As filed with the Securities and Exchange Commission on April 29, 1998.
File Nos. 2-28273
811-1605
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 60 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [x]
Amendment No.29 [x]
(Check appropriate box or boxes)
PIONEER BALANCED FUND
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
60 State Street, Boston, Massachusetts 02109
- --------------------------------------------------------------------------------
(Address of principal executive office) Zip Code
Registrant's Telephone Number, including Area Code: (617) 742-7825
- --------------------------------------------------------------------------------
Joseph P. Barri, Esq.,
Hale and Dorr LLP
60 State Street, Boston, MA 02109
- --------------------------------------------------------------------------------
(Name and address of agent for service)
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[X] on April 30, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on [date] pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on [date] pursuant to paragraph (a)(2)
of Rule 485
Title of Securities: shares of beneficial interest, no par value
<PAGE>
PIONEER BALANCED FUND
CLASS A, CLASS B AND CLASS C SHARES
Cross-Reference Sheet Showing Location in Prospectus and
Statement of Additional Information of
Information Required by Items of the Registration Form
Location in Prospectus
or Statement of
Form N-1A Item Number and Caption Additional Information
- --------------------------------- -----------------------
1. Cover Page ................ Prospectus - Cover Page
2. Synopsis .................. Prospectus - Expense
Information
3. Condensed Financial
Information ............. Prospectus - Financial
Highlights
4. General Description of
Registrant .............. Prospectus - Investment
Objective and Policies,
and Risks; The Fund
5. Management of the Fund .... Prospectus - Management
of the Fund
6. Capital Stock and Other
Securities .............. Prospectus - Investment
Objective, Policies;
and Risks; The Fund
7. Purchase of Securities Being
Offered ................. Prospectus - Fund
ShareAlternatives; How
to Buy Fund Shares;
Shareholder Services;
Distribution Plans
8. Redemption or Repurchase .. Prospectus - Fund Share
Alternatives; How to
Sell Fund Shares;
Shareholder Services
<PAGE>
9. Pending Legal Proceedings . Not Applicable
10. Cover Page ................ Statement of Additional
Information - Cover Page
11. Table of Contents ......... Statement of Additional
Information - Cover Page
12. General Information and
History ................. Statement of Additional
Information - Cover
Page; Shares of the Fund
13. Investment Objectives and
Policies ................ Statement of Additional
Information -
Investment Policies and
Restrictions
14. Management of the Fund .... Statement of Additional
Information -
Management of the Fund;
Investment Adviser
15. Control Persons and Principal Holders
of Securities ............ Statement of Additional
Information -
Management of the Fund
16. Investment Advisory and Other
Services ................ Statement of Additional
Information -
Management of the Fund;
Investment Adviser;
Shareholder
Servicing/Transfer
Agent; Underwriting
Agreement and
Distribution Plans;
Custodians; Independent
Accountants
17. Brokerage Allocation and Other
Practices ............... Statement of Additional
Information - Portfolio
Transactions
<PAGE>
18. Capital Stock and Other
Securities .............. Statement of Additional
Information - Shares of
the Fund; Shareholder
and Trustee Liability
19. Purchase Redemption and Pricing of
Securities Being Offered . Statement of Additional
Information -
Determination of Net
Asset Value; Letter of
Intention; Systematic
Withdrawal Plan
20. Tax Status ................ Statement of Additional
Information - Tax Status
21. Underwriters .............. Statement of Additional
Information - Principal
Underwriter;
Underwriting Agreement
and Distribution Plans
22. Calculation of Performance
Data .................... Statement of Additional
Information -
Investment Results
23. Financial Statements ...... Balance Sheet; Report
of Independent Public
Accountants
<PAGE>
PIONEER BALANCED FUND
PART A
PROSPECTUS
<PAGE>
[Pioneer Logo]
Pioneer
Balanced
Fund
Class A, Class B and Class C Shares
Prospectus
April 30, 1998
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 April 30, 1998, as supplemented or revised from time to time,
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, by calling 1-800-225-6292 or through the SEC's
Internet web site (http://www.sec.gov).
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
- -------------------------------------------------------------------------
<S> <C> <C>
I. EXPENSE INFORMATION ................................... 2
II. FINANCIAL HIGHLIGHTS .................................. 3
III. INVESTMENT OBJECTIVE, POLICIES AND RISKS .............. 6
IV. MANAGEMENT OF THE FUND ................................ 7
V. FUND SHARE ALTERNATIVES ............................... 8
VI. SHARE PRICE ........................................... 8
VII. HOW TO BUY FUND SHARES ................................ 9
VIII. HOW TO SELL FUND SHARES ............................... 12
IX. HOW TO EXCHANGE FUND SHARES ........................... 13
X. DISTRIBUTION PLANS .................................... 14
XI. DIVIDENDS, DISTRIBUTIONS AND TAXATION ................. 15
XII. SHAREHOLDER SERVICES .................................. 15
Account and Confirmation Statements .................. 15
Additional Investments ............................... 15
Automatic Investment Plans ........................... 16
Financial Reports and Tax Information ................ 16
Distribution Options ................................. 16
Directed Dividends ................................... 16
Direct Deposit ....................................... 16
Voluntary Tax Withholding ............................ 16
Telephone Transactions ............................... 16
FactFoneSM ........................................... 16
Retirement Plans ..................................... 17
Telecommunications Device for the Deaf (TDD) ......... 17
Systematic Withdrawal Plans .......................... 17
Reinstatement Privilege (Class A Shares only) ........ 17
XIII. THE FUND .............................................. 17
XIV. INVESTMENT RESULTS .................................... 18
APPENDIX .............................................. 18
</TABLE>
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE 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 upon actual
expenses incurred for the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
Shareholder Transaction Expenses: Class A Class B Class C
<S> <C> <C> <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 ................. None(1) 4.00% 1.00%
Redemption Fee2 ............................... None None None
Exchange Fee .................................. None None None
Annual Operating Expenses
(as a percentage of average net assets):
Management Fee3 ............................... 0.63% 0.63% 0.63%
12b-1 Fees .................................... 0.25% 1.00% 1.00%
Other Expenses
(including accounting and transfer
agent fees, custodian fees and
printing expenses)4 ........................ 0.29% 0.36% 0.35%
------ ----- -----
Total Operating Expenses: ..................... 1.17% 1.99% 1.98%
====== ===== =====
</TABLE>
- --------------------
(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 United States
(U.S.) and international wire transfers of redemption proceeds.
(3) Ratios reflect a change in management fee during the year. See "Management
of the Fund."
(4) Expenses are net of amounts paid in connection with certain expense offset
arrangements. See "Financial Highlights."
Example:
You would pay the following expenses on a $1,000 investment, with or
without redemption at the end of each time period, assuming 5% annual return,
reinvestment of all dividends and distributions and that the percentage amounts
listed under "Annual Operating Expenses" remain the same each year.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class A Shares ................... $56 $80 $106 $181
Class B Shares
- --Assuming complete redemption at
end of period .................. $60 $92 $127 $211
- --Assuming no redemption ......... $20 $62 $107 $211
Class C Shares**
- --Assuming complete redemption at
end of period .................. $30 $62 $107 $231
- --Assuming no redemption ......... $20 $62 $107 $231
</TABLE>
- --------------------
*Class B shares convert to Class A shares eight years after purchase;
therefore, Class A share expenses are used after year eight.
**Class C shares redeemed during the first year after purchase are subject to a
1% CDSC.
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, Rule 12b-1 fees and
other expenses of the Fund, 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 paying more than the economic equivalent of the maximum
sales charge permitted under the Conduct Rules of the National Association of
Securities Dealers, Inc.
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 as of December 31, 1997 appears in the Fund's Annual
Report which is incorporated by reference into the Statement of Additional
Information. The information listed below should be read in conjunction with
those financial statements. The information for the years from 1988 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 Each Period Presented:
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------------
1997 1996 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period ......................... $ 10.65 $ 10.30 $ 9.11 $ 10.21
-------- -------- -------- --------
Increase (decrease) from
investment operations:
Net investment income
(loss) ........................ $ 0.41 $ 0.64 $ 0.66 $ 0.66
Net realized and unrealized
gain (loss) on investments $ 1.03 0.33 1.29 (1.09)
-------- -------- -------- --------
Net increase (decrease)
from investment
operations ................... $ 1.44 $ 0.97 $ 1.95 $ (0.43)
Distributions to
shareholders: ..................
Net investment income .......... (0.40) (0.62) (0.65) (0.67)
Net realized gain .............. (1.54) -- (0.11) --
-------- -------- -------- --------
Net increase (decrease) in
net asset value ................ $ (0.50) $ 0.35 $ 1.19 $ (1.10)
-------- -------- -------- --------
Net asset value, end of
period ......................... $ 10.15 $ 10.65 $ 10.30 $ 9.11
======== ======== ======== ========
Total return* ................... 13.92% 9.89% 22.00% (4.31%)
Ratios/Supplemental Data
Ratio of net expenses to
average net assets ............. 1.19%++ 1.10%++ 1.13%++ 1.11%
Ratio of net investment
income (loss) to average
net assets ..................... 3.55%++ 6.17%++ 6.58%++ 7.07%
Portfolio turnover rate ......... 122% 31% 25% 50%
Average brokerage
commission per share ........... $ 0.0569 $ 0.0587 -- --
Net assets, end of period
(in thousands) ................. $274,695 $276,064 $281,639 $259,970
Ratios assuming reduction
for fees paid indirectly:
Net expenses .................. 1.17% 1.08% 1.11% --
Net investment income
(loss) ....................... 3.57% 6.19% 6.60% --
<CAPTION>
For the Year Ended December 31,
------------------------------------------------------------------------
1993+ 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ......................... $ 10.13 $ 10.14 $ 9.14 $ 9.53 $ 8.92 $ 8.67
-------- -------- -------- -------- -------- --------
Increase (decrease) from
investment operations:
Net investment income
(loss) ........................ $ 0.65 $ 0.65 $ 0.65 $ 0.70 $ 0.74 $ 0.77
Net realized and unrealized
gain (loss) on investments 0.37 0.09 1.00 (0.38) 0.63 0.27
-------- -------- -------- -------- -------- --------
Net increase (decrease)
from investment
operations ................... $ 1.02 $ 0.74 $ 1.65 $ 0.32 $ 1.37 $ 1.04
Distributions to
shareholders: ..................
Net investment income .......... (0.64) (0.66) (0.65) (0.71) (0.75) (0.76)
Net realized gain .............. (0.30) (0.09) -- -- (0.01) (0.03)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
net asset value ................ $ 0.08 $ (0.01) $ 1.00 $ (0.39) $ 0.61 $ 0.25
--------- -------- -------- -------- -------- --------
Net asset value, end of
period ......................... $ 10.21 $ 10.13 $ 10.14 $ 9.14 $ 9.53 $ 8.92
========= ======== ======== ======== ======== ========
Total return* ................... 10.24% 7.59% 18.62% 3.59% 15.89% 12.29%
Ratios/Supplemental Data
Ratio of net expenses to
average net assets ............. 1.06% 0.99% 1.04% 0.94% 0.78% 0.80%
Ratio of net investment
income (loss) to average
net assets ..................... 6.52% 6.47% 6.73% 7.67% 7.98% 8.55%
Portfolio turnover rate ......... 69% 54% 43% 44% 69% 87%
Average brokerage
commission per share ........... -- -- -- -- -- --
Net assets, end of period
(in thousands) ................. $296,699 $250,033 $197,184 $166,205 $169,607 $159,212
Ratios assuming reduction
for fees paid indirectly:
Net expenses .................. -- -- -- -- -- --
Net investment income
(loss) ....................... -- -- -- -- -- --
</TABLE>
- ---------
+ Prior to December 1, 1993, Mutual of Omaha Fund Management Company ("FMC")
acted as the investment adviser to the Fund.
++ Ratio 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.
3
<PAGE>
II. FINANCIAL HIGHLIGHTS (continued)
PIONEER BALANCED FUND
Selected Data For a Class B Share Outstanding Each Period Presented:
<TABLE>
<CAPTION>
For the Year Ended
December 31, April 28, 1995
Class B ------------------------ to
1997 1996 December 31, 1995
-------- -------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period ................................ $ 10.59 $ 10.27 $ 9.55
------- ------- ------
Increase (decrease) from investment operations:
Net investment income (loss) ....................................... $ 0.32 $ 0.52 $ 0.39
Net realized and unrealized gain (loss) on investments ............. 1.02 0.37 0.90
------- ------- ------
Net increase (decrease) from investment operations ................ $ 1.34 $ 0.89 $ 1.29
Distributions to shareholders:
Net investment income .............................................. (0.31) (0.52) (0.46)
In excess of net investment income ................................. -- (0.05) --
Net realized gain .................................................. (1.54) -- (0.11)
------- ------- ------
Net increase (decrease) in net asset value .......................... $ (0.51) $ 0.32 $ 0.72
------- ------- ------
Net asset value, end of period ...................................... $ 10.08 $ 10.59 $10.27
======= ======= ======
Total return* ....................................................... 12.98% 9.02% 13.74%
Ratios/Supplemental Data
Ratio of net expenses to average net assets ......................... 2.01%+ 1.88%+ 1.88%**+
Ratio of net investment income (loss) to average net assets ......... 2.65%+ 5.45%+ 5.83%**+
Portfolio turnover rate ............................................. 122% 31% 25%
Average brokerage commission per share .............................. $0.0569 $0.0587 --
Net assets, end of period (in thousands) ............................ $13,789 $ 6,940 $1,800
Ratios assuming reduction for fees paid indirectly:
Net expenses ....................................................... 1.99% 1.86% 1.78%**
Net investment income (loss) ....................................... 2.67% 5.47% 5.93%**
</TABLE>
- -------------
+ Ratio 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.
4
<PAGE>
II. FINANCIAL HIGHLIGHTS (continued)
PIONEER BALANCED FUND
Selected Data For a Class C Share Outstanding For Each Period Presented:
<TABLE>
<CAPTION>
For the
Year Ended January 31, 1996
December 31, to
1997 December 31, 1996
Class C -------------- ------------------
<S> <C> <C>
Net asset value, beginning of period ............................ $ 10.62 $ 10.39
Increase (decrease) from investment operations:
Net investment income (loss) ................................... $ 0.33 $ 0.49
Net realized and unrealized gain (loss) on investments ......... 1.07 0.31
-------- --------
Net increase (decrease) from investment operations ............ $ 1.40 $ 0.80
Distributions to shareholders:
Net investment income .......................................... (0.31) (0.49)
In excess of net investment income ............................. -- (0.08)
--------- --------
Net realized gain .............................................. (1.54) --
--------- --------
Net increase (decrease) in net asset value ...................... $ (0.45) $ 0.23
--------- --------
Net asset value, end of period .................................. $ 10.17 $ 10.62
========= ========
Total return* ................................................... 13.48% 8.12%
Ratios/Supplemental Data
Ratio of net expenses to average net assets ..................... 2.03%+ 1.76%**+
Ratio of net investment income to average net assets ............ 2.68%+ 5.63%**+
Portfolio turnover rate ......................................... 122% 31%
Average brokerage commission per share .......................... $0.0569 $0.0587
Net assets, end of period (in thousands) ........................ $ 1,900 $ 1,059
Ratios assuming reduction for fees paid indirectly:
Net expenses ................................................... 1.98% 1.73%* *
Net investment income (loss) ................................... 2.73% 5.66%* *
</TABLE>
- -------------
+ Ratio 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.
