Dear Fellow Shareowners,
Pioneer Three ended the first six months of its 13th fiscal year on March 31,
1995. During this time, the market for smaller-capitalization stocks generally
improved, particularly moving into the first quarter of 1995. Pioneer Three
also achieved stronger results as the period progressed, and the Fund provided
shareowners with a positive total return for the semiannual period.
Your Fund's Performance
For the six months ended March 31, 1995, we report the following results for
Pioneer Three:
* Shareowners received a dividend of $0.12 per share, and a capital gains
distribution of $1.15, both paid in December 1994.
* Net asset value per share stood at $19.09 on March 31, 1995, versus
$19.92 on September 30, 1994, in part reflecting the payment of distributions.
* The Fund's six-month total return was 2.74% based on net asset value, and
-3.19% based on maximum public offering price. Total return represents the
change in share price and assumes the reinvestment of all distributions at net
asset value. The performance figures below reflect your Fund's longer-term
results.
<TABLE>
<CAPTION>
Average Annual Total Returns
(as of March 31, 1995)
Net Asset Public Offering
Period Value Price*
<S> <C> <C>
Life-of-Fund (11/19/82) 12.90% 12.36%
10 Years 11.55 10.90
5 Years 10.91 9.60
1 Year 2.59 -3.29
</TABLE>
Improving Market Conditions
The Federal Reserve (the Fed) increased short-term interest rates twice during
the period, bringing the federal funds rate to a three-year high of 6%. By
raising rates, the Fed hoped to keep both the economy and inflation under
control. Recent economic indicators are signaling some success on the Fed's
part; home sales, construction costs and consumer spending are just a few
indicators that have declined in recent months, suggesting a slower-paced
economy.
Investors returned to the smaller-company market at the end of 1994, as they
gained confidence in the economy's direction and became less fearful of
additional interest rate increases. Pioneer Three benefited from these improved
conditions, as evidenced by its stronger results. While the Fund's total return
for the final three months of 1994 was -3.02%, its total return for the first
quarter of 1995 was 5.94%. However, large-capitalization stocks continued to
outperform smaller-capitalization investments for much of the period; their
name recognition and ease of trading apparently appealed to many investors. In
fact, the Dow Jones Industrial Average (the Dow) of 30 large-capitalization
stocks reached an historic level of 4000 in February, and continued to move up,
closing the period at 4157.68. For the six months ended March 31, 1995, the Dow
gained 9.69%.
How Pioneer Managed Your Investment
Pioneer Three pursues long-term capital growth and income by investing in
companies we think demonstrate value in terms of strong balance sheets and
income statements, high-quality management and low stock prices in relation to
assets and earning power. As of March 31, 1995, Pioneer Three's portfolio held
132 stocks from a wide range of companies and sectors. The following chart
shows the Fund's sector distribution at the close of the semiannual period.
*Reflects deduction of the maximum 5.75% sales charge and assumes reinvestment
of all distributions at net asset value.
Past performance does not guarantee future results. Return and share price
fluctuate, and your shares, when redeemed, may be worth more or less than their
original cost.
1
<PAGE>
Sector Distribution
(as of March 31, 1995)
<TABLE>
<CAPTION>
<S> <C>
Capital Goods 16%
Consumer Durables 6%
Consumer Non-Durables 18%
Financial 11%
Services 15%
Technology 9%
Basic Industries 10%
Energy 6%
Other 9%
</TABLE>
Your management continues to find opportunities in the healthcare sector. One
of the Fund's largest holdings, SciMed Life, was recently acquired by another
healthcare company, Boston Scientific. The acquisition pushed up the price of
SciMed Life, generating a sizable increase in the value of the Fund's original
investment. We continue to hold Boston Scientific, believing it to be a good
value with attractive growth prospects. We also augmented the portfolio's
position in other healthcare companies, particularly those providing
much-needed services to elderly patients. These companies include Health
Systems, Medisense and Sun Health Care.
We are gradually reducing Pioneer Three's exposure to consumer sectors, both
non-durables (due to continued stagnant retail sales) and durables (because of
slowing economic growth). On the other side of the coin, we modestly increased
your Fund's exposure to companies in the technology and energy areas. Diamond
Shamrock, a refinery, was a recent addition to the portfolio. Because of 1994's
abnormal weather patterns (e.g., an unusually warm winter and cooler-
than-normal summer), demand for energy declined, causing many energy companies
to suffer. The recent lower demand has allowed your management to buy some
bargains we think should perform well over the long run.
