[Pioneer logo]
Pioneer
Fund
Prospectus
April 24, 1995
(revised October 30, 1995)
The investment objectives of Pioneer Fund ("the Fund") are reasonable income
and growth of capital. The Fund seeks to achieve these objectives by
investing in a broad list of carefully selected, reasonably priced
securities.
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 (Part A of the Registration Statement) provides the
information about the Fund that you should know before investing in the Fund.
Please read and retain it for your future reference. More information about
the Fund is included in the Statement of Additional Information (Part B of
the Registration Statement), dated April 24, 1995 (revised October 30, 1995),
which is incorporated into this Prospectus by reference. A copy of the
Statement of Additional Information and the Fund's Annual Report 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.
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TABLE OF CONTENTS PAGE
---- ----------------------------------------------- -------
<S> <C> <C>
I. EXPENSE INFORMATION 2
II. FINANCIAL HIGHLIGHTS 3
III. INVESTMENT OBJECTIVES AND POLICIES 3
IV. MANAGEMENT OF THE FUND 4
V. DISTRIBUTION PLAN 4
VI. INFORMATION ABOUT FUND SHARES 5
How to Purchase Shares 5
Net Asset Value and Pricing of Orders 6
Dividends, Distributions and Taxation 7
Redemptions and Repurchases 7
Redemption of Small Accounts 9
Description of Shares and Voting Rights 9
VII. SHAREHOLDER SERVICES 9
Account and Confirmation Statements 9
Additional Investments 9
Automatic Investment Plans 10
Financial Reports and Tax Information 10
Distribution Options 10
Directed Dividends 10
Direct Deposit 10
Voluntary Tax Withholding 10
Exchange Privilege 10
Telephone Transactions and Related Liabilities 10
FactFone(SM) 11
Telecommunications Device for the Deaf (TDD) 11
Retirement Plans 11
Systematic Withdrawal Plans 11
Reinstatement Privilege 11
VIII. INVESTMENT RESULTS 11
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
I. EXPENSE INFORMATION
This table is designed to help you understand the charges and expenses
that you, as a shareholder, will bear directly or indirectly when you invest
in the Fund. The table reflects estimated expenses based on actual expenses
for the fiscal year ended December 31, 1994 expressed as a percentage of
average net assets of the Fund.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Expenses:
Maximum Sales Charge on Purchases(1) 5.75%
Maximum Sales Charge on Reinvestment
of Dividends none
Deferred Sales Charge(1) none
Redemption Fee(2) none
Exchange Fee none
Annual Operating Expenses (as a percentage of average
net assets):
Management Fee 0.45%
12b-1 Fees 0.16%
Other Expenses (including accounting,
transfer agent and custody fees and
printing expenses) 0.33%
------
Total Operating Expenses 0.94%
======
</TABLE>
(1) Purchases of $1,000,000 or more and purchases by participants in certain
group plans are not subject to an initial sales charge. A contingent
deferred sales charge of 1% may, however, be charged on redemptions by
such accounts of shares held less than one year, as further described
under "Redemptions and Repurchases."
(2) Separate fees (currently $10 and $20, respectively) apply to domestic or
international bank wire transfers of redemption proceeds.
Example:
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and constant expenses, with or without redemption at the end of
each time period:
One Year Three Years Five Years Ten Years
$67 $86* $107* $166*
*These are cumulative totals; the average fees and expenses
paid over a 10-year period would be approximately $16.60
per year.
The example above assumes reinvestment of all dividends and distributions
and that the percentage amounts listed under "Annual Operating Expenses"
remain the same each year.
The example is designed for informational purposes only, and should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than
those shown.
For further information regarding management fees, 12b-1 fees and other
expenses of the Fund, see "Management of the Fund," "Distribution Plan" and
"How To Purchase Shares" in this Prospectus and "Management of the Fund" and
"Underwriting Agreement and Distribution Plan" in the Statement of Additional
Information. The Fund's payment of a 12b-1 fee may result in long-term
shareholders indirectly paying more than the economic equivalent of the
maximum sales charge permitted under the Rules of Fair Practice of the
National Association of Securities Dealers Inc. ("NASD").
The maximum sales charge is reduced on purchases of specified amounts and
the value of shares owned in other Pioneer mutual funds is taken into account
in determining the applicable sales charge. See "How to Purchase Shares." No
sales charge is applied to exchanges of shares of the Fund for shares of
other publicly available Pioneer mutual funds. See "Exchange Privilege."
2
<PAGE>
II. FINANCIAL HIGHLIGHTS
The following information has been derived from financial statements of
the Fund which have been audited by Arthur Andersen LLP, independent public
accountants. Arthur Andersen LLP's report on the Fund's financial statements
as of December 31, 1994 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 the financial
statements contained in the Fund's Annual Report. 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 Fund
Financial Highlights for Each Share Outstanding throughout Each Year:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $23.25 $21.51 $20.24 $18.79 $23.28
--------- -------- -------- -------- ----------
Income from investment
operations-
Net investment income $0.49 $0.47 $0.50 $0.61 $0.67
--------- -------- -------- -------- ----------
Net realized and unrealized
gain (loss) on investments (0.63) 2.57 2.22 3.49 (3.10)
--------- -------- -------- -------- ----------
Total income (loss) from
investment operations $(0.14) $3.04 $2.72 $4.10 $(2.43)
Distribution to shareholders
from-
Net investment income (0.49) (0.47) (0.50) (0.61) (0.67)
Net realized capital gains (1.30) (0.83) (0.95) (2.04) (1.39)
--------- -------- -------- -------- ----------
Net increase (decrease) in
net asset value $(1.93) $1.74 $1.27 $1.45 $(4.49)
--------- -------- -------- -------- ----------
Net asset value, end of year $21.32 $23.25 $21.51 $20.24 $18.79
========= ======== ======== ======== ==========
Total return* (0.57%) 14.23% 13.60% 22.76% (10.52%)
Ratio of net operating
expenses to average net
assets 0.94% 0.95% 0.98% 0.87% 0.78%
Ratio of net investment
income to average net assets 2.13% 2.04% 2.33% 2.87% 3.15%
Portfolio turnover rate 20.00% 12.00% 13.00% 22.00% 17.00%
Net assets, end of year (in
thousands) $2,011,051 $2,042,945 $1,786,031 $1,614,567 $1,395,520
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1989 1988 1987 1986 1985
----------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $20.34 $18.48 $19.72 $23.13 $20.08
--------- -------- -------- -------- ----------
Income from investment
operations-
Net investment income $0.61 $0.63 $0.62 $0.56 $0.69
--------- -------- -------- -------- ----------
Net realized and unrealized
gain (loss) on investments 4.09 2.72 0.41 1.95 4.19
--------- -------- -------- -------- ----------
Total income (loss) from
investment operations $4.70 $3.35 $1.03 $2.51 $4.88
Distribution to shareholders
from-
Net investment income (0.68) (0.62) (0.61) (0.67) (0.79)
Net realized capital gains (1.08) (0.87) (1.66) (5.25) (1.04)
--------- -------- -------- -------- ----------
Net increase (decrease) in
net asset value $2.94 $1.86 $(1.24) $(3.41) $3.05
--------- -------- -------- -------- ----------
Net asset value, end of year $23.28 $20.34 $18.48 $19.72 $23.13
========= ======== ======== ======== ==========
Total return* 23.39% 18.33% 5.44% 11.49% 26.03%
Ratio of net operating
expenses to average net
assets 0.75% 0.76% 0.70% 0.70% 0.68%
Ratio of net investment
income to average net assets 2.60% 3.03% 2.75% 2.44% 3.24%
Portfolio turnover rate 6.00% 11.00% 14.00% 31.00% 18.00%
Net assets, end of year (in
thousands) $1,618,320 $1,409,755 $1,272,118 $1,302,120 $1,474,288
</TABLE>
*Assumes initial investment at net asset value at the beginning of each year,
reinvestment of all dividends and distributions, and the complete redemption
of the investment at the net asset value at the end of each year and no sales
charges. Total return would be reduced if sales charges were taken into
account.
III. INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Fund are reasonable income and growth of
capital. The Fund seeks these objectives by investing in a broad list of
carefully selected, reasonably priced securities rather than investing in
securities whose prices reflect a premium from their current market
popularity. Most of the Fund's assets are invested in common stocks and other
equity securities such as preferred stocks and securities convertible into
common stock, but the Fund may also invest in debt securities and cash
equivalent investments.
The largest portions of the Fund's portfolio are invested in securities
that have paid dividends within the preceding twelve months, but some
non-income producing securities are held for anticipated increases in value.
Assets of the Fund are substantially fully invested at all times because
management avoids speculating on broad changes in the level of the market.
Whenever the Fund wishes to obtain funds not otherwise available for the
purchase of an attractive security, it pursues the policy of selling that
security in its portfolio which seems the least attractive security owned.
The resulting rate of turnover of the portfolio is not considered an
important factor. The Fund does not purchase and sell securities for
short-term profits; however, securities are sold without regard to the time
they have been held whenever selling seems advisable.
The Fund may enter into repurchase agreements with banks, generally not
exceeding seven days. Such repurchase agreements will be fully collateralized
with United States ("U.S.") Treasury and/or Agency obligations with a market
value of not less than 100% of the obligation, valued daily. Collateral will
be held 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 write (sell) covered call options in standard contracts
traded on national securities exchanges or those which may be quoted on the
Nasdaq market, provided that it continues to own the securities covering each
call until the call has been exercised or has expired, or until the Fund has
purchased a closing call to offset the obligation to deliver securities for
the call it has written. The Fund does not expect
3
<PAGE>
to write (sell) covered call options with an aggregate market value exceeding
5% of the Fund's total assets in the foreseeable future. See the Statement of
Additional Information for information regarding the Fund's ability to write
(sell) covered call options.
The Fund may invest in foreign securities if purchases of such securities
are otherwise consistent with the fundamental policies of the Fund. As a
matter of practice, however, the Fund does not invest in foreign securities
if there appears to be a substantial risk to the issuer of such securities of
nationalization, confiscation or other national restrictions. In connection
with its investments in foreign securities and in order to protect itself
against uncertainty in future exchange rates, the Fund may engage in foreign
currency exchange transactions.
The foregoing objectives and policies may not be changed without
shareholder approval. Other investment policies and restrictions on
investments are described in the Statement of Additional Information
including a policy on lending portfolio securities. Among these other
investment policies and restrictions on investments, the Fund will not invest
more than 5% of its net assets in debt securities, including convertible
securities, which are rated less than investment grade or the equivalent.
Since all investments are subject to inherent market risks and fluctuations
in value due to earnings, economic conditions and other factors, the Fund, of
course, cannot assure that its investment objectives will be achieved.
IV. MANAGEMENT OF THE FUND
The Fund's Board of Trustees has overall responsibility for management and
supervision of the Fund. There are currently eight Trustees of the Fund, six
of whom are not "interested persons" of the Fund as defined in the Investment
Company Act of 1940 (the "1940 Act"), as amended. The Board meets at least
quarterly. By virtue of the functions performed by Pioneering Management
Corporation ("PMC") as investment adviser, the Fund requires no employees
other than its executive officers, all of whom receive their compensation
from PMC or other sources. The Statement of Additional Information contains
the names of and general background information regarding each Trustee and
executive officer of the Fund.
The Fund is managed under a contract with PMC. PMC serves as investment
adviser to the Fund and is responsible for the overall management of the
Fund's business affairs, subject only to the authority of the Fund's Board of
Trustees. PMC is a wholly-owned subsidiary of The Pioneer Group, Inc. ("PGI"),
a Delaware corporation. PGI's indirect wholly-owned subsidiary, Pioneer Funds
Distributor, Inc. ("PFD"), is the principal underwriter of shares of the Fund.
Each domestic equity portfolio managed by PMC, including the Fund, is
overseen by the Domestic Equity Portfolio Management Committee, which
consists of PMC's most senior domestic equity professionals. The Committee is
chaired by Mr. David Tripple, PMC's President and Chief Investment Officer
and Executive Vice President of each of the Funds. Mr. Tripple joined PMC in
1974 and has had general responsibility for PMC's investment operations and
specific portfolio assignments for over five years. Day-to-day management of
the Fund has been the responsibility of John A. Carey, Vice President of the
Fund and PMC, since February 1987. Mr. Carey joined PMC in 1979.
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.
Under the terms of its contract with the Fund, PMC assists in the
management of the Fund and is authorized in its discretion to buy and sell
securities for the account of the Fund. PMC pays all the ordinary operating
expenses, including executive salaries and the rental of office space
relating to its services for the Fund, with the exception of the following,
which are paid by the Fund: (a) taxes and other governmental charges, if any;
(b) interest on borrowed money, if any; (c) legal fees and expenses; (d)
auditing fees; (e) insurance premiums; (f) dues and fees for membership in
trade associations; (g) fees and expenses of registering and maintaining
registrations by the Fund of its shares with the SEC, individual states,
territories and foreign jurisdictions and of preparing reports to government
agencies; (h) fees and expenses of Trustees not affiliated with or interested
persons of PMC; (i) fees and expenses of the custodians, shareholder
servicing, dividend disbursing and transfer agent; (j) transfer taxes in
connection with securities transactions for the account of the Fund; (k)
costs of reports to shareholders, shareholders' meetings and Trustees'
meetings; (l) the cost of certificates representing shares of the Fund; (m)
bookkeeping and appraisal charges; and (n) distribution fees in accordance
with the Plan of Distribution described below. The Fund also pays all
brokers' and underwriting commissions chargeable to the Fund in connection
with its portfolio transactions.