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 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, U.S. government securities and CMOs.
The Fund's investment objective and certain investment restrictions designated
as fundamental in the Fund's 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,
resulting in high portfolio turnover 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 capital gains, distributions of which
would be taxable 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. 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 name and general business and professional background
of 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 Board of Trustees. PMC
is a wholly owned subsidiary of The Pioneer Group, Inc. ("PGI"), a publicly
traded Delaware corporation. Pioneer Funds Distributor, Inc. ("PFD"), an
indirect wholly owned subsidiary of PGI, is the principal underwriter of the
shares of the Fund.
John F. Cogan, Jr., Chairman and President of the Fund, President and a
Director of PGI and Chairman and a Director of PMC and PFD, owned approximately
14% of the outstanding capital stock of PGI as of the date of this Prospectus.
Mr. David Tripple, President and Chief Investment Officer of PMC and
Executive Vice President of each Pioneer mutual fund, has general
responsibility for PMC's investment operations and chairs a committee of PMC's
equity managers which reviews PMC's research and portfolio operations,
including those of the Fund. Mr. Tripple joined PMC in 1974. Ms. Theresa
Hamacher, Senior Vice President of PMC, oversees U.S. equity research and
portfolio management.
The Fund is covered by a team of managers and analysts which does research
for and oversees the management of other funds with similar objectives. Members
of the team meet regularly to discuss holdings, prospective investments and
portfolio composition.
Day-to-day management of the Fund has been the responsibility of Mr.
William C. Field, a Vice President of PMC and the Fund, since January 1997. Mr.
Field joined PMC in 1991 and has over six years of investment experience.
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 SEC, state or blue sky securities agencies and foreign countries, including
the preparation of Prospectuses and Statements of Additional Information for
filing with regulatory agencies; (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 Investment Company Act of 1940, as
amended (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 in which 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 or other funds for which PMC or any affiliate
or subsidiary serve as investment adviser or manager. See the Statement of
Additional Information for a further description of PMC's brokerage allocation
practices.
As compensation for its management services for the Fund and certain
expenses which PMC incurs, PMC is entitled to a management fee 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.
Certain information technology experts currently predict the possibility
of a widespread failure of computer systems and certain other equipment which
will be triggered on or
7
<PAGE>
after certain dates--primarily January 1, 2000--due to a systemic inability to
process date-related information. This scenario, commonly known as the "Year
2000 Problem," could have an adverse impact on individuals and businesses,
including the Fund and other mutual funds and financial organizations. PMC and
its affiliates are taking steps believed to be adequate to address the Year
2000 Problem with respect to the systems and equipment controlled by the Fund's
investment adviser, broker-dealer and transfer agent. In addition, other
entities providing service to the Fund and its shareholders are being asked to
provide assurances that they have undertaken similar measures with respect to
their systems and equipment. Although PMC is not expecting any adverse impact
to it or its clients from the Year 2000 Problem, it cannot provide complete
assurances that its efforts or the efforts of its key vendors will be
successful.
V. FUND SHARE ALTERNATIVES
The Fund continuously offers three Classes of shares designated as Class
A, Class B and Class C shares, as described more fully in "How to Buy Fund
Shares." If you do not specify in your instructions to the Fund which Class of
shares you wish to purchase, exchange or redeem, the Fund will assume that your
instructions apply to Class A shares.
Class A Shares. If you invest less than $1 million in Class A shares, you will
pay an initial sales charge. Certain purchases may qualify for reduced initial
sales charges. If you invest $1 million or more in Class A shares, no sales
charge will be imposed at the time of purchase; however, shares redeemed within
12 months of purchase may be subject to a CDSC. Class A shares are subject to
distribution and service fees at a combined annual rate of up to 0.25% of the
Fund's average daily net assets attributable to Class A shares.
Class B Shares. If you plan to invest up to $250,000, Class B shares are
available to you. Class B shares are sold without an initial sales charge, but
are subject to a CDSC of up to 4% if redeemed within six years. Class B shares
are subject to distribution and service fees at a combined annual rate of 1% 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 any applicable sales charge. Net asset value per
share of a Class of Fund shares 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 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 regular trading on 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 regular trading on 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 regular
trading on 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 may be 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.
8
<PAGE>
VII. HOW TO BUY FUND SHARES
You may buy Fund shares from any securities broker-dealer which has a
sales agreement with PFD. If you do not have a securities broker-dealer, please
call 1-800-225-6292. Shares will be purchased at the public offering price,
that is, the net asset value per share, plus any applicable sales charge, next
computed after receipt of a purchase order, except as set forth below.
The minimum initial investment is $1,000 for Class A, Class B and Class C
shares except as specified below. The minimum initial investment is $50 for
Class A accounts being established to utilize monthly bank drafts, government
allotments, payroll deduction and other similar automatic investment plans.
Separate minimum investment requirements apply to retirement plans and to
telephone and wire orders placed by broker-dealers; no sales charges or minimum
requirements apply to the reinvestment of dividends or capital gains
distributions. The minimum subsequent investment is $50 for Class A shares and
$500 for Class B and Class C shares except that the subsequent minimum
investment amount for Class B and Class C share accounts may be as little as
$50 if an automatic investment plan is established (see "Automatic Investment
Plans").
Telephone Purchases. Your account is automatically authorized to have the
telephone purchase privilege unless you 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" for additional information.
Class A Shares
You may buy Class A shares at the public offering price including a sales
charge as follows:
<TABLE>
<CAPTION>
Sales Charge as a % of Dealer
---------------------- Allowance
Net as a % of
Offering Amount Offering
Amount of Purchase Price Invested Price
- --------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.00%
$100,000 but less than $250,000 3.50% 3.63% 3.00%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than
$1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more -0- -0- See below
</TABLE>
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 Internal Revenue Code of 1986, as amended ("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% 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 sales of Class A shares with respect to which orders are placed during a
particular
9
<PAGE>
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 which PMC or any of its affiliates serve 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 on 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 of the Fund 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 otherwise
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 the net asset value per share next computed
after receipt of a purchase order without the imposition of an initial sales
charge; however, Class B shares redeemed within six years of purchase will be
subject to a CDSC at the rates shown in the table below. The charge will be
assessed on the amount equal to the lesser of the current market value or the
original purchase cost of the shares being redeemed. No CDSC will be imposed on
increases in account value above the initial purchase price, including shares
derived from the reinvestment of dividends or capital gains distributions.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of purchase until the time of redemption of Class B shares. For
the purpose of determining the number of years from the time of any purchase,
all payments during a quarter will be aggregated and deemed to have been made
on the first day of that quarter. In processing redemptions of Class B shares,
the Fund will first redeem shares not subject to any CDSC, and then shares held
long-
10
<PAGE>
est 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:
<TABLE>
<CAPTION>
Year Since CDSC as a Percentage of Dollar
Purchase Amount Subject to CDSC
- -------- ------------------------------
<S> <C>
First .......................... 4.0%
Second ......................... 4.0%
Third .......................... 3.0%
Fourth ......................... 3.0%
Fifth .......................... 2.0%
Sixth .......................... 1.0%
Seventh and thereafter ......... none
</TABLE>
Proceeds from the CDSC are paid to PFD and are used in whole or in part to
defray PFD's expenses related to providing distribution-related services to the
Fund in connection with the sale of Class B shares, including the payment of
compensation to broker-dealers.
Class B shares will automatically convert into Class A shares at the
beginning 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 Revenue Service (the "IRS"), 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 the net asset value per share next computed
after receipt of a purchase order 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 an UGMA, an UTMA or a trust account, 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 in Pioneer mutual funds); (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
11
<PAGE>
directed transfer (provided that this privilege has been preauthorized 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 any shares subject to a CDSC may be waived or reduced for
either non-retirement or retirement plan accounts if 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.
Broker-Dealers. An order for any Class of Fund shares received by 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 by check, bank wire or electronic funds transfer,
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 $100,000 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, PSC will send the proceeds of the sale to
the address of record. Fiduciaries and 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, any 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
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to PSC. You may redeem up to $100,000 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 wire 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 IRAs. You may always
elect to deliver redemption instructions to PSC by mail. See "Telephone
Transactions" 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 has authorized PFD to act
as its agent in the repurchase of shares of the Fund from qualified
broker-dealers and reserves the right to terminate this procedure at any time.
Your broker-dealer must receive your request before the close of business on
the Exchange and transmit it to PFD before PFD's close of business to receive
that day's redemption price. Your broker-dealer is responsible for providing
all necessary documentation to PFD and may charge you for its services.
Small Accounts. The minimum account value is $500. If you hold shares of the
Fund in an account with a net asset value of less than the minimum required
amount due to redemptions or exchanges, the Fund may redeem the shares held in
this account at net asset value if you have not increased the net asset value
of the account to at least the 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 of the
shares originally held 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" 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 day of the month designated on
your Account Application or Account Options Form.
General. Exchanges must be at least $1,000. You may exchange your investment
from one Class of Fund shares at net asset value, without a sales charge, for
shares of the same Class of any other Pioneer mutual fund. Not all Pioneer
mutual funds offer more than one Class of shares. A new Pioneer mutual fund
account opened through an exchange must have a registration identical to that
on the original account.
Shares which would normally be subject to a CDSC upon redemption will not
be charged the applicable CDSC at the time of an exchange. Shares acquired in
an exchange will be subject to the CDSC of the shares originally held. For
purposes of determining the amount of any applicable CDSC, the length of time
you have owned shares acquired by exchange will be measured from the date you
acquired the original shares and will not be affected by any subsequent
exchange.
Exchange requests received by PSC before 4:00 p.m. Eastern time will be
effective on that day if the requirements above have been met, otherwise, they
will be effective on the next
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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 to PFD.
Pursuant to the Class A Plan, the Fund reimburses PFD for its actual
expenditures to finance any activity primarily intended to result in the sale
of Class A shares or to provide services to holders of Class A shares, provided
the 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 Class A shareholders of the Fund. For the fiscal year
ended December 31, 1997, there was an allowable carryover of distribution
expenses reimbursable to PFD of $5,009 (less than 0.02% of the net assets
attributable to the Class A shares 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 sales 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 sales
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
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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% federal 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 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. The
Fund's distributions of long-term capital gains to individuals or other
noncorporate taxpayers are subject to different maximum tax rates (which will
be indicated in the annual tax information the Fund provides to shareholders),
depending generally upon the sources of, and the Fund's holding periods for the
assets that produce, the 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.
corporations may qualify for the dividends-received deduction for corporate
shareholders, subject to 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 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 that the
shareholder is not subject to backup withholding or the Fund receives notice
from the 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 tax treatment that is not described above. Shareholders should
consult their own tax advisors regarding state, local and other applicable tax
laws, including the effect of recent federal tax legislation, in their
particular circumstances.
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 Shareholder Services, 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 the
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 Intent,
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.
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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 preauthorized electronic funds transfer from
your bank account. Pioneer Investomatic Plan investments are voluntary, and you
may discontinue your plan at any time or change your plan elections for the
dollar amount, frequency or investment date by calling PSC at 1-800-225-6292,
or by sending a written request to Shareholder Services, Pioneering Services
Corporation, P.O. Box 9014, Boston, Massachusetts 02205-9014. A change to your
bank information must be made in writing on an Account Options Form. You should
allow up to five business days for PSC to make changes to an established plan.
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 dividends and capital gains in cash
and a distribution check issued to you is returned by the U.S. 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.
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
Your account is automatically authorized to have tele-phone transaction
privileges unless you indicate 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 nor PFD will be responsible for the
authenticity of instructions received by telephone; therefore, you bear the
risk of loss for unauthorized or fraudulent telephone transactions.
During times of economic turmoil or market volatility or as a result of
severe weather or a natural disaster, it may be difficult to contact the Fund
by telephone to institute a redemption or exchange. You should communicate with
the Fund in writing if you are unable to reach the Fund by telephone.
FactFone(SM)
FactFone(SM) is an automated inquiry and telephone transaction system
available to Pioneer mutual fund shareholders by dialing 1-800-225-4321.
FactFone(SM) allows you to obtain current information on your Pioneer mutual
fund accounts and to inquire about the prices and yields of all publicly
available Pioneer mutual funds. In addition, you may use FactFone(SM) to make
computer-assisted telephone purchases, exchanges and redemptions from your
Pioneer mutual fund accounts if you have activated your PIN. Telephone purchases
and redemptions require the establishment of a bank account of record. You are
strongly urged to consult with your financial representative prior to requesting
any telephone transaction. Shareholders
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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."
Call PSC for assistance.
Retirement Plans
You should contact the Retirement Plans Department of PSC at
1-800-622-0176 for information relating to tax-deferred retirement plans for
individuals, businesses and tax-exempt organizations. The 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 payments of $50 or more will be sent to you, or any person
designated by you, monthly or quarterly, and your periodic redemptions of
shares may be taxable to you. Payments can be made either by check or
electronic transfer to a bank account designated by you. If you direct that
withdrawal payments 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 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
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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; certificates will not be issued
for Class B or Class C shares.
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; distribution returns; results of actual or
hypothetical investments; changes in dividends, distributions or share values;
or any graphic illustration of such data may also be used. These data may cover
any period of the Fund's existence and may or may not include the impact of
sales charges, taxes or other factors.
Other investments or savings vehicles and/or unmanaged market indices,
indicators of economic activity or averages of mutual funds results may be
cited or compared with the investment results of the Fund. The Fund may also
include securities industry, real estate industry or comparative performance
information generally and in advertising or materials marketing the Fund's
shares. Such performance information may include rankings or listings by
magazines, newspapers or independent statistical or ratings services, such as
Lipper Analytical Services, Inc. or Ibbotson Associates.
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.
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"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.
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
U.S. 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 U.S. 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
U.S. Dividends or interest, or in some cases, capital gains, from foreign
investments may be subject to withholding or other foreign taxes which will
decrease the net return on such investments as compared to the return on the
Fund's U.S. investments. 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
19
<PAGE>
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. A forward foreign currency contract involves
an obligation to purchase or sell a specific currency on a future date at a
price set at the time of the contract. 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.
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. 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
use 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
Pioneer Small Company Fund
Pioneer Micro-Cap 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
*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 C. FIELD, 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
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
Visit our website: www.pioneerfunds.com
0498-5120
[Copyright] Pioneer Funds Distributor, Inc.