Over the past six months, we sold a number of stocks that either had become
overvalued or less attractive due to a change in company characteristics. These
stocks were: Chesapeake Corp., GranCare, Inc., Thomas Industries, Inc.,
Petrolite Corp., CPI Corp., American Maize-Products Co., Waverly, Inc., Vallen
Corp., Coherent, Inc., and Dravo Corp. Clubcar, another portfolio holding, was
taken over by Clark Equipment in a cash acquisition that generated a solid
profit for the Fund.
Looking Ahead
The two increases in short-term interest rates over the past six months show
the Fed's continued determination to control inflation. Of course, we intend to
keep a careful eye on interest rate movements, particularly given the
uncertainty of additional increases over the near term. We also will look for
signs of other events that could have an impact on the stock market, such as
the weakening dollar and conditions overseas.
Your management will monitor and adjust the Fund's portfolio to maintain a wide
selection of well-valued stocks we think are solid investments for the Fund. We
remain confident that your Fund's diversified portfolio of small- and
medium-sized companies, and our value approach to investing, will lead to
continued strong long-term results.
Please refer to the following pages for the audited list of the Fund's
portfolio holdings as of March 31, 1995. If you have any questions about your
investment in Pioneer Three, please contact your investment representative, or
call Pioneer at 1-800-225-6292.
Respectfully,
[signature of John F. Cogan, Jr.]
John F. Cogan, Jr.
Chairman and President,
Pioneer Three
May 3, 1995
2
<PAGE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS--96.0%
BASIC INDUSTRIES--9.5%
Chemicals--3.4%
274,000 Cambrex Corp.+ $ 8,357,000
231,400 Chemed Corp. 7,231,250
331,850 The Dexter Corp. 7,259,219
200,000 The Geon Co. 5,600,000
164,700 Vigoro Corp. 6,093,900
$ 34,541,369
Forest Products--1.3%
299,135 Potlatch Corp. $ 12,601,062
Iron & Steel--2.3%
721,000 Chaparral Steel Co. $ 6,579,125
151,700 Harsco Corp. 6,674,800
935,500 Intermet Corp. 7,600,937
484,500 NS Group, Inc.* 1,938,000
$ 22,792,862
Paper Products--0.9%
209,750 Pentair, Inc. $ 8,861,937
Pollution & Waste--1.1%
873,800 Applied Bioscience International, Inc.* $ 4,696,675
283,000 Roy F. Weston, Inc. (Class A)* 1,255,812
290,300 Zurn Industries, Inc. 5,334,262
$ 11,286,749
Precious Metals--0.5%
464,700 Hecla Mining Co.* $ 5,344,050
Total Basic Industries $ 95,428,029
CAPITAL GOODS--15.7%
Construction & Engineering--3.9%
505,100 Granite Construction, Inc. $ 9,281,212
148,350 Hughes Supply, Inc. 3,022,631
467,975 Ply-Gem Industries, Inc. 8,365,053
633,750 RPM, Inc. Ohio 12,595,781
387,700 The Ryland Group, Inc. 5,573,187
$ 38,837,864
Producer Goods--11.8%
486,400 Castech Aluminum Group, Inc.* $ 7,235,200
416,950 CLARCOR, Inc. 8,808,069
445,000 DT Industries, Inc. 5,340,000
463,000 The Duriron Co., Inc. 9,491,500
240,500 Farrel Corp. 1,172,437
558,480 Federal Signal Corp. 12,077,130
234,600 Ferrofluidics Corp.* 1,671,525
248,100 Finning Ltd. 3,449,027
425,000 Greenfield Industries 12,006,250
241,800 Hawker Siddeley Canada, Inc. 2,671,918
546,400 Kennametal, Inc. 14,684,500
257,251 Keystone International, Inc. 5,563,053
206,400 Kimball International, Inc. (Class B) 5,314,800
898,000 Regal-Beloit Corporation 14,031,250