Orders for the Fund's portfolio securities transactions are placed by PMC,
which strives to obtain the best price and execution for each transaction. In
circumstances where two or more broker-dealers are in a position to offer
comparable prices and execution, consideration may be given to whether the
broker-dealer provides brokerage or research services or sells shares of the
Pioneer mutual funds. See the Statement of Additional Information for a
further description of PMC's brokerage allocation practices.
As compensation for its management services and certain expenses which PMC
incurs, PMC is entitled to a management fee equal to 0.50% per annum 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 is normally
computed daily and paid monthly. During the fiscal year ended December 31,
1994, the Fund incurred expenses of approximately $19,421,000, including
management fees paid or payable to PMC of approximately $9,362,000.
John F. Cogan, Jr., Chairman and President of the Fund, Chairman of PFD,
and President and a Director of PGI and Chairman of PMC, owned approximately
15% of the outstanding capital stock of PGI as of March 31, 1995.
V. DISTRIBUTION PLAN
The Fund has adopted a Plan of Distribution (the "Plan") in accordance
with Rule 12b-1 under the 1940 Act pursuant to which certain distribution
fees are paid to PFD. As required by Rule 12b-1, the Plan was approved by a
majority of the outstanding shares held by the shareholders of the Fund and
by
4
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the Trustees, including a majority of the Trustees who are not "interested
persons" of the Fund.
Pursuant to the Plan, the Fund reimburses PFD for its actual expenditures
to finance any activity primarily intended to result in the sale of Fund
shares or to provide services to Fund shareholders, 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 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; (ii) reimbursement to PFD for its
expenditures for broker- dealer commissions and employee compensation on
certain sales of the Fund's shares with no initial sales charge (see "How to
Purchase Shares"); and (iii) reimbursement to PFD for expenses incurred in
providing services to 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 Plan are accrued daily and may
not exceed 0.25% of average daily net assets. Distribution expenses of PFD
are expected to substantially exceed the distribution fees paid by the Fund
in a given year. The Plan does not provide for the carryover of reimbursable
expenses beyond 12 months from the time the Fund is first invoiced for an
expense. The limited carryover provision in the Plan may result in an expense
invoiced to the Fund in one fiscal year being paid in the subsequent fiscal
year and thus being treated for purposes of calculating the maximum
expenditures of the Fund as having been incurred in the subsequent fiscal
year. In the event of termination or non-continuance of the Plan, the Fund
has 12 months to reimburse any expense which it incurs prior to such
termination or non-continuance, provided that payments by the Fund during
such 12-month period shall not exceed 0.25% of the Fund's average net daily
assets during such period. The Plan may not be amended to increase materially
the annual percentage limitation of average net assets which may be spent for
the services described therein without approval of the shareholders of the
Fund.
VI. INFORMATION ABOUT FUND SHARES
How to Purchase Shares
You may purchase shares of the Fund at the public offering price from any
securities broker-dealer having a sales agreement with PFD. The minimum
initial investment is $50. Separate minimum investment requirements apply to
retirement plans and to telephone and wire orders placed by broker-dealers;
no sales charge or minimum investment requirements apply to the reinvestment
of dividends or capital gains distributions.
The Fund has a minimum account requirement of $500. As a new purchaser,
you will be given at least 24 months from your initial purchase to increase
the value of the account to $500. See "Redemptions and Repurchases."
Telephone Purchases. Your account is automatically authorized to have the
telephone purchase privilege unless you indicated 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 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 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 acceptance of a telephone
purchase instruction and receipt of good funds (usually three days after the
purchase instruction). You may always elect to deliver purchases to PSC by
mail. See "Telephone Transactions and Related Liabilities" for additional
information.
The public offering price is the net asset value per share next computed
after receipt of a purchase order, plus a sales charge as follows:
<TABLE>
<CAPTION>
Dealer
Sales Charge as % of Allowance
Net as a % of
Offering Amount Offering
Amount of Purchase Price Invested Price
- --------------------- -------- --------- ------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but 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>
No sales charge is payable at the time of purchase on investments of
$1,000,000 or more or on purchases by certain group plans ("Group Plans"),
but for such investments a contingent deferred sales charge ("CDSC") of 1% is
imposed in the event of certain redemption transactions within one year of
purchase. See "Redemptions and Repurchases" below. 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 twelve calendar months. Broker-dealers
who receive a commission in connection with 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
5
<PAGE>
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 "Redemptions and Repurchases." In connection with PGI's acquisition of
Mutual of Omaha Fund Management Company and contingent upon the achievement
of certain sales objectives, PFD pays to Mutual of Omaha Investor Services,
Inc. 50% of PFD's retention of any sales commission on sales of the Fund's
shares through such dealer. 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.
The schedule of sales charges above is applicable to purchases of shares
of the Fund by (i) an individual, (ii) an individual, 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 charge applicable to a current purchase of 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 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. For example, a
person investing $5,000 in the Fund who currently owns shares of other
Pioneer mutual funds with a value of $45,000 would pay a sales charge of
4.50% of the offering price of the new investment.
Sales charges may also be reduced through an agreement to purchase a
specified quantity of shares over a designated 13-month period by completing
the "Letter of Intention" section of the Account Application. Information
about the Letter of Intention procedure, including its terms, is contained in
the Account Application as well as in the Statement of Additional
Information.
Shares of the Fund may be sold at a reduced or eliminated sales charge to
certain Group Plans under which a sponsoring organization makes
recommendations to, permits group solicitation of, or otherwise facilitates
purchases by, its employees, members or participants. Shares of the Fund may
be sold at net asset value per share without a sales charge to Optional
Retirement 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. Information about such arrangements is available from PFD.
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 serves as investment adviser
or manager; and (j) certain unit investment trusts. Shares so purchased are
purchased for investment purposes only and may not be resold except through
redemption or repurchase by or on behalf of the Fund. The availability of
this privilege depends upon the receipt by PFD of written notification of
eligibility. Shares of the Fund may also be sold at net asset value without a
sales charge in connection with certain reorganization, liquidation or
acquisition transactions involving other investment companies or personal
holding companies.
Investors who are clients of a broker-dealer with a current sales
agreement with PFD may purchase 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 60 days immediately preceding the purchase of shares of the Fund; 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.
Net Asset Value and Pricing of Orders
Shares of the Fund are sold at the public offering price, which is the net
asset value per share plus the applicable sales charge. Net asset value per
share of the Fund is determined by dividing the value of its assets, less
liabilities, by the number of shares outstanding. The net asset value is
computed once daily, on each day the New York Stock Exchange (the "Exchange")
is open, as of the close of regular trading on the Exchange.
Securities are valued at the last sale price on the principal exchange or
market where they are traded. Securities which have not traded on the date of
valuation or securities for which sales prices are not generally reported are
valued at the mean between the current bid and asked prices. Securities
quoted in foreign currencies are converted to U.S. dollars utilizing foreign
exchange rates employed by the Fund's independent pricing services.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of regular trading on the Exchange. The
values of such securities used in computing the net asset value
6
<PAGE>
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 are valued at their fair value as determined in
good faith by the Trustees. All assets of the Fund for which there is no
other readily available valuation method are valued at their fair value as
determined in good faith by the Trustees.
An order for shares received by a broker-dealer prior to the close of
regular trading on the Exchange (currently 4:00 p.m. Eastern Time) is
confirmed at the redemption price 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 PFD's close of business. An order
received by a broker-dealer following the close of regular trading on the
Exchange will be confirmed at the offering price as of the close of regular
trading on the Exchange on the next trading day.
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.
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 the Code, so that it will
not pay federal income taxes on income and capital gains distributed to
shareholders at least annually.
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 during the months of March, June, September and
December and to make distributions from net long term capital gains, if any,
in December. Distributions from net short-term capital gains, if any, may be
paid with such dividends, and other distributions from income and/or capital
gains may also be made at such times as may be necessary to avoid federal
income or excise tax. Dividends from the Fund's net investment income, net
short-term capital gains and certain net foreign exchange gains are taxable
as ordinary income. Dividends from the Fund's net long-term capital gains are
taxable as long-term capital gains.
Unless shareholders specify otherwise, all distributions will be
automatically reinvested in additional full and fractional shares of the
Fund. For federal income tax purposes, all distributions 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
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 dividend income it receives from U.S.
domestic corporations may qualify for the dividends-received deduction for
corporate shareholders, subject to certain minimum holding period
requirements and debt-financing restrictions under the Code.
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 a 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 such backup withholding or if the
Fund receives notice from the Internal Revenue Service ("IRS") or a broker
that such withholding applies. Please refer to the Account Application for
additional information.
The description above relates only to U.S. federal income tax consequences
for shareholders who are U.S. persons, i.e. U.S. citizens or residents, or
U.S. corporations, partnerships, trusts or estates and who are subject to
U.S. federal income tax. Non-U.S. shareholders and tax-exempt shareholders
are subject to different tax treatment that is not described above. You
should consult your own tax adviser regarding state, local and other
applicable tax laws.
Redemptions and Repurchases
Redemptions by Mail. As a shareholder, you have the right to offer your
shares for redemption by delivering to PSC a written request for redemption
in proper form, signed by all registered owners, and your share certificates,
if any, properly endorsed and in good order for transfer. Redemptions will be
made in cash at the net asset value per share next determined following
receipt by PSC of all necessary documents subject in certain cases to the
CDSC described below.
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 any of the following eligible guarantor institutions: (i) all
brokers, dealers, municipal securities dealers and/or brokers and government
securities dealers and/or brokers who are members of a clearing agency or
whose net capital exceeds $100,000; (ii) all banks; (iii) all credit unions;
(iv) all savings associations, including all savings and loan associations;
(v) all national securities exchanges, registered securities associations,
and all clearing agencies; and (vi) all trust companies. In addition, in some
cases (involving fiduciary or corporate transactions), good order may require
the furnishing of additional documents.
Signature guarantees may be waived for redemption requests of $50,000 or
less, provided that the record holder executes the redemption request,
payment is directed to the
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record holder at the address of record, and the address has not changed in
the previous 30 days. You cannot provide a signature guarantee by facsimile
("fax"). Payment normally will be made within seven days after receipt of
these documents. The Fund reserves the right to withhold payment until checks
received in payment of shares purchased have cleared, which may take up to 15
calendar days from the purchase date. For additional information about the
necessary documentation for redemption by mail, call PSC at 1-800-225-6292.
Redemption by Telephone or Fax. Your account is automatically authorized
to have the telephone redemption privilege unless you indicated otherwise on
your Account Application or by writing to PSC. Proper account identification
will be required for each telephone redemption. The telephone redemption
option is not available to retirement plan accounts. A maximum of $50,000 may
be redeemed by telephone or fax and the proceeds may be received by check or
by bank wire or electronic funds transfer. To receive the proceeds by check:
the check must be made payable exactly as the account is registered and the
check must be sent to the address of record which must not have changed in
the last 30 days. To receive the proceeds by bank wire or by electronic funds
transfer: the proceeds must be sent to your bank address of record which must
have been properly pre-designated 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. You may always
elect to deliver redemption instructions to PSC by mail. See "Telephone
Transactions and Related Liabilities" below. Telephone redemptions will be
priced as described above. You are strongly urged to consult with your
financial representative prior to requesting a telephone redemption.
Sales of Shares Through Broker-Dealers. For the convenience of
shareholders, the Fund has authorized PFD to act as its agent in the
repurchase of shares of the Fund from qualified broker-dealers. The Fund
reserves the right to terminate this procedure at any time. Offers to sell
shares to the Fund may be communicated to PFD by wire or telephone by
broker-dealers for their customers. The Fund's practice will be to repurchase
shares offered to it at the net asset value per share determined as of the
close of business of the Exchange on the day the offer for repurchase is
received and accepted by the broker-dealer if the offer is received by PFD
before the close of business on that day.
A broker-dealer which receives an offer for repurchase is responsible for
the prompt transmittal of such offer to PFD. Payment of the repurchase
proceeds will be made in cash to the broker-dealer placing the order. Except
for certain large accounts subject to a CDSC (as described below), neither
the Fund nor PFD charges any fee or commission upon such repurchase which is
then settled as an ordinary transaction with the broker-dealer (which may
charge the shareholder for this service) delivering the shares repurchased.
Payment will be made within seven days of the receipt by PSC of valid
instructions, including validly endorsed certificates, if appropriate, in
good order as described above.
Additional Conditions of Redemption. 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 upon the market value of the portfolio at
the time of redemption or repurchase. Redemptions and repurchases are taxable
transactions to shareholders. Shareholders whose accounts are registered in
the name of a broker, dealer or other financial institution must contact a
representative of the institution holding the shares to arrange for a
redemption.
Redemptions may be suspended or payment postponed during any period in
which any of the following conditions exists: 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.
Purchases of $1,000,000 or more, and purchases by participants in a Group
Plan which have not been subject to a sales charge, may be subject to a CDSC
upon redemption or repurchase. A CDSC is payable 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. In determining whether a CDSC is payable, and, if so, the amount
of the CDSC, it is assumed that shares purchased with reinvested dividend and
capital gain distributions and then such other shares which are held the
longest will be the first redeemed. Shares subject to the CDSC which are
exchanged into another Pioneer mutual fund will continue to be subject to the
CDSC until the original 12-month period expires. See "Exchange Privilege" for
more information. However, no CDSC is payable with respect to purchases of
shares by 401(a) or 401(k) retirement plans with 1,000 or more eligible
participants or with at least $10 million in plan assets.