<PAGE>
PIONEER BALANCED FUND
PAET B
STATEMENT OF ADDITIONAL INFORMAITON
<PAGE>
PIONEER BALANCED FUND
60 State Street
Boston, Massachusetts 02109
STATEMENT OF ADDITIONAL INFORMATION
Class A, Class B and Class C Shares
April 30, 1998
This Statement of Additional Information is not a Prospectus, but
should be read in conjunction with the Prospectus dated April 30, 1998 (the
"Prospectus"), of Pioneer Balanced Fund (the "Fund") as amended and/or
supplemented from time to time. A copy of the Prospectus can be obtained free of
charge by calling Shareholder Services at 1-800-225-6292 or by written request
to the Fund at 60 State Street, Boston, Massachusetts 02109. The most recent
Annual Report to Shareholders is attached to this Statement of Additional
Information and is hereby incorporated in this Statement of Additional
Information by reference.
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...................15
7. Custodian..............................................16
8. Principal Underwriter..................................16
9. Independent Public Accountant..........................16
10. Portfolio Transactions.................................17
11. Tax Status and Dividends...............................18
12. Description of Shares..................................21
13. Determination of Net Asset Value.......................22
14. Systematic Withdrawal Plan.............................23
15. Letter of Intent.......................................25
16. Investment Results.....................................24
17. General Information....................................29
18. Financial Statements...................................29
Appendix A - Description of Short-Term Debt
and Corporate Bond Ratings...............30
Appendix B - Performance Statistics....................36
Appendix C - Other Pioneer Information.................47
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
1. INVESTMENT OBJECTIVE AND POLICIES
The Fund's Prospectus identifies the investment objective and the principal
investment policies of the Fund. Additional investment policies and a further
description of some of the policies are set forth below. This Statement of
Additional Information should be read in conjunction with the Prospectus.
Capitalized terms not otherwise defined herein have the meaning given to them in
the Prospectus.
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 Exchange, under
agreements which would require that the loans be secured continuously by
collateral in cash, cash equivalents or U.S. Treasury bills maintained on a
current basis at an amount at least equal to the market value of the securities
loaned. The Fund would continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities loaned as well as the benefit of
an increase and the detriment of any decrease 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 enter into 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 transactions 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 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 PMC. 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 it anticipates.
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.
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.
Futures Contracts and Options on Futures Contracts
To hedge against changes in currency exchange rates, the Fund may
purchase and sell various kinds of futures contracts and purchase and write
(sell) call and put options on any of such futures contracts. The Fund may also
enter into closing purchase and sale transactions with respect to any of such
contracts and options. The futures contracts will be based on various foreign
currencies. The Fund will engage in futures and related options transactions
only for hedging purposes. All futures contracts entered into by the Fund are
traded on U.S. exchanges or boards of trade that are licensed and regulated by
the Commodity Futures Trading Commission (the "CFTC") or on foreign exchanges.
Futures Contracts. A futures contract may generally be described as an
agreement between two parties to buy and sell particular financial instruments
for an agreed price during a designated month (or to deliver the final cash
settlement price, in the case of a contract relating to an index or otherwise
not calling for physical delivery at the end of trading in the contract).
In general, the Fund can sell futures contracts on a specified currency
to seek to protect against a decline in the value of such currency and a decline
in the value of its portfolio securities which are denominated in such currency.
The Fund can purchase futures contracts on foreign currency to establish the
price in U.S. dollars of a security denominated in such currency that the Fund
has acquired or expects to acquire.
Positions taken in the futures markets are not normally held to
maturity but are instead liquidated through offsetting transactions which may
result in a profit or a loss. While futures contracts on currency will usually
be liquidated in this manner, the Fund may instead make, or take, delivery of
the underlying securities or currency whenever it appears economically
advantageous to do so. A clearing corporation associated with the exchange on
which futures on securities or currency are traded guarantees that, if still
open, the sale or purchase will be performed on the settlement date.
The Fund will be required, in connection with transactions in futures
contracts and the writing of options on futures, to make margin deposits, which
will be held by the Fund's custodian for the benefit of the futures commission
merchant through whom the Fund engages in such futures contracts and options
transactions. In the case of futures contracts or options requiring the Fund to
purchase securities or currencies, the Fund must place cash or liquid securities
in a segregated account maintained by the custodian and marked to market daily
to cover such futures contracts and options.
Hedging Strategies. Hedging, by use of futures contracts, seeks to
establish with more certainty the currency exchange rate on portfolio securities
and securities that the Fund owns or proposes to acquire. The Fund may, for
example, take a "short" position in the futures market by selling futures
contracts in an attempt to hedge against an anticipated decline in foreign
currency rates that would adversely affect the value of the Fund's portfolio
securities. Similarly, the Fund may sell futures contracts in currency in which
its portfolio securities are denominated or in one currency to seek to hedge
against fluctuations in the value of securities denominated in a different
currency if there is an established historical pattern of correlation between
the two currencies.
Options on Futures Contracts. The acquisition of put and call options
on futures contracts will give the Fund the right (but not the obligation) for a
specified price to sell or to purchase, respectively, the underlying futures
contract at any time during the option period. As the purchaser of an option on
a futures contract, the Fund obtains the benefit of the futures position if
prices move in a favorable direction but limits its risk of loss in the event of
an unfavorable price movement to the loss of the premium and transaction costs.
The writing of a call option on a futures contract generates a premium
which may partially offset a decline in the value of the Fund's assets. By
writing a call option, the Fund becomes obligated, in exchange for the premium,
to sell a futures contract if the option is exercised, which may have a value
higher than the exercise price. Conversely, the writing of a put option on a
futures contract generates a premium which may partially offset an increase in
the price of securities that the Fund intends to purchase. However, the Fund
becomes obligated to purchase a futures contract if the option is exercised,
which may have a value lower than the exercise price. Thus, the loss incurred by
the Fund in writing call options on futures (and in entering into futures
transactions) is potentially unlimited and may exceed the amount of the premium
received. The Fund will incur transaction costs in connection with the writing
of options on futures.
The holder or writer of an option on a futures contract may terminate
its position by selling or purchasing an offsetting option on the same series.
There is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
The Fund may use options on futures contracts only for hedging
purposes.
Other Considerations. As noted above, the Fund may engage in futures
and related options transactions only for hedging purposes. CFTC regulations
permit principals of an investment company registered under the 1940 Act to
engage in such transactions for bona fide hedging (as defined in such
regulations) and certain other limited purposes without registering as commodity
pool operators. The Fund is not permitted to engage in speculative futures
trading. The Fund will determine that the price fluctuations in the futures
contracts and options on futures contracts used for hedging purposes are
substantially related to price fluctuations in securities held by the Fund or
which it expects to purchase. Except as stated below, the Fund's futures
transactions will be entered into for traditional hedging purposes -- i.e.,
futures contracts will be sold to seek to protect against a decline in the
currency in which portfolio securities are denominated that the Fund owns, or
futures contracts will be purchased to protect the Fund against an increase in
the currency in which portfolio securities it intends to purchase are
denominated. As evidence of this hedging intent, the Fund expects that on 75% or
more of the occasions on which it takes a long futures or option position
(involving the purchase of futures contracts), the Fund will have purchased, or
will be in the process of purchasing, equivalent amounts of related securities
or assets denominated in the related currency in the cash market at the time
when the futures or option position is closed out. However, in particular cases,
when it is economically advantageous for the Fund to do so, a long futures
position may be terminated or an option may expire without the corresponding
purchase of securities or other assets.
As an alternative to literal compliance with the bona fide hedging
definition, a CFTC regulation permits the Fund to elect to comply with a
different test, under which the sum of the amounts of initial margin deposits on
the Fund's existing futures contracts and premiums paid for options on futures
entered into for the purpose of seeking to increase total return (net of the
amount the positions are "in the money") would not exceed 5% of the market value
of the Fund's net assets. The Fund will engage in transactions in futures
contracts and related options only to the extent such transactions are
consistent with the requirements of the Code for maintaining its qualification
as a regulated investment company for federal income tax purposes.
Transaction costs associated with futures contracts and related options
involve brokerage costs, require margin deposits and, in the case of contracts
and options obligating the Fund to purchase securities or currencies, require
the Fund to segregate assets to cover such contracts and options.
While transactions in futures contracts and options on futures may
reduce certain risks, such transactions themselves entail certain other risks.
Thus, while the Fund may benefit from the use of futures and options on futures,
unanticipated changes in interest rates, securities prices or currency exchange
rates may result in a poorer overall performance for the Fund than if it had not
entered into any futures contracts or options transactions. In the event of an
imperfect correlation between a futures position and a portfolio position which
is intended to be protected, the desired protection may not be obtained and the
Fund may be exposed to risk of loss.
Finally, it is not possible to hedge fully or perfectly against the
effect of currency fluctuations on the value of foreign securities because
currency movements impact the value of different securities in differing
degrees.
Repurchase Agreements
The Fund may enter into repurchase agreements with "primary dealers" in U.S.
government securities and member banks of the Federal Reserve System 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 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
agreed-upon repurchase price. Another risk is that in the event of bankruptcy of
the seller, the Fund could be delayed in 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 into a repurchase agreement, PMC will carefully consider the
creditworthiness of the seller pursuant to procedures reviewed and approved by
the Trustees. When-Issued Securities and Forward Commitments
The Fund will purchase securities on a when-issued, delayed delivery or
forward commitment basis only with the intention of completing the transaction
and actually purchasing the securities. If deemed appropriate by PMC however,
the Fund may dispose of or renegotiate a commitment after it is entered into,
and may sell securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date. In these cases, the Fund may
realize a taxable gain or loss.
When the Fund agrees to purchase securities on a when-issued, delayed
delivery or forward commitment basis, the Fund's custodian will set aside cash
or liquid, high grade debt securities equal to the amount of the commitment in a
segregated account. The market value of the Fund's net assets may fluctuate to a
greater degree when it sets aside portfolio securities than when it sets aside
cash. Because the Fund's liquidity and ability to manage its portfolio might be
affected when it sets aside cash or portfolio securities to cover purchase
commitments, the Fund expects that its commitments to purchase when-issued
securities and forward commitments will not exceed 33% of the value of its total
assets absent unusual market conditions. When the Fund engages in when-issued
and forward commitment transactions, it relies on the other party to the
transaction to consummate the trade. Failure of such party to do so may result
in the Fund incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.
The market value of securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their market value, are taken into account when determining the market value of
the Fund, starting on the day the Fund agrees to purchase the securities.
Lower Rated Debt Securities
The Fund may invest up to 10% of its total assets in debt securities which are
rated below investment grade by S&P or by Moody's (i.e., ratings lower than BBB
by S&P or Baa by Moody's) or, if unrated by such rating organizations,
determined to be of comparable quality by PMC.
Bonds rated BB or Ba or below 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 grade
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 S&P or Baa or better by Moody's
or, if unrated by such rating organizations, determined to be of comparable
quality by PMC). See Appendix A for a description of the ratings issued by
investment rating services.
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 rated securities
will have an adverse effect on the Fund's net asset value to the extent 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 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 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
the medium to lower rated 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.
Medium to 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 medium to 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 medium to 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.
Other Investment Companies
Under the 1940 Act, the Fund may not acquire the securities of other domestic or
foreign investment companies or investment funds if, as a result, (i) more than
10% of the Fund's total assets would be invested in securities of other
investment companies, (ii) such purchase would result in more than 3% of the
total outstanding voting securities of any one investment company being held by
the Fund, or (iii) more than 5% of the Fund's total assets would be invested in
any one investment company. These limitations do not apply to the purchase of
shares of any investment company in connection with a merger, consolidation,
reorganization or acquisition of substantially all the assets of another
investment company.
Warrants
The Fund may invest in warrants, which are securities permitting, but not
obligating, their holder to subscribe for other securities. Warrants do not
carry with them the right to dividends or voting rights with respect to the
securities that they entitle their holders to purchase, and they do not
represent any rights in the assets of the issuer. As a result, an investment in
warrants may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to its expiration date. Although the Fund does not
have a formal percentage limitation on such investments, it is not expected that
PMC will invest more than 5% of the Fund's net assets in such securities.
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.
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 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 a fundamental policy of the Fund not to concentrate its
investments in securities of companies in any particular industry. Following the
current opinion of the staff of the the SEC, 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 SEC 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.
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"); Pioneer Real
Estate Advisors, Inc., Pioneer Forest, Inc., Pioneer Explorer, Inc., Pioneer
Management (Ireland) Ltd. ("PMIL") and Closed Joint Stock Company
"Forest-Starma"; President and Director of Pioneer Metals and Technology, Inc.
("PMT"), Pioneer International Corp. ("PIntl"), Pioneer First Russia, Inc.
("First Russia") and Pioneer Omega, Inc. ("Omega"); Chairman of the Board and
Director of Pioneer Goldfields Limited ("PGL") and Teberebie Goldfields Limited;
Chairman of the Supervisory Board of Pioneer Fonds Marketing, GmbH, Pioneer
First Polish Investment Fund Joint Stock Company, S.A. and Pioneer Czech
Investment Company, A.S.; Chairman, President and Trustee of all of the Pioneer
mutual funds; Director of Pioneer Global Equity Fund Plc, Pioneer Global Bond
Fund Plc, Pioneer DM Cashfonds Plc, Pioneer European Equity Fund Plc, Pioneer
Central & Eastern Europe Fund Plc and Pioneer US Real Estate Fund Plc; and
Partner, Hale and Dorr LLP (counsel to PGI and the Fund).
MARY K. BUSH, Trustee, DOB: April 1948
4201 Cathedral Avenue, NW, Washington, DC 20016
President, Bush & Co., an international financial advisory firm;
Director and Trustee of Mortgage Guaranty Insurance Corporation, Novecon
Management Company, Hoover Institution, Folger Shakespeare Library, March of
Dimes, Project 2000, Inc.(not-for-profit organization), Small Enterprise
Assistance Fund and Wilberforce University; Advisory Board Member, Washington
Mutual Investors Fund, a registered investment company; and Trustee of all the
Pioneer mutual funds, except Pioneer Variable Contracts Trust.
RICHARD H. EGDAHL, M.D., Ph.D. Trustee, DOB: December 1926
Boston University Health Policy Institute, 53 Bay State Road, Boston, MA 02115
Alexander Graham Bell Professor of Health Care Entrepreneurship, Boston
University; Professor of Management, Boston University School of Management;
Professor of Public Health, Boston University School of Public Health; Professor
of Surgery, Boston University School of Medicine; University Professor, Boston
University; Director, Boston University Health Policy Institute and Boston
University Program for Health Care Entrepreneurship; Director, CORE (management
of workers' compensation and disability costs - NASDAQ); Director, WellSpace
(provider of complementary health care); Trustee, Boston Medical Center;
Honorary Trustee, Franciscan Children's Hospital; and Trustee of all of the
Pioneer mutual funds.