465,800 Shelby Williams Industries, Inc.+ 4,425,100
477,400 Watts Industries, Inc. (Class A) 10,502,800
$118,444,559
Total Capital Goods $157,282,423
3
<PAGE>
CONSUMER DURABLES--5.9%
Consumer Durables--1.2%
200,500 Leggett & Platt, Inc. $ 8,421,000
91,600 National Presto Industries, Inc. 3,721,250
$ 12,142,250
Motor Vehicles--4.7%
314,400 Arvin Industries, Inc. $ 6,681,000
512,000 Hi-Lo Automotive, Inc.* 4,352,000
242,800 Modine Manufacturing Co. 8,133,800
844,012 Simpson Industries, Inc. 8,334,623
212,300 SPX Corp. 3,078,350
413,400 Standard Motor Products, Inc. 8,319,675
800,000 TBC Corp.* 8,100,000
$ 46,999,448
Total Consumer Durables $ 59,141,698
CONSUMER NON-DURABLES--18.2%
Agriculture & Food--0.9%
258,950 Flowers Industries, Inc. $ 4,661,100
114,734 Golden Poultry Co., Inc. 745,771
195,500 Thorn Apple Valley, Inc. 3,763,375
$ 9,170,246
Consumer Luxuries--1.1%
406,100 Huffy Corp. $ 6,142,262
240,800 Outboard Marine Corp. 5,056,800
$ 11,199,062
Retail Food--0.8%
417,800 Ruddick Corp. $ 8,356,000
Retail Non-Food--10.3%
501,000 Arbor Drugs, Inc. $ 11,898,750
503,100 Caldor Corp.* 10,753,762
390,000 Catherines Stores*+ 3,412,500
183,800 Cato Corp. (Class A) 1,171,725
734,900 CML Group, Inc. 6,522,238
742,300 Consolidated Stores Corp.* 14,938,788
700,000 Designs, Inc.* 6,300,000
513,000 Family Dollar Stores, Inc. 6,540,750
166,000 Fingerhut Companies, Inc. 1,971,250
315,000 Fred Meyer, Inc.* 9,331,875
220,700 Hancock Fabrics, Inc. 2,234,588
359,700 Nine West Group, Inc.* 10,611,150
787,109 Pier 1 Imports, Inc. 7,280,758
542,800 Russ Berrie and Company, Inc. 7,802,750
455,000 Vans, Inc.* 2,331,875
$103,102,759
Textiles/Clothes--5.1%
350,000 Angelica Corp. $ 9,625,000
550,000 Cone Mills Corp.* 6,737,500
400,000 Crown Crafts, Inc. 6,800,000
448,400 Guilford Mills, Inc. 9,640,600
550,000 Paragon Trade Brands, Inc.* 7,837,500
368,212 Unifi, Inc. 9,941,724
$ 50,582,324
Total Consumer Non-Durables $182,410,391
4
<PAGE>
ENERGY--5.6%
Oil Services--2.1%
558,300 Enterra Corp.* $ 9,560,888
450,000 Matrix Service Co.* 1,603,125
788,300 Oceaneering International, Inc.* 7,784,463
326,500 Stolt Comex Seaway, S.A.* 2,285,500
$ 21,233,976
Oil & Gas Extraction--3.5%
171,900 Diamond Shamrock, Inc. $ 4,533,863
606,100 Home Oil Co., Ltd.* 6,157,357
502,700 Plains Resources, Inc.* 3,895,925
244,000 Seagull Energy Corp.* 4,819,000
112,600 Southwestern Energy Co. 1,689,000
478,100 Vintage Petroleum, Inc. 9,502,238
1,096,400 Wainoco Oil Corp.* 4,385,600
$ 34,982,983
Total Energy $ 56,216,959
FINANCIAL--10.8%
Commercial Bank--3.8%
442,500 Magna Group, Inc. $ 8,850,000
309,200 Meridian Bancorp, Inc. 9,469,250
405,525 Old Kent Financial Corp. 12,774,038
128,610 SunTrust Banks, Inc. 6,880,635
$ 37,973,923
Insurance-General--1.4%
500,000 American Bankers Insurance Group, Inc. $ 14,312,500
Non-Life Insurance--4.7%
936,900 Allmerica Property & Casualty Companies, Inc. $ 17,918,213
530,000 Guaranty National Corp. 8,215,000
483,000 Selective Insurance Group, Inc. 13,886,250
563,712 Willis Corroon Group Plc. (A.D.R.) 6,412,224
$ 46,431,687
Savings & Loan--0.9%
355,000 Albank Financial Corp. $ 8,875,000
Total Financial $107,593,110
SERVICES--15.0%
Health Services & Personal Care--9.7%
370,900 Allied Healthcare Products+ $ 5,702,588
421,100 American Healthcorp, Inc.*+ 3,158,250
558,560 Bergen Brunswig Corp. (Class A) 14,941,480
507,300 BioWhittaker, Inc.* 4,058,400
