Pioneering Management Corporation
("PMC") and Pioneer Funds Distributor, Inc. ("PFD"); Director of Pioneering
Services Corporation ("PSC"), Pioneer Capital Corporation ("PCC") and
Forest-Starma (Russian timber joint venture); President and Director of Pioneer
Plans Corporation ("PPC"), Pioneer Investment Corp. ("PIC"), Pioneer Metals and
Technology, Inc. ("PMT"), Pioneer International Corp. ("PIntl"), Pioneer First
Russia, Inc. ("First Russia") and Pioneer Omega, Inc. ("Omega"); Chairman of the
Board and Director of Pioneer Goldfields Limited ("PGL") and Teberebie
Goldfields Limited; Chairman of the Supervisory Board of Pioneer Fonds
Marketing, GmbH ("Pioneer GmbH"); Member of the Supervisory Board of Pioneer
First Polish Trust Fund Joint Stock Company ("PFPT"); Chairman, President and
Trustee of all of the Pioneer mutual funds and Partner, Hale and Dorr (counsel
to the Fund).
RICHARD H. EGDAHL, M.D., Trustee, DOB: December 1926
Boston University Health Policy Institute, 53 Bay State Rd., Boston, MA 02115
Professor of Management, Boston University School of Management;
Professor of Public Health, Boston University School of Public Health; Professor
of Surgery, Boston University School of Medicine; Director, Boston University
Health Policy Institute and Boston University Medical Center; Executive Vice
President and Vice Chairman of the Board, University Hospital; Academic Vice
President for Health Affairs, Boston University; Director, Essex Investment
Management Company, Inc. (investment adviser), Health Payment Review, Inc.
(health care containment software firm), Mediplex Group, Inc. (nursing care
facilities firm), Peer Review Analysis, Inc. (health care facilities firm) and
Springer-Verlag New York, Inc. (publisher); Honorary Trustee, Franciscan
Children's Hospital and Trustee of all of the Pioneer mutual funds.
MARGARET B.W. GRAHAM, Trustee, DOB: May 1947
The Keep, P.O. Box 110. Little Deer Isle, ME 04650
Founding Director, Winthrop Group, Inc. (consulting firm) since 1982;
Manager of Research Operations, Xerox Palo Alto Research Center, from 1991 to
1994; Professor of Operations Management and Management of Technology, Boston
University School of Management ("BUSM"), from 1989 to 1993 and Trustee of all
of the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
JOHN W. KENDRICK, Trustee, DOB: July 1917
6363 Waterway Drive, Falls Church, VA 22044
Professor Emeritus and Adjunct Scholar, George Washington University;
Economic Consultant and Director, American Productivity and Quality Center;
American Enterprise Institute and Trustee of all of the Pioneer mutual funds,
except Pioneer Variable Contracts Trust.
MARGUERITE A. PIRET, Trustee, DOB: May 1948
One Boston Place, Suite 2635, Boston, MA 02108
President, Newbury, Piret & Company, Inc. (merchant banking firm) and
Trustee of all of the Pioneer mutual funds.
-8-
<PAGE>
DAVID D. TRIPPLE*, Trustee and Executive Vice President, DOB: February 1944
Executive Vice President and a Director of PGI; President, Chief
Investment Officer and a Director of PMC; Director of PFD, PCC, PIC, PIntl,
First Russia, Omega and Pioneer SBIC Corporation, Executive Vice President and
Trustee of all of the Pioneer mutual funds.
STEPHEN K. WEST, Trustee, DOB: September 1928
125 Broad Street, New York, NY 10004
Partner, Sullivan & Cromwell (law firm); Trustee, The Winthrop Focus
Funds (mutual funds) and Trustee of all of the Pioneer mutual funds.
JOHN WINTHROP, Trustee, DOB: June 1936
One North Adgers Wharf, Charleston, SC 29401
President, John Winthrop & Co., Inc. (private investment firm);
Director of NUI Corp.; Trustee of Alliance Capital Reserves, Alliance Government
Reserves and Alliance Tax Exempt Reserves and Trustee of all of the Pioneer
mutual funds, except Pioneer Variable Contracts Trust.
WILLIAM H. KEOUGH, Treasurer, DOB: April 1937
Senior Vice President, Chief Financial Officer and Treasurer of PGI;
Treasurer of PFD, PMC, PSC, PCC, PIC, PIntl, PMT, PGL, First Russia, Omega and
Pioneer SBIC Corporation; Treasurer and Director of PPC and Treasurer of all of
the Pioneer mutual funds.
JOSEPH P. BARRI, Secretary, DOB: August 1946
Secretary of PGI, PMC, PPC, PIC, PIntl, PMT, First Russia, Omega and
PCC; Clerk of PFD and PSC; Partner, Hale and Dorr (counsel to the Fund) and
Secretary of all of the Pioneer mutual funds.
ERIC W. RECKARD, Assistant Treasurer, DOB: June 1956
Manager of Fund Accounting of PMC since May 1994, Manager of Auditing,
Compliance and Business Analysis for PGI prior to May 1994 and Assistant
Treasurer of all of the Pioneer mutual funds.
ROBERT P. NAULT, Assistant Secretary, DOB: March 1964
General Counsel and Assistant Secretary of PGI since 1995; Assistant
Secretary of PMC, PIntl, PGL, First Russia, Omega and all of the Pioneer mutual
funds; Assistant Clerk of PFD and PSC: and formerly of Hale and Dorr (counsel to
the Fund) where he most recently served as junior partner.
WILLIAM C. FIELD, Vice President of PMC, September 1964
Research analyst since 1991 and has served as an assistant portfolio manager for
certain institutional accounts since January 1996.
The Fund's Amended and Restated Declaration of Trust (the "Declaration of
Trust") provides that the holders of two-thirds of its outstanding shares may
vote to remove a Trustee of the Fund at any meeting of shareholders. See
"Description of Shares" below. The business address of all officers is 60 State
Street, Boston, Massachusetts 02109.
All of the outstanding capital stock of PFD, PMC and PSC is owned, directly or
indirectly, by PGI, a publicly-owned Delaware corporation. PMC, the Fund's
investment adviser, serves as the investment
-9-
<PAGE>
adviser for the Pioneer mutual funds listed below and manages the investments of
certain institutional accounts.
The table below lists all the Pioneer mutual funds currently offered to the
public and the investment adviser and principal underwriter for each fund.
Investment Principal
Fund Name Adviser Underwriter
Pioneer International Growth Fund PMC PFD
Pioneer Europe Fund PMC PFD
Pioneer World Equity Fund PMC PFD
Pioneer Emerging Markets Fund PMC PFD
Pioneer India Fund PMC PFD
Pioneer Capital Growth Fund PMC PFD
Pioneer Mid-Cap Fund PMC PFD
Pioneer Growth Shares PMC PFD
Pioneer Small Company Fund PMC PFD
Pioneer Gold Shares PMC PFD
Pioneer Balanced Portfolio PMC PFD
Pioneer Equity-Income Fund PMC PFD
Pioneer Fund PMC PFD
Pioneer II PMC PFD
Pioneer Real Estate Shares PMC PFD
Pioneer Short-Term Income Trust PMC PFD
Pioneer America Income Trust PMC PFD
Pioneer Bond Fund PMC PFD
Pioneer Intermediate Tax-Free Fund PMC PFD
Pioneer Tax-Free Income Fund PMC PFD
Pioneer Cash Reserves Fund PMC PFD
Pioneer Interest Shares, Inc. PMC Note 1
Pioneer Variable Contracts Trust PMC Note 2
Note 1 This fund is a closed-end fund.
Note 2 This is a series of eight separate portfolios designed to provide
investment vehicles for the variable annuity and variable life insurance
contracts of various insurance companies or for certain qualified pension
plans.
PMC, the Fund's investment adviser, also manages the investments of
certain institutional private accounts. As of December 31, 1996, to the
knowledge of the Fund, no officer or Trustee of the Fund owned 5% or more of the
issued and outstanding shares of PGI, except Mr. Cogan who then owned
approximately 14% of such shares. As of December 31, 1996, the officers and
trustees held in the aggregate less than 1% of the outstanding shares of the
Fund. As of December 31, 1996 , the City of Lawrence, MA Trust Funds , 200
Common Street, Lawrence, MA 01840-1517 owned approximately 29.46%(29,380) of the
outstanding Class C shares of the Fund; Treava C. Yandle, 1588 S. Robb CT.,
Lakeland, CO, 80232-6025 owned approximately 20.74% (20,689) of the outstanding
Class C shares; MLPF&S for the Benefit of Customers, Mutual Fund Administration,
4800 Deer Lake Drive East 3rd FL, Jacksonville, FL, 32246-6484 owned
approximately
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<PAGE>
10.41% (10,387) of the outstanding Class C shares ;PFD, 60 State Street,
Boston, MA 02109 owned approximately 10.28% (10,259) of the outstanding
Class C shares of the Fund.
Compensation of Officers and Trustees
The Fund pays no salaries or compensation to any of its officers. The
Fund pays an annual trustees' fee to each Trustee who is not affiliated with
PGI, PMC, PFD or PSC consisting of two components: (a) a base fee of $500 and
(b) a variable fee, calculated on the basis of the average net assets of each
series, estimated to be approximately $282 for 1996. In addition, the Fund will
pay a per meeting fee of $120 to each Trustee who is not affiliated with PGI,
PMC, PFD or PSC. The Fund also will pay an annual committee participation fee to
Trustees who serve as members of committees established to act on behalf of one
or more of the of Pioneer mutual funds. Committee fees will be allocated to the
Fund on the basis of the Fund's average net assets. Each Trustee who is a member
of the Audit Committee for the Pioneer mutual funds will receive an annual fee
equal to 10% of the aggregate annual trustees' fee, except the Committee Chair
who will receive an annual trustees' fee equal to 20% of the aggregate annual
trustees' fee. The 1996 fees for Audit Committee members and the Audit Committee
Chair are expected to be approximately $6,000 and $12,000, respectively. Members
of the Pricing Committee for the Pioneer mutual funds, as well as any other
committee which renders material functional services to the Board of Trustees
for the Pioneer mutual funds, will receive an annual fee equal to 5% of the
annual trustees' fee, except the Committee Chair who will receive an annual
trustees' fee equal to 10% of the annual trustees' fee. The 1996 fees for
Pricing Committee members and the Pricing Committee Chair are expected to be
approximately $3,000 and $6,000, respectively. Any such fees paid to affiliates
or interested persons of PGI, PMC, PFD or PSC are reimbursed to the Fund under
its management contract. The Fund paid an annual fee of $1,000 plus $100 per
meeting attended to each Trustee who was not affiliated with PGI, PMC, PFD or
PSC. The Fund paid the Chairman of the Audit Committee an annual fee of $250 and
paid each member of the Audit Committee an annual fee of $200. All Trustees are
reimbursed for expenses incurred in attending Trustee and committee meetings.
The Fund also paid an annual trustees' fee of $500 plus expenses to each Trustee
affiliated with PMC, PSC or PFD. Any such fees and expenses paid to affiliates
or interested persons of PMC, PFD or PSC are reimbursed to the Fund under its
Management Contract.
-11-
<PAGE>
The following table provides information regarding the compensation
paid by the Fund and other Pioneer Funds to the Trustees for their services.