MARGARET B.W. GRAHAM, Trustee, DOB: May 1947
The Keep, P.O. Box 110, Little Deer Isle, ME 04650
Founding Director, The Winthrop Group, Inc. (consulting firm); Manager
of Research Operations, Xerox Palo Alto Research Center, from 1991 to 1994;
Professor of Operations Management and Management of Technology and Associate
Dean, Boston University School of Management from 1989 to 1993; and Trustee of
all the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
JOHN W. KENDRICK, Trustee, DOB: July 1917
6363 Waterway Drive, Falls Church, VA 22044
Professor Emeritus, George Washington University; Director, American
Productivity and Quality Center; Adjunct Scholar, American Enterprise Institute;
and Trustee of all of the Pioneer mutual funds, except Pioneer Variable
Contracts Trust.
MARGUERITE A. PIRET, Trustee, DOB: May 1948
One Boston Place, Suite 2635, Boston, MA 02108
President, Newbury, Piret & Company, Inc. (merchant banking firm);
Trustee of Boston Medical Center; Member of the Board of Governors of the
Investment Company Institute; and Trustee of all of the Pioneer mutual funds.
DAVID D. TRIPPLE*, Trustee and Executive Vice President, DOB: February 1944
Executive Vice President and a Director of PGI; President, Chief
Investment Officer and a Director of PMC; Director of PFD, PCC, PIntl, First
Russia, Omega, Pioneer SBIC Corporation ("Pioneer SBIC"), PMIL, Pioneer Global
Equity Fund Plc, Pioneer Global Bond Fund Plc, Pioneer DM Cashfonds Plc, Pioneer
European Equity Fund Plc, Pioneer Central and Eastern Europe Fund Plc and
Pioneer US Real Estate Fund Plc; and Executive Vice President and Trustee of all
of the Pioneer mutual funds.
STEPHEN K. WEST, Trustee, DOB: September 1928
125 Broad Street, New York, NY 10004
Of Counsel to Sullivan & Cromwell (law firm); Trustee, The Winthrop
Focus Funds (mutual funds); and Trustee of all of the Pioneer mutual funds.
JOHN WINTHROP, Trustee, DOB: June 1936
One North Adgers Wharf, Charleston, SC 29401
President, John Winthrop & Co., Inc. (private investment firm);
Director of NUI Corp. (energy sales, services and distribution); and Trustee of
all of the Pioneer mutual funds, except Pioneer Variable Contracts Trust.
SHERMAN B. RUSS, Vice President, DOB: July 1937
Senior Vice President of PMC; Vice President of Pioneer Bond Fund,
Pioneer America Income Trust and Pioneer Interest Shares.
WILLIAM H. KEOUGH, Treasurer, DOB: April 1937
Senior Vice President, Chief Financial Officer and Treasurer of PGI;
Treasurer of PFD, PMC, PSC, PCC, PIntl, PMT, PGL, First Russia, Omega and
Pioneer SBIC; and Treasurer of all of the Pioneer mutual funds.
JOSEPH P. BARRI, Secretary, DOB: August 1946
Corporate Secretary of PGI and most of its subsidiaries; Secretary of all
of the Pioneer mutual funds; and Partner, Hale and Dorr LLP.
ERIC W. RECKARD, Assistant Treasurer, DOB: June 1956
Manager of Business Planning and Internal Audit of PMC since September
1996; 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 junior partner of Hale and Dorr LLP
prior to 1995.
WILLIAM C. FIELD, Vice President, DOB September 1964
Vice President of PMC; Research analyst for PMC since 1991 and has
served as an assistant portfolio manager for PMC 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 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 Independence Fund PMC Note 1
Pioneer Micro-Cap Fund PMC PFD
Pioneer Gold Shares PMC PFD
Pioneer Balanced Fund 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 PMC Note 2
Pioneer Variable Contracts Trust PMC Note 3
Note 1 This fund is available to the general public only through Pioneer
Independence Plans, a systematic investment
plan sponsored by PFD.
Note 2 This fund is a closed-end fund.
Note 3 This is a series of ten 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. 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 as of March 31, 1998, except Mr. Cogan, who then owned approximately 14% of
such shares. As of the date of this Statement of Additional Information, the
officers and Trustees of the Fund owned beneficially as a group less than 1% of
the outstanding shares of the Fund. As of March 31, 1998 , the City of Lawrence,
MA Trust Funds , 200 Common Street, Lawrence, MA 01840-1517 owned approximately
13.63% (32,986) of the outstanding Class C shares of the Fund; MLPF&S for the
Benefit of Customers, Mutual Fund Administration, 4800 Deer Lake Drive East 3rd
FL, Jacksonville, FL, 32246-6484 owned approximately 11.05% (26,735) of the
outstanding Class C shares; and PFD, 60 State Street, Boston, MA 02109 owned
approximately 5.05% (12,226) 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 the
Fund. In addition, the Fund pays a per meeting fee of $100 to each Trustee who
is not affiliated with PGI, PMC, PFD or PSC and pays an annual Trustee's fee of
$500 plus expenses to each Trustee affiliated with PGI, PMC, PFD and PSC. The
Fund also pays an annual committee participation fee to each Trustee who serves
as a member of any committee established to act on behalf of one or more of the
Pioneer mutual funds. Committee fees are allocated to the Fund on the basis of
the Fund's average net assets. Each Trustee who is a member of the Audit
Committee for the Pioneer mutual funds receives an annual fee equal to 10% of
the aggregate annual trustees' fee, except the Committee Chairperson who
receives an annual trustee's fee equal to 20% of the aggregate annual trustees'
fee. Members of the Pricing Committee for the Pioneer mutual funds, as well as
any other committee which renders material functional services to the Boards of
Trustees for the Pioneer mutual funds, receives an annual fee equal to 5% of the
aggregate annual trustee's fee, except the Committee Chairperson who receives an
annual trustee's fee equal to 10% of the aggregate annual trustee's fee. Each
Trustee who is not affiliated with PGI, PMC, PFD or PSC also receives $375 per
meeting for attendance at meetings of the Non-Interested Trustees Committee,
except for the Committee Chairperson who receives an additional $375 per
meeting. Any such fees paid to affiliates or interested persons of PGI, PMC, PFD
or PSC are reimbursed to the Fund under its management contract.
<PAGE>
The following table provides information regarding the compensation
paid by the Fund and other Pioneer mutual funds to the Trustees for their
services.
<TABLE>
<S> <C> <C> <C>
Pension or Total
Retirement Compensation
Benefits from the Fund
Aggregate Accrued and all other
Compensation as Part of Pioneer
Trustee From the Fund* the Fund's Expenses Mutual Funds**
John F. Cogan, Jr. $ 500 $0 $12,000
Mary K. Bush 1,021 $0 30,000
Richard H. Egdahl, M.D. $2,077 $0 $62,000
Margaret B.W. Graham $2,077 $0 $60,000
John W. Kendrick $1,926 $0 $55,800
Marguerite A. Piret $2,507 $0 $80,000
David D. Tripple $ 500 $0 $12,000
Stephen K. West $2,095 $0 $63,800
John Winthrop $2,352 $0 $69,000
Totals $15,055 $0 $444,600
======= == ========
</TABLE>
* For the fiscal year ended December 31, 1997.
** For the calendar year ended December 31, 1997.
4. INVESTMENT ADVISER
As stated in the Prospectus, PMC, 60 State Street, Boston,
Massachusetts, serves as the Fund's investment adviser. PMC became the Fund's
investment adviser on December 1, 1993. Prior to that date, Mutual of Omaha Fund
Management Company ("FMC") served as the Fund's investment adviser. The
management contract is renewable annually by the vote of a majority of the Board
of Trustees of the Fund (including a majority of the Board of Trustees who are
not parties to the contract or interested persons of any such parties) 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 the
giving of 60 days' written notice.
As compensation for its management services and expenses incurred, PMC
is entitled to a management fee at a rate 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 normally computed daily and paid monthly.
Prior to February 1, 1997, PMC was entitled to compensation for management
services and certain expenses PMC incurred on behalf of the Fund at the rate 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.
The Fund paid PMC $1,306,546, $1,386,645 and $1,832,707 in management
fees for the fiscal years ended December 31, 1995, December 31, 1996, and
December 31, 1997, respectively.
5. UNDERWRITING AGREEMENT AND DISTRIBUTION PLANS
The Fund has 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 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 (see
"Distribution Plans" in the Prospectus.) The expenses of the Fund pursuant to
the Class A Plan are accrued on a fiscal year basis and may not exceed the
annual rate of 0.25% of the Fund's average daily net assets attributable to
Class A shares.
Class B Plan
The Class B Plan provides that the Fund shall pay PFD, as the Fund's
distributor for its Class B shares, a daily distribution fee equal on an annual
basis to 0.75% of the Fund's average daily net assets attributable to Class B
shares and will pay PFD a service fee equal to 0.25% of the Fund's average daily
net assets attributable to Class B shares (which PFD will in turn pay to
securities dealers which enter into a sales agreement with PFD at a rate of up
to 0.25% of the Fund's average daily net assets attributable to Class B shares
owned by investors for whom that securities dealer is the holder or dealer of
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 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 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 with respect to Class B 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 B Plan also provides that PFD will receive all CDSCs
attributable to Class B shares. (See "Distribution Plans" in the Prospectus.)
When a broker-dealer sells Class B shares and elects, with PFD's approval, to
waive its right to receive the commission normally paid at the time of the sale,
PFD may cause the distribution fees described above to be paid to the
broker-dealer.
Class C Plan
The Class C Plan provides that the Fund will pay PFD, as the Fund's
distributor for its Class C shares, a distribution fee accrued daily and paid
quarterly, equal on an annual basis to 0.75% of the Fund's average daily net
assets attributable to Class C shares and will pay PFD a service fee equal to
0.25% of the Fund's average daily net assets attributable to Class C shares. PFD
will in turn pay to securities dealers which enter into a sales agreement with
PFD a distribution fee and a service fee at rates of up to 0.75% and 0.25%,
respectively, of the Fund's average daily net assets attributable to Class C
shares owned by investors for whom that securities dealer is the holder or
dealer of record. The service fee is intended to be in consideration of personal
services and/or account maintenance services rendered by the dealer with respect
to Class C shares. PFD will advance to dealers the first-year service fee at a
rate equal to 0.25% of the amount invested. As compensation therefore, PFD may
retain the service fee paid by the Fund with respect to such shares for the
first year after purchase. Commencing in the thirteenth month following a
purchase of Class C shares, dealers will become eligible for additional service
fees at a rate of up to 0.25% of the 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.)
When a broker-dealer sells Class C shares and elects, with PFD's approval, to
waive its right to receive the commission normally paid at the time of the sale,
PFD may cause the distribution fees described above to be paid to the
broker-dealer.
General
In accordance with the terms of the Plans, PFD provides to the Fund for
review by the Trustees a quarterly written report of the amounts expended under
the respective Plan and the purpose for which such expenditures were made. In
the Trustees' quarterly review of the Plans, they will consider the continued
appropriateness and the level of reimbursement or compensation the Plans
provide.
No interested person of the Fund, nor any Trustee of the Fund who is
not an interested person of the Fund, has any direct or indirect financial
interest in the operation of the Plans except to the extent that PFD and certain
of its employees may be deemed to have such an interest as a result of receiving
a portion of the amounts expended under the Plans by the Fund and except to the
extent certain officers may have an interest in PFD's ultimate parent, PGI.
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 class affected thereby. Material amendments to the Plans
must also be approved by the Trustees in the manner described above. A Plan may
be terminated at any time, without payment of any penalty, by vote of the
majority of the Trustees who are not interested persons of the Fund and have no
direct or indirect financial interest in the operations of the Plan, or by a
vote of a majority of the outstanding voting securities of the respective Class
of the Fund (as defined in the 1940 Act). A Plan will automatically terminate in
the event of its assignment (as defined in the 1940 Act). In the Trustees'
quarterly review of the Plan, they will consider its continued appropriateness
and the level of compensation it provides.
During the fiscal year ended December 31, 1997, the Fund incurred total
distribution fees pursuant to the Fund's Class A Plan, Class B Plan and Class C
Plan of $686,539, $99,188 and $14,106, 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 value 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% 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%. See " How to Buy Fund Shares" in the Prospectus. During the fiscal year
ended December 31, 1997, CDSCs in the amount of $13,632were paid to PFD.
6. SHAREHOLDER SERVICING/TRANSFER AGENT
The Fund has contracted with PSC, 60 State Street, Boston,
Massachusetts 02109, to act as shareholder servicing agent and transfer agent
for the Fund. This contract terminates if assigned and may be terminated without
penalty by either party upon the giving of 90 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 $30.00 per Class A, Class B and Class C
shareholder account from the Fund as compensation for the services described
above. PSC is also reimbursed by the Fund for its cash out-of-pocket
expenditures. The annual 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. The Fund may compensate entities which have agreed to provide certain
subaccounting services such as specific transaction processing and recordkeeping
services. Any such payments by the Fund would be in lieu of the per account fee
which would otherwise be paid by the Fund to PSC.
7. CUSTODIAN
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts
02109, is the custodian (the "Custodian") of the Fund's assets. The Custodian's
responsibilities include safekeeping and controlling the Fund's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Fund's investments. The Custodian 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 02109, serves as the
principal underwriter for the Fund in connection with the continuous offering of
the shares. The Fund will not generally issue Fund shares for consideration
other than cash. At the Fund's sole discretion, however, it may issue Fund
shares for consideration other than cash in connection with an acquisition of
portfolio securities or a merger or other reorganization .
During the Fund's 1995, 1996 and 1997 fiscal years, net underwriting
commissions retained by PFD in connection with its offering of Fund shares were
approximately $74,000, $76,000 and $68,000, respectively. Commissions reallowed
to dealers by PFD in those periods were approximately $931,000, $554,000 and
$487,000, respectively. See "Underwriting Agreement and Distribution Plans"
above for a description of the terms of the underwriting agreement with PFD.
9. INDEPENDENT PUBLIC ACCOUNTANT
Arthur Andersen LLP, 225 Franklin Street, 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 SEC.
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 efficiency, settlement capability, and
financial condition of the broker-dealer; the broker-dealer's execution services
rendered on a continuing basis; and the reasonableness of any broker-dealer
spreads.
PMC may select broker-dealers which provide brokerage and/or research
services to the Fund and/or other investment companies managed by PMC or who
sell shares of the Pioneer mutual funds. In addition, if PMC determines in good
faith that the amount of commissions charged by a broker-dealer is reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, the Fund may pay commissions to such broker-dealer in an amount
greater than the amount another firm may charge. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement). PMC
maintains a listing of broker-dealers who provide such services on a regular
basis. However, because it is anticipated that many transactions on behalf of
the Fund and other investment companies managed by PMC are placed with
broker-dealers (including broker-dealers on the listing) without regard to the
furnishing of such services, it is not possible to estimate the proportion of
such transactions directed to such broker-dealers solely because such services
were provided.
The research received from broker-dealers may be useful to PMC in
rendering investment management services to the Fund and to other investment
companies or other accounts managed by PMC, although not all of 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 Trustees periodically review 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. As such, 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 mutual
fundor a private account managed by PMC seeks to acquire the same security at
about the same time, the Fund may not be able to acquire as large a position in
such security as it desires, or it may have to pay a higher price for the
security. Similarly, the Fund may not be able to obtain as large an execution of
an order to sell or as high a price for any particular portfolio security if 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 or accrued brokerage or underwriting commissions of
$33,565, $76,135 and $523,313, respectively, for the fiscal years ended December
31, 1995,, 1996 and 1997. Differences in brokerage commissions were due to
increased portfolio activity throughout the respective periods.