1,073,121 Boston Scientific Corporation* 26,425,605
384,199 Community Health Systems, Inc.* 12,102,269
205,000 Healthdyne, Inc.* 2,101,250
276,000 Integrated Health Services, Inc. 10,453,500
40,000 Lincare Holdings, Inc.* 1,185,000
450,000 MediSense, Inc.* 8,887,500
313,800 Sun Healthcare Group, Inc.* 8,001,900
$ 97,017,742
Pharmaceuticals--1.3%
925,800 Medeva Plc. (A.D.R.) $ 12,382,575
Publishing--0.2%
50,000 Houghton Mifflin Company $ 2,325,000
5
<PAGE>
Services--3.8%
77,900 Cadmus Communications Corp. $ 1,460,625
518,600 The Interpublic Group of Companies, Inc. 19,382,675
581,850 National Data Corp. 10,109,644
385,500 New England Business Service, Inc. 7,083,562
$ 38,036,506
Total Services $149,761,823
TECHNOLOGY--9.4%
Business Machines--2.6%
850,000 Data General Corp.* $ 6,268,750
521,000 National Computer Systems, Inc. 8,726,750
1,217,100 Smith Corona Corp. 3,042,750
250,000 Stratus Computer, Inc.* 7,812,500
$ 25,850,750
Computer Software--1.2%
450,000 BancTec, Inc.* $ 6,750,000
350,000 Banyan Systems, Inc.* 5,293,750
$ 12,043,750
Electronics--5.6%
404,010 Baldor Electric Co. $ 11,211,278
218,600 Belden, Inc. 4,809,200
182,500 HADCO Corp.* 2,201,406
345,750 Joslyn Corp. 8,470,875
285,000 Kuhlman Corp. 3,313,125
249,100 Marshall Industries* 6,476,600
690,000 Micro Focus Group Plc. (A.D.R.)* 7,805,625
428,500 Structural Dynamics Research Corp.* 3,749,375
302,100 Whittaker Corp.* 5,815,425
318,900 Zenith Electronics Corp.* 2,471,475
$ 56,324,384
Total Technology $ 94,218,884
TRANSPORTATION--2.8%
Air Transport--0.8%
356,900 Airborne Freight Corp. $ 7,450,288
Ships & Shipping--1.1%
507,900 American President Companies, Ltd. $ 11,110,312
Truck Transport & Storage--0.9%
855,000 Arkansas Best Corp. $ 9,084,375
Total Transportation $ 27,644,975
UTILITIES--3.1%
Gas Utility--2.1%
591,300 KN Energy, Inc. $ 14,191,200
274,300 Peoples Energy Corp. 6,857,500
$ 21,048,700
Utility/Other--1.0%
373,000 Eastern Enterprises $ 10,350,750
Total Utilities $ 31,399,450
TOTAL COMMON STOCKS (Cost $748,921,907) (a) $961,097,742
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
TEMPORARY CASH INVESTMENTS--4.0%
<S> <C> <C>
$ 9,412,000 Commercial Credit Corp., Commercial Paper, 5.93% due 4/3/95 $ 9,418,208
11,193,000 Chevron Oil Finance, Commercial Paper, 5.96% due 4/4/95 11,198,555
9,356,000 Associates Corp. of America, Commercial Paper, 5.95% due 4/5/95 9,359,096
10,360,000 Norwest Financial Inc., Commercial Paper, 6.00% due 4/6/95 10,361,728
TOTAL TEMPORARY CASH INVESTMENTS (Cost $40,321,000) $ 40,337,587
TOTAL INVESTMENT IN SECURITIES (Cost $789,242,907)--100% $1,001,435,329
</TABLE>
* Represents non-income producing security
+ Investments held representing 5% or more of the outstanding voting stock of
such company (Note 5)
(a) At March 31, 1995, the net unrealized appreciation on investments based on
cost for federal income tax purposes of $748,921,907 was as follows:
<TABLE>
<CAPTION>
<S> <C>
Aggregrate gross unrealized appreciation for all investments in which
there is an excess of value over tax cost $298,972,867
Aggregrate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value (86,797,032)
Net unrealized appreciation $212,175,835
</TABLE>
Purchases and sales of investments securities (excluding temporary cash
investments) for the six months ended March 31, 1995, aggregated $89,879,470
and $119,045,703, respectively.