<TABLE>
<CAPTION>
PENSION OR TOTAL
RETIREMENT COMPENSATION
BENEFITS FROM THE FUND
AGGREGATE ACCRUED AND ALL OTHER
COMPENSATION AS PART OF PIONEER
TRUSTEEFROM THE FUND* THE FUND'S EXPENSES** MUTUAL FUNDS**
<S> <C> <C> <C>
John F. Cogan, Jr. $ 500 $0 $11,083
Richard H. Egdahl, M.D. $2,159 $0 $59,858
Margaret B.W. Graham $2,259 $0 $59,858
John W. Kendrick $2,259 $0 $59,858
Marguerite A. Piret $2,736 $0 $79,842
David D. Tripple $ 500 $0 $11,083
Stephen K. West $2,434 $0 $67,850
John Winthrop $2,432 $0 $66,442
Stephen G. Kasnet $ 0 $0 $ 500
-----------------------------------------------------
Totals $15,279 $0 $417,052
======= == ========
</TABLE>
* As of December 31, 1996 the Fund's fiscal year end.
** As of December 31, 1996 (calendar year end for all Pioneer mutual funds).
4. INVESTMENT ADVISER
As stated in the Prospectus, PMC, 60 State Street, Boston,
Massachusetts, serves as the Fund's investment adviser. PMC became the Fund's
investment adviser on December 1, 1993. Prior to that date, Mutual of Omaha Fund
Management Company ("FMC") served as the Fund's investment adviser. The
management contract with PMC is renewable annually by the vote of a majority of
the Board of Trustees of the Fund (including a majority of the Board of Trustees
who are not parties to the contract or interested persons of any such parties)
cast in person at a meeting called for the purpose of voting on such renewal.
This contract terminates if assigned and may be terminated without penalty by
either party by vote of its Board of Trustees or a majority of its outstanding
voting securities and the giving of 60 days' written notice.
Under the most recently approved management contract, PMC is entitled
to compensation for its management services and certain expenses PMC incurs on
behalf of the Fund 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
million. The fee is computed daily and paid monthly. Under the prior contract,
PMC was entitled to compensation for management services and certain expenses
PMC incurred on behalf of the Fund of 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. The fee was computed daily and paid monthly.
PMC had agreed that until December 1, 1995, its fee would not exceed
the fee that would have been payable under the previous management contact with
FMC, without giving effect to any expense
-12-
<PAGE>
limitation. Under the previous management contract with FMC, which was
terminated on December 1, 1993, the Fund paid FMC a management fee at an annual
rate equal to the following percentages of the Fund's average daily net assets:
Net Assets Annual Rate
For assets up to and including $100,000,000 0.50%
For assets over $100,000,000 but not over $200,000,0000 0.48%
For assets over $200,000,000 but not over $300,000,000 0.46%
For assets over $300,000,000 but not over $400,000,000 0.44%
For assets over $400,000,000 but not over $500,000,000 0.42%
For assets over $500,000,000 0.40%
PMC has agreed that if in any fiscal year the aggregate expenses of the
Fund exceed the expense limitation established by any state having jurisdiction
over the Fund, PMC will reduce its management fee to the extent required by
state law, although no such law currently applies.
The Fund paid $1,228,585 in management fees to FMC for the period from
January 1 to November 30, 1993. The Fund paid $121,129 in management fees to PMC
for the period from December 1 to December 31, 1993. The Fund paid $1,341,020
and $1,306,546 in management fees to PMC for the fiscal years ended December 31,
1994 and December 31, 1995, respectively. For the six months ended June 30,
1996, the Fund paid $693,788 in management fees to PMC.
Under the previous management contract with FMC, FMC agreed to
reimburse the Fund quarterly for all expenses (excluding interest, brokerage
commissions, taxes and extraordinary expenses) incurred in each year by the Fund
in excess of 1.50% of the first $30,000,000 of the Fund's average daily net
assets plus 1.00% of any net additional net assets, up to an amount not
exceeding its management fees for the period for which reimbursements, if any,
is made. No excess reimbursement was paid by FMC or PMC to the Fund for the
fiscal years ended December 31, 1993, 1994 or 1995 or for the six months ended
June 30, 1996.
5. UNDERWRITING AGREEMENT AND DISTRIBUTION PLANS
The Fund entered into an Underwriting Agreement with PFD on December 1,
1993. Prior to that date, FMC served as the Fund's principal underwriter. The
Underwriting Agreement will continue from year to year if annually approved by
the Trustees. The Underwriting Agreement provides that PFD will bear certain
distribution expenses not borne by the Fund.
PFD bears all expenses it incurs in providing services under the
Underwriting Agreement. Such expenses include compensation to its employees and
representatives and to securities dealers for distribution related services
performed for the Fund. PFD also pays certain expenses in connection with the
distribution of the Fund's shares, including the cost of preparing, printing and
distributing advertising or promotional materials, and the cost of printing and
distributing prospectuses and supplements to
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<PAGE>
prospective shareholders. The Fund bears the cost of registering its shares
under federal and state securities law. The Fund and PFD have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. Under the Underwriting Agreement, PFD
will use its best efforts in rendering services to the Fund.
The Fund has adopted a plan of distribution pursuant to Rule 12b-1
under the 1940 Act with respect to Class A, Class B and Class C shares (the
"Class A Plan," the "Class B Plan" and the "Class C Plan") (together, the
"Plans").
Class A Plan
Pursuant to the Class A Plan, the Fund may reimburse PFD for its
expenditures in financing any activity primarily intended to result in the sale
of the Class A shares. Certain categories of such expenditures have been
approved by the Board of Trustees and are set forth in the Prospectus under the
caption "Distribution Plans." The expenses of the Fund pursuant to the Class A
Plan are accrued on a fiscal year basis and may not exceed the annual rate of
0.25% of the Fund's average daily net assets attributable to Class A.
Class B Plan
The Class B Plan provides that the Fund shall pay PFD, as the Fund's
distributor for its Class B shares, a daily distribution fee equal on an annual
basis to 0.75% of the Fund's average daily net assets attributable to Class B
shares and will pay PFD a service fee equal to 0.25% of the Fund's average daily
net assets attributable to Class B shares (which PFD will in turn pay to
securities dealers which enter into a sales agreement with PFD at a rate of up
to 0.25% of the Fund's average daily net assets attributable to Class B shares
owned by investors for whom that securities dealer is the holder or dealer of
record). This service fee is intended to be in consideration of personal
services and/or account maintenance services rendered by the dealer with respect
to Class B shares. PFD will advance to dealers the first-year service fee at a
rate equal to 0.25% of the amount invested. As compensation therefor, PFD may
retain the service fee paid by the Fund with respect to such shares for the
first year after purchase. Dealers will become eligible for additional service
fees with respect to such shares commencing in the thirteenth month following
purchase. Dealers may from time to time be required to meet certain other
criteria in order to receive service fees. PFD or its affiliates are entitled to
retain all service fees payable under the Class B Plan for which there is no
dealer of record or for which qualification standards have not been met as
partial consideration for personal services and/or account maintenance services
performed by PFD or its affiliates for shareholder accounts.
The purpose of distribution payments to PFD under the Class B Plan is
to compensate PFD for its distribution services to the Fund. PFD pays
commissions to dealers as well as expenses of printing prospectuses and reports
used for sales purposes, expenses with respect to the preparation and printing
of sales literature and other distribution related expenses, including, without
limitation, the cost necessary to provide distribution-related services, or
personnel, travel office expenses and equipment. The Class B Plan also provides
that PFD will receive all CDSCs attributable to Class B shares. (See
"Distribution Plans" in the Prospectus.)
Class C Plan
The Class C Plan provides that the Fund will pay PFD, as the Fund's
distributor for its Class C shares, a distribution fee accrued daily and paid
quarterly, equal on an annual basis to 0.75% of the
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<PAGE>
Fund's average daily net assets attributable to Class C shares and will pay PFD
a service fee equal to 0.25% of the Fund's average daily net assets attributable
to Class C shares. PFD will in turn pay to securities dealers which enter into a
sales agreement with PFD a distribution fee and a service fee at rates of up to
0.75% and 0.25%, respectively, of the Fund's average daily net assets
attributable to Class C shares owned by investors for whom that securities
dealer is the holder or dealer of record. The service fee is intended to be in
consideration of personal services and/or account maintenance services rendered
by the dealer with respect to Class C shares. PFD will advance to dealers the
first-year service fee at a rate equal to 0.25% of the amount invested. As
compensation therefor, PFD may retain the service fee paid by the Fund with
respect to such shares for the first year after purchase. Commencing in the
thirteenth month following a purchase of Class C shares, dealers will become
eligible for additional service fees at a rate of up to 0.25% of the amount
invested and additional compensation at a rate of up to 0.75% of the net asset
value of such shares. Dealers may from time to time be required to meet certain
other criteria in order to receive service fees. PFD or its affiliates are
entitled to retain all service fees payable under the Class C Plan for which
there is no dealer of record or for which qualification standards have not been
met as partial consideration for personal services and/or account maintenance
services performed by PFD or its affiliates for shareholder accounts.
The purpose of distribution payments to PFD under the Class C Plan is
to compensate PFD for its distribution services with respect to the Class C
shares of the Fund. PFD pays commissions to dealers as well as expenses of
printing prospectuses and reports used for sales purposes, expenses with respect
to the preparation and printing of sales literature and other
distribution-related expenses, including, without limitation, the cost necessary
to provide distribution-related services, or personnel, travel office expenses
and equipment. The Class C Plan also provides that PFD will receive all CDSCs
attributable to Class C shares. (See "Distribution Plans" in the Prospectus.)
General
In accordance with the terms of the Plans, PFD provides to the Fund for
review by the Trustees a quarterly written report of the amounts expended under
the respective Plan and the purpose for which such expenditures were made. In
the Trustees' quarterly review of the Plans, they will consider the continued
appropriateness and the level of reimbursement or compensation the Plans
provide.
No interested person of the Fund, nor any Trustee of the Fund who is
not an interested person of the Trust, has any direct or indirect financial
interest in the operation of the Plans except to the extent that PFD and certain
of its employees may be deemed to have such an interest as a result of receiving
a portion of the amounts expended under the Plans by the Fund and except to the
extent certain officers may have an interest in PFD's ultimate parent, PGI.
The Plans were adopted by a majority vote of the Board of Trustees,
including all of the Trustees who are not, and were not at the time they voted,
interested persons of the Fund, as defined in the 1940 Act (none of whom had or
have any direct or indirect financial interest in the operation of the Plan),
cast in person at a meeting called for the purpose of voting on the Plans. In
approving the Plans, the Trustees identified and considered a number of
potential benefits which the Plans may provide. The Board of Trustees believes
that there is a reasonable likelihood that the Plans will benefit the Fund and
its current and future shareholders. Under their terms, the Plans remain in
effect from year to year provided such continuance is approved annually by vote
of the Trustees in the manner described above. The Plans may not be amended to
increase materially the annual percentage limitation of average net assets which
may be spent for the services described therein without approval of the
shareholders of the Fund affected thereby, and material amendments to the Plans
must also be approved by the Trustees in the manner
-15-
<PAGE>
described above. A Plan may be terminated at any time, without payment of any
penalty, by vote of the majority of the Trustees who are not interested persons
of the Fund and have no direct or indirect financial interest in the operations
of the Plan, or by a vote of a majority of the outstanding voting securities of
the respective Class of the Fund (as defined in the 1940 Act). The Plan will
automatically terminate in the event of its assignment (as defined in the 1940
Act). In the Trustees' quarterly review of the Plan, they will consider its
continued appropriateness and the level of compensation it provides.