11. TAX STATUS AND DIVIDENDS
It is the Fund's policy to meet the requirements of Subchapter M of
Code, for qualification as a regulated investment company. These requirements
relate to the sources of the Fund's income, the diversification of its assets
and the distribution of its income to shareholders. If the Fund meets all such
requirements and distributes to its shareholders, in accordance with the Code's
timing requirements, all investment company taxable income and net capital gain,
if any, which it earns, the Fund will be relieved of the necessity of paying
federal income tax.
In order to qualify as a regulated investment company under Subchapter
M, the Fund must, among other things, derive at least 90% of its annual gross
income from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock, securities or foreign
currencies, or other income (including gains from currency options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "90% income test and satisfy certain annual
distribution and quarterly diversification requirements.
Dividends from investment company taxable income, which includes net
investment income, net short-term capital gain in excess of net long-term
capital loss, and certain net foreign exchange gains, are taxable as ordinary
income, whether received in cash or reinvested in additional shares. Dividends
from net long-term capital gain in excess of net short-term capital loss ("net
capital gain"), if any, whether received in cash or reinvested in additional
shares, are taxable to the Fund's shareholders as capital gains for federal
income tax purposes without regard to the length of time shares of the Fund have
been held . As a result of the enactment of the Taxpayer Relief Act of 1997 (the
"1997 TRA") on August 5, 1997, gain recognized after May 6, 1997 from the sale
of a capital asset is taxable to individual (noncorporate) investors at
different maximum federal income tax rates, depending generally upon the tax
holding period for the asset, the federal income tax bracket of the taxpayer,
and the dates the asset was acquired and/or sold. The Treasury Department has
issued guidance under the 1997 TRA that (subject to possible modification by
future "technical corrections" legislation) enables the Fund to pass through to
its shareholders the benefits of the capital gains tax rates enacted in the 1997
TRA. The Fund will provide appropriate information to its shareholders about its
distributions, including the tax rate(s) applicable to its distributions from
long-term capital gains, in accordance with this and any future guidance.
Shareholders should consult their own tax advisers on the correct application of
these new rules in their particular circumstances.
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, foreign currency forward contracts, certain
options and futures contracts relating to foreign currency, or payables or
receivables denominated in a foreign currency are subject to Section 988 of the
Code, which generally causes such gains and losses to be treated as ordinary
income and losses and may affect the amount, timing and character of
distributions to shareholders. Under future regulations, any transactions in
foreign currency or currency options, futures, or forward contracts that are not
directly related to the Fund's investments in stock or securities may need to be
limited in order to enable the Fund to satisfy the 90% income test. If the net
foreign exchange loss for a year were to exceed the Fund's investment company
taxable income (computed without regard to such loss), the resulting ordinary
loss for such year would not be deductible by the Fund or its shareholders in
future years.
If the Fund acquires any equity interest (under proposed regulations,
generally including not only stock but also an option to acquire stock such as
is inherent in a convertible bond) in certain foreign corporations that receive
at least 75% of their annual gross income from passive sources (such as
interest, dividends, certain rent, and royalties, or capital gains) or 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. An election may generally be available that would
ameliorate these adverse tax consequences, but any such election could require
the Fund to recognize taxable income or gain (subject to the tax distribution
requirements) without the concurrent receipt of cash. These investments could
also result in the treatment of associated capital gains as ordinary income. 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 does not become
subject to federal income or excise tax.
If the Fund invests in certain pay-in-kind securities ("PIKs"), zero
coupon securities, deferred interest securities or, in general, any other
securities with original issue discount (or with market discount if the Fund
elects to include market discount in income currently), the Fund must accrue
income on such investments for each taxable year, which generally will be prior
to the receipt of the corresponding cash payments. However, the Fund must
distribute, at least annually, all or substantially all of its net income,
including such accrued income, to shareholders to qualify as a regulated
investment company under the Code and avoid federal income and excise taxes.
Therefore, the Fund may have to dispose of its portfolio securities under
disadvantageous circumstances to generate cash, or may have to leverage itself
by borrowing the cash, to satisfy distribution requirements.
For federal income tax purposes, the Fund is permitted to carry forward
a net capital loss for any year to offset its capital gains, if any, during the
eight years following the year of the loss. To the extent subsequent capital
gains are offset by such losses, they would not result in federal income tax
liability to the Fund and therefore are not expected to be distributed as such
to shareholders. As of the end of its most recent taxable year, the Fund had no
capital loss carryforwards.
At the time of an investor's purchase of Fund shares, a portion of the
purchase price may be attributable to realized or unrealized appreciation in the
Fund's portfolio or undistributed taxable income of the Fund. Consequently,
subsequent distributions by the Fund on these shares 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 economically represent a
return of a portion of the investment.
Redemptions and exchanges are taxable events for shareholders that are
subject to tax. Shareholders should consult their own tax advisers with
reference to their individual circumstances to determine whether any particular
transaction in Fund shares is properly treated as a sale for tax purposes, as
the following discussion assumes, and the character of and tax rate applicable
to any gains or losses recognized in such transactions under the new rate
structure enacted in the 1997 TRA.. Any loss realized by a shareholder upon the
redemption, exchange or other disposition of shares with a tax holding period of
six months or less will be treated as a long-term capital loss to the extent of
any amounts treated as distributions of long-term capital gain with respect to
such shares.
In addition, if Class A shares redeemed or exchanged have been held for
less than 91 days, (1) in the case of a reinvestment at net asset value pursuant
to the reinvestment privilege, the sales charge paid on such shares is not
included in their tax basis under the Code, and (2) in the case of an exchange,
all or a portion of the sales charge paid on such shares is not included in
their tax basis under the Code, to the extent a sales charge that would
otherwise apply to the shares received is reduced pursuant to the exchange
privilege. In either case, the portion of the sales charge not included in the
tax basis of the shares redeemed or surrendered in an exchange is included in
the tax basis of the shares acquired in the reinvestment or exchange. Losses on
redemptions or other dispositions of shares may be disallowed under "wash sale"
rules in the event of other investments in the Fund (including those made
pursuant to reinvestment of dividends and/or capital gain distributions) within
a period of 61 days beginning 30 days before and ending 30 days after a
redemption or other disposition of shares. In such a case, the disallowed
portion of any loss would be included in the federal tax basis of the shares
acquired in the other investments.
Options written or purchased by the Fund, as well as futures and
forward contracts, on foreign currencies may cause the Fund to recognize gains
or losses from marking-to-market even though such options may not have lapsed,
been closed out, or exercised and such futures or forward contracts may not have
been performed or closed out. The tax rules applicable to these contracts may
result in the treatment of the capital gains and losses realized by the Fund
from these contracts as ordinary income and losses in some cases. Losses on
certain options, futures or forward contracts and/or offsetting positions
(portfolio securities or other positions with respect to which the Fund's risk
of loss is substantially diminished by one or more options, futures or forward
contracts) may also be deferred under the tax straddle rules of the Code, which
may also affect the characterization of capital gains or losses from straddle
positions and certain successor positions as long-term or short-term Certain tax
elections may be available that would enable the Fund to ameliorate some adverse
effects of the tax rules described in this paragraph. The tax rules applicable
to options and straddles may affect the amount, timing and character of the
Fund's income and losses and hence of its distributions to shareholders.
For purposes of the 70% dividends-received deduction generally
available to corporations under the Code, dividends received by the Fund 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)
extending before and after each dividend held in an unleveraged position and
distributed and designated by the Fund may be treated as qualifying dividends.
Any corporate shareholder should consult its tax advisor 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 and, to the extent such basis would be reduced below zero, current
recognition of income may be required. In order to qualify for the deduction,
corporate shareholders must meet the minimum holding period requirement stated
above with respect to their Fund shares, taking into account any holding period
reductions from certain hedging or other transactions or positions that diminish
their risk of loss with respect to their Fund shares, and, if they borrow to
acquire or otherwise incur debst attributable to Fund shares, they 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, including taxes on interest, dividends and capital gains,
with respect to its investments in those countries. Tax conventions between
certain countries and the U.S. may reduce or eliminate such taxes in some cases.
The Fund does not expect to satisfy the requirements for passing through to its
shareholders their pro rata shares of qualified foreign taxes paid by the Fund,
with the result that shareholders will not include such taxes in their gross
incomes and will not be entitled to a tax deduction or credit for such taxes on
their own tax returns.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions, and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their tax
advisers for more information.
A state income (and possibly local income and/or intangible property)
tax exemption is generally available to the extent (if any) the Fund's
distributions are derived from interest on (or, in the case of intangible
property taxes, the value of its assets is attributable to) certain U.S.
government obligations, provided in some states that certain thresholds for
holdings of such obligations and/or reporting requirements are satisfied. The
Fund will not seek to satisfy any threshold or reporting requirements that may
apply in particular taxing jurisdictions, although the Fund may in its sole
discretion provide relevant information to shareholders.
Federal law requires that the Fund withhold (as "backup withholding")
31% of reportable payments, including taxable dividends, capital gain dividends
and the proceeds of redemptions (including exchanges) and repurchases to
shareholders who have not complied with IRS regulations. In order to avoid this
withholding requirement, shareholders must certify on their Account
Applications, or on separate IRS Forms W-9, that the Social Security Number or
other Taxpayer Identification Number they provide is their correct number and
that they are not currently subject to backup withholding, or that they are
exempt from backup withholding. The Fund may nevertheless be required to
withhold if it receives notice from the IRS or a broker that the number provided
is incorrect or backup withholding is applicable as a result of previous
underreporting of interest or dividend income.
If, as anticipated, the Fund continues to qualify as a regulated
investment company under the Code, it will not be required to pay any
Massachusetts income, corporate excise or franchise taxes or any Delaware
corporation income tax.
The description of certain federal tax provisions above relates only to
U.S. federal income tax consequences for shareholders who are U.S. persons, i.e.
U.S. citizens or residents or U.S. corporations, partnerships, trusts or
estates, and who are subject to U.S. federal income tax. This description does
not address the special tax rules that may be applicable to particular types of
investors, such as financial institutions, insurance companies, securities
dealers, or tax-exempt or tax-deferred plans, accounts or entities. Investors
other than U.S. persons may be subject to different U.S. tax treatment,
including a possible 30% non-resident alien U.S. withholding tax (or
non-resident alien withholding tax at a lower treaty rate) on amounts treated as
ordinary dividends from the Fund and, unless an effective IRS Form W-8 or
authorized substitute for Form W-8 is on file, to 31% backup withholding on
certain other payments from the Fund. Shareholders should consult their own tax
advisers on these matters and on state, local and other applicable tax laws.
12. DESCRIPTION OF SHARES
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. Reference to the Fund includes both the Delaware business trust and
the predecessor Nebraska corporation. 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. 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.
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.
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 Exchange (normally 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,
Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is also determined on any other day in which the level of
trading in its portfolio securities is sufficiently high that the current net
asset value per share might be materially affected by changes in the value of
its portfolio securities. On any day in which no purchase orders for the shares
of the Fund become effective and no shares are tendered for redemption, the
Fund's net asset value per share may not be determined.
The net asset value per share of each class of the Fund is computed by
taking the value of all of the Fund's assets attributable to that class, less
the Fund's liabilities attributable to that class, and dividing the result by
the number of outstanding shares of that class. For purposes of determining net
asset value, expenses of the 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 sale 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 the SWP. The applicant must deposit
or purchase for deposit with PSC shares of the Fund having a total value of not
less than $10,000. Periodic payments of $50 or more will be deposited monthly or
quarterly directly into a bank account designated by the applicant, or will be
sent by check to the applicant, or any person designated by the applicant. A
designation of a third party to receive payments subsequent to opening an
account requires an acceptable signature guarantee. Class B accounts must meet
the minimum initial investment requirement prior to establishing a SWP.
Withdrawals under a SWP 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 - Waiver or Reduction of Contingent Deferred Sales Charge" 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. 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. Redemptions are potentially taxable transactions
to shareholders. 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 INTENT
A Letter of Intent (an "LOI") may be established by completing the LOI
section of the Account Application. When you sign the Account Application, you
agree to irrevocably appoint PSC your attorney-in-fact to surrender for
redemption any or all shares held in escrow with full power of substitution. An
LOI is not a binding obligation upon the investor to purchase, or the Fund to
sell, the full amount indicated.
If the total purchases, less redemptions, exceed the amount specified
under the LOI and are in an amount which would qualify for a further quantity
discount, all transactions will be recomputed on the expiration date of the LOI
to effect the lower sales charge. Any difference in the sales charge resulting
from such recomputation will be either delivered to you in cash or invested in
additional shares at the lower sales charge. The dealer, by signing the Account
Application, agrees to return to PFD, as part of such retroactive adjustment,
the excess of the commission previously reallowed or paid to the dealer over
that which is applicable to the actual amount of the total purchases under the
LOI.
If the total purchases, less redemptions, are less than the amount
specified under the LOI, you must remit to PFD any difference between the sales
charge on the amount actually purchased and the amount originally specified in
the LOI section of the Account Application. When the difference is paid, the
shares held in escrow will be deposited to your account. If you do not pay the
difference in sales charge within 20 days after written request from PFD or your
dealer, PSC, after receiving instructions from PFD, will redeem the appropriate
number of shares held in escrow to realize the difference and release any
excess. See "How to Buy Fund Shares" in the Prospectus for more information.
16. INVESTMENT RESULTS
The Fund's yield quotations and average annual total return quotations
as they may appear in the Prospectus, this Statement of Additional Information
or in advertising materials are calculated by standard methods prescribed by the
SEC.
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 Merrill Lynch 1-3 Year Government Bond 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 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.
Standardized Yield Quotations
The yield of a class is computed by dividing the class'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 class 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.
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, 1997 was
2.82% for Class A shares, 2.10% for Class B shares and 1.88% for Class C shares.
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%.
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 average annual total returns for Class A, Class B and Class C
shares of the Fund as of December 31, 1997 are as follows:
Average Annual Total Return (%)
One Year Five Years Ten Years Since Inception*
Class A Shares 8.81 8.99 10.22 8.78
Class B Shares 9.17 N/A N/A 12.49
Class C Shares 13.48 N/A N/A 11.24
*Inception 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 (FactFoneSM)
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 Cash Reserves Fund; 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 (except for
Pioneer Cash Reserves Fund, which seeks a stable $1.00 share price) will also
vary, and such shares may be worth more or less at redemption than their
original cost.
<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, filed with the SEC on February 23, 1998
(Accession No. 0000069405-98-000001), is incorporated by reference into this
Statement of Additional Information. The financial statements in the Fund's
Annual Report, including the financial highlights, for the period ended December
31, 1997, included or incorporated by reference into the Prospectus and this
Statement of Additional Information, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect to the
financial statements, and are included in reliance upon the authority of Arthur
Andersen LLP as experts in accounting and auditing in giving their report.