Waiver or Reduction of Contingent Deferred Sales Charge. The CDSC on
shares subject to a CDSC may be waived or reduced for non-retirement accounts
if: (a) the redemption results from the death of all registered owners of an
account (in the case of UGMAs, UTMAs and trust accounts, 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 shares subject to a CDSC 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 participant 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
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the distribution amount is established; a required minimum distribution due
to the participant's attainment of age 70-1/2 may exceed the 10% limit only
if the distribution amount is based on plan assets held by Pioneer); (c) the
distribution is from a 401(a) or 401(k) retirement plan and is a return of
excess employee deferrals or employee contributions or a qualifying hardship
distribution as defined by the Code or results from a termination of
employment (limited with respect to a termination to 10% per year of the
value of the plan's assets in the Fund as of the later of the prior December
31 or the date the account was established unless the plan's assets are being
rolled over to or reinvested in the same class of shares of a Pioneer mutual
fund subject to the CDSC of the shares originally held); (d) the distribution
is from an IRA, 403(b) or employer-sponsored retirement plan and is to be
rolled over to or reinvested in the same class of shares in a Pioneer mutual
fund and which will be subject to the applicable CDSC upon redemption; (e)
the distribution is in the form of a loan to a participant in a plan which
permits loans (each repayment of the loan will constitute a new sale which
will be subject to the applicable CDSC upon redemption); or (f) the
distribution is from a qualified defined contribution plan and represents a
participant's directed transfer (provided that this privilege has been
pre-authorized through a prior agreement with PFD regarding participant
directed transfers).
The CDSC on shares subject to a CDSC may be waived or reduced for either
non-retirement or retirement plan accounts if: (a) the redemption is made by
any state, county, or city, or any instrumentality, department, authority, or
agency thereof, which is prohibited by applicable laws from paying a CDSC in
connection with the acquisition of shares of any registered investment
management company; or (b) the redemption is made pursuant to the Fund's
right to liquidate or involuntarily redeem shares in a shareholder's account.
Redemption of Small Accounts
As a new shareholder, you have a minimum of 24 months (including the six
months following the mailing of the notice described below) to increase the
value of your account to $500 or more. If you hold shares of the Fund in an
account with a net asset value of less than $500 due to redemptions or
exchanges or failure to meet the initial minimum account requirement set
forth above, 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 $500 within six months of written notice by the Fund to you of the
Fund's intention to redeem the shares.
Description of Shares and Voting Rights
The Fund is an open-end diversified management investment company
(commonly referred to as a mutual fund) which was organized as a Delaware
corporation in 1928 and reorganized as a Massachusetts corporation in 1967
and as a Massachusetts business trust in 1985. The Fund has authorized an
unlimited number of shares of beneficial interest. As an open-end 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 "Redemptions and
Repurchases" above.
The Fund has only one class of shares, entitled shares of beneficial
interest. Each share represents an equal proportionate interest in the Fund
with each other share. Shareholders are entitled to one vote for each share
held and may vote in the election and removal of Trustees and on other
matters submitted to shareholders. Shares have no preemptive or conversion
rights. Shares are fully-paid and, except as set forth in the Statement of
Additional Information, non-assessable. Upon liquidation of the Fund, the
Fund's shareholders would be entitled to share pro rata in the Fund's net
assets available for distribution. Shares will remain on deposit with PSC and
certificates will not be issued unless requested. Certificates for fractional
shares will not be issued. The Fund reserves the right to charge a fee for
the issuance of certificates.
The Fund reserves the right to create and issue additional series of
shares, in which case the shares of each series would participate equally in
the earnings, dividends and assets of the particular series. Shares of each
series would be entitled to vote separately to approve investment advisory
agreements or changes in investment restrictions, but shares of all series
would be entitled to vote together in the election or selection of Trustees
and accountants.
VII. 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. 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 all
shareholders who have more than one Pioneer 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
investment or redemption of shares by mail, automatic reinvestment of
dividends and capital gains distributions, withdrawal plans, Letters of
Intention, Rights of Accumulation, telephone exchanges and redemptions,
newsletters and other informational mailings.
Additional Investments
You may add to your account by sending a check ($50 minimum) to PSC
(account number 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 or through a Pioneer Investomatic Plan. A
Pioneer Investomatic Plan provides for a monthly or quarterly investment by
means of a preauthorized draft drawn on a checking account. Pioneer
Investomatic Plan investments are voluntary and you may discontinue the plan
without penalty upon 30 days' written notice to PSC. PSC acts as agent for
the purchaser, the broker-dealer, and PFD in maintaining these plans.
Financial Reports and Tax Information
As a shareholder, you will receive financial reports at least
semi-annually. In January of each year, the Fund will mail you information
about the tax status of dividends and other distributions.
Distribution Options
Dividends and capital gains distributions, if any, will automatically be
invested in additional shares of the Fund, at the applicable net asset value
per share, unless you indicate another option on the Account Application.
Two other available options are (a) dividends in cash and capital gains
distributions in additional shares; and (b) all dividends and distributions
in cash. These two options are not available, however, for retirement plans
or an account with a net asset value of less than $500. Changes in the
distribution options may be made by written request to PSC.
Directed Dividends
You may elect (in writing) to have the dividends paid by one Pioneer fund
account invested in a second Pioneer mutual fund account. The value of this
second account must be at least $1,000 ($500 for the Fund or Pioneer II).
Invested dividends may be in any amount, and there are no fees or charges for
this service. Retirement plan shareholders may only direct dividends to
accounts with identical registrations i.e., PGI IRA Cust for John Smith may
only go into another account registered PGI IRA Cust for John Smith.
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 distribution 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.
Exchange Privilege
Exchanges must be at least $1,000. You may exchange your shares of the
Fund at net asset value, without a sales charge, for shares of other Pioneer
mutual funds which do not offer different classes of shares or for the Class
A shares of those Pioneer mutual funds that offer more than one class of
shares. There are currently no fees or sales charges on such an exchange. An
exchange of shares may be made only in states where legally permitted.
A new Pioneer mutual fund account opened through an exchange must have a
registration identical to that on the original account. PSC will process
exchanges only after receiving an exchange request in proper form.
Written Exchanges. If the exchange request is in writing, it must be
signed by all record owner(s) exactly as the shares are registered. If your
original account includes a Pioneer Investomatic or Systematic Withdrawal
Plan and you open a new account by exchange, you should specify whether the
plans should continue in your new account or remain with your original
account.
Telephone Exchanges. Your account is automatically authorized to have the
telephone exchange privilege unless you indicated 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, will be recorded. You are strongly urged to consult
with your financial representative prior to requesting a telephone exchange.
Automatic Exchange. You may automatically exchange shares from one
Pioneer mutual fund account to another Pioneer mutual fund account on a
regular schedule, either monthly or quarterly. The accounts must have
identical registrations and the originating account must have a minimum
balance of $5,000. The exchange will occur on the 18th day of each month.
If an exchange request is received by PSC before 4:00 p.m. Eastern Time
(or before the time that the Exchange closes for regular trading on that day,
if different), the exchange will be effective on that day if the requirements
above have been met. If the exchange request is received after this time, the
exchange will be effective on the following business day.
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 federal and (generally) state income tax purposes,
an exchange represents a sale of the shares exchanged and a purchase of
shares in another 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.
To prevent abuse of the exchange privilege to the detriment of other Fund
shareholders, the Fund and PFD reserve the right to limit the number and/or
frequency of exchanges and/or to charge a fee for exchanges.
Telephone Transactions and Related Liabilities
Your account is automatically authorized to have telephone transaction
privileges unless you indicated otherwise on your Account Application or by
writing to PSC. You may purchase, sell or exchange Fund shares by telephone.
See "Net Asset Value and Pricing of Orders" for more information. For
personal assistance, call 1-800-225-6292 between 8:00 a.m. and 8:00 p.m.
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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. See "Net Asset
Value and Pricing of Orders," "Redemptions and Repurchases" and "Exchange
Privilege" for more information. To confirm that each transaction instruction
received by telephone is genuine, PSC will record each telephone transaction,
require the caller to provide the personal identification number ("PIN") for
the account and send you a written confirmation of each telephone
transaction. Different procedures may apply to accounts that are registered
to non-U.S. citizens or that are held in the name of an institution or in the
name of an investment broker-dealer or other third-party. If reasonable
procedures, such as those described above, are not followed, the Fund may be
liable for any loss due to unauthorized or fraudulent instructions. The Fund
may implement other procedures from time to time. In all other cases, neither
the Fund, PSC or PFD will be responsible for the authenticity of instructions
received by telephone, therefore, you bear the risk of loss for unauthorized
or fraudulent telephone transactions.
During times of economic turmoil or market volatility or as a result of
severe weather or a natural disaster, it may be difficult to contact the Fund
by telephone to institute a redemption or exchange. You should communicate
with the Fund in writing if you are unable to reach the Fund by telephone.
FactFone(SM)
FactFone is an automated inquiry and telephone transaction system
available to Pioneer shareholders by dialing 1-800-225-4321. FactFone 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 to make computer-assisted telephone
purchases, exchanges and redemptions from your Pioneer accounts if you have
activated your PIN. Telephone purchases and redemptions require the
establishment of a bank account of record. You are strongly urged to consult
with your financial representative prior to requesting any telephone
transaction. Shareholders whose accounts are registered in the name of a
broker-dealer or other thrid party may not be able to use FactFone. See "How
to Purchase Fund Shares," "Exchange Privilege," "Redemptions and Repurchases"
and "Telephone Transactions and Related Liabilities." Call PSC for
assistance.
Telecommunications Device for the Deaf (TDD)
If you have a hearing disability and your own 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.
Retirement Plans
You should contact the Retirement Plans Department of PSC at
1-800-622-0176 for information on retirement plans for businesses, Simplified
Employee Pensions Plans, IRAs, and Section 403(b) retirement plans for
employees of certain non-profit organizations and public school systems, all
of which are available in conjunction with investments in the Fund. The
Account Application accompanying this Prospectus should not be used to
establish any of these plans. Separate applications are required.
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. Periodic checks of $50 or more will be sent to you monthly or
quarterly and your periodic redemptions of shares may be taxable to you. You
may also direct that withdrawal checks be paid to another person, although if
you make this designation after you have opened your account, a signature
guarantee must accompany your instructions. Purchases of 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
If you redeem all or part of your shares of the Fund, you may reinvest all
or part of the redemption proceeds without a sales commission in 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 shares of the Fund 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. Subject to the provisions outlined
under "Exchange Privilege" above, you may also reinvest in any other Pioneer
mutual funds; in this case you must meet the minimum investment requirement
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 filling out
an Account Options Form, which you may request by calling 1-800-225-6292.
VIII. INVESTMENT RESULTS
The Fund may include in advertisements, and furnish to existing or
prospective shareholders, information concerning the average annual total
return on an investment in the Fund for a designated period of time. Whenever
this information is provided, it includes a standardized calculation of
average annual total return computed by determining the average annual
compounded rate of return that would cause a hypothetical investment (after
deduction of the maximum sales charge) made on the first day of the
designated period
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(assuming all dividends and distributions are reinvested) to equal the
resulting net asset value of such hypothetical investment on the last day of
the designated period. The periods illustrated would normally include one,
five and ten years. These standardized calculations do not reflect the impact
of federal or state income taxes.
The foregoing computation method is prescribed for advertising and other
communications subject to SEC Rule 482. Communications not subject to this
rule may contain one or more additional measures of investment results,
computation methods 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. These data may cover any period of the
Fund's existence and may or may not include the impact of sales charges,
taxes or other factors.
Other investments or savings vehicles and/or unmanaged market indexes,
indicators of economic activity, or averages of mutual funds results may be
cited or compared with the investment results of the Fund. Rankings or
listings by magazines, newspapers or independent statistical or ratings
services, such as Lipper Analytical Services, Inc. or Ibbotson Associates,
may also be referenced.
The Fund's investment results will vary from time to time depending on
market conditions, the composition of the Fund's portfolio and operating
expenses of the Fund. Therefore, any prior investment results of the Fund
should not be considered representative of what an investment in the Fund may
earn in any future period. These factors and possible differences in the
methods used in calculating investment results should be considered when
comparing performance information regarding the Fund to information published
for other investment companies, investment vehicles, and unmanaged indexes.
The Fund's investment results should also be considered relative to the risks
associated with the Fund's investment objectives and policies.
For further information about the calculation methods used for computing
the Fund's investment results, see the Statement of Additional Information.