During the fiscal year ended December 31, 1995, the Fund incurred total
distribution fees pursuant to the Fund's Class A Plan and Class B Plan of
$674,096 and $4,628, respectively. The Fund had not incurred any distribution
fees pursuant to the Class C Plan. Class C shares were first offered January 31,
1996. During the six months ended June 30, 1996, the Fund incurred total
distribution fees pursuant to the Fund's Class A Plan, Class B and Class C Plan
of $343,975, $16,160 and $1,531, respectively. The distribution fees were paid
by the Fund to PFD in reimbursement of expenses related to servicing of
shareholder accounts and to compensating dealers and sales personnel
Redemptions of each Class of shares may be subject to a CDSC. A CDSC of
1.00% may be imposed on certain net asset purchases of Class A shares that are
redeemed within one year of purchase. Class B shares that are redeemed within
six years of purchase are subject to a CDSC at declining rates beginning at 4.0%
based on the lower of cost or market value of shares being redeemed. Redemptions
of Class C shares within one year of purchase are subject to a CDSC of 1.00%.
See " How to Buy Fund Shares" in the Prospectus. During the fiscal year ended
December 31, 1995, CDSCs in the amount of $134 were paid to PFD. For the six
months ended June 30, 1996, CDSCs in the amount of $1,191 were paid to PFD. Such
CDSCs are paid to PFD in reimbursement of expenses related to servicing of
shareholder accounts and compensation paid to dealers and sales personnel.
6. SHAREHOLDER SERVICING/TRANSFER AGENT
The Fund has contracted with PSC, 60 State Street, Boston,
Massachusetts, to act as shareholder servicing agent and transfer agent for the
Fund. This contract terminates if assigned and may be terminated without penalty
by either party by vote of its Board of Trustees or a majority of its
outstanding voting securities and the giving of ninety days' written notice.
Under the terms of its contract with the Fund, PSC will service
shareholder accounts, and its duties will include: (i) processing sales,
redemptions and exchanges of shares of the Fund; (ii) distributing dividends and
capital gains associated with Fund portfolio accounts; and (iii) maintaining
account records and responding to routine shareholder inquiries.
PSC receives an annual fee of $22.00 per Class A, Class B and Class C
shareholder account from the Fund as compensation for the services described
above. This fee is set at an amount determined by vote of a majority of the
Trustees (including a majority of the Trustees who are not parties to the
contract with PSC or interested persons of any such parties) to be comparable to
fees for such services being paid by other investment companies.
7. CUSTODIAN
Brown Brothers Harriman & Co. (the "Custodian"), 40 Water Street,
Boston, Massachusetts 02109, is the custodian of the Fund's assets. The
Custodian's responsibilities include safekeeping and controlling the Fund's cash
and securities, handling the receipt and delivery of securities, and collecting
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<PAGE>
interest and dividends on the Fund's investments. The Custodian also provides
fund accounting, bookkeeping and pricing assistance to the Fund.
The Custodian does not determine the investment policies of the Fund or
decide which securities it will buy or sell. The Fund may invest in securities
issued by the Custodian, deposit cash in the Custodian and deal with the
Custodian as a principal in securities transactions. Portfolio securities may be
deposited into the Federal Reserve-Treasury Department Book Entry System or the
Depository Trust Company.
8. PRINCIPAL UNDERWRITER
PFD, 60 State Street, Boston, Massachusetts, serves as the principal
underwriter for the Fund in connection with the continuous offering of the
shares of the Fund. Under the Fund's previous underwriting agreement with FMC,
FMC received $2,376,000 in aggregate underwriting commissions for the period
from January 1 to November 30, 1993, of which $216,280 was retained. Under the
Fund's current Underwriting Agreement with PFD, PFD received $123,000,
$1,501,540 and $665,332, respectively, in aggregate underwriting commissions for
the period from December 1 through December 31, 1993 and for the fiscal years
ended December 31, 1994 and December 31, 1995 of which $15,107, $120,501 and
$73,704, respectively, was retained. For the six months ended June 30, 1996, PFD
received approximately $386,000 in aggregate underwriting commissions of which
approximately $26,000 was retained.
The Fund will not generally issue Fund shares for consideration other
than cash. At the Fund's sole discretion, however, it may issue Fund shares for
consideration other than cash in connection with a bona fide reorganization,
statutory merger, or other acquisition of portfolio securities (other than
municipal debt securities issued by state political subdivisions or their
agencies or instrumentalities) provided (i) the securities meet the investment
objective and policies of the Fund; (ii) the securities are acquired by the Fund
for investment and not for resale; (iii) the securities are not restricted as to
transfer either by law or liquidity of market; and (iv) the securities have a
value which is readily ascertainable (and not established only by evaluation
procedures) as evidenced by a listing on the American Stock Exchange or the New
York Stock Exchange or the NASDAQ National Market.
9. INDEPENDENT PUBLIC ACCOUNTANT
Arthur Andersen LLP, One International Place, Boston, Massachusetts
02110, is the Fund's independent public accountants, providing audit services,
tax return review, and assistance and consultation with respect to the
preparation of filings with the Commission.
10. PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of the Fund by PMC pursuant to authority contained in the Fund's
management contract. In selecting broker-dealers, PMC will consider various
relevant factors, including, but not limited to, the size and type of the
transaction; the nature and character of the markets for the security to be
purchased or sold; the execution
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efficiency, settlement capability, and financial condition of the broker-dealer;
the broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any broker-dealer spreads.
PMC may select broker-dealers which provide brokerage and/or research
services to the Fund and/or other investment companies managed by PMC or who
sell shares of the Pioneer Funds. In addition, if PMC determines in good faith
that the amount of commissions charged by a broker-dealer is reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, the Fund may pay commissions to such broker-dealer in an amount
greater than the amount another firm may charge. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement). PMC
maintains a listing of broker-dealers who provide such services on a regular
basis. However, because it is anticipated that many transactions on behalf of
the Fund and other investment companies managed by PMC are placed with
broker-dealers (including broker-dealers on the listing) without regard to the
furnishing of such services, it is not possible to estimate the proportion of
such transactions directed to such broker-dealers solely because such services
were provided.
The research received from broker-dealers may be useful to PMC in
rendering investment management services to the Fund as well as other investment
companies managed by PMC, although not all such research may be useful to the
Fund. Conversely, such information provided by brokers or dealers who have
executed transaction orders on behalf of such other PMC clients may be useful to
PMC in carrying out its obligations to the Fund. The receipt of such research
has not reduced PMC's normal independent research activities; however, it
enables PMC to avoid the additional expenses which might otherwise be incurred
if it were to attempt to develop comparable information through its own staff.
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.
The Board of Trustees periodically reviews PMC's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Fund.
In addition to the Fund, PMC also acts as investment adviser or
subadviser to the other Pioneer mutual funds and certain private accounts with
investment objectives similar to that of the Fund. Securities frequently meet
the investment objective of the Fund, such other funds and such private
accounts. In such cases, the decision to recommend a purchase to one fund or
account rather than another is based on a number of factors. The determining
factors in most cases are the amount of securities of the issuer then
outstanding, the value of those securities and the market for them. Other
factors considered in the investment recommendations include other investments
which each fund or account presently has in a particular industry and the
availability of investment funds in each fund or account.
It is possible that at times identical securities will be held by more
than one fund and/or account. However, positions in the same issue may vary and
the length of time that any fund or account may choose to hold its investment in
the same issue may likewise vary. To the extent the Fund, another Pioneer Fund,
Pioneer Interest Shares, Inc. or a private account managed by PMC may not be
able to
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acquire as large a position in such security as it desires, it may have to pay a
higher price for the security. Similarly, the Fund may not be able to obtain as
large an execution of an order to sell or as high a price for any particular
portfolio security if PMC decides to sell on behalf of another account the same
portfolio security at the same time. On the other hand, if the same securities
are bought or sold at the same time by more than one fund or account, the
resulting participation in volume transactions could produce better executions
for the Fund or the account. In the event more than one account purchases or
sells the same security on a given date, the purchases and sales will normally
be made as nearly as practicable on a pro rata basis in proportion to the
amounts desired to be purchased or sold by each.
The Fund paid brokerage or underwriting commissions of approximately
$66,000, $78,278 and $33,565, respectively, for the fiscal years ended December
31, 1993, 1994 and 1995. For the six months ended June 30, 1996, the Fund paid
approximately $28,000 in brokerage or underwriting commissions.
11. TAX STATUS AND DIVIDENDS
The Fund's policy is to pay dividends quarterly from net investment
income to shareholders of record in the latter part of March, June, September
and December and to distribute net realized capital gains, if any, once a year.
Additional distributions may be made for the purpose of avoiding liability for
federal income or excise tax.
It is the Fund's policy to meet the requirements of Subchapter M of the
Code for qualification as a regulated investment company. These requirements
relate to the sources of the Fund's income, the diversification of its assets,
and the timing of its distributions to shareholders. If the Fund meets all such
requirements and distributes to its shareholders, in accordance with the Code's
timing requirements, all investment company taxable income and net capital gain,
if any, which it receives, the Fund will be relieved of the necessity of paying
federal income tax.
Dividends from investment company taxable income, which includes net
investment income, net short-term capital gain in excess of net long-term
capital loss, and certain net foreign exchange gains are taxable as ordinary
income, whether received in cash or in additional shares. Dividends from net
long-term capital gain in excess of net short-term capital loss, if any, whether
received in cash or additional shares, are taxable to the Fund's shareholders as
long-term capital gains for federal income tax purposes without regard to the
length of time shares of the Fund have been held. The federal income tax status
of all distributions will be reported to shareholders annually.
Any dividend declared by the Fund in October, November or December as
of a record date in such a month and paid during the following January will be
treated for federal income tax purposes as received by shareholders on December
31 of the calendar year in which it is declared.
Foreign exchange gains and losses realized by the Fund in connection
with certain transactions involving foreign currency-denominated debt
securities, foreign currencies, or payables or receivables denominated in a
foreign currency are subject to Section 988 of the Code, which generally causes
such gains and losses to be treated as ordinary income and losses and may affect
the amount, timing and character of distributions to shareholders.
If the Fund acquires stock in certain non-U.S. corporations that
receive at least 75% of their annual gross income from passive sources (such as
interest, dividends, rents, royalties or capital gain) or
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hold at least 50% of their assets in investments producing such passive income
("passive foreign investment companies"), the Fund could be subject to federal
income tax and additional interest charges on "excess distributions" received
from such companies or gain from the sale of stock in such companies, even if
all income or gain actually received by the Fund is timely distributed to its
shareholders. The Fund would not be able to pass through to its shareholders any
credit or deduction for such a tax. Certain elections may, if available,
ameliorate these adverse tax consequences, but any such election would require
the Fund to recognize taxable income or gain without the concurrent receipt of
cash. The Fund may limit and/or manage its holdings in passive foreign
investment companies to minimize its tax liability or maximize its return from
these investments.