<PAGE>
APPENDIX A
DESCRIPTION OF SHORT-TERM DEBT AND CORPORATE BOND RATINGS1
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM PRIME RATING SYSTEM -
TAXABLE DEBT AND DEPOSITS GLOBALLY
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
Prime-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
Leading market positions in well-established industries. High rates of
return on funds employed.
Conservative capitalization structure with moderate reliance on debt
and ample asset protection. Broad margins in earnings coverage of fixed
financial charges and high internal cash generation. Well-established
access to a range of financial markets and assured sources of alternate
liquidity.
Prime-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
Not Prime: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Obligations of a branch of a bank are considered to be domiciled in the country
in which the branch is located. Unless noted as an exception, Moody's rating on
a bank's ability to repay senior obligations extends only to branches located in
countries which carry a Moody's Sovereign Rating for Bank Deposits. Such branch
obligations are rated at the lower of the bank's rating or Moody's Sovereign
Rating for Bank Deposits for the country in which the branch is located.
When the currency in which an obligation is denominated is not the same as the
currency of the country in which the obligation is domiciled, Moody's ratings do
not incorporate an opinion as to whether payment of the obligation will be
affected by actions of the government controlling the currency of denomination.
In addition, risks associated with bilateral conflicts between an investor's
home country and either the issuer's home country or the country where an
issuer's branch is located are not incorporated into Moody's short-term debt
ratings.
If an issuer represents to Moody's that its short-term debt obligations are
supported by the credit of another entity or entities, then the name or names of
such supporting entity or entities are listed within the parenthesis beneath the
name of the issuer, or there is a footnote referring the reader to another page
for the name or names of the supporting entity or entities. In assigning ratings
to such issuers, Moody's evaluates the financial strength of the affiliated
corporations, commercial banks, insurance companies, foreign governments or
other entities, but only as one factor in the total rating assessment.
MOODY'S CORPORATE BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicated that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicated
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
STANDARD & POOR'S SHORT-TERM ISSUE CREDIT RATINGS
A-1: A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B: A short-term obligation rated B is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C: A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
STANDARD & POOR'S CORPORATE BOND RATINGS
AAA: An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA: An obligation rated AA differs from the highest-rated obligations only in a
small degree. The obligor's capacity to meet
its financial commitment on the obligation is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to the
obligor's capacity to meet its financial commitment on the obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial or economic conditions, the obligor is not likely to
have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.
D: An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments are jeopardized.
PLUS (+) OR MINUS (-): The rating from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major categories.
r: This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk, such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
- --------
1 The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such ratings,
they undertake no obligation to do so, and the ratings indicated do not
necessarily represent ratings which will be given to these securities on the
date of the Fund's fiscal year-end.
<PAGE>
Appendix B
Pioneer Balanced Fund
Class A Shares
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Initial Net
Initial Offering Sales Charge Shares Value Asset
Date Investment Price Included Purchased Per Share Value
12/31/86 $10,000 $9.36 4.50% 1,068.376 8.94 $9,550
</TABLE>
Value of Shares
Dividends and Capital Gains Reinvested
<TABLE>
<S> <C> <C> <C> <C>
From Investment From Capital From Dividends Total
Date Gains Reinvested Reinvested Value
12/31/87 $9,263 $145 $795 $10,203
12/31/88 $9,530 $164 $1,763 $11,457
12/31/89 $10,182 $175 $2,921 $13,278
12/31/90 $9,765 $168 $3,821 $13,754
12/31/91 $10,833 $186 $5,296 $16,315
12/31/92 $10,823 $345 $6,385 $17,553
12/31/93 $10,908 $892 $7,550 $19,350
12/31/94 $9,733 $796 $7,988 $18,517
12/31/95 $11,004 $1,133 $10,453 $22,590
12/31/96 $11,378 $1,174 $12,273 $24,825
12/31/97 $10,844 $4,850 $12,587 $28,281
</TABLE>
<PAGE>
Pioneer Balanced Fund
Class B Shares
<TABLE>
<S> <C> <C> <C> <C> <C>
Net Asset Initial Net
Initial Offering Shares Value Asset
Date Investment Price Purchased Per Share Value
4/28/95 $10,000 $9.55 1,047.120 $9.55 $10,000
</TABLE>
Value of Shares
Dividends and Capital Gains Reinvested
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
From Investment From Capital From Dividends Contingent Total Value CDSC
--------------- ------------- --------------- ---------- ----------- ----
Date Gains Reinvested Reinvested Deferred Sales if Redeemed Percentage
---- ---------------- ----------- --------------- ----------- ----------
Charge if
Redeemed
12/31/95 $10,753 $118 $503 $400 $10,974 4.00%
12/31/96 $11,089 $123 $1,188 $400 $12,000 4.00%
12/31/97 $10,556 $1,981 $1,473 $300 $13,710 3.00%
</TABLE>
<PAGE>
Pioneer Balanced Fund
Class C Shares
<TABLE>
<S> <C> <C> <C> <C> <C>
Net Asset Initial Net
Initial Offering Shares Value Asset
Date Investment Price Purchased Per Share Value
1/31/96 $10,000 $10.39 962.464 $10.39 $10,000
</TABLE>
Value of Shares
Dividends and Capital Gains Reinvested
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
From Investment From Capital From Dividends Contingent Total Value CDSC
--------------- ------------- --------------- ---------- ----------- ----
Date Gains Reinvested Reinvested Deferred Sales if Redeemed Percentage
---- ---------------- ----------- --------------- ----------- ----------
Charge if
Redeemed
12/31/96 $10,222 $1 $589 $100 $10,712 1.00%
12/31/97 $9,788 $1,622 $859 0 $12,269 0.00%
</TABLE>
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
The following securities indices are well known, unmanaged measures of market
performance. Advertisements and sales literature for the Fund may refer to these
indices or may present comparisons between the performance of the Fund and one
or more of the indices. Other indices may also be used, if appropriate. The
indices are not available for direct investment. The data presented are not
meant to be indicative of the performance of the Fund, do not reflect past
performance and do not guarantee future results.
S&P 500
This index is a readily available, carefully constructed, market value weighted
benchmark of common stock performance. Currently, the S&P 500 includes 500 of
the largest stocks (in terms of stock market value) in the U.S.
DOW JONES INDUSTRIAL AVERAGE
This is a total return index based on the performance of stocks of 30 blue chip
companies widely held by individuals and institutional investors. The 30 stocks
represent about a fifth of the $8 trillion-plus market value of all U.S. stocks
and about a fourth of the value of stocks listed on the New York Stock Exchange
(NYSE).
U.S. SMALL STOCK INDEX
This index is a market value weighted index of the ninth and tenth deciles of
the NYSE, plus stocks listed on the American Stock Exchange and over the counter
with the same or less capitalization as the upper bound of the NYSE ninth
decile.
U.S. INFLATION
The Consumer Price Index for All Urban Consumers (CPI-U), not seasonally
adjusted, is used to measure inflation, which is the rate of change of consumer
goods prices. Unfortunately, the inflation rate as derived by the CPI is not
measured over the same period as the other asset returns. All of the security
returns are measured from one month-end to the next month-end. CPI commodity
prices are collected during the month. Thus, measured inflation rates lag the
other series by about one-half month. Prior to January 1978, the CPI (as
compared with CPI-U) was used. Both inflation measures are constructed by the
U.S.
Department of Labor, Bureau of Labor Statistics, Washington, DC.
S&P/BARRA INDEXES
The S&P/BARRA Growth and Value Indexes are constructed by dividing the stocks in
the S&P 500 according to price-to-book ratios. The Growth Index contains stocks
with higher price-to-book ratios, and the Value Index contains stocks with lower
price-to-book ratios. Both indexes are market capitalization weighted.
MERRILL LYNCH MICRO-CAP INDEX
The Merrill Lynch Micro-Cap Index represents the performance of 2,036 stocks
ranging in market capitalization from $50 million to $220 million. Index returns
are calculated monthly.
LONG-TERM U.S. GOVERNMENT BONDS
The total returns on long-term government bonds after 1977 are constructed with
data from The Wall Street Journal and are calculated as the change in the flat
price or and-interest price. From 1926 to 1976, data are obtained from the
government bond file at the Center for Research in Security Prices (CRSP),
Graduate School of Business, University of Chicago. Each year, a one-bond
portfolio with a term of approximately 20 years and a reasonably current coupon
was used and whose returns did not reflect potential tax benefits, impaired
negotiability or special redemption or call privileges. Where callable bonds had
to be used, the term of the bond was assumed to be a simple average of the
maturity and first call dates minus the current date. The bond was "held" for
the calendar year and returns were computed.
INTERMEDIATE-TERM U.S. GOVERNMENT BONDS
Total returns of intermediate-term government bonds after 1987 are calculated
from The Wall Street Journal prices, using the change in flat price. Returns
from 1934 to 1986 are obtained from the CRSP government bond file.
Each year, one-bond portfolios are formed, the bond chosen is the shortest
noncallable bond with a maturity not less than five years, and this bond is
"held" for the calendar year. Monthly returns are computed. (Bonds with impaired
negotiability or special redemption privileges are omitted, as are partially or
fully tax-exempt bonds starting with 1943.) From 1934 to 1942, almost all bonds
with maturities near five years were partially or fully tax-exempt and were
selected using the rules described above. Personal tax rates were generally low
in that period, so that yields on tax-exempt bonds were similar to yields on
taxable bonds. From 1926 to 1933, there are few bonds suitable for construction
of a series with a five-year maturity. For this period, five-year bond yield
estimates are used.
MORGAN STANLEY CAPITAL INTERNATIONAL ("MSCI")
MSCI's international indices are based on the share prices of approximately
1,700 companies listed on stock exchanges in the 22 countries that make up the
MSCI World Index. MSCI's emerging market indices are comprised of approximately
1000 stocks from 26 countries.
Countries in the MSCI EAFE Index are: Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and
United Kingdom.
Countries in the MSCI Emerging Markets Free Index are: Argentina, Brazil, Chile,
China Free, Czech Republic, Colombia, Greece, Hungary, India, Indonesia Free,
Israel, Jordan, Korea (at 50%), Malaysia Free, Mexico Free, Pakistan, Peru,
Philippines Free, Poland, Portugal, South Africa, Sri Lanka, Taiwan (at 50%),
Thailand Free, Turkey and Venezuela.
6-MONTH CDs
Data sources include the Federal Reserve Bulletin and The Wall Street Journal.
LONG-TERM U.S. CORPORATE BONDS
Since 1969, corporate bond total returns are represented by the Salomon Brothers
Long-Term High-Grade Corporate Bond Index. As most large corporate bond
transactions take place over the counter, a major dealer is the natural source
of these data. The index includes nearly all Aaa- and Aa-rated bonds with at
least 10 years to maturity. If a bond is downgraded during a particular month,
its return for the month is included in the index before removing the bond from
future portfolios.
From 1926 to 1968 the total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946 to 1968,
Ibbotson and Sinquefield backdated the Salomon Brothers' index, using Salomon
Brothers' monthly yield data with a methodology similar to that used by Salomon
Brothers for 1969 to 1995. Capital appreciation returns were calculated from
yields assuming (at the beginning of each monthly holding period) a 20-year
maturity, a bond price equal to par, and a coupon equal to the
beginning-of-period yield. For the period 1926 to 1945, Standard & Poor's
monthly high-grade corporate composite yield data were used, assuming a 4%
coupon and a 20-year maturity. The conventional present-value formula for bond
price for the beginning and end-of-month prices was used. (This formula is
presented in Ross, Stephen A., and Westerfield, Randolph W. Corporate Finance,
Times Mirror/Mosby, St. Louis, 1990, p. 97 ["Level-Coupon Bonds"].) The monthly
income return was assumed to be one-twelfth the coupon.
U.S. (30-DAY) TREASURY BILLS
For the U.S. Treasury Bill Index, data from The Wall Street Journal are used
after 1977; the CRSP government bond file is the source until 1976. Each month a
one-bill portfolio containing the shortest-term bill having not less than one
month to maturity is constructed. (The bill's original term to maturity is not
relevant.) To measure holding period returns for the one-bill portfolio, the
bill is priced as of the last trading day of the previous month-end and as of
the last trading day of the current month.
NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT TRUSTS
("NAREIT")EQUITY REIT INDEX
All of the data are based upon the last closing price of the month for all
tax-qualified REITs listed on the NYSE, AMEX and NASDAQ. The data are
market-value-weighted. Prior to 1987 REITs were added to the index the January
following their listing. Since 1987 newly formed or listed REITs are added to
the total shares outstanding figure in the month that the shares are issued.
Only common shares issued by the REIT are included in the index. The total
return calculation is based upon the weighting at the beginning of the period.
Only those REITs listed for the entire period are used in the total return
calculation. Dividends are included in the month based upon their payment date.
There is no smoothing of income.
Liquidating dividends, whether full or partial, are treated as income.
RUSSELL U.S. EQUITY INDEXES
The Russell 3000(R) Index (the "Russell 3000") is comprised of the 3,000 largest
U.S. companies as determined by market capitalization representing approximately
98% of the U.S. equity market. The average market capitalization is
approximately $2.8 billion. The Russell 2500TM Index measures performance of the
2,500 smallest companies in the Russell 3000. The average market capitalization
is approximately $733.4 million, and the largest company in the index has an
approximate market capitalization of $2.9 billion. The Russell 2000(R) Index
measures performance of the 2,000 smallest stocks in the Russell 3000; the
largest company in the index has a market capitalization of approximately $1.1
billion. The Russell 1000(R) Index (the "Russell 1000") measures the performance
of the 1,000 largest companies in the Russell 3000. The average market
capitalization is approximately $7.6 billion. The smallest company in the index
has an approximate market capitalization of $1.1 billion. The Russell MidcapTM
Index measures performance of the 800 smallest companies in the Russell 1000.
The largest company in the index has an approximate market capitalization of
$8.0 billion.
The Russell indexes are reconstituted annually as of July 1, based on May 31
market capitalization rankings.
WILSHIRE REAL ESTATE SECURITIES INDEX
The Wilshire Real Estate Securities Index is a market capitalization weighted
index of 120 publicly traded real estate securities, such as REITs, real estate
operating companies ("REOCs") and partnerships.
The index contains performance data on five major categories of property:
office, retail, industrial, apartment and miscellaneous. The companies in the
index are 91.66% equity and hybrid REITs and 8.33% REOCs.
STANDARD & POOR'S MIDCAP 400 INDEX
The S&P 400 is a market-capitalization-weighted index. The performance data for
the index were calculated by taking the stocks presently in the index and
tracking them backward in time as long as there were prices reported. No attempt
was made to determine what stocks "might have been" in the S&P 400 five or ten
years ago had it existed. Dividends are reinvested on a monthly basis prior to
June 30, 1991, and are reinvested daily thereafter.