12
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Notes
13
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Notes
14
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THE PIONEER FAMILY OF MUTUAL FUNDS
International Growth Funds
Pioneer India Fund
Pioneer Emerging Markets Fund
Pioneer International Growth Fund
Pioneer Europe Fund
Growth Funds
Pioneer Gold Shares
Pioneer Growth Shares
Pioneer Capital Growth Fund
Growth and Income Funds
Pioneer Three
Pioneer II
Pioneer Fund
Pioneer Real Estate Shares
Pioneer Equity-Income Fund
Income Funds
Pioneer Income Fund
Pioneer Bond Fund
Pioneer America Income Trust
Pioneer Short-Term Income Trust
Tax-Free Income Funds
Pioneer California Double Tax-Free Fund*
Pioneer Massachusetts Double Tax-Free Fund*
Pioneer New York Triple Tax-Free Fund*
Pioneer Tax-Free Income Fund*
Pioneer Intermediate Tax-Free Fund*
Money Market Funds
Pioneer Tax-Free Money Fund*
Pioneer Cash Reserves Fund
Pioneer U.S. Government Money Fund
*Not suitable for retirement accounts
15
<PAGE>
Pioneer
Fund
60 State Street
Boston, Massachusetts 02109
OFFICERS
JOHN F. COGAN, JR., Chairman and President
DAVID D. TRIPPLE, Executive Vice President
JOHN A. CAREY, Vice President
WILLIAM H. KEOUGH, Treasurer
JOSEPH P. BARRI, Secretary
INVESTMENT ADVISER
PIONEERING MANAGEMENT CORPORATION
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP
LEGAL COUNSEL
HALE AND DORR
PRINCIPAL UNDERWRITER
PIONEER FUNDS DISTRIBUTOR, INC.
SHAREHOLDER SERVICES AND TRANSFER AGENT
PIONEERING SERVICES CORPORATION
60 State Street
Boston, Massachusetts 02109
Telephone: 1-800-225-6292
SERVICE 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
1095-2837
(C) Pioneer Funds Distributor, Inc.
<PAGE>
PIONEER FUND
60 State Street
Boston, Massachusetts 02109
STATEMENT OF ADDITIONAL INFORMATION
April 24, 1995
(revised October 30, 1995)
This Statement of Additional Information (Part B of the Registration Statement)
is not a Prospectus, but should be read in conjunction with the Prospectus (the
"Prospectus") dated April 24, 1995 (revised October 30, 1995) of Pioneer Fund. A
copy of the Prospectus can be obtained free of charge by calling Shareholder
Services at 1-800-225-6292 or by written request to Pioneer Fund at 60 State
Street, Boston, Massachusetts 02109.
TABLE OF CONTENTS
Page
1. Investment Policies and Restrictions...........................B-2
2. Management of the Fund.........................................B-6
3. Investment Adviser.............................................B-10
4. Shareholder Servicing/Transfer Agent...........................B-10
5. Custodian......................................................B-10
6. Principal Underwriter..........................................B-11
7. Distribution Plan..............................................B-11
8. Independent Public Accountants.................................B-12
9. Portfolio Transactions.........................................B-12
10. Dividends and Tax Status.......................................B-14
11. Description of Shares..........................................B-17
12. Certain Liabilities............................................B-17
13. Determination of Net Asset Value...............................B-18
14. Systematic Withdrawal Plan.....................................B-18
15. Letter of Intention............................................B-19
16. Investment Results.............................................B-19
Appendix.......................................................B-22
--------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
1. INVESTMENT POLICIES AND RESTRICTIONS
The Prospectus of Pioneer Fund (the "Fund") identifies the investment
objectives and the principal investment policies of the Fund. Other investment
policies of the Fund are set forth below.
Lending of Portfolio Securities
In order to realize additional income, the Fund may lend its portfolio
securities, principally to broker-dealers, under agreements which would require
that the loans be secured continuously by cash equivalents or United States
("U.S.") Treasury bills equal at all times to at least the market value of the
securities loaned. The Fund would continue to receive interest or dividends on
the securities loaned and would also earn interest on the investment of the loan
collateral. The loan collateral would be invested only in U.S. Treasury notes,
certificates of deposit or other high-grade, short-term obligations or
interest-bearing cash equivalents. Although voting rights, or rights to consent
attendant to securities loaned, pass to the borrower, such loans will be called
so that the securities may be voted if a material event affecting the investment
is to occur.
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 Fund's Board of Trustees, which
will monitor the creditworthiness of any such firms. If the management of the
Fund decides to make securities loans, it is intended that the value of the
securities loaned by the Fund would not exceed 30% of the value of the Fund's
total assets. In the Fund's last fiscal year, it did not lend portfolio
securities with a value exceeding 5% of its net assets and, while it reserves
the right to do so, the Fund has no present intention of lending portfolio
securities with such a value during the coming year.
Covered Call Options
The Fund may write (sell) covered call options on certain portfolio
securities, but options may not be written on more than 25% of the aggregate
market value of any single portfolio security (determined each time a call is
sold as of the date of such sale). As writers of a call option, the Fund
receives a premium less commission, and, in exchange, foregoes the opportunity
to profit from increases in the market value of the security covering the call
above the sum of the premium and the exercise price of the option during the
life of the option. The purchaser of such a call has the option of purchasing
the security from the Fund's portfolio at the option price during the life of
the option. Portfolio securities on which options may be written are purchased
solely on the basis of investment considerations consistent with the Fund's
investment objectives. The security covering the call is maintained in a
segregated account of the Fund's custodian. The Fund does not consider a
security covered by a call option to be "pledged" as that term is used in the
Fund's policy which limits the pledging or mortgaging of their assets.
The Fund will purchase a call option only when entering into a "closing
purchase transaction," i.e., a purchase of a call option on the same security
with the same exercise price and expiration date as a "covered" call already
written by the Fund. There is no assurance that the Fund will be able to effect
such closing purchase transactions at a favorable price; if the Fund cannot
enter into such a transaction it may be required to hold a security that it
might otherwise have sold. The Fund's portfolio turnover may increase through
the exercise of options if the market price of the underlying securities
appreciates and the Fund has not entered into a closing purchase transaction.
The commission on purchase or sale of a call option is higher in relation to the
B-2
<PAGE>
premium than the commission in relation to the price on purchase or sale of the
underlying security.
Foreign Securities
The Fund may invest a portion of its assets in foreign securities.
Investment in securities of foreign companies and countries involves certain
considerations and risks that are not typically associated with investment in
U.S. Government securities and securities of domestic companies. Foreign
companies are not generally subject to uniform accounting, auditing and
financial standards and requirements comparable to those applicable to U.S.
companies. There may also be less government supervision and regulation of
foreign securities exchanges, brokers and listed companies than exists in the
United States. Dividends and interest paid by foreign issuers may be subject to
withholding and other foreign taxes which may decrease the net return on such
investments as compared to interest paid to the Fund by the U.S. Government or
by domestic companies. In addition, there may be the possibility of
expropriations, confiscatory taxation, political, economic or social instability
or diplomatic developments which could affect assets of the Fund held in foreign
countries. The value of foreign securities may be adversely affected by
fluctuations in the relative rates of exchange between the currencies of
different nations and by exchange control regulations. There may be less
publicly available information about foreign companies and governments compared
to reports and ratings published about U.S. companies. Some foreign securities
markets have substantially less volume than domestic markets and securities of
some foreign companies are less liquid and more volatile than securities of
comparable U.S. companies. In connection with its investments in foreign
securities and in order to protect against uncertainty in future exchange rates,
the Fund may engage in foreign currency exchange transactions.
Debt Securities
No more than 5% of the Fund's net assets may be invested in debt
securities, including convertible securities, rated below "BBB" by Standard &
Poor's Ratings Group ("Standard & Poor's") or the equivalent. If the rating of a
debt security is reduced below investment grade ("BBB" or higher), management
will consider whatever action is appropriate, consistent with the Fund's
investment objective and policies.
Bonds rated below "BBB" or comparable unrated securities are commonly
referred to as "junk bonds" and are considered speculative and may be
questionable as to principal and interest payments. In some cases, such bonds
may be highly speculative, have poor prospects for reaching investment standing
and be in default. As a result, investment in such bonds will entail greater
speculative risks than those associated with investment in investment grade
bonds (i.e., bonds rated "BBB" or better by Standard & Poor's or, if unrated by
such rating organization, determined to be of comparable quality by the Fund's
investment adviser).
The amount of junk bond securities outstanding has proliferated in
conjunction with the increase in merger and acquisition and leveraged buyout
activity. An economic downturn could severely affect the ability of highly
leveraged issuers to service their debt obligations or to repay their
obligations upon maturity. Factors having an adverse impact on the market value
of lower quality securities will have an adverse effect on the Fund's net asset
value to the extent that it invests in such securities. In addition, the Fund
may incur additional expenses to the extent it is required to seek recovery upon
a default in payment of principal or interest on its portfolio holdings.
B-3
<PAGE>
The secondary market for junk bond securities, which is concentrated in
relatively few market makers, may not be as liquid as the secondary market for
more highly rated securities, a factor which may have an adverse effect on the
Fund's ability to dispose of a particular security when necessary to meet its
liquidity needs. Under adverse market or economic conditions, the secondary
market for junk bond securities could contract further, independent of any
specific adverse changes in the condition of a particular issuer. As a result,
the Fund could find it more difficult to sell these securities or may be able to
sell the securities only at prices lower than if such securities were widely
traded. Prices realized upon the sale of such lower rated or unrated 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 quality debt securities of the type in which
the Fund may invest a portion of its assets, the yields and prices of such
securities may tend to fluctuate more than those for higher rated securities. In
the lower quality segments of the debt securities market, changes in perceptions
of issuers' creditworthiness tend to occur more frequently and in a more
pronounced manner than do changes in higher quality segments of the debt
securities market, resulting in greater yield and price volatility.
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. The Fund's investment adviser
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.
The prices of all debt securities generally fluctuate in response to
the general level of interest rates. Another factor which causes fluctuations in
the prices of debt securities is the supply and demand for similarly rated
securities. Fluctuations in the prices of portfolio securities subsequent to
their acquisition will not affect any cash income from such securities but will
be reflected in the Fund's net asset value.
Investment Restrictions
The restrictions set forth in the next sentence are fundamental
policies of the Fund which may not be changed without the affirmative vote of
the holders of a majority of the Fund's outstanding shares. As used in the
Prospectus and this Statement of Additional Information, such approval means the
approval of the lesser of (i) the holders of 67% or more of the shares
represented at a meeting if the holders of more than 50% of the outstanding
shares are present in person or by proxy, or (ii) the holders of more than 50%
of the outstanding shares.
B-4
<PAGE>
The Fund may not:
(1) purchase securities "on margin" or effect "short sales" of
securities;
(2) underwrite any issue of securities;
(3) acquire the securities of any other domestic or foreign investment
company or investment fund (except in connection with a plan of merger or
consolidation with or acquisition of substantially all the assets of such other
investment company); provided, however, that nothing herein contained shall
prevent the Fund from investing in the securities issued by a real estate
investment trust, provided that such trust shall not be permitted to invest in
real estate or interests in real estate other than mortgages or other security
interests;
(4) purchase securities of a company if the purchase would result in
the Fund having more than 5% of the value of its total assets invested in
securities of such company;
(5) purchase securities of a company if the purchase would result in
the Fund owning more than 10% of the outstanding voting securities of such
company;
(6) purchase securities for the purpose of controlling management of
other companies;
(7) invest in commodities, commodity contracts, or real estate;
(8) purchase "investment letter" securities (i.e., securities that must
be registered under the Securities Act of 1933 before they may be offered or
sold to the public);
(9) purchase the securities of any enterprise which has a business
history of less than three years, including the operation of any predecessor
business to which it has succeeded;
(10) purchase or retain the securities of any issuer if those officers
and Trustees of the Fund, their adviser or principal underwriter, owning
individually more than one-half of 1% of the securities of such issuer, together
own more than 5% of the securities of such issuer;
(11) make loans, provided that (i) the purchase of publicly distributed
debt securities pursuant to the Fund's investment objectives shall not be deemed
loans for the purposes of this restriction, (ii) loans of portfolio securities
as described, from time to time, under "Lending of Portfolio Securities" shall
be made only in accordance with the terms and conditions therein set forth and
(iii) in seeking a return on temporarily available cash, the Fund may engage in
repurchase transactions with banks maturing in one week or less and involving
obligations of the U.S. Government, its agencies or instrumentalities;
(12) borrow money, except that, as a temporary measure for
extraordinary or emergency purposes and not for investment purposes, the Fund
may borrow from banks up to 10% of the value of their net assets at the time of
the borrowing; or
(13) guarantee the securities of any other company, or mortgage,
pledge, hypothecate, assign or otherwise encumber as security for indebtedness
its securities or receivables in an amount exceeding the amount of the borrowing
secured thereby. If the Fund borrows money as a temporary measure, it must
comply with restrictions on borrowing in the Investment Company Act of 1940
B-5
<PAGE>
whereby it has undertaken not to make additional portfolio investments while
such borrowing exceeds 5% of its net assets.
It is the policy of the Fund not to concentrate its investments in
securities of companies in any particular industry or group of industries. In
the opinion of the staff of the Securities and Exchange Commission ("SEC"),
investments are concentrated in a particular industry if such investments
aggregate 25% or more of the Fund's total assets. The Fund has agreed to abide
by the foregoing non-fundamental policy which it will not change without the
affirmative vote of the holders of a majority of the Fund's outstanding shares
of beneficial interest.
In addition, in connection with the offering of its shares in various
states and foreign countries, the Fund has agreed to abide by certain additional
restrictions which may not be changed without the approval of the regulatory
agencies in such states and foreign countries (but which may be changed without
notice to or approval of the Fund's shareholders). These restrictions are that
the Fund will not: (1) purchase the securities of any issuer if such purchase
would result in the Fund owning more than 10% of any class of securities of such
issuer; (2) invest in uncovered puts or calls, or straddles, spreads, or any
combination thereof, or in oil, gas or other mineral leases or exploration or
development programs; (3) borrow in excess of 10% of gross assets taken at cost;
(4) pledge, mortgage, hypothecate or otherwise encumber any assets of the Fund;
(5) invest in foreign securities (exclusive of foreign securities listed on
recognized domestic or foreign securities exchanges), together with other
investments which are not readily marketable, in excess of 5% of average net
assets; and (6) invest more than 5% of its total assets in warrants, valued at
the lower of cost or market, or more than 2% of its total assets in warrants, so
valued, which are not listed on either the New York or American Stock Exchanges.