7
<PAGE>
BALANCE SHEET--MARCH 31, 1995
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investment in securities, at value (including temporary cash
investments of $40,338) (cost $789,243; see Schedule of Investments
and Notes 1 and 5) $1,001,435
Cash 1,823
Receivables--
Investment securities sold 3,717
Dividends and interest 1,213
Trust shares sold 1,436
Other 31
Total assets $1,009,655
LIABILITIES:
Payables--
Investment securities purchased $ 999
Trust shares repurchased 917
Accrued expenses--
Management fees (Note 2) 51
Other (Notes 2, 3 and 4) 731
Total liabilities $ 2,698
NET ASSETS:
Trust shares (unlimited number of shares authorized), amount paid in on
52,753,223 shares outstanding (Note 1) $ 760,500
Accumulated undistributed net investment income 3,332
Accumulated undistributed net realized gain on investments 30,949
Net unrealized gain on investments 212,176
Total net assets (equivalent to $19.09 per share based on 52,753,223
trust shares outstanding) $1,006,957
</TABLE>
8
<PAGE>
STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME (Note 1):
Dividends $9,411
Interest 887
Total investment income $ 10,298
EXPENSES:
Management fees (Note 2) $2,273
Transfer fees (Note 3) 877
Distribution fees (Note 4) 783
Accounting (Note 2) 54
Custodian fees 46
Professional fees 38
Registration fees 27
Fees and expenses of nonaffiliated trustees 26
Printing 22
Miscellaneous 26
Total expenses 4,172
Net investment income $ 6,126
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments (Note 1) $ 33,254
Decrease in net unrealized gain on investments (12,995)
Net gain on investments $ 20,259
Net increase in net assets resulting from
operations $ 26,385
</TABLE>
9
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six Months Ended March 31, 1995 and for the Year Ended September 30, 1994
(Dollars in Thousands Except Per Share Amounts)
Six Months
Ended Year Ended
Mar. 31, Sept. 30
1995 1994
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 6,126 $ 12,317
Net realized gain on investments 33,254 61,071
Increase (decrease) in net unrealized gain on investments (12,995) (46,767)
Net increase in net assets resulting from operations $ 26,385 $ 26,621
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ($0.12 and $0.25 per share, respectively) $ (6,045) $ (12,441)
Net realized gain on investments ($1.15 and $1.51 per share, respectively) (57,659) (72,766)
Decrease in net assets resulting from distributions to shareholders $ (63,704) $ (85,207)
FROM TRUST SHARE TRANSACTIONS:
SHARES
Net proceeds from sale of shares 2,701,551 6,605,985 $ 50,667 $ 134,158
Net asset value of shares issued to shareholders in
reinvestment of dividends and capital gain
distributions 3,483,545 4,067,109 61,171 81,921
Cost of shares repurchased (4,502,954) (7,844,246) (84,795) (159,319)
Increase in net assets resulting from trust share
transactions 1,682,142 2,828,848 $ 27,043 $ 56,760
Net increase (decrease) in net assets $ (10,276) $ (1,826)
NET ASSETS:
Beginning of period 1,017,233 1,019,059
End of period (including accumulated undistributed net investment income of $3,332 and
$3,251, respectively) $1,006,957 $1,017,233
</TABLE>
10
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Data For a Share Outstanding For The Periods Presented
<TABLE>
<CAPTION>
Six
Months
Ended
March 31, For the Year Ended September 30,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $19.92 $21.12 $18.03 $16.16 $12.96 $ 17.80 $15.09 $18.52 $16.01 $13.98 $13.19
Income from
investment
operations--
Net investment
income $ 0.12 $ 0.24 $ 0.28 $ 0.33 $ 0.41 $ 0.41 $ 0.42 $ 0.30 $ 0.28 $ 0.34 $ 0.34
Net realized
and unrealized
gain (loss) on
investments 0.32 0.32 3.72 2.04 3.94 (3.56) 3.33 (1.91) 3.76 2.41 0.97