The Fund may invest in debt obligations that are in the lower rating
categories or are unrated. Investments in debt obligations that are at risk of
default present special tax issues for the Fund. Tax rules are not entirely
clear about issues such as when the Fund may cease to accrue interest, original
issue discount, or market discount, when and to what extent deductions may be
taken for bad debts or worthless securities, how payments received on
obligations in default should be allocated between principal and income, and
whether exchanges of debt obligations in a workout context are taxable. These
and other issues will be addressed by the Fund, in the event it invests in such
securities, in order to seek to ensure that it distributes sufficient income to
preserve its status as a regulated investment company and to avoid becoming
subject to federal income or excise tax.
If the Fund invests in certain PIKs, zero coupon securities, or, in
general, any other securities with original issue discount (or with market
discount if the Fund elects to include market discount in income currently), the
Fund must accrue income on such investments prior to the receipt of the
corresponding cash payments. However, the Fund must distribute, at least
annually, all or substantially all of its net income, including such accrued
income, to shareholders to qualify as a regulated investment company under the
Code and avoid federal income and excise taxes. Therefore, the Fund may have to
dispose of its portfolio securities under disadvantageous circumstances to
generate cash, or may have to leverage itself by borrowing the cash, to satisfy
distribution requirements.
At the time of an investor's purchase of Fund shares, a portion of the
purchase price is often attributable to realized or unrealized appreciation in
the Fund's portfolio or undistributed taxable income of the Fund. Consequently,
subsequent distributions from such appreciation or income may be taxable to such
investor even if the net asset value of the investor's shares is, as a result of
the distributions, reduced below the investor's cost for such shares and the
distributions in reality represent a return of a portion of the investment.
Redemptions and exchanges are taxable events. Any loss realized upon
the redemption or other disposition of shares with a tax holding period of six
months or less will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain with respect to such
shares.
In addition, if Class A shares redeemed or exchanged have been held for
less than 91 days, (1) in the case of a reinvestment at net asset value pursuant
to the reinvestment privilege, the sales charge paid on such shares is not
included in their tax basis under the Code, and (2) in the case of an exchange,
all or a portion of the sales charge paid on such shares is not included in
their tax basis under the Code, to the extent a sales charge that would
otherwise apply to the shares received is reduced pursuant to the exchange
privilege. In either case, the portion of the sales charge not included in the
tax basis of the shares redeemed or surrendered in an exchange is included in
the tax basis of the shares acquired in the reinvestment or exchange. Losses on
certain redemptions may be disallowed under "wash sale" rules in
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the event of other investments in the Fund (including pursuant to automatic
dividend reinvestments) within a period of 61 days beginning 30 days before and
ending 30 days after a redemption or other sale of shares.
For federal income tax purposes, the Fund is permitted to carry forward
a net capital loss in any year to offset capital gains, if any, during the eight
years following the year of the loss. To the extent subsequent capital gains are
offset by such losses, they would not result in federal income tax liability to
the Fund and are not expected to be distributed as such to shareholders. For the
taxable year ended December 31, 1995, the Fund had no capital loss
carryforwards.
Certain options written by the Fund on portfolio securities may cause
the Fund to recognize gains or losses from marking-to-market at the end of its
taxable year even though such options may not have lapsed, been closed out, or
exercised and may affect the characterization as long-term or short-term of some
capital gains and losses realized by the Fund. Gains or losses from the lapse or
closing out of options written by the Fund may be treated as short-term capital
gains or losses under Section 1234 of the Code or, in the case of options
subject to Section 1256, all gains or losses may be treated as 60% long-term and
40% short-term capital gains or losses. Losses on certain options and/or
offsetting positions (portfolio securities or other positions with respect to
which the Fund's risk of loss is substantially diminished by one or more
options) may also be deferred under the tax straddle rules of the Code, which
may also affect the characterization of capital gains or losses from straddle
positions and certain successor positions as long-term or short-term. The effect
of these rules may be mitigated to the extent the Fund limits its options
writing to "qualified covered call options" on portfolio stock. The tax rules
applicable to options and straddles may affect the amount, timing and character
of the Fund's income and loss and hence of its distributions to shareholders.
For purposes of the 70% dividends-received deduction available to
corporations, dividends received by the Fund, if any, from U.S. domestic
corporations in respect of any share of stock with a tax holding period of at
least 46 days (91 days in the case of certain preferred stock) in an unleveraged
position and distributed and designated by the Fund may be treated as qualifying
dividends. Any corporate shareholder should consult its tax adviser regarding
the possibility that its tax basis in its shares may be reduced, for federal
income tax purposes, by reason of "extraordinary dividends" received with
respect to the shares. Corporate shareholders must meet the minimum holding
period requirement stated above (46 or 91 days), taking into account any
holding-period reductions from certain hedging or other transactions that
diminish risk of loss, with respect to their Fund shares in order to qualify for
the deduction and, if they borrow to acquire Fund shares, may be denied a
portion of the dividends-received deduction. The entire qualifying dividend,
including the otherwise deductible amount, will be included in determining the
excess (if any) of a corporation's adjusted current earnings over its
alternative minimum taxable income, which may increase a corporation's
alternative minimum tax liability.
The Fund may be subject to withholding and other taxes imposed by
foreign countries with respect to its investments in those countries. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes in some cases. The Fund will not satisfy the requirements for passing
through to shareholders their pro rata shares of foreign taxes paid by the Fund,
with the result that its shareholders will not include such taxes in their gross
incomes and will not be entitled to a tax deduction or credit for such taxes on
their own tax returns.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions, and certain prohibited transactions is accorded to
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accounts maintained as qualified retirement plans. Shareholders should consult
their tax advisers for more information.
Federal law requires that the Fund withhold (as "backup withholding")
31% of reportable payments, including dividends, capital gain dividends, and the
proceeds of redemptions (including exchanges) and repurchases, to shareholders
who have not complied with IRS regulations. In order to avoid this withholding
requirement, shareholders must certify on their Account Applications, or on
separate W-9 Forms, that the Social Security Number or other Taxpayer
Identification Number they provide is their correct number and that they are not
currently subject to backup withholding, or that they are exempt from backup
withholding. The Fund may nevertheless be required to withhold if it receives
notice from the IRS or a broker that the number provided is incorrect or backup
withholding is applicable as a result of previous underreporting of interest or
dividend income.
Provided that the Fund qualifies as a regulated investment company
under the Code, it will not be required to pay any Massachusetts income,
corporate excise or franchise taxes, and it should also not be required to pay
Delaware corporation income tax.
The description above relates only to U.S. federal income tax
consequences for shareholders who are U.S. persons, i.e., U.S. citizens or
residents and U.S. domestic corporations, partnerships, trusts or estates, and
who are subject to U.S. federal income tax. The description does not address the
special tax rules applicable to certain classes of investors, such as banks,
insurance companies, or tax-exempt entities. Investors other than U.S. persons
may be subject to different U.S. tax treatment, including a possible 30% U.S.
nonresident alien withholding tax (or nonresident alien withholding tax at a
lower treaty rate) on amounts treated as ordinary dividends from the Fund, and
unless an effective IRS Form W-8 or authorized substitute is on file, to 31%
backup withholding on certain other payments from the Fund. Shareholders should
consult their own tax advisors on these matters and on state, local and other
applicable tax laws.
12. SHARES OF THE FUND
General
The Fund is a diversified, open-end investment company established as a
Nebraska corporation in 1968 and reorganized as a Delaware business trust in
June 1994. Prior to February 1, 1997, the Fund was known as Pioneer Income Fund.
Prior to June 30, 1994, the Fund was known as Pioneer Income Fund, Inc. and
prior to December 1, 1993, the Fund was known as Mutual of Omaha Income Fund,
Inc. Reference to the Fund includes both the Delaware business trust and the
Nebraska corporation. The Board of Trustees of the Fund, as of the date of this
Statement of Additional Information, has authorized the issuance of three
classes of shares, Class A, Class B and Class C.
Unless otherwise required by the 1940 Act or the Agreement and
Declaration of Trust (the "Declaration of Trust"), the Fund has no intention of
holding annual meetings of shareholders. Shareholders may remove a Trustee by
the affirmative vote of at least two-thirds of the Fund's outstanding shares and
the Trustees shall promptly call a meeting for such purpose when requested to do
so in writing by the record holders of not less than 10% of the outstanding
shares of the Trust. Shareholders may, under certain circumstances communicate
with other shareholders in connection with requesting a special meeting of
shareholders. However, at any time that less than a majority of the Trustees
holding office were elected by the shareholders, the Trustees will call a
special meeting of shareholders for the purpose of electing Trustees.
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The Declaration of Trust permits the issuance of series of shares in
addition to the Fund which would represent interests in separate portfolios of
investments. No series would be entitled to share in the assets of any other
series or be liable for the expenses or liabilities of any other series.
In addition to the requirements under Delaware law, the Declaration of
Trust provides that shareholders of the Fund may bring a derivative action on
behalf of the Fund only if the following conditions are met: (a) shareholders
eligible to bring such derivative action under Delaware law who hold at least
10% of the outstanding shares of the Fund, or 10% of the outstanding shares of
the series or class to which such action relates, shall join in the request for
the Trustees to commence such action; and (b) the Trustees must be afforded a
reasonable amount of time to consider such shareholder request and to
investigate the basis of such claim. The Trustees shall be entitled to retain
counsel or other advisers in considering the merits of the request and shall
require an undertaking by the shareholders making such request to reimburse the
Fund for the expense of any such advisers in the event that the Trustees
determine not to bring such action.
Shareholder and Trustee Liability
The Fund is organized as a Delaware business trust, and, under Delaware
law, the shareholders of such a trust are not generally subject to liability for
the debts or obligations of the Trust. Similarly, Delaware law provides that the
Fund will not be liable for the debts or obligations of any other series of the
Trust. However, no similar statutory or other authority limiting business trust
shareholder liability exists in many other states. As a result, to the extent
that a Delaware business trust or a shareholder is subject to the jurisdiction
of courts in such other states, the courts may not apply Delaware law and may
thereby subject the Delaware business trust shareholders to liability. To guard
against this risk, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund. Notice of such
disclaimer will normally be given in each agreement, obligation or instrument
entered into or executed by the Fund or a Trustee. The Declaration of Trust
provides for indemnification by the Fund for any loss suffered by a shareholder
as a result of an obligation of the Fund. The Declaration of Trust also provides
that the Fund shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Fund and satisfy any judgment
thereon. The Trustees believe that, in view of the above, the risk of personal
liability of shareholders is remote.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
or her office.
13. DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of the Fund is determined
as of the close of regular trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., Eastern Time) on each day the Exchange is open
for business. As of the date of this Statement of Additional Information, the
Exchange is open for trading every weekday except for the following holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share of
each class of the Fund is also determined on any other day in which the level of
trading in its portfolio securities is sufficiently high that the current net
asset value per share might be materially affected by changes in the value of
its portfolio securities. On any
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day in which no purchase orders for the shares of the Fund become effective and
no shares are tendered for redemption, the Fund's net asset value per share may
not be determined.
The net asset value per share of each class of the Fund is computed by
taking the value of all of the Fund's assets attributable to that class, less
the Fund's liabilities attributable to that class, and dividing it by the number
of outstanding shares of that class. For purposes of determining net asset
value, expenses of classes of the Fund are accrued daily and taken into account.