LIPPER BALANCED FUNDS INDEX
This index represents equally weighted performance, adjusted for capital gains
distributions and income dividends, of approximately 30 of the largest funds
with a primary objective of conserving principal by maintaining at all times a
balanced portfolio of stocks and bonds. Typically, the stock/bond ratio ranges
around 60%/40%.
BANK SAVINGS ACCOUNT
Data sources include the U.S. League of Savings Institutions Sourcebook; average
annual yield on savings deposits in FSLIC [FDIC] insured savings institutions
for the years 1963 to 1987; and The Wall Street Journal thereafter.
Sources: Ibbotson Associates, Towers Data Systems, Lipper Analytical Services,
Inc. Merrill Lynch and PGI
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Dow S&P/ S&P/
S&P Jones U.S. Small BARRA BARRA Merrill Lynch
500 Industrial Stock U.S. 500 500 Micro-Cap
Average Index Inflation Growth Value Index
- ----------------------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 11.62 N/A 0.28 -1.49 N/A N/A N/A
Dec 1927 37.49 N/A 22.10 -2.08 N/A N/A N/A
Dec 1928 43.61 55.38 39.69 -0.97 N/A N/A N/A
Dec 1929 -8.42 -13.64 -51.36 0.20 N/A N/A N/A
Dec 1930 -24.90 -30.22 -38.15 -6.03 N/A N/A N/A
Dec 1931 -43.34 -49.02 -49.75 -9.52 N/A N/A N/A
Dec 1932 -8.19 -16.88 -5.39 -10.30 N/A N/A N/A
Dec 1933 53.99 73.72 142.87 0.51 N/A N/A N/A
Dec 1934 -1.44 8.08 24.22 2.03 N/A N/A N/A
Dec 1935 47.67 43.77 40.19 2.99 N/A N/A N/A
Dec 1936 33.92 30.23 64.80 1.21 N/A N/A N/A
Dec 1937 -35.03 -28.88 -58.01 3.10 N/A N/A N/A
Dec 1938 31.12 33.16 32.80 -2.78 N/A N/A N/A
Dec 1939 -0.41 1.31 0.35 -0.48 N/A N/A N/A
Dec 1940 -9.78 -7.96 -5.16 0.96 N/A N/A N/A
Dec 1941 -11.59 -9.88 -9.00 9.72 N/A N/A N/A
Dec 1942 20.34 14.13 44.51 9.29 N/A N/A N/A
Dec 1943 25.90 19.06 88.37 3.16 N/A N/A N/A
Dec 1944 19.75 17.19 53.72 2.11 N/A N/A N/A
Dec 1945 36.44 31.60 73.61 2.25 N/A N/A N/A
Dec 1946 -8.07 -4.40 -11.63 18.16 N/A N/A N/A
Dec 1947 5.71 7.61 0.92 9.01 N/A N/A N/A
Dec 1948 5.50 4.27 -2.11 2.71 N/A N/A N/A
Dec 1949 18.79 20.92 19.75 -1.80 N/A N/A N/A
Dec 1950 31.71 26.40 38.75 5.79 N/A N/A N/A
Dec 1951 24.02 21.77 7.80 5.87 N/A N/A N/A
Dec 1952 18.37 14.58 3.03 0.88 N/A N/A N/A
Dec 1953 -0.99 2.02 -6.49 0.62 N/A N/A N/A
Dec 1954 52.62 51.25 60.58 -0.50 N/A N/A N/A
Dec 1955 31.56 26.58 20.44 0.37 N/A N/A N/A
Dec 1956 6.56 7.10 4.28 2.86 N/A N/A N/A
Dec 1957 -10.78 -8.63 -14.57 3.02 N/A N/A N/A
Dec 1958 43.36 39.31 64.89 1.76 N/A N/A N/A
Dec 1959 11.96 20.21 16.40 1.50 N/A N/A N/A
Dec 1960 0.47 -6.14 -3.29 1.48 N/A N/A N/A
Dec 1961 26.89 22.60 32.09 0.67 N/A N/A N/A
Dec 1962 -8.73 -7.43 -11.90 1.22 N/A N/A N/A
Dec 1963 22.80 20.83 23.57 1.65 N/A N/A N/A
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Dow S&P/ S&P/
S&P Jones U.S. Small BARRA 500 BARRA Merrill Lynch
500 Industrial Stock U.S. Growth 500 Micro-Cap
Average Index Inflation Value Index
- ----------------------------------------------------------------------------------------------------------------------
Dec 1964 16.48 18.85 23.52 1.19 N/A N/A N/A
Dec 1965 12.45 14.39 41.75 1.92 N/A N/A N/A
Dec 1966 -10.06 -15.78 -7.01 3.35 N/A N/A N/A
Dec 1967 23.98 19.16 83.57 3.04 N/A N/A N/A
Dec 1968 11.06 7.93 35.97 4.72 N/A N/A N/A
Dec 1969 -8.50 -11.78 -25.05 6.11 N/A N/A N/A
Dec 1970 4.01 9.21 -17.43 5.49 N/A N/A N/A
Dec 1971 14.31 9.83 16.50 3.36 N/A N/A N/A
Dec 1972 18.98 18.48 4.43 3.41 N/A N/A N/A
Dec 1973 -14.66 -13.28 -30.90 8.80 N/A N/A N/A
Dec 1974 -26.47 -23.58 -19.95 12.20 N/A N/A N/A
Dec 1975 37.20 44.75 52.82 7.01 31.72 43.38 N/A
Dec 1976 23.84 22.82 57.38 4.81 13.84 34.93 N/A
Dec 1977 -7.18 -12.84 25.38 6.77 -11.82 -2.57 N/A
Dec 1978 6.56 2.79 23.46 9.03 6.78 6.16 27.76
Dec 1979 18.44 10.55 43.46 13.31 15.72 21.16 43.18
Dec 1980 32.42 22.17 39.88 12.40 39.40 23.59 32.32
Dec 1981 -4.91 -3.57 13.88 8.94 -9.81 0.02 9.18
Dec 1982 21.41 27.11 28.01 3.87 22.03 21.04 33.62
Dec 1983 22.51 25.97 39.67 3.80 16.24 28.89 42.44
Dec 1984 6.27 1.31 -6.67 3.95 2.33 10.52 -14.97
Dec 1985 32.16 33.55 24.66 3.77 33.31 29.68 22.89
Dec 1986 18.47 27.10 6.85 1.13 14.50 21.67 3.45
Dec 1987 5.23 5.48 -9.30 4.41 6.50 3.68 -13.84
Dec 1988 16.81 16.14 22.87 4.42 11.95 21.67 22.76
Dec 1989 31.49 32.19 10.18 4.65 36.40 26.13 8.06
Dec 1990 -3.17 -0.56 -21.56 6.11 0.20 -6.85 -29.55
Dec 1991 30.55 24.19 44.63 3.06 38.37 22.56 57.44
Dec 1992 7.67 7.41 23.35 2.90 5.07 10.53 36.62
Dec 1993 9.99 16.94 20.98 2.75 1.68 18.60 31.32
Dec 1994 1.31 5.06 3.11 2.67 3.13 -0.64 1.81
Dec 1995 37.43 36.84 34.46 2.54 38.13 36.99 30.70
Dec 1996 23.07 28.84 17.62 3.32 23.96 21.99 13.88
Dec 1997 33.36 24.88 22.78 1.92 36.52 29.98 24.61
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Long- Intermediate- MSCI Long-
Term Term U.S. EAFE 6- Term U.S. U.S.
U.S. Gov't Government (Net of Month Corporate T-Bill
Bonds Bonds Taxes) CDs Bonds (30-Day)
- ------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A
Dec 1926 7.77 5.38 N/A N/A 7.37 3.27
Dec 1927 8.93 4.52 N/A N/A 7.44 3.12
Dec 1928 0.10 0.92 N/A N/A 2.84 3.56
Dec 1929 3.42 6.01 N/A N/A 3.27 4.75
Dec 1930 4.66 6.72 N/A N/A 7.98 2.41
Dec 1931 -5.31 -2.32 N/A N/A -1.85 1.07
Dec 1932 16.84 8.81 N/A N/A 10.82 0.96
Dec 1933 -0.07 1.83 N/A N/A 10.38 0.30
Dec 1934 10.03 9.00 N/A N/A 13.84 0.16
Dec 1935 4.98 7.01 N/A N/A 9.61 0.17
Dec 1936 7.52 3.06 N/A N/A 6.74 0.18
Dec 1937 0.23 1.56 N/A N/A 2.75 0.31
Dec 1938 5.53 6.23 N/A N/A 6.13 -0.02
Dec 1939 5.94 4.52 N/A N/A 3.97 0.02
Dec 1940 6.09 2.96 N/A N/A 3.39 0.00
Dec 1941 0.93 0.50 N/A N/A 2.73 0.06
Dec 1942 3.22 1.94 N/A N/A 2.60 0.27
Dec 1943 2.08 2.81 N/A N/A 2.83 0.35
Dec 1944 2.81 1.80 N/A N/A 4.73 0.33
Dec 1945 10.73 2.22 N/A N/A 4.08 0.33
Dec 1946 -0.10 1.00 N/A N/A 1.72 0.35
Dec 1947 -2.62 0.91 N/A N/A -2.34 0.50
Dec 1948 3.40 1.85 N/A N/A 4.14 0.81
Dec 1949 6.45 2.32 N/A N/A 3.31 1.10
Dec 1950 0.06 0.70 N/A N/A 2.12 1.20
Dec 1951 -3.93 0.36 N/A N/A -2.69 1.49
Dec 1952 1.16 1.63 N/A N/A 3.52 1.66
Dec 1953 3.64 3.23 N/A N/A 3.41 1.82
Dec 1954 7.19 2.68 N/A N/A 5.39 0.86
Dec 1955 -1.29 -0.65 N/A N/A 0.48 1.57
Dec 1956 -5.59 -0.42 N/A N/A -6.81 2.46
Dec 1957 7.46 7.84 N/A N/A 8.71 3.14
Dec 1958 -6.09 -1.29 N/A N/A -2.22 1.54
Dec 1959 -2.26 -0.39 N/A N/A -0.97 2.95
Dec 1960 13.78 11.76 N/A N/A 9.07 2.66
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Long- Intermediate- MSCI Long-
Term Term U.S. EAFE 6- Term U.S. U.S.
U.S. Gov't Government (Net of Month Corporate T-Bill
Bonds Bonds Taxes) CDs Bonds (30-Day)
- ------------------------------------------------------------------------------------------------------
Dec 1961 0.97 1.85 N/A N/A 4.82 2.13
Dec 1962 6.89 5.56 N/A N/A 7.95 2.73
Dec 1963 1.21 1.64 N/A N/A 2.19 3.12
Dec 1964 3.51 4.04 N/A 4.17 4.77 3.54
Dec 1965 0.71 1.02 N/A 4.68 -0.46 3.93
Dec 1966 3.65 4.69 N/A 5.76 0.20 4.76
Dec 1967 -9.18 1.01 N/A 5.47 -4.95 4.21
Dec 1968 -0.26 4.54 N/A 6.45 2.57 5.21
Dec 1969 -5.07 -0.74 N/A 8.70 -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 5.39 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 6.11 1.71 5.12
Dec 1978 -1.18 3.49 32.62 10.21 -0.07 7.18
Dec 1979 -1.23 4.09 4.75 11.90 -4.18 10.38
Dec 1980 -3.95 3.91 22.58 12.33 -2.76 11.24
Dec 1981 1.86 9.45 -2.28 15.50 -1.24 14.71
Dec 1982 40.36 29.10 -1.86 12.18 42.56 10.54
Dec 1983 0.65 7.41 23.69 9.65 6.26 8.80
Dec 1984 15.48 14.02 7.38 10.65 16.86 9.85
Dec 1985 30.97 20.33 56.16 7.82 30.09 7.72
Dec 1986 24.53 15.14 69.44 6.30 19.85 6.16
Dec 1987 -2.71 2.90 24.63 6.59 -0.27 5.47
Dec 1988 9.67 6.10 28.27 8.15 10.70 6.35
Dec 1989 18.11 13.29 10.54 8.27 16.23 8.37
Dec 1990 6.18 9.73 -23.45 7.85 6.78 7.81
Dec 1991 19.30 15.46 12.13 4.95 19.89 5.60
Dec 1992 8.05 7.19 -12.17 3.27 9.39 3.51
Dec 1993 18.24 11.24 32.56 2.88 13.19 2.90
Dec 1994 -7.77 -5.14 7.78 5.40 -5.76 3.90
Dec 1995 31.67 16.80 11.21 5.21 27.20 5.60
Dec 1996 -0.93 2.10 6.05 5.21 1.40 5.21
Dec 1997 15.85 8.38 1.78 5.71 12.95 5.26
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
NAREIT Lipper MSCI
Equity Russell Wilshire Balanced Emerging Bank
REIT 2000 Real Estate S&P Fund Markets Savings
Index Index Securities 400 Index Free Index Account
- -----------------------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 N/A N/A N/A N/A N/A N/A N/A
Dec 1927 N/A N/A N/A N/A N/A N/A N/A
Dec 1928 N/A N/A N/A N/A N/A N/A N/A
Dec 1929 N/A N/A N/A N/A N/A N/A N/A
Dec 1930 N/A N/A N/A N/A N/A N/A 5.30
Dec 1931 N/A N/A N/A N/A N/A N/A 5.10
Dec 1932 N/A N/A N/A N/A N/A N/A 4.10
Dec 1933 N/A N/A N/A N/A N/A N/A 3.40
Dec 1934 N/A N/A N/A N/A N/A N/A 3.50
Dec 1935 N/A N/A N/A N/A N/A N/A 3.10
Dec 1936 N/A N/A N/A N/A N/A N/A 3.20
Dec 1937 N/A N/A N/A N/A N/A N/A 3.50
Dec 1938 N/A N/A N/A N/A N/A N/A 3.50
Dec 1939 N/A N/A N/A N/A N/A N/A 3.40
Dec 1940 N/A N/A N/A N/A N/A N/A 3.30
Dec 1941 N/A N/A N/A N/A N/A N/A 3.10
Dec 1942 N/A N/A N/A N/A N/A N/A 3.00
Dec 1943 N/A N/A N/A N/A N/A N/A 2.90
Dec 1944 N/A N/A N/A N/A N/A N/A 2.80
Dec 1945 N/A N/A N/A N/A N/A N/A 2.50
Dec 1946 N/A N/A N/A N/A N/A N/A 2.20
Dec 1947 N/A N/A N/A N/A N/A N/A 2.30
Dec 1948 N/A N/A N/A N/A N/A N/A 2.30
Dec 1949 N/A N/A N/A N/A N/A N/A 2.40
Dec 1950 N/A N/A N/A N/A N/A N/A 2.50
Dec 1951 N/A N/A N/A N/A N/A N/A 2.60
Dec 1952 N/A N/A N/A N/A N/A N/A 2.70
Dec 1953 N/A N/A N/A N/A N/A N/A 2.80
Dec 1954 N/A N/A N/A N/A N/A N/A 2.90
Dec 1955 N/A N/A N/A N/A N/A N/A 2.90
Dec 1956 N/A N/A N/A N/A N/A N/A 3.00
Dec 1957 N/A N/A N/A N/A N/A N/A 3.30
Dec 1958 N/A N/A N/A N/A N/A N/A 3.38
Dec 1959 N/A N/A N/A N/A N/A N/A 3.53
Dec 1960 N/A N/A N/A N/A 5.77 N/A 3.86
Dec 1961 N/A N/A N/A N/A 20.59 N/A 3.90
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
NAREIT Lipper MSCI
Equity Russell Wilshire Balanced Emerging Bank
REIT 2000 Real Estate S&P Fund Markets Savings
Index Index Securities 400 Index Free Index Account
- -----------------------------------------------------------------------------------------------------------------------
Dec 1962 N/A N/A N/A N/A -6.80 N/A 4.08
Dec 1963 N/A N/A N/A N/A 13.10 N/A 4.17
Dec 1964 N/A N/A N/A N/A 12.36 N/A 4.19
Dec 1965 N/A N/A N/A N/A 9.80 N/A 4.23
Dec 1966 N/A N/A N/A N/A -5.86 N/A 4.45
Dec 1967 N/A N/A N/A N/A 15.09 N/A 4.67
Dec 1968 N/A N/A N/A N/A 13.97 N/A 4.68
Dec 1969 N/A N/A N/A N/A -9.01 N/A 4.80
Dec 1970 N/A N/A N/A N/A 5.62 N/A 5.14
Dec 1971 N/A N/A N/A N/A 13.90 N/A 5.30
Dec 1972 8.01 N/A N/A N/A 11.13 N/A 5.37
Dec 1973 -15.52 N/A N/A N/A -12.24 N/A 5.51
Dec 1974 -21.40 N/A N/A N/A -18.71 N/A 5.96
Dec 1975 19.30 N/A N/A N/A 27.10 N/A 6.21
Dec 1976 47.59 N/A N/A N/A 26.03 N/A 6.23
Dec 1977 22.42 N/A N/A N/A -0.72 N/A 6.39
Dec 1978 10.34 N/A 13.04 N/A 4.80 N/A 6.56
Dec 1979 35.86 43.09 70.81 N/A 14.67 N/A 7.29
Dec 1980 24.37 38.58 22.08 N/A 19.70 N/A 8.78
Dec 1981 6.00 2.03 7.18 N/A 1.86 N/A 10.71
Dec 1982 21.60 24.95 24.47 22.68 30.63 N/A 11.19
Dec 1983 30.64 29.13 27.61 26.10 17.44 N/A 9.71
Dec 1984 20.93 -7.30 20.64 1.18 7.46 N/A 9.92
Dec 1985 19.10 31.05 22.20 35.58 29.83 N/A 9.02
Dec 1986 19.16 5.68 20.30 16.21 18.43 N/A 7.84
Dec 1987 -3.64 -8.77 -7.86 -2.03 4.13 N/A 6.92
Dec 1988 13.49 24.89 24.18 20.87 11.18 40.43 7.20
Dec 1989 8.84 16.24 2.37 35.54 19.70 64.96 7.91
Dec 1990 -15.35 -19.51 -33.46 -5.12 0.66 -10.55 7.80
Dec 1991 35.70 46.05 20.03 50.10 25.83 59.91 4.61
Dec 1992 14.59 18.41 7.36 11.91 7.46 11.40 2.89
Dec 1993 19.65 18.91 15.24 13.96 11.95 74.83 2.73
Dec 1994 3.17 -1.82 1.64 -3.57 -2.05 -7.32 4.96
Dec 1995 15.27 28.44 13.65 30.94 24.89 -5.21 5.24
Dec 1996 35.26 16.53 36.87 19.20 13.01 6.03 4.95
Dec 1997 20.29 22.36 19.80 32.26 20.05 -11.59 5.17
</TABLE>
<PAGE>
APPENDIX C
OTHER PIONEER INFORMATION
The Pioneer group of mutual funds was established in 1928 with the creation of
Pioneer Fund. Pioneer is one of the oldest and most experienced money managers
in the United States.