Total increase
(decrease) from
investment
operations $ 0.44 $ 0.56 $ 4.00 $ 2.37 $ 4.35 $ (3.15) $ 3.75 $(1.61) $ 4.04 $ 2.75 $ 1.31
Distribution to
shareholders
from--
Net investment
income (0.12) (0.25) (0.29) (0.35) (0.41) (0.46) (0.36) (0.41) (0.36) (0.36) (0.34)
Net realized
capital gains (1.15) (1.51) (0.62) (0.15) (0.74) (1.23) (0.68) (1.41) (1.17) (0.36) (0.18)
Net increase
(decrease) in
net asset value $(0.83) $(1.20) $ 3.09 $ 1.87 $ 3.20 $ (4.84) $ 2.71 $(3.43) $ 2.51 $ 2.03 $ 0.79
Net asset value,
end of period $19.09 $19.92 $21.12 $18.03 $16.16 $ 12.96 $17.80 $15.09 $18.52 $16.01 $13.98
Total return* 2.74% 2.62% 22.82% 15.05% 35.80% (19.39%) 26.32% (6.00%) 27.50% 20.40% 10.21%
Ratio of net
operating
expenses to
average net
assets 0.85%** 0.86% 0.84% 0.85% 0.74% 0.71% 0.72% 0.76% 0.68% 0.71% 0.75%
Ratio of net
investment
income to
average net
assets 1.25%** 1.19% 1.43% 1.85% 2.72% 2.58% 2.56% 2.15% 1.74% 2.41% 3.08%
Porfolio
turnover rate 19%** 15% 18% 12% 5% 14% 16% 12% 23% 24% 11%
Net assets end
of period (in
thousands) $1,006,957 $1,017,233 $1,019,059 $779,631 $692,344 $562,343 $752,135 $616,953 $734,300 $543,173 $369,080
</TABLE>
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at the 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
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS-March 31, 1995
1. Pioneer Three (The Fund) is a Massachusetts business trust registered under
the Investment Company Act of 1940 as a diversified, open-end management
company. The following is a summary of significant accounting policies
consistently followed by the Fund, which are in conformity with those generally
accepted in the investment company industry.
A. Investment Securities--Security transactions are recorded on the date the
securities are purchased or sold. Investments in securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation or securities for which sale
prices are not generally reported are valued at the mean between the last bid
and asked prices. Temporary cash investments are valued at cost plus accrued
interest, which approximates value. Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis.
Gains and losses from sales of investments are calculated on the "identified
cost" method for both financial reporting and federal income tax purposes. It
is the Fund's practice first to select for sale those securities that have the
highest cost and also qualify for long-term capital gain or loss treatment for
tax purposes.
B. Federal Taxes--It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if any, to
its shareholders. Therefore, no federal income tax provisions are required.
The characterization of distributions to shareholders for financial reporting
purposes is determined in accordance with income tax rules. Therefore, the
source of a fund's distributions may be shown in the accompanying financial
statements as either from or in excess of net investment income or net realized
gain on investment transactions, or from capital, depending on the type of
book/tax differences that may exist.
C. Trust Shares--The Fund records sales and repurchases of its trust shares
on the trade date. Net losses, if any, as a result of cancellations are
absorbed by Pioneer Funds Distributor, Inc. (PFD), the principal underwriter
for the Fund and a wholly owned subsidiary of The Pioneer Group, Inc. (PGI).
PFD earned $102,000 in underwriting commissions on the sale of trust shares of
the Fund during the six months ended March 31, 1995. Dividends and
distributions to shareholders are recorded as of the ex-dividend date.
2. Pioneering Management Corporation (PMC) is the Fund's investment adviser,
manages the Fund's portfolio and is a wholly owned subsidiary of PGI.