In determining the value of the assets of the Fund for the purpose of
obtaining the net asset value, securities listed or traded on a national or
foreign securities exchange shall be valued at their last sales price on the day
of valuation or, if there are no sales on that day, at the latest bid quotation.
Equity securities traded over-the-counter for which the last sales price on the
day of valuation is available shall be valued at that price. All other
over-the-counter equity securities for which reliable quotations are readily
available shall be valued at their latest bid quotation. Convertible securities
traded over-the-counter for which reliable quotations are readily available
shall be valued on the basis of valuations furnished by pricing services which
utilize electronic data processing techniques to determine the valuations for
normal institutional-size trading units of such securities. Securities not
valued by the pricing service for which reliable quotations are readily
available, shall be valued at market values furnished by recognized dealers in
such securities. Short-term obligations with remaining maturities of 60 days or
less shall be valued at amortized cost. Securities and other assets for which
reliable quotations are not readily available, shall be valued at their fair
value as determined in good faith under consistently applied guidelines
established by and under the general supervision of the Board of Trustees of the
Fund, although the actual calculations may be made by persons acting pursuant to
the direction of the Board.
The Fund's maximum offering price per Class A share is determined by
adding the maximum sales charge to the net asset value per Class A share. Class
B and Class C shares are offered at net asset value without the imposition of an
initial sales charge.
14. SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan ("SWP") is designed to provide a
convenient method of receiving fixed payments at regular intervals from shares
of the Fund deposited by the applicant under this SWP. The applicant must
deposit or purchase for deposit with PSC shares of the Fund having a total value
of not less than $10,000. Periodic checks of $50 or more will be sent to the
applicant, or any person designated by him, monthly or quarterly. Withdrawals
from Class B and Class C share accounts are limited to 10% of the value at the
time the SWP is implemented. See "How to Sell Fund Shares" in the Prospectus.
Any income dividends or capital gains distributions on shares under the
SWP will be credited to the SWP account on the payment date in full and
fractional shares at the net asset value per share in effect on the record date.
SWP payments are made from the proceeds of the redemption of shares
deposited under the SWP in a SWP account. Redemptions are taxable transactions
to shareholders. To the extent that such redemptions for periodic withdrawals
exceed dividend income reinvested in the SWP account, such redemptions will
reduce and may ultimately exhaust the number of shares deposited in the SWP
account.
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In addition, the amounts received by a shareholder cannot be considered as an
actual yield or income on his or her investment because part of such payments
may be a return of his or her investment.
The SWP may be terminated at any time (1) by written notice to PSC or
from PSC to the shareholder; (2) upon receipt by PSC of appropriate evidence of
the shareholder's death; or (3) when all shares under the SWP have been
redeemed.
15. LETTER OF INTENTION
Purchases in the Fund of $100,000 or over of Class A Shares (excluding
any reinvestments of dividends and capital gains distributions) made within a
13-month period pursuant to a Letter of Intention provided to PFD will qualify
for a reduced sales charge. Such reduced sales charge will be the charge that
would be applicable to the purchase of all Class A Shares purchased during such
13-month period pursuant to a Letter of Intention had such shares been purchased
all at once. See "How to Buy Fund Shares" in the Prospectus. For example, a
person who signs a Letter of Intention providing for a total investment in Fund
Class A Shares of $100,000 over a 13-month period would be charged at the 3.50%
sales charge rate with respect to all purchases during that period. Should the
amount actually purchased during the 13-month period be more or less than that
indicated in the Letter, an adjustment in the sales charge will be made. A
purchase not made pursuant to a Letter of Intention may be included thereafter
if the Letter is filed within 90 days of such purchase. Any shareholder may also
obtain the reduced sales charge by including the value (at current offering
price) of all his Class A Shares in the Fund and other Pioneer funds held of
record as of the date of his or her Letter of Intention as a credit toward
determining the applicable scale of sales charge for the Class A Shares to be
purchased under the Letter of Intention.
The Letter of Intention authorizes PSC to escrow Class A Shares having
a purchase price equal to 5% of the stated investment specified in the Letter of
Intention. A Letter of Intention is not a binding obligation upon the investor
to purchase, or the Fund to sell, the full amount indicated and the investor
should carefully read the provisions of the Letter of Intention set forth in the
Account Application before signing.
16. INVESTMENT RESULTS
Other Quotations, Comparisons, and General Information
From time to time, in advertisements, in sales literature, or in
reports to shareholders, the past performance of the Fund may be illustrated
and/or compared with that of other mutual funds with similar investment
objectives, and to other relevant indices. For example, the Fund may compare its
yield to the Shearson Lehman Hutton Government Index, U.S Government bond rates,
or other comparable indices or investment vehicles. In addition, the performance
of the classes of the Fund may be compared to alternative investment or savings
vehicles and/or to indices or indicators of economic activity, e.g., inflation
or interest rates. Data for economic indicators may come from Bloomberg
Financial Systems, Towers Data Systems, the financial press and other sources.
Performance rankings and listings reported in newspapers or national business
and financial publications, such as Barron's, Business Week, Consumers Digest,
Consumer Reports, Financial World, Forbes, Fortune, Investors Business Daily,
Kiplinger's Personal Finance Magazine, Money, New York Times, Smart Money, USA
Today, U.S. News and World Report, The Wall Street Journal and Worth may also be
cited (if the Fund is listed in
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any such publication) or used for comparison, as well as performance listings
and rankings from various other sources including CDA/Weisenberger, Donoghue's
Mutual Fund Almanac, Ibbotson Associates Investment Company Data, Inc.,
Johnson's Charts, Kanon Bloch Carre and Co., Lipper Analytical Services, Inc.,
Micropal, Inc., Morningstar, Inc., Schabacker Investment Management and Towers
Data Systems, Inc.
The Fund's yield quotations and average annual total return quotations
as they may appear in the Prospectus, this Statement of Additional Information
or in advertising are calculated by standard methods prescribed by the
Securities and Exchange Commission.
Standardized Yield Quotations
The Fund's yield is computed by dividing the Fund's net investment
income per share during a base period of 30 days, or one month, by the maximum
offering price per share of the Fund on the last day of such base period in
accordance with the following formula:
a-b
YIELD = 2[( ----- +1)6-1]
cd
Where: a = interest earned during the period
b = net expenses accrued for the period
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends
d = the maximum offering price per share on the
last day of the period
For purposes of calculating interest earned on debt obligations as provided in
item "a" above:
(i) The yield to maturity of each obligation held by the Fund is
computed based on the market value of the obligation (including actual accrued
interest, if any) at the close of business each day during the 30-day base
period, or, with respect to obligations purchased during the month, the purchase
price (plus actual accrued interest, if any) on settlement date, and with
respect to obligations sold during the month the sale price (plus actual accrued
interest, if any) between the trade and settlement dates.
(ii) The yield to maturity of each obligation is then divided by 360
and the resulting quotient is multiplied by the market value of the obligation
(including actual accrued interest, if any) to determine the interest income on
the obligation for each day. The yield to maturity calculation has been made on
each obligation during the 30 day base period.
(iii) Interest earned on all debt obligations during the 30-day or one
month period is then totaled.
(iv) The maturity of an obligation with a call provision(s) is the next
call date on which the obligation reasonably may be expected to be called or, if
none, the maturity date.
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With respect to the treatment of discount and premium on mortgage or
other receivables-backed obligations which are expected to be subject to monthly
payments of principal and interest ("pay downs"), the Fund accounts for gain or
loss attributable to actual monthly pay downs as an increase or decrease to
interest income during the period. In addition, the Fund may elect (i) to
amortize the discount or premium remaining on a security, based on the cost of
the security, to the weighted average maturity date, if such information is
available, or to the remaining term of the security, if the weighted average
maturity date is not available, or (ii) not to amortize the discount or premium
remaining on a security.
The Fund's 30-day SEC yield for the period ended December 31, 1995 was
5.74% for Class A shares and 5.14% for Class B shares. Class C shares were first
offered January 31, 1996.
Standardized Average Annual Total Return Quotations
One of the primary methods used to measure the performance of a class
of the Fund is "total return." "Total return" will normally represent the
percentage change in value of an account, or of a hypothetical investment in a
class of the Fund, over any period up to the lifetime of that class of the Fund.
Total return calculations will usually assume the reinvestment of all dividends
and capital gains distributions and will be expressed as a percentage increase
or decrease from an initial value, for the entire period or for one or more
specified periods within the entire period. Total return percentages for periods
of less than one year will usually be annualized; total return percentages for
periods longer than one year will usually be accompanied by total return
percentages for each year within the period and/or by the average annual
compounded total return for the period. The income and capital components of a
given return may be separated and portrayed in a variety of ways in order to
illustrate their relative significance. Performance may also be portrayed in
terms of cash or investment values, without percentages. Past performance cannot
guarantee any particular future result.
Average annual total return quotations for each Class of Fund shares
are computed by finding the average annual compounded rates of return that would
cause a hypothetical investment in that class made on the first day of a
designated period (assuming all dividends and distributions are reinvested) to
equal the ending redeemable value of such hypothetical investment on the last
day of the designated period in accordance with the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1000, less the
maximum sales load for Class A shares or the
deduction of the CDSC on Class B or Class C shares at
the end of the period.
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1000
initial payment made at the beginning of the
designated period (or fractional portion thereof)
For purposes of the above computation, it is assumed that all dividends and
distributions made by the Fund are reinvested at net asset value during the
designated period. The average annual total return quotation is determined to
the nearest 1/100 of 1%.
-27-
<PAGE>
In determining the average annual total return (calculated as provided
above), recurring fees, if any, that are charged to all shareholder accounts of
a particular class are taken into consideration. For any account fees that vary
with the size of the account, the account fee used for purposes of the above
computation is assumed to be the fee that would be charged to the Fund's mean
account size.
The total returns for Class A, Class B and Class C shares of the Fund
as of December 31, 1996 are as follows:
Average Annual Total Return (%)
One Year Five Years Ten Years Commencement*
Class A Shares 4.90 7.76 9.52 8.60
Class B Shares 5.02 N/A N/A 11.46
Class C Shares N/A N/A N/A 7.12
*Commencement was 5/17/68 for Class A shares; 4/28/95 for Class B shares; and
1/31/96 for Class C Shares.
Automated Information Line (FactFone)
FactFoneSM, Pioneer's 24-hour automated information line, allows
shareholders to dial toll-free 1-800-225-4321 and hear recorded fund
information, including:
o net asset value prices for all Pioneer mutual funds;
o annualized 30-day yields on Pioneer's fixed income funds;
o annualized 7-day yields and 7-day effective (compound) yields
for Pioneer money market funds; and
o dividends and capital gains distributions on all Pioneer
mutual funds.
Yields are calculated in accordance with SEC mandated standard
formulas.
In addition, by using a personal identification number ("PIN")
shareholders may enter purchases, exchanges and redemptions, access their
account balance and last three transactions and may order a duplicate statement.
See "FactFoneSM" in the Prospectus for more information.
All performance numbers communicated through FactFoneSM represent past
performance, and figures for all bond funds include the maximum applicable sales
charge. A shareholder's actual yield and total return will vary with changing
market conditions. The value of Class A, Class B and Class C shares will also
vary, and such shares may be worth more or less at redemption than their
original cost.