2. 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 Investment Company Act of 1940, as amended (the "1940
Act").
JOHN F. COGAN, JR.*, President and Director of The Pioneer Group,
Chairman of the Board, Inc. ("PGI"); Chairman and Director of
President and Trustee Pioneering Management Corporation ("PMC");
Chairman of the Board and Chief Executive
Officer of Pioneer Winthrop Advisers ("PWA")
(since 1993); Chairman of the Board of
Pioneer Funds Distributor, Inc. ("PFD");
Director of Pioneering Services Corporation
("PSC") and Pioneer Capital Corporation
("PCC"); President and Director of Pioneer
Plans Corporation ("PPC"); Chairman of the
Board and Director of Teberebie Goldfields
Limited; Chairman and President of the
Pioneer mutual funds and Chairman and
Partner, Hale and Dorr (counsel to the
Fund).
RICHARD H. EGDAHL, M.D., Professor of Management, Boston University
Trustee ......... School of Management; Professor of Public
Boston University Health Health, Boston University School of Public
Policy Institute.. Health; Professor of Surgery, Boston
53 Bay State Road. University School of Medicine and Boston
B-6
<PAGE>
Boston, Massachusetts University Health Policy Institute;Director,
Boston University Medical Center; Executive
Vice President and Vice Chairman of the
Board, University Hospital; Academic Vice
President for Health Affairs, Boston
University; Director, Essex Investment
Management Company, Inc. (investment
adviser), Health Payment Review, Inc.
(health care containment software firm),
Mediplex Group, Inc. (nursing care
facilities firm), Peer Review Analysis, Inc.
(health care utilization management firm);
Springer-Verlag New York, Inc. (publisher);
Honorary Director, Franciscan Children's
Hospital and Trustee of all the Pioneer
mutual funds.
MARGARET B.W. GRAHAM, Manager of Research Operations, Xerox Palo
Trustee ......... Alto Research Center (since September 1991);
The Keep ......... Professor of Operations Management and
Post Office Box 110 Management of Technology, Boston University
Little School of Management ("BUSM"); Associate
Deer Isle, Maine Dean, BUSM, 1988 to 1990;
previously, Associate Professor, Department
of Operations Management, BUSM and Trustee
of all the Pioneer mutual funds, except
Pioneer Variable Contracts Trust.
JOHN W. KENDRICK,. Professor Emeritus of Economics, George
Trustee Washington University; Adjunct Scholar,
6363 Waterway Drive American Enterprise Institute and Trustee of
Falls Church, Virginia all the Pioneer mutual funds, except Pioneer
Variable Contracts Trust.
MARGUERITE A. PIRET, President, Newbury, Piret & Company, Inc. (a
Trustee merchant banking firm) and Trustee of all
One Boston Place, Suite 2635 the Pioneer mutual funds.
Boston, Massachusetts.
DAVID D. TRIPPLE*, Executive Vice President and Director of
Trustee and Executive PGI; Director of PFD, Pioneer Investment
Vice President Corp. ("PIC"), Pioneer International Corp.
("PIntl."), PCC and Pioneer SBIC
Corporation; President, Chief Investment
Officer and a Director of PMC and Trustee of
all the Pioneer mutual funds..
STEPHEN K. WEST... Partner, Sullivan & Cromwell (a law firm)
Trustee ......... and Trustee of all the Pioneer mutual funds.
125 Broad Street
New York, New York
JOHN WINTHROP,.... President, John Winthrop & Co., Inc. (a
Trustee ......... private investment firm); Director of NUI
One North Adgers Wharf Corp., Alliance Capital Reserves, Alliance
Charleston, South Carolina Government Reserves and Alliance Tax Exempt
Reserves and Trustee of all the Pioneer
mutual funds, except Pioneer Variable
Contracts Trust.
JOHN A. CAREY,.... Vice President, PMC.
Vice President
B-7
<PAGE>
WILLIAM H. KEOUGH, Senior Vice President, Chief Financial
Treasurer ........ Officer and Treasurer of PGI; Treasurer of
PFD, PMC, PSC, PCC and Pioneer SBIC
Corporation; Treasurer and Director of PPC;
and Treasurer of all the Pioneer mutual
funds..
JOSEPH P. BARRI,.. Secretary of PGI, PMC, PPC, PIC, and PCC;
Secretary Clerk of PFD and PSC; Partner, Hale and Dorr
(counsel to the Fund) and Secretary of all
the Pioneer mutual funds.
ERIC W. RECKARD,.. Manager of Fund Accounting and Compliance
Assistant Treasurer for PMC (since 1994); Manager of Auditing
and Business Analysis for PGI (until May,
1994) and Assistant Treasurer of all the
Pioneer mutual funds.
ROBERT P. NAULT,.. General Counsel of PGI (since 1995);
Assistant formerly of Hale and Secretary Dorr (counsel
to the Fund) where he most recently served
as a junior partner and Assistant Secretary
of all the Pioneer mutual funds.
The Fund's 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
special meeting of shareholders. The business address of all officers is 60
State Street, Boston, Massachusetts 02109.
Each of the above (except for Mr. Carey) is also an officer and/or
Trustee or Director of each Pioneer fund listed below. All of the outstanding
capital stock of PMC and PSC is owned by PGI, a Delaware corporation. All of the
outstanding capital stock of PFD is owned by PMC. 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 Fund PMC PFD
Pioneer II PMC PFD
Pioneer Three PMC PFD
Pioneer Growth Shares PMC PFD
Pioneer Capital Growth Fund PMC PFD
Pioneer Equity-Income Fund PMC PFD
Pioneer Gold Shares PMC PFD
Pioneer Real Estate Shares PMC PFD
Pioneer Europe Fund PMC PFD
Pioneer International Growth Fund PMC PFD
Pioneer India Fund * PFD
Pioneer Emerging Markets Fund PMC PFD
Pioneer Bond Fund PMC PFD
Pioneer America Income Trust PMC PFD
B-8
<PAGE>
Pioneer Short-Term Income Fund PMC PFD
Pioneer Income Fund PMC PFD
Pioneer Tax-Free Income Fund PMC PFD
Pioneer Intermediate Tax-Free Fund PMC PFD
Pioneer California Double Tax-Free Fund PMC PFD
Pioneer New York Triple Tax-Free Fund PMC PFD
Pioneer Massachusetts Double Tax-Free Fund PMC PFD
Pioneer Cash Reserves Fund PMC PFD
Pioneer U.S. Government Money Fund PMC PFD
Pioneer Tax-Free Money Fund PMC PFD
Pioneer Interest Shares, Inc. PMC **
Pioneer Variable Contracts Trust PMC ***
* ITI Pioneer AMC Ltd. manages the Fund's investments in India, and PMC
manages all of the Fund's other investments.
** This fund is a closed-end fund underwritten by Mellon Bank.
*** This Trust consists of seven 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 Trust's investment adviser, also manages the investments of
certain institutional private accounts. Messrs. Cogan, Tripple, Keough and
Barri, officers and/or Trustees of the Fund, are also officers and/or directors
of PFD, PMC, PSC (except Mr. Tripple) and PGI. 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 the date of this Statement of Additional Information, except
Mr. Cogan who then owned approximately 15% of such shares. As of the date of
this Statement of Additional Information, the Trustees and officers of the Fund
owned less than 1% of the outstanding securities 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 of $5,000 and a payment of $300 plus expenses
per meeting attended, to each Trustee who is not affiliated with PMC, PFD or PSC
and pays an annual trustees' fee of $500 plus expenses to each Trustee
affiliated with PMC, PFD or PSC. Any such fees and expenses paid to affiliates
or interested persons of PMC, PFD or PSC are reimbursed to the Fund under its
management contract.
The following table sets forth certain information with respect to the
compensation of each Trustee of the Fund for the year ended December 31, 1994:
Pension or Total
Aggregate Retirement Compensation
Compensation Benefits Accrued from Fund and
from the as Part of Pioneer Family
Name of Trustee Fund Fund's Expenses of Funds
John F. Cogan, Jr. $ 500 $0 $11,750
David D. Tripple 500 0 11,750
Richard H. Egdahl, M.D. 8,300 0 55,650
B-9
<PAGE>
Margaret B.W. Graham 8,300 0 55,650
John W. Kendrick 8,300 0 55,650
Marguerite A. Piret 9,550 0 66,650
Stephen K. West 9,300 0 63,650
John Winthrop 9,300 0 63,650
----- ------
$54,050 $384,400
3. INVESTMENT ADVISER
The Fund has contracted with PMC, 60 State Street, Boston,
Massachusetts, to act as its investment adviser. PMC assists in the management
of the Fund and is authorized in its discretion to buy and sell securities for
the account of the Fund, subject to the right of the Fund's trustees to
disapprove any such purchase or sale. The term of the contract is one year, but
it is renewable annually by vote of a majority of the Board of Trustees of the
Fund (including a majority of the 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. The contract terminates if assigned
and may be terminated without penalty by either party by vote of its Board of
Directors or Trustees or vote of a majority of its outstanding securities and
the giving of sixty days' written notice. The management contract was approved
by the shareholders of the Fund at a meeting of shareholders held on October 12,
1990. As compensation for its management services and expenses incurred, PMC
receives 0.50% per annum 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. The fee is computed daily and
paid monthly.
During its fiscal years ended December 31, 1994, 1993 and 1992, the
Fund paid or owed management fees to PMC of approximately $9,362,000, $8,774,000
and $7,734,000, respectively.
4. SHAREHOLDER SERVICING/TRANSFER AGENT
The Fund has contracted with Pioneering Services Corporation ("PSC"),
60 State Street, Boston, Massachusetts, to act as its dividend disbursing agent
and transfer agent. This contract terminates if assigned and may be terminated
without penalty by either party by vote of its Board of Directors or Trustees or
a majority of its outstanding voting securities and the giving of sixty days'
written notice.
Under the terms of its contract with the Fund, PSC services shareholder
accounts, and its duties include: (i) processing sales, redemptions and
exchanges of Fund shares; (ii) distributing dividends and capital gains
associated with Fund accounts; and (iii) maintaining account records and
responding to shareholder inquiries.
PSC receives an annual fee of $22.00 per shareholder account from the
Fund as compensation for the services described above. This fee is set at an
amount determined by vote of a majority of the Fund's 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.
5. CUSTODIAN
Brown Brothers Harriman & Co. (the "Custodian") is the custodian of the
Fund's assets. The Custodian's responsibilities include safekeeping and
controlling the Fund's cash and securities, handling the receipt and delivery of
securities, and collecting interest and dividends on the Fund's investments. The
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Custodian does not determine the investment policies of the Fund or decide which
securities the Fund will buy or sell. The Fund may, however, invest in
securities, including repurchase agreements, issued by the Custodian and may
deal with the Custodian as principal in securities transactions. Portfolio
securities may be deposited into the Federal Reserve-Treasury Department Book
Entry System or the Depository Trust Company.
6. PRINCIPAL UNDERWRITER
PFD, 60 State Street, Boston, Massachusetts, serves as the principal
underwriter for the Fund in connection with the continuous offering of its
shares. The Fund has entered into an Underwriting Agreement with PFD. The
Underwriting Agreement will continue from year to year if annually approved by
the Trustees in conjunction with the continuance of the Plan (as defined below).
The Underwriting Agreement provides that PFD will bear the distribution expenses
of the Fund not borne by the Fund. During the Fund's 1994, 1993 and 1992 fiscal
years, net underwriting commissions retained by PFD were approximately $990,413,
$880,000 and $831,000, respectively. Commissions reallowed to dealers for the
1994, 1993 and 1992 fiscal years were approximately $6,589,413, $7,303,666 and
$5,595,989, respectively.
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, state and foreign
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 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 (other than municipal debt securities issued by state political
subdivisions or their agencies or instrumentalities) pursuant to a bona fide
purchase of assets, merger or other reorganization provided (i) the securities
meet the investment objectives and policies of the Fund; (ii) the securities are
acquired by the Fund for investment and not for resale; (iii) the securities are
not restricted as to transfer either by law or liquidity of market; and (iv) the
securities have a value which is readily ascertainable (and not established only
by evaluation procedures) as evidenced by a listing on the American Stock
Exchange or the New York Stock Exchange, or by quotation under the NASD
Automated Quotation System. An exchange of securities for Fund shares will
generally be a taxable transaction to the shareholder.
7. DISTRIBUTION PLAN
The Fund has adopted a plan of distribution pursuant to Rule 12b-1
under the 1940 Act (the "Plan") pursuant to which the Fund may reimburse PFD for
its expenditures in financing any activity primarily intended to result in the
sale of the shares of the Fund. Certain categories of such expenditures have
been approved by the Board of Trustees and are set forth in the Prospectus. See
"Distribution Plan" in the Prospectus. The expenses of the Fund pursuant to the
Plan are accrued on a fiscal year basis and may not exceed the annual rate of
0.25% of the Fund's average annual net assets. In accordance with the terms of
the Plan, PFD provides to the Fund for review by the Trustees a quarterly
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written report of the amounts expended under the Plan and the purpose for which
such expenditures were made. In the Trustees' quarterly review of the Plan, they
will consider its continued appropriateness and the level of compensation it
provides.