As of December 31, 1997, PMC employed a professional investment staff of 58,
with a combined average of 12 years' experience in the financial services
industry.
Total assets of all Pioneer mutual funds at December 31, 1997, were
approximately $19.8 billion representing 1,177,148 shareholder accounts
consisting of 791,468 non-retirement accounts and 385,680 retirement accounts.
<PAGE>
PIONEER BALANCED FUND
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
The financial highlights of the Registrant are included in
Part A of the Registration Statement and the financial
statements of the Registrant are incorporated by reference
into Part B of the Registration Statement from the 1997 Annual
Report to Shareholders for the year ended December 31, 1997
(filed electronically on February 23, 1998; file no. 811-1605;
accession number 0000069405-98-000001).
(b) Exhibits:
1.1 Declaration of Trust*
1.2 Establishment and Designation of Class B Shares*
1.3 Establishment and Designation of Class C Shares**
1.4 Form of Amendment to Agreement and Declaration of
Trust***
2. By-Laws*
3. None
4. None
5. Form of Management Contract***
6.1 Form of Underwriting Agreement*
6.2 Form of Dealer Sales Agreement**
7. None
8. Form of Custodian Agreement; and the Assignment dated
August 28, 1990*
9. Form of Investment Company Service Agreement*
<PAGE>
10. Opinion of Morris, Nichols, Arsht & Tunnell**
11. Consent of Independent Public Accountants+
12. None
13. Understanding~
14. None
15.1 Plan of Distribution*
15.2 Class B Plan of Distribution*
15.3 Class C Plan of Distribution**
16.1 Schedule of Computation of Total Return*
16.2 Schedule of Computation of Yield*
17. Financial Data Schedule+
18. Rule 18f-3 Plan Covering Two Classes of Shares**
18.1 Rule 18f-3 Plan Covering Three Classes of Shares**
19. Powers of Attorney+
---------------
~ Incorporated by reference from the Registrant's
Registration Statement on Form N-1A (File No.2-28273 and
811-1605-3) as filed electronically with the Securities
and Exchange Commission as Post-Effective Amendment No. 31
on March 18, 1980.
* Incorporated by reference from the Registrant's
Registration Statement on Form N-1A (File No. 2-28273 and
811-1605-3) as filed electronically with the Securities
and Exchange Commission as Post-Effective Amendment No. 56
on April 26, 1995.
C-2
<PAGE>
** Incorporated by reference from the Registrant's
Registration Statement on Form N-1A (File No.2-28273 and
811-1605-3) as filed electronically with the Securities
and Exchange Commission as Post-Effective Amendment No. 57
on April 26, 1996
*** Incorporated by reference from the Registrant's
Registration Statement on Form N-1A (File No.2-28273 and
811-1605-3) as filed electronically with the Securities
and Exchange Commission as Post-Effective Amendment No. 58
on November 27, 1996
+ Filed herewith.
Item 25. Persons Controlled By or Under
Common Control With Registrant
Percent State/Country
of of
Company Owned By Shares Incorporation
------- -------- ------ -------------
Pioneering Management Corp. (PMC) PGI 100% DE
Pioneering Services Corp. (PSC) PGI 100% MA
Pioneer Capital Corp. (PCC) PGI 100% MA
Pioneer Funds Marketing GmbH (GmbH) PGI 100% MA
Pioneer SBIC Corp. (SBIC) PGI 100% MA
Pioneer Associates, Inc. (PAI) PGI 100% MA
Pioneer International Corp. (PInt) PGI 100% MA
Pioneer Plans Corp. (PPC) PGI 100% MA
Pioneer Goldfields Ltd (PGL) PGI 100% MA
Pioneer Investments Corp. (PIC) PGI 100% MA
Pioneer Metals and Technology, Inc.(PMT) PGI 100% DE
Pioneer First Polish Trust Fund
Joint Stock Co. (First Polish) PGI 100% Poland
Teberebie Goldfields Ltd. (TGL) PGI 90% Ghana
Pioneer Funds Distributor, Inc. (PFD) PMC 100% MA
SBIC's outstanding capital stock PCC 100% MA
THE FUNDS: All are parties to management contracts with PMC.
C-3-
<PAGE>
BUSINESS
FUND TRUST
---- --------
Pioneer World Equity Fund DE
Pioneer International Growth Fund MA
Pioneer Europe Fund MA
Pioneer Emerging Markets Fund DE
Pioneer India Fund DE
Pioneer Growth Trust MA
Pioneer Mid-Cap Fund DE
Pioneer Micro-Cap Fund DE
Pioneer Growth Shares DE
Pioneer Small Company Fund DE
Pioneer Fund MA
Pioneer II MA
Pioneer Real Estate Shares DE
Pioneer Short-Term Income Trust MA
Pioneer America Income Trust MA
Pioneer Bond Fund MA
Pioneer Balanced Fund DE
Pioneer Intermediate Tax-Free Fund MA
Pioneer Tax-Free Income Fund DE
Pioneer Money Market Trust DE
Pioneer Variable Contracts Trust DE
Pioneer Interest Shares DE
OTHER:
[bullet] SBIC is the sole general partner of Pioneer Ventures
Limited Partnership, a Massachusetts limited
partnership.
[bullet] Kotari Pioneer AMC Ltd. (Kotari Pioneer) (Indian Corp.),
is a joint venture between PMC and Investment Trust of
India Ltd. (Kotari) (Indian Corp.)
[bullet] Kotari and PMC own approximately 46% and 49%,
respectively, of the total equity capital of Kotari
Pioneer.
JOHN F. COGAN, JR.
Owns approximately 14% of the outstanding shares of PGI.
C-4-
<PAGE>
TRUSTEE/
ENTITY CHAIRMAN PRESIDENT DIRECTOR OTHER
------ -------- --------- -------- -----
Pioneer Family
of Mutual Funds X X X
PGL X X X
PGI X X X
PPC X X
PIC X X
PIntl X X
PMT X X
PCC X
PSC X
PMC X X
PFD X X
TGL X X
First Polish X Member of
Supervisory
Board
Hale and Dorr LLP Partner
GmbH Chairman of
Supervisory
Board
C-5-
<PAGE>
Item 26. Number of Holders of Securities
The following table sets forth the approximate number of
recordholders of each class of securities of the Registrant as of March 31,
1997:
Class A Class B Class C
Number of Record Holders: 17,896 692 74
Item 27. Indemnification
Except for the Agreement and Declaration of Trust establishing the
Registrant as a trust under Delaware law, there is no contract, arrangement or
statute under which any director, officer, underwriter or affiliated person of
the Registrant is insured or indemnified. The Agreement and Declaration of Trust
provides that no Trustee or officer will be indemnified against any liability to
which the Registrant would otherwise be subject by reason of or for willful
misfeasance, bad faith, gross negligence or reckless disregard of such person's
duties.
Insofar as indemnification for liability arising under the Securities Act
of 1933, as amended (the "Act"), may be available to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
All of the information required by this item is set forth in the
Forms ADV, as amended, of the Registrant's Manager, Pioneering Management
Corporation. The following sections of each such Form ADV are incorporated
herein by reference:
(a) Items 1 and 2 of Part 2;
C-6-
<PAGE>
(b) Section IV, Business Background, of
each Schedule D.
Item 29. Principal Underwriter
(a) See Item 25 above.
(b) Directors and Officers of PFD:
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- --------------------- ---------------------
John F. Cogan, Jr. Director and Chairman Chairman of the Board,
President and Trustee
Robert L. Butler Director and President None
David D. Tripple Director Executive Vice
President and Trustee
Steven M. Graziano Senior None
Vice President
Stephen W. Long Senior None
Vice President
John W. Drachman Vice President None
Mary Kleeman Vice President None
Barry G. Knight Vice President None
William A. Misata Vice President None
Anne W. Patenaude Vice President None
Elizabeth B. Bennett Vice President None
Gail A. Smyth Vice President None
Constance D. Spiros Vice President None
Marcy L. Supovitz Vice President None
C-7-
<PAGE>
Steven R. Berke Assistant None
Vice President
Mary Sue Hoban Assistant None
Vice President
William H. Keough Treasurer Treasurer
Roy P. Rossi Assistant Treasurer None
Joseph P. Barri Clerk Secretary
Robert P. Nault Assistant Clerk Assistant Secretary
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts and records are maintained at the Registrant's office
at 60 State Street, Boston, Massachusetts; contact the Treasurer.
Item 31. Management Services
The Registrant is a party to one contract, described in the
Prospectus and the Statement of Additional Information, under which it receives
management and advisory services from Pioneering Management Corporation.
Item 32. Undertakings
(A) None.
(B) None.
(C) The Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent or
given, a copy of the Registrant's annual report to shareholders furnished
pursuant to and meeting the requirements of Rule 30d-1 from which the specified
information is incorporated by reference, unless such person currently holds
securities of the Registrant and otherwise has received a copy of such report,
in which case the Registrant shall state in the Prospectus that it will furnish,
without charge, a copy of
C-8-
<PAGE>
such report on request, and the name, address and telephone number of the person
to whom such a request should be directed.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment No. 60 to
its Registration Statement (the "Amendment") pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston and
The Commonwealth of Massachusetts, on the 29th day of April, 1998.
PIONEER BALANCED FUND
By: /s/John F. Cogan, Jr.
John F. Cogan, Jr.
Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 60 to the Registration Statement of Pioneer
Balanced Fund (File Nos. 2-28273; 811-1605-3) has been signed below by the
following persons in the capacities and on the dates indicated:
Signature Title
/s/John F. Cogan, Jr. Chairman of the Board )
John F. Cogan, Jr. and President (Principal )
Executive Officer )
)
)
/s/William H. Keough Chief Financial Officer )
William H. Keough, Treasurer and Treasurer (Principal )
Financial and Accounting )
Officer )
)
)
April 29, 1998 )
C-1-
<PAGE>
)
/s/John F. Cogan, Jr. )
John F. Cogan, Jr.
Mary K. Bush* )
Mary K. Bush )
)
Richard H. Egdahl, M.D. )
Richard H. Egdahl, M.D. )
)
)
Margaret B.W. Graham* )
Margaret B.W. Graham )
)
)
John W. Kendrick* )
John W. Kendrick )
)
)
Marguerite A. Piret* )
Marguerite A. Piret )
)
)
David D. Tripple* )
David D. Tripple )
)
)
Stephen K. West* )
Stephen K. West )
)
)
John Winthrop* )
John Winthrop )
*By: /s/John F. Cogan Jr.
John F. Cogan Jr.
Attorney-in-fact
C-2-
<PAGE>
Exhibit Index
Exhibit
Number Document Title
11. Consent of Independent Public Accountants
17. Financial Data Schedule
C-3-
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report on
Pioneer Balanced Fund dated February 2, 1998 (and to all references to our firm)
included in or made a part of Post-Effective Amendment No. 60 and Amendment No.
29 to Registration Statement File Nos. 2-28273 and 811-1605, respectively.
/s/ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 27, 1997
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