-28-
<PAGE>
17. GENERAL INFORMATION
The Fund is registered with the SEC as a diversified, open-end
management investment company. Such registration does not involve supervision by
the SEC of the management or policies of the Fund. For further information with
respect to the Fund and the securities offered hereby, reference is made to the
registration statement filed with the SEC, including all exhibits thereto.
Annual and semiannual reports of the Fund are mailed to each shareholder.
18. FINANCIAL STATEMENTS
The Fund's Annual Report dated December 31, 1995 and Semi-Annual Report
dated June 30, 1996, are incorporated by reference into this Statement of
Additional Information in reliance upon the report of Arthur Andersen LLP,
independent public accountants, as experts. A copy of the Fund's Annual Report
and Semi-Annual Report may be obtained without charge by calling Shareholder
Services at 1-800-225-6292 or by written request to the Fund at 60 State Street,
Boston, Massachusetts 02109.
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<PAGE>
APPENDIX A
MOODY'S CORPORATE BOND RATINGS
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be greater amplitude or there may be other elements present which make the
long term risks appear somewhat larger than in Aaa securities.
A
Bonds which are rated A posses many favorable investment attributes are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa
Bonds which are rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
other good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
-30-
<PAGE>
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicated that the security ranks in the higher end of its generic
rating category; the modifier 2 indicated a mid-range ranking and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
STANDARD AND POOR'S RATINGS GROUP CORPORATE BOND RATINGS
AAA
Debt rated AAA has the highest rating assigned by Standard and Poor's. Capacity
to pay interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay principal and
differs from the higher rated issues only in small degree.
A
Debt rated A has a strong capacity to pay interest and repay principal although
it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB
Debt rated BBB is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions of changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
-31-
<PAGE>
BB
Debt rated BB has less near-term vulnerability to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. The BB rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied BBB-rating.
B
Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC
Debt rated CCC has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC
The rating CC is typically applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating.
C
The C rating is typically applied to debt subordinated to senior debt which is
assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI
The rating CI is reserved for income bonds on which no interest is being paid.
D
Debt rated D is in payment default. The D rating category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-)
The rating from AAA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major categories.
-32-
<PAGE>
PIONEER INCOME FUND - SAI TEMPLATE - A SHARES
PERFORMANCE UPDATE 12/31/96 - CLASS A SHARES
INVESTMENT RETURNS
Average Annual Total Returns (As of December 31, 1996)
Period Public Offering Price
1 Year 4.90%
5 Years 7.76
10 Years 9.52
Life (inception 8.60
5/17/68 )
INVESTMENT ILLUSTRATION TO 12/31/96
<TABLE>
<CAPTION>
Date Initial Offering Price Sales Charge Shares Purchased Net Asset Initial Net
Investment Included Value per Share Asset Value
<S> <C> <C> <C> <C> <C> <C>
5/17/68 $10,000.00 $10.4700 4.50% 955.110 $10.0000 $9,550
Date From Investment From Cap Gains From Dividends Total Value
Reinvested Reinvested
<S> <C> <C> <C> <C>
12/31/68 $11,041 $0 $200 $11,241
12/31/69 $8,853 $259 $592 $9,704
12/31/70 $9,541 $279 $1,243 $11,063
12/31/71 $10,325 $693 $1,881 $12,899
12/31/72 $9,923 $1,369 $2,319 $13,611
12/31/73 $8,147 $1,124 $2,573 $11,844
12/31/74 $6,523 $900 $2,775 $10,198
12/31/75 $7,746 $1,068 $4,128 $12,942
12/31/76 $9,246 $1,275 $5,860 $16,381
12/31/77 $8,740 $1,205 $6,528 $16,473
12/31/78 $8,319 $11,148 $7,349 $16,816
12/31/79 $8,185 $1,129 $8,678 $17,992
12/31/80 $7,946 $1,096 $10,337 $19,379
12/31/81 $7,449 $1,028 $12,005 $20,482
12/31/82 $8,109 $1,119 $15,776 $25,004
12/31/83 $7,861 $1,084 $17,902 $26,847
12/31/84 $7,908 $1,091 $21,171 $30,170
12/31/85 $8,759 $1,996 $26,609 $37,364
12/31/86 $8,539 $3,119 $29,177 $40,835
12/31/87 $8,280 $3,644 $31,695 $43,619
12/31/88 $8,519 $3,813 $36,650 $48,982
12/31/89 $9,102 $4,074 $43,592 $56,768
12/31/90 $8,729 $3,907 $46,167 $58,803
12/31/91 $9,685 $4,334 $55,735 $69,754
12/31/92 $9,675 $5,010 $60,360 $75,045
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<PAGE>
12/31/93 $9,752 $7,376 $65,599 $82,727
12/31/94 $8,701 $6,581 $63,882 $79,164
12/31/95 $9,837 $8,436 $78,307 $96,580
12/31/96 $10,173 $8,734 $87,228 $106,135
PIONEER INCOME FUND - SAI TEMPLATE - B SHARES
PERFORMANCE UPDATE 12/31/96 - CLASS B SHARES
INVESTMENT RETURNS
Cumulative Total Return (As of December 31, 1996)
Period Public Offering Price
1 Year 5.02%
Life (inception 11.46
4/28/95)
INVESTMENT ILLUSTRATION TO 12/31/96
Date Initial Offering Price Shares Purchased Net Asset Value Initial Net CDSC
Investment per Share Asset Value
<S> <C> <C> <C> <C> <C> <C>
4/28/95 $10,000.00 $9.5500 1047.120 $9.5500 $10,000 4.00%
Date From Investment From Cap Gains From Dividends Contingent Total Value
Reinvested Reinvested Deferred Sales
Charge
<S> <C> <C> <C> <C>
12/31/95 $10,753 $118 $503
12/31/96 $11,089 $123 $1,188 $400 $12,000
PIONEER INCOME FUND - SAI TEMPLATE - C SHARES
PERFORMANCE UPDATE 12/31/96 - CLASS C SHARES
INVESTMENT RETURNS
Cumulative Total Return (As of December 31, 1996)
Period Public Offering Price
Life (inception 7.12%
1/31/96)
INVESTMENT ILLUSTRATION TO 12/31/96
Date Initial Offering Price Shares Purchased Net Asset Value Initial Net CDSC
Investment per Share Asset Value
<S> <C> <C> <C> <C> <C> <C>
1/31/96 $10,000.00 $10.3900 962.464 $10.3900 $10,000 1.00%
Date From Investment From Cap Gains From Dividends Contingent Total Value
Reinvested Reinvested Deferred Sales
Charge
<S> <C> <C> <C> <C>
12/31/96 $10,222 $1 $589 $100 $10,712
</TABLE>
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<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
The following securities indices are well-known, unmanaged measures of market
performance. Advertisements and sales literature for the Fund may refer to these
indices or may present comparisons between the performance of the Fund and one
or more of the indices. Other indices may be used, if appropriate. The indices
are not available for direct investment. The data presented is not meant to be
indicative of the performance of the Fund, reflects past performance and does
not guarantee future results.
S&P 500
This index is a readily available, carefully constructed, market value weighted
benchmark of common stock performance. Currently, the S&P Composite Index
includes 500 of the largest stocks (in terms of stock market value) in the
United States; prior to March 1957 it consisted of 90 of the largest stocks.
DOW JONES INDUSTRIAL AVERAGE
This is a total return index based on the performance of 30 blue chip stocks.
U.S. SMALL STOCK INDEX
This index is a market value weighted index of the ninth and tenth deciles of
the New York Stock Exchange (NYSE), plus stocks listed on the American Stock
Exchange (AMEX) and over-the-counter (OTC) with the same or less capitalization
as the upper bound of the NYSE ninth decile.
U.S. INFLATION
The Consumer Price Index for All Urban Consumers (CPI-U), not seasonally
adjusted, is used to measure inflation, which is the rate of change of consumer
goods prices. Unfortunately, the inflation rate as derived by the CPI is not
measured over the same period as the other asset returns. All of the security
returns are measured from one month-end to the next month-end. CPI commodity
prices are collected during the month. Thus, measured inflation rates lag the
other series by about one-half month. Prior to January 1978, the CPI (as
compared with CPI-U) was used. Both inflation measures are constructed by the
U.S. Department of Labor, Bureau of Labor Statistics, Washington, DC.
S&P/BARRA INDEXES
The S&P/BARRA Growth and Value Indexes are constructed by dividing the stocks in
the S&P 500 Index according to price-to-book ratios. The Growth Index contains
stocks with higher price-to-book ratios, and the Value Index contains stocks
with lower price-to-book ratios. Both indexes are market capitalization
weighted.
LONG-TERM U.S. GOVERNMENT BONDS
The total returns on long-term government bonds from 1977 to 1991 are
constructed with data from The Wall Street Journal. Over 1926-1976, data are
obtained from the Government bond file at the Center for Research in Security
Prices (CRSP), Graduate School of Business, University of Chicago. Each year, a
one-bond portfolio with a term of approximately 20 years and a reasonably
current coupon was used, and whose returns did not reflect potential tax
benefits, impaired negotiability, or special redemption or call privileges.
Where callable bonds had to be used, the term of the bond was assumed to be a
simple average of the maturity and first call dates
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<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
minus the current date. The bond was "held" for the calendar year and returns
were computed. Total returns for 1977-1991 are calculated as the change in the
flat price or and-interest price.
INTERMEDIATE-TERM U.S. GOVERNMENT BONDS
Total returns of the intermediate-term government bonds for 1977-1991 are
calculated from The Wall Street Journal prices, using the change in flat price.
Returns from 1934-1986 are obtained from the CRSP Government Bond File.
Each year, one-bond portfolios are formed, the bond chosen is the shortest
noncallable bond with a maturity not less than 5 years, and this bond is "held"
for the calendar year. Monthly returns are computed. (Bonds with impaired
negotiability or special redemption privileges are omitted, as are partially or
fully tax-exempt bonds starting with 1943.) From 1934-1942, almost all bonds
with maturities near 5 years were partially or full tax-exempt and were selected
using the rules described above. Personal tax rates were generally low in that
period, so that yields on tax-exempt bonds were similar to yields on taxable
bonds. From 1926-1933, there are few bonds suitable for construction of a series
with a 5-year maturity. For this period, five year bond yield estimates are
used.
MSCI
Morgan Stanley Capital International Indices, developed by the Capital
International S.A., are based on share prices of some 1470 companies listed on
the stock exchanges around the world.
Countries in the MSCI EAFE Portfolio are:
Australia; Austria; Belgium; Denmark; Finland; France; Germany; Hong Kong;
Italy; Japan; Netherlands; N. Zealand; Norway; Singapore/Malaysia; Spain;
Sweden; Switzerland; United Kingdom.
6 MONTH CDs
Data sources include the Federal Reserve Bulletin and The Wall Street Journal.
LONG-TERM U.S. CORPORATE BONDS
For 1969-1991, corporate bond total returns are represented by the Salomon
Brothers Long-Term High-Grade Corporate Bond Index. Since most large corporate
bond transactions take place over the counter, a major dealer is the natural
source of these data. The index includes nearly all Aaa- and Aa-rated bonds. If
a bond is downgraded during a particular month, its return for the month is
included in the index before removing the bond from future portfolios.
