PIONEER THREE
Supplement dated January 5, 1996
to Prospectus dated January 27, 1995
The Trustees of Pioneer Three (the "Fund") have approved certain changes to the
Fund's operations, including a new management contract with a performance based
management fee and a change in the Fund's investment objective from reasonable
income and growth of capital to capital growth exclusively. These changes have
been submitted for shareholder approval at a meeting scheduled to be held on
January 23, 1996. If approved by shareholders, the changes will take effect on
February 1, 1996.
EXPENSE INFORMATION
As more fully described below, the Fund has submitted for shareholder approval a
proposed management contract under which the basic rate of management fee
payable to Pioneering Management Corporation ("PMC") would be increased or
decreased based upon the Fund's investment performance relative to the record of
a benchmark securities index. Under the proposed contract, the "Annual Operating
Expenses" and the "Example" shown on pages 2 and 3 of the prospectus would
change as set forth below. The "Shareholder Transaction Expenses" shown on page
2 of the prospectus would not change as a result of the new contract.
The information in the table below is an estimate based on the Fund's actual
expenses for the year ended September 30, 1995. Management fees have been
restated to reflect the basic, maximum and minimum fees payable under the
proposed contract. Actual management fees and total operating expenses for the
fiscal year ended September 30, 1995 were 0.46% and 0.85%, respectively, under
the management contract currently in effect.
Annual Fund Operating Expenses
(As a Percentage of Average Net Assets):
Management Fee
Basic Maximum Minimum
Management Fee .625% .825% .425%
12b-1 Fees .18 % .18 % .18 %
Other Expenses (including .21 % .21% .21 %
accounting and transfer
agent fees, custodian fees
and printing expenses)
Total Operating Expenses 1.02% 1.22% .82%
Example:
You would pay the following fees and expenses on a $1,000 investment, assuming a
5% annual return and redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Management Fee
Basic $10 $30 $52 $116
Maximum $11 $35 $61 $135
Minimum $ 8 $24 $42 $ 94
The example above assumes the reinvestment of all dividends and distributions
and that the percentage amounts listed above under "Annual Operating Expenses"
remain the same each year.
THE EXAMPLE IS DESIGNED FOR INFORMATION PURPOSES ONLY, AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF FUTURE EXPENSE OR RETURN. ACTUAL FUND EXPENSES
AND RETURN WILL VARY FROM YEAR TO YEAR AND MAY BE HIGHER OR LOWER THAN THOSE
SHOWN.
0196-3008
(C)Pioneer Funds Distributor, Inc.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
It is proposed that the Fund change its investment objective from reasonable
income and growth of capital to capital growth exclusively. If this change is
approved, the Fund will eliminate its current policy of investing the largest
portion of its portfolio in securities which have yielded their holders an
interest or dividend return
within the preceding twelve months. In addition, whether or not the proposed
change in investment objective is approved, the Fund will eliminate its current
policy of investing only in companies with market capitalizations not exceeding
$750 million and will instead adopt a policy of investing at least 65% of the
Fund's assets total assets in securities of companies with market
capitalizations between $100 million and $5 billion. In connection with this
change in policy, the Fund will change its name to "Pioneer Mid-Cap Fund."
Changes in the Fund's policy relating to investments in repurchase agreements
and in a number of the fundamental investment restrictions set forth in the
Fund's statement of additional information have also been proposed. However,
none of these changes are expected to have a material effect on the Fund's
current investment operations.
MANAGEMENT FEE
Under the proposed management contract, as compensation for its management
related services and certain expenses which PMC incurs on behalf of the Fund,
the Fund would pay PMC a management fee that is comprised of two components. The
first component is a basic fee equal to 0.625% per annum of the Fund's average
daily net assets (the "Basic Fee"). The second component is a performance fee
adjustment.
Computing The Performance Fee Adjustment
The Basic Fee is subject to an upward or downward adjustment, depending on
whether, and to what extent, the investment performance of the Fund for the
performance period exceeds, or is exceeded by, the record of the Standard and
Poors Mid-Cap 400 Index of mid-capitalization stocks (the "Index") over the same
period. The performance period consists of the current month and the prior 35
months ("performance period"). Each percentage point of difference (up to a
maximum of +/- 10) is multiplied by a performance adjustment rate of 0.02%.
Thus, the maximum annualized adjustment rate is +/- 0.20%. This performance
comparison is made at the end of each month. One twelfth (1/12) of this rate is
then applied to the Fund's average net assets for the entire performance period,
giving a dollar amount that will be added to (or subtracted from) the Basic Fee.
Because the adjustment to the Basic Fee is based on the comparative performance
of the Fund and the record of the Index, the controlling factor is not whether
Fund performance is up or down, but whether it is up or down more or less than
the record of the Index. Moreover, the comparative investment performance of the
Fund is based solely on the relevant performance period without regard to the
cumulative performance over a longer or shorter period of time.
Phase-In of Performance Fee Arrangements
As indicated above, if approved by shareholders, the proposed contract with PMC
will become effective February 1, 1996. Under the terms of the contract, for the
period beginning February 1 and ending June 30, 1996, the Fund would pay PMC
fees at the same rates as under the current contract which are set forth in the
prospectus on page 5. For the period beginning July 1, 1996 and ending December
31, 1996, the Basic Fee will take effect but a performance adjustment will only
be made if this will result in a lowering of the Basic Fee. For periods after
January 1, 1997, the performance adjustment will be made as described above.
The performance period initially used for calculating any performance adjustment
to the Basic Fee will begin on February 1, 1996 and will increase by each
succeeding month until a total of 36 months has been reached. Thereafter, the
performance period will consist of the current month and the prior 35 months as
described above.
The Basic Fee is computed daily, the performance fee adjustment is
calculated once per month and the entire management fee is paid monthly.