Management fees are calculated daily at the annual rate of 0.50% of the Fund's
average daily net assets up to $250,000,000, 0.48% of such assets between
$250,000,000 and $300,000,000, and 0.45% of such assets in excess of
$300,000,000.
In addition, under the management agreement, certain services and costs
including accounting, regulatory reporting and insurance premiums are paid by
the Fund. Included in Accrued expenses--Other is approximately $12,000 in
accounting fees payable to PMC at March 31, 1995.
3. Pioneering Services Corporation (PSC), a wholly owned subsidiary of PGI,
provides substantially all transfer agent and shareholder services to the Fund
at negotiated rates. Included in Accrued expenses--Other is approximately
$253,000 in transfer fees payable to PSC at March 31, 1995.
4. The Fund has adopted a Plan of Distribution (the Plan) in accordance with
Rule 12b-1 under the Investment Company Act of 1940. The Plan generally
provides that the Fund will reimburse PFD for PFD's actual expenditures to
finance activities intended to result in the sale of the Fund's shares or to
provide services to the Fund's shareholders. Expenditures to the fund pursuant
to the Plan may
12
<PAGE>
not exceed 0.25% of the Fund's average annual net assets. The Plan provides for
service fees to be paid at a rate of 0.15% per annum on qualifying investments
in the Fund made prior to August 19, 1991 and 0.25% on qualifying investments
made on or subsequent to that date. Included in Accrued expenses--Other is
approximately $378,000 in distribution fees payable to PFD at March 31, 1995.
5. The Fund's investment in certain companies may exceed 5% of the outstanding
voting stock. Such companies are deemed affiliates of the Fund for financial
reporting purposes. The following summarizes transactions with affiliates of
the Fund as of March 31, 1995.
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
Purchases Sales Dividend
Affiliates Cost Cost Income Value
<S> <C> <C> <C> <C>
Allied Healthcare Products $-- $-- $ 52 $ 5,703
American Healthcorp, Inc.* -- -- -- 3,158
Cambrex Corp. -- -- 27 8,357
Catherines Stores* -- -- -- 3,413
Shelby Williams Industries, Inc. -- 27 65 4,425
TOTAL $-- $27 $144 $25,056
</TABLE>
*Represents non-income producing security
13
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF PIONEER THREE:
We have audited the accompanying balance sheet of PIONEER THREE (a
Massachusetts business trust) including the schedule of investments, as of
March 31, 1995, and the related statement of operations, the statements of
changes in net assets and the financial highlights for the periods presented.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
PIONEER THREE as of March 31, 1995, the results of its operations, the changes
in its net assets and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 21, 1995
14
<PAGE>
INTENTIONALLY LEFT BLANK
15
<PAGE>
PIONEER THREE
60 State Street
Boston, Massachusetts 02109
OFFICERS
JOHN F. COGAN, JR., Chairman and President
DAVID D. TRIPPLE, Executive Vice President
ROBERT W. BENSON, Vice President
WILLIAM H. KEOUGH, Treasurer
JOSEPH P. BARRI, Secretary
TRUSTEES
JOHN F. COGAN, JR.
RICHARD H. EGDAHL, M.D.
MARGARET B. W. GRAHAM
JOHN W. KENDRICK
MARGUERITE A. PIRET
DAVID D. TRIPPLE
STEPHEN K. WEST
JOHN WINTHROP
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
SHAREHOLDER SERVICES AND TRANSFER AGENT
PIONEERING SERVICES CORPORATION
60 State Street
Boston, Massachusetts 02109
Please call Pioneer for information on:
Existing accounts, new accounts,
prospectuses, applications,
and service forms 1-800-225-6292
Fund yields and prices 1-800-225-4321
Toll-free fax 1-800-225-4240
Retirement plans 1-800-622-0176
Telecommunications Device for the Deaf
(TDD) 1-800-225-1997
When distributed to persons who are not shareowners of the Fund, this report
must be accompanied by an official prospectus, which discusses the objectives,
policies, sales charges, and other information about the Fund.
0595-2435
(c) Pioneer Funds Distributor, Inc.
[Pioneer Logo]
Pioneer
Three
SEMIANNUAL REPORT
MARCH 31, 1995
16