Over 1926-1968 the total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946-1968, Ibbotson
and Sinquefield backdated the Salomon Brothers' index, using Salomon Brothers'
monthly yield data with a methodology similar to that used by Salomon for
1969-1991. Capital appreciation returns were calculated from yields assuming (at
the beginning of each monthly holding period) a 20-year maturity, a bond price
equal to par, and a coupon equal to the beginning-of-period yield. For the
period 1926-1945, the Standard and Poor's monthly High-Grade Corporate Composite
yield data were used, assuming a 4 percent coupon and a 20-year maturity. The
conventional present-value formula for bond price for the beginning and
end-of-month prices was used. (This formula is presented in Ross, Stephen A.,
and Randolph W. Westerfield, Corporate Finance, Times
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<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
Mirror/Mosby, St. Louis, 1990, p. 97 ["Level-Coupon Bonds"].) The monthly income
return was assumed to be one-twelfth the coupon.
U.S. (30 DAY) TREASURY BILLS
For the U.S. Treasury bill index, data from The Wall Street Journal are used for
1977-1991; the CRSP U.S. Government Bond File is the source until 1976. Each
month a one-bill portfolio containing the shortest-term bill having not less
than one month to maturity is constructed. (The bill's original term to maturity
is not relevant.) To measure holding period returns for the one-bill portfolio,
the bill is priced as of the last trading day of the previous month-end and as
of the last trading day of the current month.
NAREIT-EQUITY INDEX
All of the data is based upon the last closing price of the month for all
tax-qualified REITs listed on the NYSE, AMSE and the NASDAQ. The data is
market-value-weighted. Prior to 1987 REITs were added to the index the January
following their listing. Since 1987 Newly formed or listed REITs are added to
the total shares outstanding figure in the month that the shares are issued.
Only common shares issued by the REIT are included in the index. The total
return calculation is based upon the weighing at the beginning of the period.
Only those REITs listed for the entire period are used in the total return
calculation. Dividends are included in the month based upon their payment date.
There is no smoothing of income. Liquidating dividends, whether full or partial,
are treated as income.
RUSSELL 2000 SMALL STOCK INDEX
Index of the 2,000 smallest stocks in the Russell 3000 Index (TM); the smallest
company has a market capitalization of approximately $13 million.
The Russell 3000 is comprised of the 3,000 largest US companies as determined
by market capitalization representing approximately 98% of the US equity market.
The largest company in the index has a market capitalization of $67 billion. The
Russell Indexes (TM) are reconstituted annually as of June 1st, based on May 31
market capitalization rankings.
WILSHIRE REAL ESTATE SECURITIES INDEX
The Wilshire Real Estate Securities Index is a market capitalization-weighted
index which measures the performance of more than 85 securities.
The index contains performance data on five major categories of property;
office, retail, industrial, apartment and miscellaneous. Additionally, the Index
has real estate portfolio encumbered by 16% third party mortgages. The companies
in the WRESEC are 79% equity and hybrid REIT's and 21% real estate operating
companies. The capitalization is 47% NYSE, 33% AMEX and 20% OTC."
STANDARD & POOR'S MIDCAP 400 INDEX
The Standard and Poor's MidCap 400 Index is a market-value-weighted index. The
performance data for the MidCap 400 Index were calculated by taking the stocks
presently in the MidCap 400 Index and tracking them backwards in time as long as
there were prices reported. No attempt was made to determine what stocks "might
have been" in the MidCap 400 Index five or ten years ago had it existed.
Dividends are reinvested on a monthly basis prior to June 30, 1991, and are
reinvested daily thereafter.
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<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
The S&P MidCap 400 Index and the S&P 500 together represent approximately 85% of
the total market capitalization of stocks traded in the United States.
BANK SAVINGS ACCOUNT
Data sources include the U.S. League of Savings Institutions Sourcebook; average
annual yield on savings deposits in FSLIC [FDIC] insured savings institutions
for the years 1963-1987 and The Wall Street Journal for the years 1988-1994.
Source: Ibbotson Associates
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<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
S&P 500 Dow U.S. Small S&P/ S&P/
Jones Stock U.S. BARRA BARRA
Industrials Index Inflation Growth Value
- --------------------------------------------------------------------------------
Dec 1928 43.61 55.38 39.69 -0.97 N/A N/A
Dec 1929 -8.42 -13.64 -51.36 0.20 N/A N/A
Dec 1930 -24.90 -30.22 -38.15 -6.03 N/A N/A
Dec 1931 -43.34 -49.03 -49.75 -9.52 N/A N/A
Dec 1932 -8.19 -16.88 -5.39 -10.30 N/A N/A
Dec 1933 53.99 73.71 142.87 0.51 N/A N/A
Dec 1934 -1.44 8.07 24.22 2.03 N/A N/A
Dec 1935 47.67 43.77 40.19 2.99 N/A N/A
Dec 1936 33.92 30.23 64.80 1.21 N/A N/A
Dec 1937 -35.03 -28.88 -58.01 3.10 N/A N/A
Dec 1938 31.12 33.16 32.80 -2.78 N/A N/A
Dec 1939 -0.41 1.31 0.35 -0.48 N/A N/A
Dec 1940 -9.78 -7.96 -5.16 0.96 N/A N/A
Dec 1941 -11.59 -9.88 -9.00 9.72 N/A N/A
Dec 1942 20.34 14.12 44.51 9.29 N/A N/A
Dec 1943 25.90 19.06 88.37 3.16 N/A N/A
Dec 1944 19.75 17.19 53.72 2.11 N/A N/A
Dec 1945 36.44 31.60 73.61 2.25 N/A N/A
Dec 1946 -8.07 -4.40 -11.63 18.16 N/A N/A
Dec 1947 5.71 7.61 0.92 9.01 N/A N/A
Dec 1948 5.50 4.27 -2.11 2.71 N/A N/A
Dec 1949 18.79 20.92 19.75 -1.80 N/A N/A
Dec 1950 31.71 26.40 38.75 5.79 N/A N/A
Dec 1951 24.02 21.77 7.80 5.87 N/A N/A
Dec 1952 18.37 14.58 3.03 0.88 N/A N/A
Dec 1953 -0.99 2.02 -6.49 0.62 N/A N/A
Dec 1954 52.62 51.25 60.58 -0.50 N/A N/A
Dec 1955 31.56 26.58 20.44 0.37 N/A N/A
Dec 1956 6.56 7.10 4.28 2.86 N/A N/A
Dec 1957 -10.78 -8.63 -14.57 3.02 N/A N/A
Dec 1958 43.36 39.31 64.89 1.76 N/A N/A
Dec 1959 11.96 20.21 16.40 1.50 N/A N/A
Dec 1960 0.47 -6.14 -3.29 1.48 N/A N/A
Dec 1961 26.89 22.60 32.09 0.67 N/A N/A
Dec 1962 -8.73 -7.43 -11.90 1.22 N/A N/A
Dec 1963 22.80 20.83 23.57 1.65 N/A N/A
Dec 1964 16.48 18.85 23.52 1.19 N/A N/A
Dec 1965 12.45 14.39 41.75 1.92 N/A N/A
Dec 1966 -10.06 -15.78 -7.01 3.35 N/A N/A
Dec 1967 23.98 19.16 83.57 3.04 N/A N/A
Dec 1968 11.06 7.93 35.97 4.72 N/A N/A
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<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
S&P 500 Dow U.S. Small S&P/ S&P/
Jones Stock U.S. BARRA BARRA
Industrials Index Inflation Growth Value
- --------------------------------------------------------------------------------
Dec 1969 -8.50 -11.78 -25.05 6.11 N/A N/A
Dec 1970 4.01 9.21 -17.43 5.49 N/A N/A
Dec 1971 14.31 9.83 16.50 3.36 N/A N/A
Dec 1972 18.98 18.48 4.43 3.41 N/A N/A
Dec 1973 -14.66 -13.28 -30.90 8.80 N/A N/A
Dec 1974 -26.47 -23.58 -19.95 12.20 N/A N/A
Dec 1975 37.20 44.75 52.82 7.01 31.72 43.38
Dec 1976 23.84 22.82 57.38 4.81 13.84 34.93
Dec 1977 -7.18 -12.84 25.38 6.77 -11.82 -2.57
Dec 1978 6.56 2.79 23.46 9.03 6.78 6.16
Dec 1979 18.44 10.55 43.46 13.31 15.72 21.16
Dec 1980 32.42 22.17 39.88 12.40 39.40 23.59
Dec 1981 -4.91 -3.57 13.88 8.94 -9.81 0.02
Dec 1982 21.41 27.11 28.01 3.87 22.03 21.04
Dec 1983 22.51 25.97 39.67 3.80 16.24 28.89
Dec 1984 6.27 1.31 -6.67 3.95 2.33 10.52
Dec 1985 32.16 33.55 24.66 3.77 33.31 29.68
Dec 1986 18.47 27.10 6.85 1.13 14.50 21.67
Dec 1987 5.23 5.48 -9.30 4.41 6.50 3.68
Dec 1988 16.81 16.14 22.87 4.42 11.95 21.67
Dec 1989 31.49 32.19 10.18 4.65 36.40 26.13
Dec 1990 -3.17 -0.56 -21.56 6.11 0.20 -6.85
Dec 1991 30.55 24.19 44.63 3.06 38.37 22.56
Dec 1992 7.67 7.41 23.35 2.90 5.07 10.53
Dec 1993 9.99 16.94 20.98 2.75 1.68 18.60
Dec 1994 1.31 5.06 3.11 2.78 3.13 -0.64
Dec 1995 37.43 36.84 34.46 2.74 38.13 36.99
Dec 1996 23.07 28.84 17.62 3.58 23.96 21.99
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<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
Intermediate MSCI Long-
Long-Term -Term U.S. EAFE 6 Term U.S. U.S.