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 Plan 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 Plan by the Fund and except to the
extent certain officers may have an interest in PFD's ultimate parent, PGI.
The Plan was 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
had 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 Plan. In
approving the Plan, the Trustees identified and considered a number of potential
benefits which the Plan may provide. The Board of Trustees believes that there
is a reasonable likelihood that the Plan will benefit the Fund and its current
and future shareholders. Under its terms, the Plan remains in effect from year
to year provided such continuance is approved annually by vote of the Trustees
in the manner described above. The Plan may not be amended to increase
materially the annual percentage limitation of average net assets which may be
spent for the services described therein without approval of the shareholders of
the Fund, and material amendments of the Plan must also be approved by the
Trustees in the manner described above. The 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 Fund (as defined in the 1940 Act). The Plan
was approved at a meeting of shareholders held on October 15, 1991. The Plan
will automatically terminate in the event of its assignment (as defined in the
1940 Act).
During the fiscal year ended December 31, 1994, the Fund incurred total
distribution fees pursuant to the Plan of $3,361,000. Distribution fees were
paid by the Fund to PFD in reimbursement of expenses related to services,
shareholder accounts and to compensating dealers and sales personnel.
8. INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP are 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 Securities and Exchange
Commission.
9. 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 management
contract (subject to the right of the Trustees to reverse any such transaction).
The primary consideration in placing portfolio security transactions is
execution at the most favorable prices. Additionally, in selecting brokers or
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 dealer; the dealer's
execution services rendered on a continuing basis; and the reasonableness of any
dealer spreads.
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In circumstances where two or more broker-dealers are in a position to
offer comparable prices and execution, dealers may be selected who provide
brokerage and/or research services to the Fund and/or other investment companies
managed by PMC, or who sell shares of the Fund. In addition, if PMC determines
in good faith that the amount of commissions charged by a broker is reasonable
in relation to the value of the brokerage and research services provided by such
broker, the Fund may pay commissions to such broker in an amount greater than
the amount another firm may charge. Brokerage and research 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; providing stock price quotation services;
furnishing analyses, electronic information services, manuals and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, performance of accounts, comparative fund statistics and
credit rating service information; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement). PMC
maintains a listing of 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 dealers (including
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
dealers solely because such services were provided. Management believes that no
exact dollar value can be calculated for such services.
The receipt of research from dealers may be useful to PMC in rendering
investment management services to the Fund and other investment companies
managed by PMC, and 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.
The Trustees periodically review PMC's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Fund. During the fiscal years ended December 31, 1994, 1993 and
1992, the Fund paid or owed total brokerage commissions of approximately
$1,016,736, $1,270,000 and $1,245,000, respectively.
The Fund is managed by Pioneering Management Corporation ("PMC"), which
also serves as investment adviser to other mutual funds in the Pioneer group and
private accounts with investment objectives similar to those of the Fund.
Securities frequently meet the investment objectives of the Fund, such other
mutual funds in the Pioneer group and such other private accounts. In such
cases, the decision to recommend a purchase to one mutual fund or account rather
than the other 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 client presently
has in a particular industry and the availability of investment funds in each
client account.
It is possible that at times identical securities will be held by more
than one fund and/or account. However, the position of any mutual fund or
account in the same issue may vary and the length of time that any mutual fund
or account may choose to hold its investment in the same issue may likewise
vary. To the extent that the Fund, another mutual fund in the Pioneer group or 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
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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 account, the resulting participation in volume
transactions could produce better executions for the Fund or the account. In the
event that 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. Although some of the other mutual funds in the Pioneer group have the same
general investment objectives and fundamental policies as the Fund, their
portfolios do not generally consist of the same investments as the Fund or each
other and their performance results are likely to differ from that of the Fund.
10. DIVIDENDS AND TAX STATUS
It is the Fund's policy to meet the requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), for qualification as a
regulated investment company. The requirements relate to the sources of its
income, diversification of its assets and distributions 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 receives, the Fund
will be relieved of the necessity of paying federal income tax.
Dividends from investment company taxable income, which includes net
investment income, net short-term capital gain in excess of net long-term
capital loss, and certain net foreign exchange gains are taxable as ordinary
income, whether received in cash or in additional shares. Dividends from net
long-term capital gain in excess of net short-term capital loss, if any, whether
received in cash or additional shares, are taxable to the Fund's shareholders as
long-term capital gains for federal income tax purposes without regard to the
length of time shares of the Fund have been held. The federal income tax status
of all distributions will be reported to shareholders annually.
Any dividend declared by the Fund in October, November or December as
of a record date in such a month and paid during the following January will be
treated for federal income tax purposes as received by shareholders on December
31 of the calendar year in which it is declared.
Foreign exchange gains and losses realized by the Fund in connection
with certain transactions involving foreign currency-denominated debt
securities, forward foreign currency contracts, foreign currencies, or payables
or receivables denominated in a foreign currency are subject to Section 988 of
the Code, which generally causes such gains and losses to be treated as ordinary
income and losses and may affect the amount, timing and character of
distributions to shareholders.
If the Fund acquires stock in certain non-U.S. corporations that
receive at least 75% of their annual gross income from passive sources (such as
interest, dividends, rents, royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), the Fund could be subject to federal income tax and
additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the Fund is timely distributed to its shareholders.
The Fund would not be able to pass through to its shareholders any credit or
deduction for such a tax. Certain elections may, if available, ameliorate these
adverse tax consequences, but any such election would require the Fund to
recognize taxable income or gain without the concurrent receipt of cash. The
Fund may limit and/or manage its holdings in passive foreign investment
companies to minimize its tax liability or maximize its return from these
investments.
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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 ensure that it distributes sufficient income to preserve
its status as a regulated investment company and to avoid becoming subject to
federal income or excise tax.
If the Fund invests in certain PIKs, zero coupon securities, or, in
general, any other securities with original issue discount (or with market
discount if the Fund elects to include market discount in income currently), the
Fund must accrue income on such investments prior to the receipt of the
corresponding cash payments. However, the Fund must distribute, at least
annually, all or substantially all of its net income, including such accrued
income, to shareholders to qualify as a regulated investment company under the
Code and avoid Federal income and excise taxes. Therefore, the Fund may have to
dispose of its portfolio securities under disadvantageous circumstances to
generate cash, or may have to leverage itself by borrowing the cash, to satisfy
distribution requirements.
At the time of an investor's purchase of Fund shares, a portion of the
purchase price is often attributable to realized or unrealized appreciation in
the Fund's portfolio or undistributed taxable income of the Fund. Consequently,
subsequent distributions from such appreciation or income may be taxable to such
investor even if the net asset value of the investor's shares is, as a result of
the distributions, reduced below the investor's cost for such shares and the
distributions in reality represent a return of a portion of the investment.
Any loss realized by a shareholder upon the redemption 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 shares redeemed or exchanged have been held for less
than 91 days, (1) in the case of a reinvestment at net asset value pursuant to
the reinvestment privilege, the sales charge paid on such shares is not included
in their tax basis under the Code, and (2) in the case of an exchange, all or a
portion of the sales charge paid on such shares is not included in their tax
basis under the Code, to the extent a sales charge that would otherwise apply to
the shares received is reduced pursuant to the exchange privilege. In either
case, the portion of the sales charge not included in the tax basis of the
shares redeemed or surrendered in an exchange is included in the tax basis of
the shares acquired in the reinvestment or exchange. Losses on certain
redemptions may be disallowed under "wash sale" rules in the event of other
investments in the Fund within a period of 61 days beginning 30 days before and
ending 30 days after a redemption or other sale of shares.
Options written by the Fund on certain securities may cause the Fund to
recognize gains or losses from marking-to-market at the end of its taxable year
even though such options may not have lapsed, been closed out, or exercised and
may affect the characterization as long-term or short-term of some capital gains
and losses realized by the Fund. Losses on certain options and/or offsetting
positions (portfolio securities or other positions with respect to which the
Fund's risk of loss is substantially diminished by one or more options) may also
be deferred under the tax straddle rules of the Code, which may also affect the
characterization of capital gains or losses from straddle positions and certain
successor positions as long-term or short- term. The effect of these rules may
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be mitigated to the extent the Fund limits its option-writing to "qualified
covered call options" on portfolio stock. The tax rules applicable to options
and straddles may affect the amount, timing and character of the Fund's income
and losses and hence of its distributions to shareholders.
For purposes of the 70% dividends-received deduction available to
corporations, dividends received by the Fund, if any, from U.S. domestic
corporations in respect of any share of stock with a tax holding period of at
least 46 days (91 days in the case of certain preferred stock) in an unleveraged
position and distributed and designated by the Fund may be treated as qualifying
dividends. Any corporate shareholder should consult its tax 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. Corporate shareholders must meet the minimum holding
period requirement stated above (46 or 91 days), taking into account any holding
period reductions from certain hedging or other positions that diminish risk of
loss, with respect to their Fund shares in order to qualify for the deduction
and, if they borrow to acquire Fund shares, may be denied a portion of the
dividends-received deduction. The entire qualifying dividend, including the
otherwise deductible amount, will be included in determining the excess (if any)
of a corporation's adjusted current earnings over its alternative minimum
taxable income, which may increase a corporation's alternative minimum tax
liability.
The Fund may be subject to withholding and other taxes imposed by
foreign countries with respect to its investments in those countries. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. The Fund does not expect to satisfy the requirements for passing through
to shareholders their pro rata shares of 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.
Federal law requires that the Fund withhold 31% of reportable payments
including dividends, capital gain dividends and the proceeds of redemptions
(including exchanges) and repurchases to shareholders who have not complied with
Internal Revenue Service ("IRS") regulations. In order to avoid this withholding
requirement, shareholders must certify on their Applications, or on separate W-9
Forms, that the Social Security or other Taxpayer Identification Number they
provide is their correct number and that they are not currently subject to
backup withholding, or that they are exempt from backup withholding. The Fund
may nevertheless be required to withhold if it receives notice from the IRS or a
broker that the number provided is incorrect or backup withholding is applicable
as a result of previous underreporting of interest or dividend income.
Provided that the Fund qualifies as a regulated investment company
under the Code, it will not be required to pay any Massachusetts income,
corporate excise or franchise taxes.
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. This description does not address the
special tax rules applicable to particular types of investors, such as banks,
insurance companies or tax exempt entities. Investors other than U.S. persons
may be subject to different U.S. tax treatment, including a possible 30% U.S.
withholding tax (or withholding tax at a lower treaty rate) on amounts treated
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as ordinary dividends from the Fund and, unless an effective IRS Form W-8 or
authorized substitute is on file, to 31% backup withholding on certain other
payments from the Fund. Shareholders should consult their own tax advisers on
these matters and on state, local and other applicable tax laws.
11. DESCRIPTION OF SHARES
The Fund's Declaration of Trust permits its Board of Trustees to
authorize the issuance of an unlimited number of full and fractional shares of
beneficial interest (without par value) which may be divided into such separate
series as the Trustees may establish. The Trustees may establish additional
series of shares, and may divide or combine the shares into a greater or lesser
number of shares without thereby changing the proportionate beneficial
interests. Each share represents an equal proportionate interest with each other
share. The shares of any additional series would participate equally in the
earnings, dividends and assets of the particular series, and would be entitled
to vote separately to approve investment advisory agreements or changes in
investment restrictions, but shareholders of all series would vote together in
the election and selection of Trustees and accountants. Upon liquidation of the
Fund, the Fund's shareholders are entitled to share pro rata in the Fund's net
assets available for distribution to shareholders.
Shareholders are entitled to one vote for each share held and may vote
in the election of Trustees and on other matters submitted to meetings of
shareholders. Although Trustees are not elected annually by the shareholders,
shareholders have under certain circumstances the right to remove one or more
Trustees. No material amendment may be made to the Fund's Declaration of Trust
without the affirmative vote of the holders of a majority of the Fund's
outstanding shares as defined in the 1940 Act. Shares have no preemptive or
conversion rights. Shares are fully paid and non-assessable by the Fund, except
as set forth below. See "Certain Liabilities."
12. CERTAIN LIABILITIES
As a Massachusetts business trust, the Fund's operations are governed
by its Declaration of Trust dated April 16, 1985, a copy of which is on file
with the office of the Secretary of State of The Commonwealth of Massachusetts.
Theoretically, shareholders of a Massachusetts business trust may, under certain
circumstances, be held personally liable for the obligations of the trust.
However, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Fund and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Fund or the Trustees. Moreover, the Declaration of Trust
provides for the indemnification out of the Fund's property of any shareholders
held personally liable for any obligations 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. Thus, the risk of a shareholder incurring financial loss
beyond his or her investment because of shareholder liability would be limited
to circumstances in which the Fund itself would be unable to meet its
obligations. In light of the nature of the Fund's business and the nature and
amount of its assets, the possibility of the Fund's liabilities exceeding its
assets, and, therefore, a shareholder's risk of personal liability, is remote.
The Declaration of Trust further provides that the Fund shall indemnify
each of its Trustees and officers against liabilities and expenses reasonably
incurred by them, in connection with, or arising out of, any action, suit or
proceeding, threatened against or otherwise involving such Trustee or officer,
directly or indirectly, by reason of being or having been a Trustee or officer
of the Fund. The Declaration of Trust does not authorize the Fund to indemnify
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any Trustee or officer against any liability to which he or she would otherwise
be subject by reason of or for willful misfeasance, bad faith, gross negligence
or reckless disregard of such person's duties.
13. DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined as of the close
of regular trading on the New York Stock Exchange (normally 4:00 P.M., Eastern
Time) on each day on which the New York Stock Exchange is open for business. As
of the date of this Statement of Additional Information, the New York Stock
Exchange is open for trading every weekday except for the following holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share of
the Fund is also determined on any other day in which the level of trading in
its portfolio securities is sufficiently high so 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 net
asset value per share is not determined.
The net asset value per share of the Fund is computed by taking the
amount of the value of all of its assets, less its liabilities, and dividing it
by the number of outstanding shares. 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 last bid and asked prices.
Securities for which no market quotations are readily available (including those
the trading of which has been suspended) will be valued at fair value as
determined in good faith by the Board of Trustees, although the actual
computations may be made by persons acting pursuant to the direction of the
Board.
14. SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan ("SWP") is designed to provide a
convenient method of receiving fixed payments at regular intervals from shares
of the Fund deposited by the applicant under this SWP. You 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 you, or will be sent by
check to you, or any person designated by you. Designation of another person to
receive the checks subsequent to opening an account must be accompanied by a
signature guarantee.
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 Plan 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 capital.
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. The fees of PSC for maintaining the SWP is paid by the Fund.
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15. LETTER OF INTENTION
Purchases of $50,000 or over (excluding any reinvestments of dividends
and capital gains distributions) made within a 13-month period pursuant to a
Letter of Intention provided by PFD will qualify for a reduced sales charge.
Such reduced sales charge will be the charge that would be applicable to the
purchase of all shares purchased during such 13-month period pursuant to a
Letter of Intention had such shares been purchased all at once. See "Information
About Fund Shares" in the Prospectus. For example, a person who signs a Letter
of Intention providing for a total investment in Fund shares of $50,000 over a
13-month period would be charged at the 4.50% sales charge rate with respect to
all purchases during that period. Should the amount actually purchased during
the 13-month period be more or less than that indicated in the Letter, an
adjustment in the sales charge will be made. A purchase not made pursuant to a
Letter of Intention may be included thereafter if the Letter is filed within 90
days of such purchase. Any shareholder may also obtain the reduced sales charge
by including the value (at current offering price) of all his shares in the Fund
and all other Pioneer mutual funds, except the Class A shares of Pioneer Money
Market Trust, held of record as of the date of his Letter of Intention as a
credit toward determining the applicable scale of sales charge for the shares to
be purchased under the Letter of Intention.
The Letter of Intention authorizes PSC to escrow shares having a
purchase price equal to 5% of the stated investment in the Letter of Intention.
A Letter of Intention is not a binding obligation upon the investor to purchase,
or the Fund to sell, the full amount indicated and the investor should read the
provisions of the Letter of Intention contained in the Account Application
carefully.
16. INVESTMENT RESULTS
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 to that of other mutual funds with similar investment
objectives, and to stock or other relevant indices. For example, the Fund's
performance may be compared to rankings prepared by Lipper Analytical Services,
Inc., a widely recognized independent service which monitors mutual fund
performance; the Standard & Poor's 500 Stock Index ("S&P 500"), an index of
unmanaged groups of common stock; or the Dow Jones Industrial Average, a
recognized unmanaged index of common stocks of 30 industrial companies listed on
the New York Stock Exchange; or the Frank Russell Indexes ("Russell 1000,"
"2000," "2500," "3000") and Wilshire Total Market Value Index ("Wilshire 5000"),
recognized unmanaged indexes of broad-based common stocks.
In addition, the performance of the Fund may be compared to alternative
investment or savings vehicles and/or to indexes or indicators of economic
activity, e.g., inflation or interest rates. 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, Investors Business Daily, Kiplinger's Personal Finance Magazine, Money
Magazine, 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 Bloomberg Financial Markets,
CDA Weisenberger, Donaghue's Mutual Fund Almanac, 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.
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<PAGE>
In addition, from time to time quotations from articles from financial
publications such as those listed above may be used in advertisements, in sales
literature or in reports to Shareholders of the Fund.
Standardized Average Annual Total Returns
Quotations and Other Performance Quotations
One of the methods used to measure the Fund's performance is "total
return." "Total return" will normally represent the percentage change in value
of an account, or of a hypothetical investment in the Fund, over any period up
to the lifetime 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 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. Past
performance cannot guarantee any particular future result.
Generally, performance illustrations will include or be accompanied by
the Fund's average annual total return over the prior one year, five year and
ten year periods. The average annual total return ("T") is computed by equating
the value at the end of the period ("ERV") with a hypothetical initial
investment of $1,000 ("P") over a period of years ("n") according to the
following formula specified by the SEC: P(1+T)n = ERV.
These computations will assume the deduction of the maximum sales
charge of 5.75% from the initial investment, the reinvestment of dividends and
distributions at net asset value on the appropriate dates and a redemption of
the account at the end of the period.
The average annual compounded total return of the Fund for the
one-year, five-year, ten-year and life-of-Fund periods ending December 31, 1994,
was -6.30%, 5.96%, 11.19% and 12.58%, respectively.
The Fund may also present, from time to time, historical information
depicting the value of a hypothetical account over the time period from the
Fund's inception in 1928 until the present. The Fund also may depict summary
results of assumed investments in the Fund for each of the ten-calendar-year
periods in the Fund's history and for the ten-year periods which began at
recognized market highs or ended at recognized market lows. An example of this
historical information describing various performance characteristics of the
Fund from 1928 until the present is contained under the caption "Investment
Results" in this Statement of Additional Information.
In presenting investment results, the Fund may also include references
to certain financial planning concepts, including (a) an investor's need to
evaluate his financial assets and obligations to determine how much to invest;
(b) his need to analyze the objectives of various investments to determine where
to invest; and (c) his need to analyze his time frame for future capital needs
to determine how long to invest. The investor controls these three factors, all
of which affect the use of investments in building assets.
B-20
<PAGE>
Automated Information Line
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 fixed income funds;
o annualized 7-day yields and 7-day effective (compound) yields
for Pioneer money market funds; and
o dividends and capital gains distributions for 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 quoted bond funds include the applicable
maximum sales charge. A shareholder's actual yield and total return will vary
with changing market conditions. The value of shares (except for Pioneer money
market funds, which seek a stable $1.00 share price) will also vary and may be
worth more or less at redemption than their original cost.
The audited financial statements and related report of Arthur Andersen
LLP contained in the Fund's 1995 Annual Report are hereby incorporated by
reference and attached hereto. A copy of the Annual Report may be obtained
without charge by calling Shareholder Services at 1-800-225-6292 or by written
request to the Fund at 60 State Street, Boston, Massachusetts 02109.
B-21
<PAGE>
APPENDIX A
The Pioneer family of mutual funds was established in 1928 with the
creation of Pioneer Fund. Pioneer is one of the oldest, most respected and
successful money managers in the United States.
As of December 31, 1994, PMC employed a professional investment staff
of 46, with a combined average of 14 years' experience in the financial services
industry.
At December 31, 1994, there were 591,192 non-retirement shareholder
accounts and 337,577 retirement shareholder accounts in the Pioneer's funds.
Total assets for all Pioneer Funds at December 31, 1994 were $10,038,000,000
representing 928,769 shareholder accounts.
B-22
<PAGE>
APPENDIX
ILLUSTRATION OF A $10,000 INVESTMENT
IN PIONEER FUND ON MARCH 1, 1928
The total amounts of dividends and capital gains distributions reinvested were
$7,755,389 and $15,448,054. The total return for the period illustrated is
275,361.5%, or an average annual total return of 12.58%.
<TABLE>
<CAPTION>
Value of Account Assuming Dividends Value of Account Assuming Dividends
Taken in Cash Reinvested
Year
Ended Cash Dividends Paid Account Dividends Reinvested Account Value
12/31 Each Year Value During the Year
<S> <C> <C> <C> <C>
1928 $403 $10,968 $403 $11,435
1929 457 10,215 476 11,094
1930 457 6,344 496 7,198
1931 457 4,409 519 5,363
1932 457 5,484 556 7,362
1933 457 6,237 613 9,070
1934 457 7,419 665 11,581
1935 498 9,785 777 16,298
1936 538 12,796 896 22,484
1937 498 6,774 875 12,366
1938 498 7,849 909 15,383
1939 498 8,710 976 18,151
1940 498 8,387 1,038 18,478
1941 498 9,462 1,097 22,084
1942 847 11,398 1,978 28,983
1943 782 16,667 2,022 44,748
1944 1,203 22,688 3,301 64,501
1945 1,149 33,000 3,322 97,802
1946 1,504 35,705 4,527 110,365
1947 1,638 35,025 5,151 113,389
1948 1,791 33,554 5,907 114,345
1949 1,656 36,686 5,751 131,275
1950 1,911 43,539 6,968 163,507
1951 1,887 49,586 7,177 193,588
1952 1,986 53,103 7,865 215,453
1953 2,218 53,746 9,135 227,190
1954 2,394 71,676 10,278 315,010
1955 2,421 82,784 10,769 375,190
1956 2,796 89,374 12,830 418,471
1957 2,971 78,830 14,081 381,682
1958 3,112 108,110 15,271 541,611
B-23
<PAGE>
Value of Account Assuming Dividends Value of Account Assuming Dividends
Taken in Cash Reinvested
Year
Ended Cash Dividends Paid Account Dividends Reinvested Account Value
12/31 Each Year Value During the Year
1959 3,180 120,118 16,095 618,458
1960 3,382 118,991 17,602 630,683
1961 3,532 144,719 18,906 786,407
1962 4,052 130,609 22,268 732,169
1963 4,313 145,338 24,454 839,496
1964 4,547 161,951 26,559 963,188
1965 4,739 197,061 28,473 1,203,295
1966 5,123 182,817 31,590 1,147,238
1967 5,617 245,981 35,593 1,582,809
1968 6,528 310,038 42,395 2,042,023
1969 7,264 253,789 48,287 1,714,636
1970 7,982 247,558 54,625 1,731,675
1971 8,245 272,248 58,332 1,964,839
1972 8,676 304,879 63,308 2,265,381
1973 9,227 285,379 69,390 2,190,733
1974 10,350 222,920 80,532 1,780,164
1975 11,136 297,832 90,323 2,474,181
1976 12,415 393,658 104,490 3,386,262
1977 14,170 393,328 123,524 3,510,093
1978 15,540 425,249 140,730 3,942,860
1979 17,842 523,607 167,801 5,042,040
1980 21,841 658,922 213,459 6,588,757
1981 27,303 611,931 277,290 6,390,741
1982 28,998 660,386 308,821 7,252,753
1983 28,440 794,482 316,959 9,060,386
1984 29,801 756,492 344,935 8,982,792
1985 30,947 917,825 372,870 11,321,114
1986 27,930 993,960 348,345 12,622,128
1987 30,392 1,019,330 396,119 13,309,062
1988 34,198 1,170,655 451,556 15,748,522
1989 39,181 1,403,092 532,900 19,431,988
1990 40,381 1,216,567 565,533 17,387,916
1991 39,495 1,451,371 570,554 21,344,277
1992 35,854 1,610,754 532,016 24,246,351
1993 35,195 1,803,044 533,893 27,695,413
1994 38,000 1,755,142 1 588,234 27,536,153 2
</TABLE>
1 Account value includes capital gains distributions of $1,253,811 but does
not include total dividends of $695,250.
2 Account value includes reinvested capital gains distributions of
$15,448,054 and reinvested dividends of $7,755,389.
B-24
<PAGE>
<TABLE>
<CAPTION>
WORST CASE/BEST CASE INVESTMENT
SCENARIOS $5,000 Yearly Investments in
Pioneer Fund from 1974
Worst Case Best Case
(Purchase at Yearly DJIA Highs) (Purchase at Yearly DJIA Lows)
----------------------------------------- -----------------------------------------
Cumulative Value Cumulative Value
Year High Date Investment on 12/31 Low Date Investment on 12/31
---- --------- ---------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
1975 07/15/75 5,000 9,194 01/02/75 5,000 15,540
1976 09/21/76 10,000 21,869 01/02/76 10,000 35,319
1977 01/03/77 15,000 32,011 11/02/77 15,000 44,824
1978 09/08/78 20,000 42,174 02/28/78 20,000 58,483
1979 10/05/79 25,000 61,117 11/07/79 25,000 83,336
1980 11/20/80 30,000 87,689 04/21/80 30,000 119,778
1981 04/27/81 35,000 91,846 09/25/81 35,000 123,629
1982 12/27/82 40,000 110,810 08/12/82 40,000 148,991
1983 11/29/83 45,000 144,828 01/03/83 45,000 194,499
1984 01/06/84 50,000 149,796 07/24/84 50,000 200,016
1985 12/16/85 55,000 194,984 01/04/85 55,000 260,199
1986 12/02/86 60,000 223,279 01/22/86 60,000 297,170
1987 08/25/87 65,000 239,385 10/19/87 65,000 318,783
1988 10/21/88 70,000 288,687 01/20/88 70,000 383,884
1989 10/09/89 75,000 361,660 01/03/89 75,000 480,590
1990 07/16/90 80,000 328,842 10/11/90 80,000 436,580
1991 12/31/91 85,000 409,008 01/09/91 85,000 543,372
1992 06/01/92 90,000 470,401 10/09/92 90,000 623,324
1993 12/29/93 95,000 543,196 01/20/93 95,000 718,431
1994 01/31/94 100,000 545,749 04/04/94 100,000 720,583
Annual Growth Rate:
(Internal Rate of Return) 13.03% 14.96%
</TABLE>
B-25
<PAGE>
S&P 500 *
This index is a readily available, carefully constructed, market value weighted
benchmark of common stock performance. Currently, the S&P Composite Index
includes 500 of the largest stocks (in terms of stock market value) in the U.S.;
prior to March 1957 it consisted of 90 of the largest stocks.