U.S. Gov't Government - Net of MONTH Corporate (30 Day)
Bonds Bonds Taxes CDs Bonds T- Bill
- --------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A
Dec 1926 7.77 5.38 N/A N/A 7.37 3.27
Dec 1927 8.93 4.52 N/A N/A 7.44 3.12
Dec 1928 0.1 0.92 N/A N/A 2.84 3.56
Dec 1929 3.42 6.01 N/A N/A 3.27 4.75
Dec 1930 4.66 6.72 N/A N/A 7.98 2.41
Dec 1931 -5.31 -2.32 N/A N/A -1.85 1.07
Dec 1932 16.84 8.81 N/A N/A 10.82 0.96
Dec 1933 -0.07 1.83 N/A N/A 10.38 0.30
Dec 1934 10.03 9.00 N/A N/A 13.84 0.16
Dec 1935 4.98 7.01 N/A N/A 9.61 0.17
Dec 1936 7.52 3.06 N/A N/A 6.74 0.18
Dec 1937 0.23 1.56 N/A N/A 2.75 0.31
Dec 1938 5.53 6.23 N/A N/A 6.13 -0.02
Dec 1939 5.94 4.52 N/A N/A 3.97 0.02
Dec 1940 6.09 2.96 N/A N/A 3.39 0.00
Dec 1941 0.93 0.50 N/A N/A 2.73 0.06
Dec 1942 3.22 1.94 N/A N/A 2.60 0.27
Dec 1943 2.08 2.81 N/A N/A 2.83 0.35
Dec 1944 2.81 1.80 N/A N/A 4.73 0.33
Dec 1945 10.73 2.22 N/A N/A 4.08 0.33
Dec 1946 -0.10 1.00 N/A N/A 1.72 0.35
Dec 1947 -2.62 0.91 N/A N/A -2.34 0.50
Dec 1948 3.40 1.85 N/A N/A 4.14 0.81
Dec 1949 6.45 2.32 N/A N/A 3.31 1.10
Dec 1950 0.06 0.70 N/A N/A 2.12 1.20
Dec 1951 -3.93 0.36 N/A N/A -2.69 1.49
Dec 1952 1.16 1.63 N/A N/A 3.52 1.66
Dec 1953 3.64 3.23 N/A N/A 3.41 1.82
Dec 1954 7.19 2.68 N/A N/A 5.39 0.86
Dec 1955 -1.29 -0.65 N/A N/A 0.48 1.57
Dec 1956 -5.59 -0.42 N/A N/A -6.81 2.46
Dec 1957 7.46 7.84 N/A N/A 8.71 3.14
Dec 1958 -6.09 -1.29 N/A N/A -2.22 1.54
Dec 1959 -2.26 -0.39 N/A N/A -0.97 2.95
Dec 1960 13.78 11.76 N/A N/A 9.07 2.66
Dec 1961 0.97 1.85 N/A N/A 4.82 2.13
Dec 1962 6.89 5.56 N/A N/A 7.95 2.73
Dec 1963 1.21 1.64 N/A N/A 2.19 3.12
Dec 1964 3.51 4.04 N/A 4.18 4.77 3.54
Dec 1965 0.71 1.02 N/A 4.68 -0.46 3.93
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<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
Intermediate MSCI Long-
Long-Term -Term U.S. EAFE 6 Term U.S. U.S.
U.S. Gov't Government - Net of MONTH Corporate (30 Day)
Bonds Bonds Taxes CDs Bonds T- Bill
- --------------------------------------------------------------------------------
Dec 1966 3.65 4.69 N/A 5.75 0.20 4.76
Dec 1967 -9.18 1.01 N/A 5.48 -4.95 4.21
Dec 1968 -0.26 4.54 N/A 6.44 2.57 5.21
Dec 1969 -5.07 -0.74 N/A 8.71 -8.09 6.58
Dec 1970 12.11 16.86 -11.66 7.06 18.37 6.52
Dec 1971 13.23 8.72 29.59 5.36 11.01 4.39
Dec 1972 5.69 5.16 36.35 5.38 7.26 3.84
Dec 1973 -1.11 4.61 -14.92 8.60 1.14 6.93
Dec 1974 4.35 5.69 -23.16 10.20 -3.06 8.00
Dec 1975 9.20 7.83 35.39 6.51 14.64 5.80
Dec 1976 16.75 12.87 2.54 5.22 18.65 5.08
Dec 1977 -0.69 1.41 18.06 6.12 1.71 5.12
Dec 1978 -1.18 3.49 32.62 10.21 -0.07 7.18
Dec 1979 -1.23 4.09 4.75 11.90 -4.18 10.38
Dec 1980 -3.95 3.91 22.58 12.33 -2.76 11.24
Dec 1981 1.86 9.45 -2.28 15.50 -1.24 14.71
Dec 1982 40.36 29.1 -1.86 12.18 42.56 10.54
Dec 1983 0.65 7.41 23.69 9.65 6.26 8.80
Dec 1984 15.48 14.02 7.38 10.65 16.86 9.85
Dec 1985 30.97 20.33 56.16 7.82 30.09 7.72
Dec 1986 24.53 15.14 69.44 6.30 19.85 6.16
Dec 1987 -2.71 2.90 24.63 6.58 -0.27 5.47
Dec 1988 9.67 6.10 28.27 8.15 10.70 6.35
Dec 1989 18.11 13.29 10.54 8.27 16.23 8.37
Dec 1990 6.18 9.73 -23.45 7.85 6.78 7.81
Dec 1991 19.3 15.46 12.13 4.95 19.89 5.60
Dec 1992 8.05 7.19 -12.17 3.27 9.39 3.51
Dec 1993 18.24 11.24 32.56 2.88 13.19 2.90
Dec 1994 -7.77 -5.14 7.78 5.40 -5.76 3.90
Dec 1995 31.67 16.8 11.21 5.21 26.39 5.60
Dec 1996 -0.93 2.10 6.05 5.21 1.40 5.21
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<PAGE>
<TABLE>
<CAPTION>
RUSSELL LIPPER MSCI EMERGING
2000 WILSHIRE REAL S&P MIDCAP BALANCED MARKETS FREE BANK
NAREIT-EQUITY INDEX ESTATE 400 FUND INDEX SAVINGS ACCOUNT
SECURITIES INDEX INDEX
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 N/A N/A N/A N/A N/A N/A N/A
Dec 1927 N/A N/A N/A N/A N/A N/A N/A
Dec 1928 N/A N/A N/A N/A N/A N/A N/A
Dec 1929 N/A N/A N/A N/A N/A N/A N/A
Dec 1930 N/A N/A N/A N/A N/A N/A 5.30
Dec 1931 N/A N/A N/A N/A N/A N/A 5.10
Dec 1932 N/A N/A N/A N/A N/A N/A 4.10
Dec 1933 N/A N/A N/A N/A N/A N/A 3.40
Dec 1934 N/A N/A N/A N/A N/A N/A 3.50
Dec 1935 N/A N/A N/A N/A N/A N/A 3.10
Dec 1936 N/A N/A N/A N/A N/A N/A 3.20
Dec 1937 N/A N/A N/A N/A N/A N/A 3.50
Dec 1938 N/A N/A N/A N/A N/A N/A 3.50
Dec 1939 N/A N/A N/A N/A N/A N/A 3.40
Dec 1940 N/A N/A N/A N/A N/A N/A 3.30
Dec 1941 N/A N/A N/A N/A N/A N/A 3.10
Dec 1942 N/A N/A N/A N/A N/A N/A 3.00
Dec 1943 N/A N/A N/A N/A N/A N/A 2.90
Dec 1944 N/A N/A N/A N/A N/A N/A 2.80
Dec 1945 N/A N/A N/A N/A N/A N/A 2.50
Dec 1946 N/A N/A N/A N/A N/A N/A 2.20
Dec 1947 N/A N/A N/A N/A N/A N/A 2.30
Dec 1948 N/A N/A N/A N/A N/A N/A 2.30
Dec 1949 N/A N/A N/A N/A N/A N/A 2.40
Dec 1950 N/A N/A N/A N/A N/A N/A 2.50
Dec 1951 N/A N/A N/A N/A N/A N/A 2.60
Dec 1952 N/A N/A N/A N/A N/A N/A 2.70
Dec 1953 N/A N/A N/A N/A N/A N/A 2.80
Dec 1954 N/A N/A N/A N/A N/A N/A 2.90
Dec 1955 N/A N/A N/A N/A N/A N/A 2.90
Dec 1956 N/A N/A N/A N/A N/A N/A 3.00
Dec 1957 N/A N/A N/A N/A N/A N/A 3.30
Dec 1958 N/A N/A N/A N/A N/A N/A 3.38
Dec 1959 N/A N/A N/A N/A N/A N/A 3.53
Dec 1960 N/A N/A N/A N/A 5.77 N/A 3.86
Dec 1961 N/A N/A N/A N/A 20.59 N/A 3.90
Dec 1962 N/A N/A N/A N/A -6.80 N/A 4.08
Dec 1963 N/A N/A N/A N/A 13.10 N/A 4.17
Dec 1964 N/A N/A N/A N/A 12.36 N/A 4.19
Dec 1965 N/A N/A N/A N/A 9.80 N/A 4.23
Dec 1966 N/A N/A N/A N/A -5.86 N/A 4.45
Dec 1967 N/A N/A N/A N/A 15.09 N/A 4.67
Dec 1968 N/A N/A N/A N/A 13.97 N/A 4.68
Dec 1969 N/A N/A N/A N/A -9.01 N/A 4.80
Dec 1970 N/A N/A N/A N/A 5.62 N/A 5.14
Dec 1971 N/A N/A N/A N/A 13.90 N/A 5.30
-43-
<PAGE>
RUSSELL LIPPER MSCI EMERGING
2000 WILSHIRE REAL S&P MIDCAP BALANCED MARKETS FREE BANK
NAREIT-EQUITY INDEX ESTATE 400 FUND INDEX SAVINGS ACCOUNT
SECURITIES INDEX INDEX
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dec 1972 8.01 N/A N/A N/A 11.13 N/A 5.37
Dec 1973 -15.52 N/A N/A N/A -12.24 N/A 5.51
Dec 1974 -21.40 N/A N/A N/A -18.71 N/A 5.96
Dec 1975 19.30 N/A N/A N/A 27.10 N/A 6.21
Dec 1976 47.59 N/A N/A N/A 26.03 N/A 6.23
Dec 1977 22.42 N/A N/A N/A -0.72 N/A 6.39
Dec 1978 10.34 N/A 13.04 N/A 4.80 N/A 6.56
Dec 1979 35.86 43.09 70.81 N/A 14.67 N/A 7.29
Dec 1980 24.37 38.58 22.08 N/A 19.70 N/A 8.78
Dec 1981 6.00 2.03 7.18 N/A 1.86 N/A 10.71
Dec 1982 21.60 24.95 24.47 22.68 30.63 N/A 11.19
Dec 1983 30.64 29.13 27.61 26.10 17.44 N/A 9.71
Dec 1984 20.93 -7.30 20.64 1.18 7.46 N/A 9.92
Dec 1985 19.10 31.05 22.20 35.58 29.83 N/A 9.02
Dec 1986 19.16 5.68 20.30 16.21 18.43 N/A 7.84
Dec 1987 -3.64 -8.77 -7.86 -2.03 4.13 N/A 6.92
Dec 1988 13.49 24.89 24.18 20.87 11.18 40.43 7.20
Dec 1989 8.84 16.24 2.37 35.54 19.70 64.96 7.91
Dec 1990 -15.35 -19.51 -33.46 -5.12 0.66 10.55 7.80
Dec 1991 35.70 46.05 20.03 50.10 25.83 59.91 4.61
Dec 1992 14.59 18.41 7.36 11.91 7.46 11.40 2.89
Dec 1993 19.65 18.91 15.24 13.96 11.95 74.83 2.73
Dec 1994 3.17 -1.82 1.64 -3.57 -2.05 7.32 4.96
Dec 1995 15.27 28.44 13.65 30.94 24.89 5.21 5.24
Dec 1996 35.26 16.53 36.87 19.20 13.01 6.03 4.95
</TABLE>
Source: Lipper
-44-
<PAGE>
APPENDIX B
ADDITIONAL PIONEER INFORMATION
The Pioneer group of mutual funds was established in 1928 with the
creation of Pioneer Fund. Pioneer is one of the oldest and most experienced
money managers in the United States.
As of December 31, 1996, PMC employed a professional investment staff
of 53, with a combined average of twelve years' experience in the financial
services industry.
Total assets of all Pioneer mutual funds at December 31, 1996, were
approximately $15.8 billion representing 1,086,554 shareholder accounts, 722,661
non-retirement accounts and 363,893 retirement accounts.
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