DOW JONES INDUSTRIAL AVERAGE *
This is a total return index based on the performance of 30 blue chip stocks.
SMALL CAPITALIZATION STOCKS *
This index is a market value weighted index of the ninth and tenth deciles of
the New York Stock Exchange (NYSE), plus stocks listed on the American Stock
Exchange (AMEX) and over-the-counter (OTC) with the same or less capitalization
as the upper bound of the NYSE ninth decile.
INFLATION *
The Consumer Price Index for All Urban Consumers (CPI-U), not seasonally
adjusted, is used to measure inflation, which is the rate of change of consumer
goods prices. Unfortunately, the inflation rate as derived by the CPI is not
measured over the same period as the other asset returns. All of the security
returns are measured from one month-end to the next month-end. CPI commodity
prices are collected during the month. Thus, measured inflation rates lag the
other series by about one-half month. Prior to January 1978, the CPI (as
compared with CPI-U) was used. Both inflation measures are constructed by the
U.S. Department of Labor, Bureau of Labor Statistics, Washington, DC.
S&P/BARRA INDEXES *
"The S&P/BARRA Growth and Value Indexes are constructed by dividing the stocks
in the S&P 500 Index according to price-to-book ratios. The Growth Index
contains stocks with higher price-to-book ratios, and the Value Index contains
stocks with lower price-to-book ratios. Both indexes are market capitalization
weighted."
LONG-TERM MUNICIPAL BOND PORTFOLIO *
For 1926-1984, returns are calculated form yields on 20-year prime issues from
Solomon Brothers' Analytical Record of Yields and Yields Spreads, assuming
coupon equals previous year-end yield and a 20-year maturity. For 1985-present,
returns are calculated using Moody's Bond Record, using the December average
municipal yield as the beginning-of-following year coupon (average of Aaa, Aa,
A, Baa grades).
LONG-TERM CORPORATE BONDS *
For 1969-1991, corporate bond total returns are represented by the Salomon
Brothers Long-Term High-Grade Corporate Bond Index. Since most large corporate
bond transactions take place over the counter, a major dealer is the natural
source of these data. The index includes nearly all Aaa- and Aa-rated bonds. If
a bond is downgraded during a particular month, its return for the month is
included in the index before removing the bond from future portfolios.
Over 1926-1968 the total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946-1968, Ibbotson
and Sinquefield backdated the Salomon Brothers' index, using Salomon Brothers'
monthly yield data with a methodology similar to that used by Salomon for
1969-1991. Capital appreciation returns were calculated from yields assuming (at
B-26
<PAGE>
the beginning of each monthly holding period) a 20-year maturity, a bond price
equal to par, and a coupon equal to the beginning-of-period yield. For the
period 1926-1945, the Standard and Poor's monthly High-Grade Corporate Composite
yield data were used, assuming a 4 percent coupon and a 20-year maturity. The
conventional present-value formula for bond price for the beginning and
end-of-month prices was used. (This formula is presented in Ross, Stephen A.,
and Randolph W. Westerfield, Corporate Finance, Times Mirror/Mosby, St. Louis,
1990, p. 97 ["Level-Coupon Bonds"].) The monthly income return was assumed to be
one-twelfth the coupon.
LONG-TERM GOVERNMENT BOND TOTAL RETURN *
The total returns on long-term government bonds from 1977 to 1991 are
constructed with data from The Wall Street Journal. Over 1926-1976, data are
obtained from the Government bond file at the Center for Research in Security
Prices (CRSP), Graduate School of Business, University of Chicago. Each year, a
one-bond portfolio with a term of approximately 20 years and a reasonably
current coupon was used, and whose returns did not reflect potential tax
benefits, impaired negotiability, or special redemption or call privileges.
Where callable bonds had to be used, the term of the bond was assumed to be a
simple average of the maturity and first call dates minus the current date. The
bond was "held" for the calendar year and returns were computed. Total returns
for 1977-1991 are calculated as the change in the flat price or and-interest
price.
INTERMEDIATE-TERM GOVERNMENT BONDS TOTAL RETURN *
Total returns of the intermediate-term government bonds for 1977-1991 are
calculated from The Wall Street Journal prices, using the change in flat price.
Returns from 1934-1986 are obtained from the CRSP Government Bond File.
Each year, one-bond portfolios are formed, the bond chosen is the shortest
noncallable bond with a maturity not less than 5 years, and this bond is "held"
for the calendar year. Monthly returns are computed. (Bonds with impaired
negotiability or special redemption privileges are omitted, as are partially or
fully tax-exempt bonds starting with 1943.) From 1934-1942, almost all bonds
with maturities near 5 years were partially or full tax-exempt and were selected
using the rules described above. Personal tax rates were generally low in that
period, so that yields on tax-exempt bonds were similar to yields on taxable
bonds. From 1926-1933, there are few bonds suitable for construction of a series
with a 5-year maturity. For this period, five year bond yield estimates are
used.
B-27
<PAGE>
U.S. (30 DAY) TREASURY BILL TOTAL RETURNS *
For the U.S. Treasury bill index, data from The Wall Street Journal are used for
1977-1991; the CRSP U.S. Government Bond File is the source until 1976. Each
month a one-bill portfolio containing the shortest-term bill having not less
than one month to maturity is constructed. (The bill's original term to maturity
is not relevant.) To measure holding period returns for the one-bill portfolio,
the bill is priced as of the last trading day of the previous month-end and as
of the last trading day of the current month.
BANK SAVINGS ACCOUNT **
Data sources include the U.S. League of Savings Institutions Sourcebook; average
annual yield on savings deposits in FSLIC [FDIC] insured savings institutions
for the years 1963-1987 and The Wall Street Journal for the years 1988-1994.
6 MONTH CD **
Data sources include the Federal Reserve Bulletin and The Wall Street Journal.
MSCI
Morgan Stanley Capital International Indices, developed by the Capital
International S.A., are based on share prices of some 1470 companies listed on
the stock exchanges around the world.
Countries in the MSCI EAFE Portfolio *are: Australia; Austria; Belgium; Denmark;
Finland; France; Germany; Hong Kong; Italy; Japan; Netherlands; N. Zealand;
Norway; Singapore/Malaysia; Spain; Sweden; Switzerland; United Kingdom.
Countries in the MSCI EUROPE 14 Portfolio *** are: Austria, Belgium, Denmark,
Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Spain, Sweden,
Switzerland, United Kingdom
Countries in the MSCI WORLD Portfolio *** are: Australia; Austria; Belgium;
Canada; Denmark; Finland; France; Germany; Hong Kong; Italy; Japan; Netherlands;
N. Zealand; Norway; Singapore/Malaysia; Spain; Sweden; Switzerland; United
Kingdom; United States.
INTERNATIONAL FINANCE CORPORATION COMPOSITE *
An index representing the performance of a composite of Latin America
(Argentina, Brazil, Chile, Columbia, Mexico, Peru, Venezuela), East Asia (China,
Korea, Philippines, Taiwan), South Asia (India, Indonesia, Malaysia, Pakistan,
Sri Lanka, Thailand), Europe/Mideast/Africa (Greece, Hungary, Jordan, Nigeria,
Poland, Portugal, Turkey, Zimbabwe).
Sources: * Ibbotson Associates
** Towers Data Systems
*** Lipper Analytical Services
B-28
<PAGE>
EQUITY COMPARATIVE PERFORMANCE STATISTICS
<TABLE>
<CAPTION>
Dow Jones U.S. Small S&P/BARRA S&P/BARRA
S&P500 Ind'l Avg Stock Index U.S. Inflation Growth Value
%TR %TR %TR %TR %TR %TR
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dec 1928 43.61 55.38 39.69 -0.97 N/A N/A
Dec 1929 -8.42 -13.64 -51.36 0.20 N/A N/A
Dec 1930 -24.90 -30.22 -38.15 -6.03 N/A N/A
Dec 1931 -43.34 -49.03 -49.75 -9.52 N/A N/A
Dec 1932 -8.19 -16.88 -5.39 -10.30 N/A N/A
Dec 1933 53.99 73.71 142.87 0.51 N/A N/A
Dec 1934 -1.44 8.07 24.22 2.03 N/A N/A
Dec 1935 47.67 43.77 40.19 2.99 N/A N/A
Dec 1936 33.92 30.23 64.80 1.21 N/A N/A
Dec 1937 -35.03 -28.88 -58.01 3.10 N/A N/A
Dec 1938 31.12 33.16 32.80 -2.78 N/A N/A
Dec 1939 -0.41 1.31 0.35 -0.48 N/A N/A
Dec 1940 -9.78 -7.96 -5.16 0.96 N/A N/A
Dec 1941 -11.59 -9.88 -9.00 9.72 N/A N/A
Dec 1942 20.34 14.12 44.51 9.29 N/A N/A
Dec 1943 25.90 19.06 88.37 3.16 N/A N/A
Dec 1944 19.75 17.19 53.72 2.11 N/A N/A
Dec 1945 36.44 31.60 73.61 2.25 N/A N/A
Dec 1946 -8.07 -4.40 -11.63 18.16 N/A N/A
Dec 1947 5.71 7.61 0.92 9.01 N/A N/A
Dec 1948 5.50 4.27 -2.11 2.71 N/A N/A
Dec 1949 18.79 20.92 19.75 -1.80 N/A N/A
Dec 1950 31.71 26.40 38.75 5.79 N/A N/A
Dec 1951 24.02 21.77 7.80 5.87 N/A N/A
Dec 1952 18.37 14.58 3.03 0.88 N/A N/A
Dec 1953 -0.99 2.02 -6.49 0.62 N/A N/A
Dec 1954 52.62 51.25 60.58 -0.50 N/A N/A
Dec 1955 31.56 26.58 20.44 0.37 N/A N/A
Dec 1956 6.56 7.10 4.28 2.86 N/A N/A
Dec 1957 -10.78 -8.63 -14.57 3.02 N/A N/A
Dec 1958 43.36 39.31 64.89 1.76 N/A N/A
Dec 1959 11.96 20.21 16.40 1.50 N/A N/A
Dec 1960 0.47 -6.14 -3.29 1.48 N/A N/A
Dec 1961 26.89 22.60 32.09 0.67 N/A N/A
Dec 1962 -8.73 -7.43 -11.90 1.22 N/A N/A
Dec 1963 22.80 20.83 23.57 1.65 N/A N/A
Dec 1964 16.48 18.85 23.52 1.19 N/A N/A
Dec 1965 12.45 14.39 41.75 1.92 N/A N/A
Dec 1966 -10.06 -15.78 -7.01 3.35 N/A N/A
Dec 1967 23.98 19.16 83.57 3.04 N/A N/A
B-29
<PAGE>
Dec 1968 11.06 7.93 35.97 4.72 N/A N/A
Dec 1969 -8.50 -11.78 -25.05 6.11 N/A N/A
Dec 1970 4.01 9.21 -17.43 5.49 N/A N/A
Dec 1971 14.31 9.83 16.50 3.36 N/A N/A
Dec 1972 18.98 18.48 4.43 3.41 N/A N/A
Dec 1973 -14.66 -13.28 -30.90 8.80 N/A N/A
Dec 1974 -26.47 -23.58 -19.95 12.20 N/A N/A
Dec 1975 37.20 44.75 52.82 7.01 31.72 43.38
Dec 1976 23.84 22.82 57.38 4.81 13.84 34.93
Dec 1977 -7.18 -12.84 25.38 6.77 -11.82 -2.57
Dec 1978 6.56 2.79 23.46 9.03 6.78 6.16
Dec 1979 18.44 10.55 43.46 13.31 15.72 21.16
Dec 1980 32.42 22.17 39.88 12.40 39.40 23.59
Dec 1981 -4.91 -3.57 13.88 8.94 -9.81 0.02
Dec 1982 21.41 27.11 28.01 3.87 22.03 21.04
Dec 1983 22.51 25.97 39.67 3.80 16.24 28.89
Dec 1984 6.27 1.31 -6.67 3.95 2.33 10.52
Dec 1985 32.16 33.55 24.66 3.77 33.31 29.68
Dec 1986 18.47 27.10 6.85 1.13 14.50 21.67
Dec 1987 5.23 5.48 -9.30 4.41 6.50 3.68
Dec 1988 16.81 16.14 22.87 4.42 11.95 21.67
Dec 1989 31.49 32.19 10.18 4.65 36.40 26.13
Dec 1990 -3.17 -0.56 -21.56 6.11 0.20 -6.85
Dec 1991 30.55 24.19 44.63 3.06 38.37 22.56
Dec 1992 7.67 7.41 23.35 2.90 5.07 10.53
Dec 1993 9.99 16.94 20.98 2.75 1.68 18.60
Dec 1994 1.31 5.06 3.11 2.78 3.13 -0.64
</TABLE>
Source: Ibbotson Associates
B-30
